LADIES AND GENTLEMEN, WE HAVE SEPARATION
The above chart is of the CRB cash index. I have not looked at this for a very long time. I was somewhat surprised to see it not be stronger than this. However, since I am looking for sell signals in almost every commodity market right now, I was not surprised to see a sell signal in place here. We have a significant price divergence going on here with the momentum oscillator, and it is rolling over. I am looking for sell signals Tuesday or Wednesday in several markets. Here is what is very surprising, I am looking for a buy signal in the stock indexes in that same time window. Commodity and stock markets have been joined at the hip on an almost tick for tick basis month after month for quite some time, and although it is a historical anomaly, it is still almost shocking to see the two markets actually separating again.
This has come out of the blue, which makes it more legitimate. What everyone waits for will never happen. I don't think many were looking for this decoupling to happen right now. Ironically, at a time when the bullishness for Oil is just off the charts, that market seems to be ready any day for a major tumble. See the history books if that surprises you. In the Fed's quest to inflate everything, they have been pushing on a string as we know, so it may be that they will only be able to keep control of the stock indexes, and will have to let the dollar rally and commodities decline. It has to be tiring to monitor financial and commodity markets to the degree they are doing it, and put out one fire after another. At some point you have to figure something has to give. It seems they can control the whole world, but they cannot.
The one very bearish fellow I mentioned here in this blog recently, whose emails I have subscribed to just for the sake of evaluating the doomsday scenario, has even relented some on Gold expecting a major shakeout to occur there this year. Of course he still sees that as a buying opportunity. He may be right on that, I really have no idea. I will evaluate whether or not metals are a buy if they tumble. Until then, I am looking for a sell entry, and still don't see one. One could develop this week if we get a bounce. The one problem here is that when a market is inflated this much based on the speculation of small investors, the exits could become crowded in seconds, and believe me, when the small fries head for the doors in those markets, you newbies are going to see something you won't forget for many years. I wish I had the divine wisdom required to pinpoint that $100 down day in Gold we have coming, but I don't. However, I would literally bet my life we will see one if not more of those probably this year sometime.
So, what to do now. First, look for pullbacks in the dollar to buy, and bounces in commodities to get short. In the stock market, I think buying the next dip, even if it is a day or two, is the correct play.
The next chart is a weekly chart of the Wheat market, the weakest of the Grain complex. I am hoping to find a sell signal here soon. You can see the heavy Commercial selling that has taken place recently. Many commodities markets have this, some of them have had it going on for awhile now and are due for trend changes. However, they have not occurred yet, so be patient. The powers that be don't want a dollar rally and commodity decline, so it may take awhile for true market forces to get this done.
I suggest anyone who has any interest in COT stuff to spend time studying the material. There are still ways to use this stuff, but they are not necessarily the same as the traditional ones. We are in uncharted waters for market manipulation, so the timeliness of the turns in the markets are not as closely tied to fundamentals as they historically have been.
I wanted to briefly touch on a subject I find myself contemplating on a daily basis now, and have not come to any conclusion yet. This subject is the doomsday scenario. There are those out there as I have mentioned who are quite credible, calling for a major crisis to develop soon. I generally do not spend alot of time thinking about such things since my time frame for trading is reasonably short. However, if these guys are correct, my trading accounts will be in jeopardy because all the firms will fail, and the SPIC will be basically gone. As a result, I find myself devoting some time thinking about the possibility of such an occurrence, and also how if it were to happen, would I survive it.
What bothers me on the surface about all of this is that everyone of these people say the only possible way to survive this is to put all your eggs in one basket, GOLD. Regardless of my views on GOLD or any other market in particular, I find myself having a hard time believing that putting all your eggs in any one basket is ever a good strategy. IT SIMPLY IS NOT. If you don't believe me track down a former Enron employee.
Here is another thing that on the surface seems implausible about all of this. It requires predicting correctly the fall of the ROMAN EMPIRE part II. I have never believed that good strategies require the ability to correctly pick the "different this time" scenarios. It is true that changes in the world do happen, and when they do they are first time occurrences. It is my feeling that if the US were to fail, the whole world goes down, we don't go down on our own. Certainly the European countries are in far worse shape than we are, and I just can't see myself bowing the Buddha every day hoping he will spare me. On the other hand, it is clear we are on the verge of something very bad here. Just the sheer arrogance of the congress to try and push through that 1 Trillion omnibus bill, shows those jerkoffs have not and won't ever get the message. They have dug us such a hole along with the Fed, that I don't see any way out without considerable damage to many of us.
In summary, this is something I am continuing to evaluate, and once I come up with a definite view on this I will put it in here. One thing I am sure of, when this next crisis does arrive, and I do think there is going to be one of some type, there will be a tremendous opportunity to make money if you are in the right place at the right time. I do also think that when it does arrive it will be bigger than the last one. I also think it is likely that the money will be made on the short side of something, not the long side. I think it is going to be a massive deflation not inflation wave.