S&P Jump Above 200-Day Average, Crude Hits New High (Again)

Today is Monday, June 1, 2009. It was a busy day for the financial markets. GM has declared Chapter 11 bankruptcy, doing what they should have done 7 months ago. The economic fascisation/socialization of the US continues as the American government takes a more than 60% stake in the "new General Motors". Chrysler is still in bankruptcy, whereas Ford, which has been smartly run by Mulally et. al., gaining market share, is doing relatively well, at least compared to the other two of the "Big Three",

Back in New York, the S&P 500 index, a major stock index of 500 companies, closed above 940, and above its 200-day moving average:



This is usually a bullish event, but don't be fooled too quickly. The rallies in November 2007 and May 2008 touched and briefly exceeded the 200-day moving average, but quickly sunk to new lows afterwards. This week and the rest of June will tell whether the move above the falling trend is sustainable.

If stocks quickly retreat after today, then the move is likely not sustained, and this rally has seen its top. If they continue to power upwards, then it will be a bullish sign. If those high levels can be sustained for more than a few weeks, then there will be a cyclical bull market which may last 2 to 5 years.

If the quick retreat comes, then be prepared to see the stock market sink back towards the lows. A double bottom with the second lowaround 700, or Dow 6800 would be a healthy move, and would confirm the end of the bear market. If the lows are broken through, then the bear market is far from over.

If the power-up comes, then it is likely the beginning of the end of a bear market phase of the secular bear market that we are currently in (2000-c. 2020), but either scenario is by no means the end of the depression we are currently in or the secular bear market. Remember that the Federal Reserve is printing money like maniacs, and that will cause some inflation when the recovery begins, and as the economy recovers and the velocity of money increases, then there is a probability of it spiraling into hyperinflation, which will create an economic collapse. My estimate for this is somewhere in the range of 2010-2013. And hyperinflation will crush any bull market.

Meanwhile, commodities are currently surging, with gold futures at 976 per ounce after hitting a high of 980 last week, and oil continuing its monster rally, now at 68.40 a barrel, up more than 100% since the low hit on Christmas Eve, and the highest level since November 2008.