Oil Pulling Back, Equities Pumping Up
09/19/2005
Friday's weakness in crude after only a 1 1/2-day recovery bounce in the
aftermath of an $8/bbl decline should send a scare through the ranks of the
bulls. Why? Because crude shows little or no umph on the upside right at
its 50-day moving average, which argues for still more selling pressure
directly ahead -- in the $61-$60 support zone next.
A move below $60 will point to a plunge towards the 200-day moving average,
now at $56.63. At this juncture, only a rally the hurdles and sustains
above $65.80 will argue for a recovery rally.
Meanwhile, gold closed up $4 to $463.30 an ounce on the New York Mercantile
Exchange, having earlier risen to as high as $464, which takes out the
prior high at $357.63 from December 2004. The contract gained 2.3% on the
week. Gold is the only market that makes sense to me right now... as
rising inflationary perceptions certainly are in the forefront of
everyone's mind.
As gold climbs, longer term interest rates have been creeping higher (which
does make sense)... up to 4.22% from 3.98% on September 1, while the U.S.
dollar has climbed versus the euro from 1.2500 to 1.2200 since September 1
(which does not make sense).
As for equities? Well, the Katrina low was established on August 29 at
1200.50 in S&P 500 December E-mini contract, and the index rocketed to a
September 12 high at 1251.00 despite all that unfortunate news, and despite
anticipated massive government (deficit) spending (which was reiterated and
embellished by President Bush in his address on Thursday evening)
prior to
this week's pullback.
As of this moment, although all of us can find multiple reasons to expect
the stock market to implode, the bulls still appear to have the upper hand.
Once again, I am treating the weakness from Monday to Thursday as a
pullback within the still dominant Katrina uptrend.
Once the pullback is complete (at Thursday's low of 1230, perhaps), the
dominant uptrend should continue-- and propel the index to new highs above
1251.00-1255.25. Is this logical? No. But the dominant uptrend is not yet
finished, period.
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