Friday October 26, 2007
By Mike Paulenoff MPTrader.com
Thinking outloud: Frankly, a sharply falling dollar coupled with sharply rising (historic) oil prices amidst credit and housing crises would not be considered my ideal background for a roaring bull market in equities.
On the other hand, that is exactly the backdrop, isn't it? And after I stop scratching my head, I realize that a huge amount of petro dollars and euro/$'s are being cycled back into purchases of U.S. assets... from equities to businesses to real estate. That is where the money is coming from for the most part.
Didn't that happen in the late 1980's, when the roaring but inflated Japanese economy produced the buyers of cheap U.S. assets-- right at the top? Remember Pebble Beach and the Rockefeller Plaza "deals?"
There is a lesson here somewhere.
While on the subject of crude oil, needless to say the surge in prices over the last two sessions, from 86.50 to 92.22, has surprised me. Let's notice, though, that today's high once again is not confirmed by daily RSI momentum, which is a second warning signal that the intermdiate-term uptrend in oil prices is running out of "fuel."
Can prices continue higher? Sure