In a nutshell here is where we are folks:
Scary times. The US dollar and bonds are getting hammered. Oil, silver, and gold are soaring as the Fed remains the only game in town that refuses to fight inflation by raising interest rates.
The ECB assured this last week with their rate hike. The obvious concern here is how long can the consumer hang in there as oil rises to $113 a barrel?
Things are really unstable at this point. I currently sit here mainly in cash and metals with a few short hedges.
I continue to believe that the ending (or extension) of QE2 is the next real inflection point for the markets. The last few weeks of price action have been nothing but a bunch of black box trading among the robots on Wall St.
There is nothing really to analyze when 70% of stocks are being held for seconds by the HFT guys. IMO, throw out the old T/A analysis for the most part because things have changed. The market is now a different animal.
Focus on bonds here. The 10 year is once again nearing 4%. If we hop over that level look out. If this happens than I expect that the Fed will pull liquidity and create a sell off in order to keep the bond market solvent. As a result, be careful shorting treasuries here. I will be increasing my short on treasuries on any hard sell off in stocks which artificially raises bond prices.
Also, if we get over 4% on treasuries and oil rises to $120 a barrel then its time to short the market. For now I sit on my hands.
Hope all is well with everyone and be careful out there!