Here are some charts I’m looking at today.
First, a Marketwatch reporter asked me this morning if I thought the OPEC meeting coming up could result in anything important. I replied with a chart.
Here is what I wrote to the reporter …
The pricing in the oil market has been detached from fundamentals in the last couple months or so – speculators are driving this market up and down. So, I don’t think OPEC can do much fundamentally to move prices. And I don’t think there’s anything particularly important about its next meeting, which is coming up.
Crude oil is the black line, the S&P 500 is the red line. You can see that oil bottomed 3 weeks ahead of the market. Why is this? I believe both markets are being driven by speculators now – and since crude is a much smaller market, it’s easier to see speculators at work. Now, we’ve seen the stock market signal it wants to go lower, but crude oil is still in an uptrend. Is the S&P 500 leading now – down – or is oil still the better tell?
Forget fundamentals and watch the speculative money flows. It results in less headaches.
Now let’s look at something else interesting — a chart I picked up from the boys at Stockcharts.com over the weekend …
Here is the Brazilian Bovespa. You can clearly see the shift between bull and bear markets. It is rallying within the context of a bear phase now. Does that remind you of anything? Yes, that’s just what we’ve seen with our own S&P 500.
However, nothing is written in stone. This correction in the Bovespa could be ending. And this would be potentially good news for the S&P 500 …
It is my belief that the emerging markets like the Brazilian Index are leading the S&P 500, and we can find clues in them for whether the S&P 500 will go up or down. The reason is simple – the emerging markets (like oil) is where speculative money A) goes first and B) is easier to track.
So let’s watch for clues on a more detailed, weekly chart of the EWZ, the ETF that tracks Brazil …
I’m glad we took two rounds of gains on the EWZ in RGS recently – gains are always good – but I’ll watch for a potential re-entry point.
Finally, let’s look at the most speculative market of all …
The US dollar is the anti-everything now, the “Spock with a beard” to other investments, including crude oil, the S&P 500 and more. The US dollar rallied as other things sold off last week. Watch the dollar for clues as to what will happen with all other investment vehicles.
IN OTHER NEWS
Commodity Stockpiles Are China’s New Sovereign Wealth Strategy, RBC Says
China is stockpiling commodities such as copper and iron ore as part of a reallocation of its sovereign wealth amid concern that the value of its dollar assets may decline, according to the Royal Bank of Canada.
Lowe’s Tops Analysts’ Profit Estimates After Reining in Costs; Shares Rise
Lowe’s Cos., the second-largest U.S. home-improvement retailer, posted first-quarter profit that fell less than analysts estimated as a slower sales decline helped boost gross margin. The shares gained in early New York trading.
XX Sean’s note — reigning in costs could show up as deflation, so these results may not help the long-term US economic picture. But it’s no suprise they had such good results — I spent a fortune at Lowe’s this past quarter getting ready for WTSHTF. And I don’t think I’m the only one. Also, people who are laid off may still have a few pennies to keep themselves busy with projects around the house.
Gasoline to Fall 20% as Biggest Rally in Decade Ending With Memorial Day
Gasoline’s biggest springtime rally in more than a decade may be ending before U.S. motorists start hitting the road as vacation season begins and demand peaks.
Commodity Mutual Funds Attracted the Most Money Since March, EPFR Reports
Inflows into commodity mutual funds were $352.6 million in the week ended May 13, the largest in seven weeks, researcher EPFR Global said.
The always worth-reading Jon Nadler writes:
“We note that U.S. consumer prices were unchanged in April, after seasonal adjustments, and have fallen 0.7% in the past 12 months, the largest decline in 54 years, the Labor Department reported Friday. The decline in the consumer price index has sparked concerns about deflation in the United States.
“At the very least, retail level inflation is in cryogenic suspension. We note that US factory output fell 0.5% in April. Most of all we note that US capacity utilization fell to a record low of 69.1%. If that is not a headline for the state of the inflation hysteria versus reality, we do not know what is. You need CU up in the mid 80s area in order to begin talking about inflation. Thus, we feel that today’s price increase fears are little more than a case of an inverted bottle of Heinz ketchup. As sung by Carly Simon. Some three years before it became legal to own/trade gold. For those of you who remember.”
Have a good Monday and be careful out there.
Related Posts
- 4 Charts on Crude Oil, US Dollar and Gold (05/11/09)
- 3 Charts for Santa — The Dollar, Oil and Gold (12/21/09)
- 3 Charts on the US Dollar and Precious Metals (08/24/09)
- Carnival of Charts — oil and the dollar (05/07/08)
- Wednesday Charts: Is This Dollar Rally for Real? (08/26/09)
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