EYE OF THE STORM
Yesterday was one of those odd days where the world crumbled internally yet the Dow average showed a very small decline. The reason for this is the above chart, IBM. This is a Dow component, and it had a monster day up while many individual stocks got hit hard. If you look at all the broader indexes, you saw large down days, but due to the Dow average being comprised of only 30 stocks, when one had a day this large it helps support the narrow average.
There are alot of interesting things happening today. First, the stock market is remaining the calm at the eye of the storm. Large declines are happening in currencies and commodities today almost across the board. I had mentioned in the metals that we had pulled back to some support points but to be careful because they could "free fall." That is exactly what is happening today. Silver as you can see below is down about $1.25 today so far.
I could put up any one of a number of charts, they all look the same. It is interesting though that the dollar has not rallied much. What this tells me is these markets are just so overextended that they are falling on their own weight, and don't really need an impetus. Is this the big one? Of course we never know that, and I think it is impossible to determine that. None of these markets should have ever gotten anywhere near the heights they have, so it is really a pointless task to try and big a realistic big picture view. If the governments left them alone I think most things would fall 50% in a flash, stocks maybe 30%. That is not going to happen so it is anyone's guess from a 10,000 ft view.
Gold bugs say go long with all you got every time a blade of grass grows, bubble people say go hide in a bunker. The truth is likely someone in the middle. One thing to keep in mind with the public is they are often right in the middle of trends, and usually wrong at the extremes. Overly bullish or bearish sentiment leaves you in situations where there is nobody left to act in that direction and that is now reversals happen. So far this seems to be a normal pullback. We will find out in many of these markets if it is more when we bounce. If the high tests fail we might have something bigger on our hands. I expect that to happen as readers know, but so far this is not enough to prove anything.
One thing I "like" about all of this is that it came out of the blue just when people least expected it. That is what also makes me think we have something bigger on our hands. You can bet the PPT has both hands on the wheel right here, let's see what they got in the last hour today. What I have also said repeatedly, is that the exits are going to be crowded when this happens. Small money is scared money, and small investors have driven most of these moves. When someone has 5k to their name and puts it in Gold or Soybeans because some celebrity on a commercial told them to, then a neighbor told him he had made a fortune on Gold coins from Peru, you can bet than when that 5k becomes 4k, he is getting pretty nervous. That nervous feeling will turn into a mouse click on the sell button pretty quickly. Now the same guy has 3k by the time he gets out and it not clicking the buy button when he should be, buying on weakness after the washout happens.
If you are not short anywhere, don't chase this, wait for a bounce in whatever you are looking at.