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Tuesday, July 7, 2009

The War On Commodities

888 was the clear pivot today, as it was being teased all day, until right about an hour before the close, when a burst of volume took us below. I didn't expect a drop to 878, but we damn near got there. The technical "neckline" of the head and shoulders is broken, but I am very wary of a head fake move here. I'm waiting to see if the shorts jump in feet first tomorrow at the open. If so, then the big money will probably fade the gap down. However, longer term (the next week or so out), this is a very bearsih pattern and I suspect we will be visiting the next support, near 825, soon.

Not too much doubt about the Dow. The May low is broken, and next major support is near 7800. Despite the price rise in May and June, money has been flowing out since early May. CMF is a good indicator of where the big money is flowing, and you can see that the big money started getting out on the way up.

The upward sloping neckline on the Nasdaq, if it is indeed valid, has been broken, as has been the 50dma. We still have the May low for support, and I suspect we'll test it soon. Today will qualify for another distribution day, unless IBD calls a correction, which they may indeed do.

The Russell 2000 is still supported by the 200dma, but that may not last long. There is still the May low, but at the rate this has been dropping, it could test it as soon as tomorrow.

This is one of the Dow Jones commodity indexes. Commodities are in the process of collapsing again, thanks to pessimism about the alledged recovery, and Congresses periodic attacks on commodity "speculators". Someday they will realize that in a free market, you can't have it both ways. High demand and low prices do not go together, especially when those low prices are politically induced.

One of the frequent commenters here, Eddie, asked about "inelastic commodity prices" and since I didn't know what it meant, I had to look it up. Wikipedia has an excelllent article on it here. Also, he mentioned John Mauldin writing on the inflation-deflation debate, and I believe I have found the article he was refering to here. And I have the latest on the impasse with the $24 billion dollar budget deficit in California here (that not the $24 billion budget, it's the $24 billion deficit). Thank God I recieve zero dollars from the State of California.

I am pressed for time so I will try to get the new highs update earlier than usual.

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