Saturday, May 16, 2009

Major Correction Ahead?????

The Bulls have fought a great fight lately and I think that we could be headed higher---BUT WE HAVE SOME MAJOR ROADBLOCKS. It appears that we are headed to the land of more government programs like nationalized healthcare. There are only 2 ways to pay for it 1) Raise Taxes 2)Monetize the Debt. Raising taxes at this juncture could put our economy into a tailspin from which we might never recover. Monetizing the debt will certainly---as if it is not already certain--cause inflation to spike out of control.

So what do investors and traders do? Right now we have to watch the tape. The market is acting as if it wants to hold up and I think until we see some signs of weakness we should be careful about shorting. If we ever turn around and reverse below 790 on the S&P this thing could get ugly.

See what David Tice had to say a couple of weeks ago.

The massive government spending was designed to kick-start the economy. It may kick start inflation and give a false sense of security to many. We tend to have short memories as consumers and if we crank up the spending again at the first sign of recovery, we are going to create another bubble that we be mega-painful when we finally see it burst--and it will. Quantitative easing has created many a bubble and Alan Greenspan used more of it each time a bubble burst. We are now down to the last chance in my opinion. We must bite the bullet and let the capitalistic system run. Yes it will be painful, Yes there will be bankruptcies, Yes times will be hard for many... But if we don't do the right things now we are going to see our markets crash. If we raise taxes and hamstring the job creators we may not see these levels in our equity markets for many many years. If we aren't careful, the street will be full of bears and they will change the name of Wall Street to Bear Street.

So what happens? I will stay tuned and watch for the bulls as long as we stay above 790 on the S&P and as long as we don't hear of a plan to hike taxes---but if either occur, I am running for cover. FCX has pulled back nicely and just as I said you are able to buy it cheaper. I am hoping it will pull back to about $37. I am still watching ICE and hope they can close over $103.

I love natural gas right here and I think I might even be able to get it a little cheaper. There is no massive rush to push it up right now, but it sure presents a great long term opportunity if it pulls back a little more.
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