The grains opened higher posted their highs around 10AM CST, trended lower through the afternoon, then rallied on short covering into the close to settle mostly unchanged. At one point it looked as if there might be a sharper move down, after the 3 or 4 sessions of higher prices we have seen, but when that didn’t materialize, the shorts got out of their positions. SX alone rallied 8 cents off its lows, CZ rallied a nickle and WZ rallied almost 10 cents…
In the Crude market, the contract continued to ruminate around the 75 dollar level posting a high art 75.83. The stock indexes continue to hang fire, with both DJZ and SPZ trading in relatively narrow ranges today..
DJZ looked to be mired in about a 50 point range, seemingly not having the courage or the follow through to go and test the 10000 level, although the Cash Dow traded at 1003 on its high tick so far today.
So why, with the dollar doing so poorly, are the stock indexes doing better? The answer, I think has 3 issues. The first is relatively speaking, US stocks are on sale for the rest of the world. Believe it or not, the US is still a country the rest of the world is interested in doing business with. They may resent us as a people, but they want access to our markets, because even though the USA had a case of double pneumonia and congestive heart failure, that rippled through the rest of the world, putting them at risk for a combo of aids and flesh eating bacteria…
That being said, other countries around the world are buying US everything on sale, US real estate, US equities, and most importantly, US corn, wheat, beans, are on sale… Gold is sitting at contract highs and although its having 10 and 15 dollar pull backs and fluctuations, it still looks like it wants to go higher.. That being said, the US Dollar will have periodic rallies as it continues on is downward roll. Where is stops, I think will be a factor of when The Fed Chairman, steps in and starts raising interest rates… Until then, our commodities will be buoyed by the declining dollar.
Second issue supporting US equities, is that we have seen a nice 60 percent rally from the lows… This will continue to attract new buyers who feel that they missed the buying opportunity of a lifetime… As long as there is steady demand for US Stocks, as people return en Mass to the markets, that will be supportive of equity prices..
And thirdly, the level of bearishness in this country is still pervasively high.. The pundits on the cable shows are still wringing their hands doubting what they are seeing.. That’s a good thing, if you are a bull… When they start doing stories about how day traders are making a killing in this market again, or if they do a reality TV show about a hedge fund operation going gangbusters, then that will be the sign to step aside and let the froth go off the top.
In the mean time, we could have a 38 or even 50 percent retracement from this 8 month, 3,500 point rally… a fifty percent correction brings us down from 10,000 to the 8,750 level, at that point… that will be the true test of this market, as well as for all the people who checked off “long term investor” when they both their last mutual fund… As we have seen, no one likes to see half of their investment evaporate on a correction…
As long as we climb the wall of worry, however, I think there is still upside to these indexes…
Good trading