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11/08/2010

 General:

  • There's not much to say as over-extended turns to even more over-extended. The economic points this week is what the bets are on, soWED there's the October US Import Prices, THURS is the beginning of the G20 meetings, and FRI is part II of G20 & October Chinese Inflation. These events should generate some news to rally the dollar and squeeze out the consensus dollar-short trade, and with the strong inverse correlation between the S&P500 and the US Dollar, this should result in a sharp swift market correction. I don't think this will be the intermediate top of this market, but the size and duration of the correction will determine that in the end. If the decline is deep and the USD gains strength, this could be the top. However, it is more likely that after the drop, the market will rally to a newer high and that may be intermediate term top. 
  • By the official data and ShadowGovernmentStats, Inflation has been declining in 2010. Unemployment has been rising (NYSEMKT:SGS), or flat-to-slightly-declining (official & consensus). Money supply has been increasing by all measures. GDP growth has been negative recently (SGS) or close to +2%YoY (official). Consumer confidence is ~flat(UMI) to declining(Conference Board). The bottom line is economic prospects in the US looks shaky because the rest of the global economy has picked up significantly and already is beginning to slow (many foreign countries have been raising interest rates recently). For America to start strong growth now will be an uphill battle to put it lightly. 

 

  • Also, Web Bot  predicts a financial or stock market related crisis event Nov 5-14, so take that for what you will.

 

Short-term outlook:

  • USD up, SPX down, XLK down, EUR down


Disclosure: Short SH, Short XLK, Long EUO