Commodity and Equity Bifurcation Continues Towards Plaid

The markets have gone plaid.  We had horrible Chinese and German flash PMI data come out this morning which kept commodity prices under duress all day. Copper continues its trek towards $3.00 per lb.  Silver broke back below $23 after challenging $24 yesterday. The grain complex was whacked across the board in late session trading — corn and soybeans were both sold without prejudice.  Softs like coffee and sugar had bad days as well.  German and Chinese demand numbers are bad.  U.S. housing data released this morning was awful as well, with new home sales at a 9 month low and ASP’s dropping as well.

So, what do stocks do? They rally hard, of course.  When there is a silly amount of liquidity sloshing around and an entire generation of Japanese investors sending their capital overseas as fast as the lifeboats from the Titanic can carry them away from the Ring of Fire there is little that can be done to stop the short-squeezing carnage.

Not that Bernanke and The Fed want that carnage to stop, of course.  I mean, how else is the cash-strapped U.S. consumer going to keep lining the pockets of the global banking elite  funding the recovery if they don’t borrow against their 401k accounts to pay for food?  And they can only do that if equities and bonds continue to rise in price against falling commodity prices.  Only oil acted like a risk-on asset rising about $1 as either WTI or Brent Crude.

Ain’t the new normal grand?

The S&P 500 closed up 16.28 to 1578.28 while the Dow Jones Industrial Average pushed to 14719.46, up 152.29.

About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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