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A Trepidatious Trader


For the first time since 2009, earnings growth for S&P companies has turned negative, which is a significant warning sign.

Crude oil has coiled itself tightly and a significant move appears imminent. An upside breakout bodes well for a bullish bias toward (and a re-test of) 2008 highs. Remember that commodity timing leads equity price. If you are in the camp that believes that the Fed will be successful in creating the reflation trade, as it was post WWII, crude will be a guide higher. A break of $100 per barrel will likely set in motion a run to $150-160 in WTI. Below $80 and we will likely have the deflation case diagnosed.

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In August, I highlighted the looming breakout in gold. Seeing the reaction in the headlines to MBS purchasing and an extension to keeping rates substantially low by the Fed, gold has broken out of a large consolidation zone. My target remains $1900, which is where a potential double top would present itself. Interesting to note the shift in gold. Once labeled the "fear trade," that is no more. Gold has traded inline with equities for the better part of a year and should be viewed as a risk on - risk off vehicle. Thus far, it is leading the risk on trade.

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No positions in stocks mentioned.

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