January 21, 2004

Rick Santelli of CNBC fame said gold and silver were up because the dollar was down and not because oil was up as some others on the floor were postulating. Oh, but oil had a lot to do with it. We have seen this before. Oil up equals economic weakness, keeps the fed at bay both of which weaken the dollar , whcih helps the metals. Gold was up almost $5 and gold stocks also had a good day inspite of the beating the overall market took. The dollar fell almost a cent against the Euro. This oil dollar relationship seems to kick in when oil is over $47.50 a barrel. Similar to the stock market the dollar seems to ignore oil when we are under that level.

I thuink the catalyst for stocks getting hammered today was oil. The news from GE and UTX was good , but it was history. Oil getting within spitting distance of $50 was the new information, or at least the newer information. Saturday Walmart announces weekly sales trends and Friday we get GDP which could be lower than expected to due our huge trade deficit.. That will be what to watch next week along with oil prices and the technicals, as we are at critical support 1160-1170 in the S&P. Before the big election rally, 1160 was the high, tested in Jan, Feb, and Mar. and 1170 was the the first reaction closing low of the the fall rally. Finally, option expirations in the past have often marked either the high or low for the month.