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Reflation Supported By Stocks, Commodities, and Crude Oil

Stock-Markets / Financial Markets 2009 Oct 16, 2009 - 03:21 AM GMT

By: Chris_Ciovacco

Stock-Markets

Best Financial Markets Analysis ArticleLast week in Gold, Recessions, Bonds, and 1987, we stated the following:

  • A major objective of all the money printing, government intervention, and low interest rates is to create positive inflation, which includes asset price inflation.
  • Asset inflation helps heal sick balance sheets and repairs a portion of the lost "wealth effect".
  • When gold lies dormant, it means reflation is not working all that well in the minds of market participants. Gold’s recent breakout may indicate that in the minds of market particiapants reflation of assets is working. That mind set results from the fear of future inflation caused by money printing, intervention, etc.

Crude oil also can lend support to the relation case as market participants look for ways to protect purchasing power and profit from slowly improving fundamentals. Regardless of whether or not crude oil can hold the recent breakout as of the close Friday (10/15/09), the primary trend for oil will remain up.

The CRB Index is a basket of commodities including, but not limited to, copper, sugar, heating oil, wheat, live cattle, crude oil, platinum, natural gas, and soybeans. The CRB Index also experienced a breakout this week contributing to bullish reflation trends evident across many markets.

Stock Market Remains Healthy

On Friday, the S&P 500 will be trying to hold above its 89-week moving average (green line in chart below). As of Thursday’s close the 89-week stood at 1,066.83. As you can see in the spring of 2008, the 89-week acted as resistance. A sustained break above 1,066 would provide some support for the current bull market (resistance becomes support).

Expecting More Of The Same Also Involves Risk Management

We often say:

We will expect to see more of the same (bullish trends, higher highs, and normal corrections), until we see significant evidence to the contrary.

By Chris Ciovacco
Ciovacco Capital Management

    Copyright (C) 2009 Ciovacco Capital Management, LLC All Rights Reserved.

    Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com

    Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. As a registered investment advisor, CCM helps individual investors, large & small; achieve improved investment results via independent research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions. When looking at money managers in Atlanta, take a hard look at CCM.

    All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

Chris Ciovacco Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Victor
16 Oct 09, 09:45
Stock Market Remains Healthy

confused.

A few months ago you wrote

Highest Probability – New lows / continuation of bear market.

Moderate Probability – Cyclical bull – higher highs – followed by retests or new lows.

Lowest Probability – A sustainable bull market (secular).


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