Reply #5: Is Street Hoping For $50 Crude? [View All]

http://www.321gold.com/editorials/ackerman/current.html

With the price of crude strongly on the rise again Tuesday, the stock market somehow eked out a modest gain. The Dow Industrials tacked on 14 points, while the S&Ps rose slightly. A Venutian monitoring Wall Street might have come away thinking that investors were not much concerned about the skyward drift of energy prices. The July contract was up nearly $2 over Friday's close to a new record high of 42.45. Would the alien have guessed that every additional penny at the pump adds $1 billion to U.S. transportation costs. Because I wasn't tuned to the bull marketing channel, I don't know how the talking heads might have imparted a bullish spin to yesterday's developments in the NYMEX pits. But new all-time-highs in the price of oil doesn't sound like bullish news to me. Quite the contrary.

The hidden-pivot runes are saying that crude oil may be about to get even pricier. Basis the July contract, I've projected a minimum 43.80 for the minor bull cycle. But, as I've explained, even a slight overshoot would produce a new target of 47.18. Venutians, take note: If Tuesday's surge in energy prices produced a 14-point gain in the Dow, you can realistically dial in further gains of about 40 points, assuming the July NYMEX contract is bound for the higher of my targets. Then again, applying the quintessentially post-modern theory that too much of a bad thing is never enough, perhaps $47 crude would produce an even larger percentage gain in the Dow. Here's your headline, news editors: "Dow Soars on Hopes for $50 Oil."

The Dumb Money

While black gold may have been off and running yesterday, yellow gold barely got out of the starting gate. Buyers of the metal and of mining shares got fleeced on a deceptively strong opening. When such opening-hour shenanigans greet the new week it is often a sign of further weakness to follow, since Monday-morning market orders lucidly reveal what the weakest players are thinking and doing. Not to take anything away from Barron's, but the Smart Money got that way by fading the dumb money on Monday mornings.

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