Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20
Facebook (FB) AI Mega-trend Tech Stocks Investing 2020 - 10th Feb 20
The US Constitution IS the Crisis - 10th Feb 20
Stock Market Correction Continues - 10th Feb 20
Useful Tips for Becoming a Better Man - 10th Feb 20
Will CoronaVirus Pandemic Trigger a Stocks Bear Market 2020? Part1 - 9th Feb 20
Could Silver Break-out like it did in 2011? - 9th Feb 20
The End of the Global Economy - 9th Feb 20
Fed to Stimulate in Any Crisis; Don’t Let Short-Term Events Bother You - 9th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Higher Prices Here to Stay

Economics / Inflation May 27, 2008 - 12:41 PM GMT

By: Paul_J_Nolte

Economics Absent big economic news, a few rumors of buyouts affecting select stocks, the markets were focused on energy prices and their new ascent to dizzying heights. Cuts of SUV production by Ford and reports of sales up over 20% of hybrid vehicles (not to mention articles about motorized scooters) indicate consumers are beginning to seriously look at changing their driving habits. While conservation remains a couple of years away, the fact that much of the discussion has finally hit the table is a good start.


The financial markets are fretting about the impact upon the consumer, as they are not getting the matching increases in pay to cover their transportation cost increases – meaning their spending pie is getting smaller, impacting an ever growing portion of the economy. Investor sentiment (as measured by Investor's Intelligence) has steadily increased from just over 30 to over 47, the highest levels since the beginning of the year (when the market was trading at roughly current levels). Next week reports on home sales, sentiment and income/consumption should get plenty of ink and help color the picture of how stressed the consumer is over the rising food/energy prices – the story is not yet complete.

Monday started as a house of fire, as stocks traded well over the 200-day average discussed here last week. However those levels could not be maintained and by the end of the week, it looks as though the failure is triggering a correction of the two-month rally that will initially target the 1350 level on the SP500 – only 2% lower than Friday's close. Many of our short-term indicators have rolled over and could take a couple of weeks to set themselves up for a summer rally that could begin around July 4th. The key will be watching for deterioration in the longer-term data.

While the decline in stocks was large, the market internals matched that of early April. It will be important for stocks to maintain the 1350 level, as a breach of those levels could open the door for another retest of the Jan/March lows of 1270. The Fed has indicated that they are not likely to help out markets with additional rate cuts, so investors will need the assistance of better economic and earnings reports to bolster the next leg higher. If the markets do breakdown, the recent rally may be nothing more than a short-term rally within a long-term downtrend that has yet to be completed. The next few weeks will be key to the direction of stocks.

The bond market has been watching the commodity market closely, looking for signs of some breaks in any of the commodity markets. By the end of the week, commodities were modestly higher, interest rates higher for short-term bonds, a bit lower for long-term bonds. Over the past two months, long-term rates have added nearly half a point to yields, indicating that there is some fear in the bond market about persistently higher commodity prices. Our bond model continues to point to still higher rates over the near term, indicating the commodity rise has not yet finished playing out. Save for the past month, commodity prices have been rising at an annual rate of between 10-30% since 4q02. Now rising at 30%+, we think we are entering a blow-off phase that will eventually bring prices lower.

By Paul J. Nolte CFA
http://www.hinsdaleassociates.com
mailto:pnolte@hinsdaleassociates.com

Copyright © 2008 Paul J. Nolte - All Rights Reserved.
Paul J Nolte is Director of Investments at Hinsdale Associates of Hinsdale. His qualifications include : Chartered Financial Analyst (CFA) , and a Member Investment Analyst Society of Chicago.

Disclaimer - The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

Paul J. Nolte Archive

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


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules