Crude Factors

1) Global central bankers are lifting interest rates in unison, and slowly draining global liquidity.

2) Beijing is tightening its grip on the yuan money supply, leading to exaggerated fears of a hard landing for China's economy.

3) Crude oil traders unwound a $15 per barrel Iranian "war premium" after Europe's big-3 signaled a split from the Bush administration's campaign for UN economic sanctions against Iran.

4) Weaker crude oil prices triggered a rout in the gold and silver markets.

Gary Dorsch: http://safehaven.com/article-5916.htm

Crude: Search for Support

Crude: Accumulate closer to 58-60/ in the next two + week.

A sharp decline from 77 to 61 ---clearly catches the attention of both bull and bears. Given a bearish stance on crude, I am glad to see this decline. I must say as a rational investor this downside action is highly surprising.

Near-term recovery pending as stated last week but clearly buyers are stepping away and selling near-term bounces. At this stage, looking for consolidation with worst case scenario of $58.

One has to look at current levels closer to February 2006 and October 2005 levels to get a clearer long-term perspective.

Again crude did go from 20 – 70 and that move is still intact. I wonder if the summer mid-east conflict was a key contributor to a climbing irrational move closer to$77.

Perhaps, $68 is the key resistance level and $58-60 is an area of interest in the next two weeks.

Net/Net: Next two weeks I would stay away from this trade and find further downside extremes. Then one can step in and accmulate or bail out of a trap.

Commodity vs Stocks: 9-20-2006

Oil has declined over 20 % in the summer. Tech and Consumer related names have recovered signifgantly since the July lows. There has been a rotation into technology.

Tech, consumer and financials dominate the US markets and early signs of rotation out of commodities and into stocks.

Chart demonstrates recent sell of in Oil and Gold - and the recent diveragence. Woth a look:

Black: CRB VS SPX Red: Real Price SPX Blue: Real Price CRB Index

Small Cap : Ideas and methodology

Consolidating patterns: TIBX, USTI, CMTL, VSEA, SONS, BRCD, and MDCO.
Questions to ask.
Are we hoping for breakouts? Are these value traps.
Attractive risk/reward: extremes that can be exploited :

Momentum Extremes: CYMI, ATHR, WGO, RATE, BCEN, CENT, ECLP, KYPH, AMMD.
Questions to ask.
After acknowledging oversold weekly momentum; are these names all worth taking the risk/reward

Leadership Momentum: MW and PSSI

Questions to ask.
What are the risks of sticking with momentum names? Any reason

Early rotation to tech:

Further upside move in the markets clearly shown by advancers expanding from 57,318 to 176,522 in CBOE put/call data. Looking for pullbacks this week in tech/retail related themes.

Coming into September, I was looking for further upside move in the VIX - but volatility has been tame in this upside move.

Clearly, the fed speak day will offer further uncertainty and volatility. A decline in VIX from 14-11 is visible in near-term charts.

CHART: Last week clearly tech rally continues exhibited by acceleration in semis. OSX - sluggish performance continues and this inverse correlation is shown in the above charts.
Rotation into tech out of commodity related names.

Decline in crude: a theme which has worked and due for a near-term recovery.