Friday, October 26, 2007

Entry for October 26, 2007 9:07 am

A bullish day?

I wonder if consensus has just formed as of today, or if was built out through the week, but I had already been expecting 25bp and a not surprising 50pt preemptive fed funds cut. Perhaps all this media just finally converged leading to this bullish tone today. Naturally this greater expectation, has lead to the further weakening of the dollar, with gold on its continued trend upward.

I guess one could say, people are fleeing to the traditional inflation hedge despite the weakening correlation over the years between inflation and gold. Though such ideas are not totally dead as strength in the liquid gold swissie is still prominent.

Supporting this inflationary environment energy has soared above 90, and slowly creeps its way to 100. I wonder if at this point if oil is more of a psychological move on the aggressive bulls playing out the supply numbers. Naturally if it is the case, oil won't reach past 100, though with the bullishness in the markets and with current oil supplies i wouldn't be surprised to see a break in 100 at this rate. Though deep down inside, i won't to believe that even middle to upper middle class consumers would not pay for such high oil prices. Though even if oil does reach past a 100 a slow growth in consumers would only reflect in later quarters with lagged reporting affects.

In terms of the S&P 500, i do not think we will be able to see 3 black crows today considering the sentiment currently in the markets, though if some bad news does come in that would be significant for shorters or bears to gain the upper hand. By looking at yesterdays price range the bearish were barely able to push prices downward any more significantly than the bulls were able to push the prices upward. This evening out may be reflected in a more neutral to bullish day today. Interestingly enough volume spiked higher than the previous day, which would lead me to think of further downward pressures. Once the MACD 0 line is pierce i would start looking for signs of strength along with support levels (look to yesterdays entry), as momentum seems to be slowing down as support levels are being reached. I believe there to be enough weakness to continue on through next week.

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