Monday August 9, 2010
Note this is the weekly chart form 2008. The bars are the price of oil, gold is copperand brown is lumber. At bottom is the SPX. That year commodities sprinted to new highs in July. Our newspaper column at the time warned those in the Oil Patch to start hedging. Oh well...All three quickly lost their luster so to speak crashing into the fall. But the highs preceded the fall in stocks by about 2.5 months. We drew the blue line in the middle from the top of commodities to the start of the waterfall decline in stocks. Hmm, any similairty to now I wonder?
The chart starts about the same point and uses daily ratehr than weekly bars as, darn it, stockcharts is still not capable of projecting the rest of the year for us. Frankly one would not expect the same exhuberance and it is not present. This time Copper has joined WTIC but lumber has not joined in. This late in the recession,the word is out on housing and lumber is not rallying. However, WTIC and copper have. this is complete through last Friday and one can see the drop in WTIC. We are not experiencing the same giddy heights of price specualtion becasue the economy is just not in that same great condition. Will lightning strike twice, are new highs in commodity prices, but lower than the previous high, a prelude to another stock sell off? The best answer of course is to bookmark Market Perspectives and we will keep you posted. However we think it is relevant to point out that commodiy prices can and do peak as a precursor to a stock market sell off.
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