We finally got a bounce today. It was an oversold rally. Breadth started out strong but finished the day only 57 issues ahead. A late rally by oil to 49.60 in the front contract cut the stock rally in half, as measured by the S&P.
Bonds did the oppisite and had an overbought selloff. The 20yr TIPS auction didn't really go that well, bid to cover was weak. Consumer confidence readings came in a little higher than expected.
Higher rates helped the dollar as well as Germany downgrading her growth prospects for the 3rd time in 9 months to 1.6% GDP. Dollar strength knocked gold down over $5.
Although, we've held the support, first time down that I've talked about the last few days, and we are above the weekly uptrend line that comes in at around 1150 on the S&P, I think the trading strategy should be to sell rallies, as long as oil is above 47.50, with 1200 as a stop.
It is going to be hard for gold stocks and gold to rally as the Fed raises rates and current levels of inflation are shrugged off. Better buying opportunities may lay down the road. I feel strongly though that as global economic activity weakens, central banks will be under enormous pressure to monetize the run-up in oil prices and to cheapen their currencies to protect their export markets . When they begin, it will be time to grab the shares and metals with both hands. That time is not yet here.
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