We’re looking at a perfect storm, in which spiking oil is leading to higher prices and therefore causing inflation, coupled with a financial crisis with your banks and lenders that has led to a near financial meltdown. With these two factors, the U.S. now faces a stagflationary environment where two unlikely bedfellows, inflation and a crippled economy team up together. That’s the long-term perspective that the U.S. economy is having to deal with. But in the short term, oil is dominating market direction, and once again we sold off hard today on rising oil prices. The market will continue to trade opposite to the price of oil, and until we get a breakdown in the commodity, stocks prices will continue to fall under incredible selling pressures.
Strategy for the next couple of days is as follows, yesterday we stated that trying to play a market bounce was too high of a risk, but now, with today’s unexpected sell-off, risk/reward ratio is much more favorable for the buyer. So, we’re going to look at creating a position in an ultra-long on any selling tomorrow.
This is a difficult market for creating positions to the short side. The sell-off is very fast and quick, and in order to profit off of it, one has to anticipate the selling rather than wait for confirmation. It’s a tough market so hang in there.
Here’s the NASDAQ and S&P Charts…
