Roaring Into the Top
10/29/2007
Thinking outloud: Frankly, a sharply falling dollar coupled with sharply rising (historic) oil prices amidst credit and housing crises would not be considered my ideal background for a roaring bull market in equities. On the other hand, that is exactly the backdrop, isn't it? And after I stop scratching my head, I realize that a huge amount of petro dollars and euro/$'s are being cycled back into purchases of U.S. assets... from equities to businesses to real estate. That is where the money is coming from for the most part. Didn't that happen in the late 1980's, when the roaring but inflated Japanese economy produced the buyers of cheap U.S. assets-- right at the top? Remember Pebble Beach and the Rockefeller Plaza "deals?" There is a lesson here somewhere. While on the subject of crude oil, needless to say the surge in prices over the last two sessions, from 86.50 to 92.22, has surprised me. Let's notice, though, that today's high once again is not confirmed by daily RSI momentum, which is a second warning signal that the intermdiate-term uptrend in oil prices is running out of "fuel." Can prices continue higher? Sure…but let's just be aware that at some point probably sooner than later, oil prices will hit an airpocket and plunge like a rock -- into the $83.00 initial target zone (big deal, right?). Anyone long oil here must be prepare for just about anything -- anything negative, that is, and any time now. 
Taking one more look at stocks, even after today's pop from Microsoft, the Q's still cannot seem to claw their way above 54.00/20. And until that happens, I will hold my counter-trend long position (model portfolio) in the QIDs (UltraShort Q's). 
Mike Paulenoff is author of the MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis on equity markets, futures, metals, currencies and Treasuries. Sign up for a free 15-day trial to Mike's ETF Trading Diary today.
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