The 60 and 135 minute eMini chart are below. Both time frames saw their upper channels exceeded this morning, as the S&P moved over 150 points in just a few trading hours. I’m going to go out on a limb and speculate that neither yesterday’s low nor today’s high will be taken out for a number of weeks. It’s time to slowly squeeze the volatility out of prices, barring a renewed round of October fear. For now, I think the market will bide it’s time and go basically nowhere, with a likely down bias next week. Channel tops are currently at 1272 (60 minute) and 1291 (135 minute).
click chart to enlarge
click chart to enlarge
The explosion in gold is clearly the market’s perception of the effect of the massive printing of U.S. dollars being done to rescue the toxic debt markets. Gold and silver have a monetary role to play if the government entities can’t control their hands on the printing presses. But will these dollar printing presses reignite the inflationary commodity bull market? I don’t think so. Look at the DJ-AIG commodity index chart below. While it’s making noises about going higher with some bullish signals here. It’s behavior is quite restrained compared to that of gold and silver. Much of the money the government is now printing will not be circulating to inflate the markets. It’s merely being shoveled into the black holes of debt to stop the capital implosion of the system.
click chart to enlarge
4 responses so far ↓
1 Peter VC // Sep 20, 2008 at 4:01 am
Chris,
I think you are spot on. All the fresh money is in fact debt-based. It will not flow -as the Fed’s hope – into the commodity markets. Instead, the fun is in the Bond Market. (halving interest rates will double your bond price…).
Gold and silver are indeed monetary metals, despite a government decree to the contrary, due to its (near) constant marginal utility. No foldable ( let alone electronic version) of paper money has that property, because gold is no-ones debt. Paper is some-ones (toxic?) debt.
And nothing will change those facts.
We are -as you say- steering into the black hole of tumbling interest rates.
2 yzdeaner // Sep 20, 2008 at 8:40 am
Chris,
Of major importance to many of us is the “time” factor. Using your indicators that focus on time, when would you anticipate the S&P500 to reach the 1230 price point.
Thanks so much.
dean
3 muellerjoerg // Sep 20, 2008 at 10:38 am
Even though the longer-term deflationary picture may still be intact, short term it looks like we made an intermediate bottom in CRB and the stock market, along with a top in bonds. I’ve always thought that the long bond will not make it beyond the 2003 top without some failed tests beforehand, if at all. It looks like another failed test happened this week. Also, we retraced 50% of the S&P500 ascent from 2002-2007, so a more pronounced upward bounce can be expected IMO. I wonder if it can even last until the November Spiral Calendar turn date for stocks.
In the final analysis I agree we are headed for more deflation in the next two years or so. I do not think gold & silver will fare significantly better than other commodities, though. The crude oil bounce this week looks similar to the one of gold. I expect more of an inflation bounce for some weeks to come. Once the shift to deflation reassures itself again, they will all go down more than this weeks lows.
Joe
4 JC Martin // Sep 21, 2008 at 2:48 pm
Any true panic in sight?
JC
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