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The Trend Turning Down

We are at a critical moment for the following market areas: US Dollar, Commodity Prices and US Equities.  On Friday  the US Dollar moved up sharply with the increased sovereign risk in Greece.  At the same time, the Euro currency fell sharply and is now down over 800 points since the high in November.  The rise in the US Dollar is now disrupting the dollar carry trade which resulted in a big rise in commodity prices in 2009.  The March DX futures this am is trading around 77.70 and is on its way to 7900-7925.
Last week we saw two commodity areas show significant weakness.   The US grain prices fell sharply based on the USDA Crop report and the energy did the same.  The US crude price fell $ 7.5 last week from a recent high of $85.  Fundamentally the energy market has adequate supplies and temperatures rose throughout the US snapping the cold spot.  We are also seeing weakness in precious metal markets and the gold market is off over $100 from its recent high.
At the same time US Stocks Futures were down over 1% on Friday.  This came after positive earning reports with Intel and JPM.  There was good downside volume and four stock were down for every advancing stock. US stocks have shown weakening A/D(Advance/Decline) figures during the past month.  Recently a number of technical indicators reached extreme levels.  The Put/Call ratio earlier last week fell to its lowest level in over a year while the Investor Intelligence Survey showed over 72% bullishness.  This was the highest level in 3 years.  Certainly the yellow caution light is flashing.  Another indicator shows that US equities have rallied 61.8% since its low last March.   This is an important Fibonacci retracement level and can point to a major turning point.  The next critical level in the S&P level is the 1100-1110 area and if reached will point to a signifcant correction.



 












 

 







Disclosure: We have positions in the following markets: Feb 1125 Emini puts, long March DX Futures and shorts in March Silver.