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September 13, 2005

End of the post-K bump, Tues., September 13, 2005, 6:22 AM

This morning, equity prices in Europe as well as the DOW (-30) and NDQ (-3.60) futures are weak. There are indications that traders fear a higher PPI trend this morning, with the result being that the FED will continue its policy of measured tightening.

My take is that the post-Katrina bump is coming to an end.

The energy complex (crude oil, natural gas, gasoline) is weaker this morning, but the prices are still high enough to cause inordinate problems for corporations and individuals all over the world.

As you know, it is not just the U.S. that is having problems. Europe is paying the equivalent of $8 a gallon for gasoline, and Canada about $4.

The worry of traders on the bull side of equity prices is that the energy complex stays too highly priced, causing more inflation than the FED will permit.

So the FED fears inflation, and traders fear economic slowdown, increases in interest rates, and lower equity prices. I think everybody is going to realize their fears.

From a stochastics RSI perspective, the post-Katrina bump has already come to an end, starting mid-day Friday. Depending on the inflation outlook following this week's economic data and next week's FOMC decision, which I expect to be inflation-oriented, I believe that broad equity prices will fall significantly from here.

Posted by Posted by Bill Cara on September 13, 2005 06:22:07 AM | Category: Cara Today in the Market