The FOMC did nothing as expected. Really not much they can do but sit by and watch the destruction happen and wonder why. As if they were not the cause. The reason we are in this mess is simple. The devaluation of the Dollar is the culprit. Never in the history of recorded time has devaluing a currency helped the long term prospects of the underlying economy and yet Bumbling Bernanke and company feel that they have the power to rewrite history. Mr. Buffett has is correct when he called for Mr. Bernanke to step down. A chimpanzee and two trainees could do a better job than he has. He shows a complete lack of understanding of economics. This from the former head of Economics from Princeton? Princeton should hang its head in shame. They should close down their economics department if this is the best mind they can produce. I am not trying to beat up on Princeton but seriously does anyone there even own or know how to operate a calculator? Apparently not as they think that deficit spending is a solution rather than cause of the problem. The problem is that America and Americans are broke. No matter how many times you look in your wallet there is still nothing there but receipts from the money you wasted on whatever it was. The time for wasteful consumption is over. Time to pull up those boot straps and get ready to get your hands dirty as this is the beginning of change not the end of it.
Crude Oil:
Crude did manage to push above 140 as we expected and we now expect to see 150 tested this week. The bubble in this market continues to grow but that is in now way signaling a top. We could easily see Crude oil continue to move much higher as demand in Asia continues to grow despite higher prices. No matter what we do here in the States, the price of oil will remain high until we regain some type of equilibrium between supply and demand. We continue to be light buyers of dips as long as Crude Oil stays above the critical 130 support level. If crude can breach that level of support we could see a hard fall, but getting back to that point will take some sort of shift in the traders’ mentality.
Natural Gas:
This market continues to stay with the trend. This market has been a classic example of the trend is your friend. We continue to see little that will reverse this trend in the near term but the probability of a sharp break increases exponentially each day.
Stocks:
The stock market took it on the chin last week. Fear took over and investors ran for cover. We feel it is time to step up and step into this market as buyers and take advantage of this dip. Buying dips has been harder this year than in hears past but it has still been the right thing to do. We expect to see 1250 hold as support for the S&P this week and are buyers near the 1275 level with stops below the 1250 level. WE are targeting a move back to at least 1325 before this dead cat bounced is over.
Bonds:
Bonds did bounce hard as we suggested they would on the back of the FOMC. Betting against the Fed. doing the right thing is the easiest money I have ever made. We suspect Bumbling Ben and Co. will continue to drink the Kool-Aid and try and tell the American people that inflation is not much of a concern. And why would it be? I can barely even take the FOMC seriously anymore. Mark Twain famously once said: “Truth is stranger than fiction, but it is because Fiction is obliged to stick to possibilities. Truth isn’t.” If you are not calling for Bernanke’s resignation than you have as solid of a grasp of economics as he does.
Metals:
With the FOMC still hell bent on crushing the Dollar, Gold continues to remain strong. We continue to tell anyone who will listen to buy gold on dips. Gold has reach our target from last week and we are exiting the longs put on early last week. We will look for another dip to rebuy but this week will be a bit move volatile due to both the Holiday and the ECB meeting. Silver too is being exited at these levels and will look to rebuy on a pullback later this week. Copper is betting toppy and we continue to expect copper to resist out below 4.00. We are exiting longs and looking to go short above 3.89 with stops above 4.03.
Grains:
We had the grain report come out this week with both bullish and bearish data. The bears seem to have the upper hand and at this time we are looking to sell rallies in beans and corn. Beans in particular we feel will not rally above the highs posted recently. Bottom line here is simply that while the foods did devastate many people and crops the reality of the devastation is not as bad as the fear that preceded it. The market will fall as that fear is discounted. Sell rallies with stops above recent highs.
Softs:
OJ is trying to get a rally going off of the 110 support level. If OJ can close above 118, this market could begin to really rally. We suspect it will not break out through that in the near term but in the event that it does we wanted to alert readers to it. We exited a long cocoa last week a bit early. We did get stopped out of some shorts we attempted last week for a very small loss. We will again look for short signals this week but will be patient due to ECB. Coffee continues to be strong and we are now targeting a move above 160 before this rally stalls. At this point it is too risky to buy a dip so if you missed this trade simply move on. Sugar is building a bull flagg that could point to a move above 13.00 in the near future. We are buyers of dips below 11.55 with stops below 10.89. Cotton is now trading inside of a range between 70-75 we expect 70 to hold as support and aggressive traders could look to buy long in the low 70’s with stops below 70 and sell rallies above 80 with stops below 85
