"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, May 4, 2012

Commodity Sector Continues to Reel

Today's pathetic payrolls number brought on more of the risk aversion or "slowing growth" trades with the result that it has now sent the commodity sector down to levels last seen in September 2010.

The 50 week moving average is coming perilously close to crossing down below the 100 week, further confirming the downward trend. If the Fed indeed was hoping to see commodity prices weaken to avoid the fallout from their little episode of money creation, so far they have gotten their wish.

The problem they have however is if stock prices continue to swoon lower, which they DO NOT WANT. If they are required to resuscitate equities by engaging in another round of QE, they certainly have room do so once again as far as the price of hard assets go.

On the longer term monthly chart the index has now decidedly fallen below both median lines as well as violated the 38.2% Fibonacci retracement level of the rally off the 2008 bottom, a bottom formed when the first round of QE came our way. From a purely technical chart perspective, there is no chart support until until the 50% or halfway point of the entire rally from that same 2008 low to the early 2011 high. That level does not come in until close to the 507 level.

Note even in spite of the current weak technical posture of the sector, the index still remains in a decided uptrend as the chart pattern is a series of higher highs and higher lows as you move from left to right.

While wholesale prices of the commodity sector as a whole are moving lower, they are still much higher than they were a mere 4 years ago; something to keep in mind whenever the Fed and the feds parrot the nonsense to us that inflation pressures are tame.

1 comment:

  1. Hello Trader Dan!

    I've been watching the CRX and CRB, both look they have a fair way yet to fall -from a technical level at least - I'd guess back to summer 2009 levels - which would probably equate to sp'1150/00.

    My best guess, the Bernanke will wait until summer to do more of the QE nonsense (1 trillion MBS purchases?).

    Ohh, and yeah, those jobs numbers today sure were pathetic. It was nice to see at least Santelli on clown channel highlight the general media spin on it though.

    Good wishes for the weekend


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