Monday, March 9, 2009

Rally Coming? Inflation Is

I am amazed at how many bloggers have been predicting a rally every day. I must admit that I have been amazed that we haven't had a decent bounce, but many look like they are hoping that if they call it every day it will eventually happen. That said, I think we are going to see a rally this week. Several of the doom sayers are opining that we are going to make it through this crisis. To now we have basically heard that things are over and we will never be the same---so a well it will take us 10 years to work our way out of it prediction is a good one---at least we have some hope.

It looks like I am going to miss my gold $1250 by the end of March call, but I still am sure that commodities prices are going up. Copper seems to be making a good base and oil is quietly doing the same thing. Don't forget that a simple consolidation could become a huge breakout if the dollar begins to fall. Are we going to be tested on the international stage? You bet we are and tensions between the U.S. and China will hurt the dollar if only psychologically. The dollar does not need much encouragement to start a downward spiral. Many are going to be surprised by the pace of the decline once the dollar begins its fall. When that happens, and we see reduced inventories of oil as a result of the OPEC production cuts we are going to be in trouble. We have taken domestic oil and gas production off line and while this may be a simple analysis---you can take it off line faster than you can put it back on. During the oil crisis last summer, I remember wondering how demand was holding up in the face of rising prices---and was it ever. We will be back in that place again soon---and it is scary.

I have to brag about my short call from late last week. AVAV was down over a dollar during the regular session today and after some disappointing numbers, the stock was down about $7 during after hours trade.

Seriously, I am expecting a rally tomorrow---barring some kind of dumb announcement. Even though I don't think you can assign a fair multiple to the S&P because of the cloudy earnings, I believe that many are convinced it is cheap. The overseas markets are doing well at this moment and the futures are looking strong.

I am looking at LFT for a trade. I like the stock from a technical perspective and think it will move into the $19.70 range soon. I am looking for the S&P to close over 700 by the end of this week and this stock will benefit if it does.
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