Stocks Continue Slide, Oil And Gas Continue To Party As Inflation Looms

Financial stocks continue to weigh heavily on the major indexes as continued fear regarding the health of the economy and the banking system dragged down stocks. Assisting the fear was Light Sweet Crude Oil prices moving higher towards all time highs. Small Cap Oil related stocks surged higher from recent consolidation. Volume swelled double digits across the board a major hint large institutional players were net sellers. Distribution within an attempted rally trying to follow-through is never a great sign to see. Normally, we want to see continued accumulation or light volume pull backs. The day was an overall disappointment for the bulls, bearishness on Wall Street continues and price and volume echo that.

This is a scared market, the VXN and VIX rose over 4.5% on the day. The II survey of newsletter writers showed a “cross” where bears out number bulls (typically a bullish sign). Fear is gripping Wall Street at the moment and its most likely tied to woes in Financials and Light Sweet Crude Oil prices. Getting back to the “cross,” this isn’t an immediate indicator and its time to get long NOW. The uptrend may take a week and sometimes up to a month to form. Our last cross was at the end of March where we say a rally occur right through May. Be patient and let the market sort itself out. Extremes help us capture opportunities to make money in the market, the extreme fear at some point will allow us to grab the next upswing.

As Bernanke and other central Banking folks down play the aggressive stance on fighting inflation,I believe we’ll begin to see our CPI tick much higher. Unless of course Big Ben and Company decide to get on the more aggressive side of raising rates. If Crude superspikes, we’ll see inflation creep on us real fast. Let’s go to the charts.

Kicking off the inflation party, crude oil:

Cotton and Sugar should regain their mojo after the rise in price of Corn. Here are those charts:

And for good measure let’s take a look at these two stocks HOGS and SEED:

I am not jumping up and down bullish at the moment. The market needs to work out this bearishness prior to signaling any type of new rally. Do we have our next bull market? Probably not, it took almost 2 years after the ultimate high in crude in the 1979 for the market to hit lows. Are we there yet? Well, we were closer than we were yesterday!

Keep those losses small!

Posted in Categories: Contributor, External Research, Stocks, USA.

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