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Here's one vote for a Double-Dip Recession!

I keep hearing the Federal Reserve officials continue to talk about how the recovery is slow but is still happening. Each of their speeches seem to act like they are trying to patch up the holes in the investor sentiment by telling them that everything is okay out there.

I guess I mainly have one big problem with that. If that's the case and the U.S. and global economy is slowly recovering, then why is the price of oil falling rapidly? If there is a global expansion like the Fed and G-20 seem to indicate, then oil should still be holding its uptrend or even holding at a high range.

However, if you look at the chart below, you can see that oil peaked around $87 a barrel and broke its uptrend line and left its major moving averages behind by the time oil broke $75 a barrel. Now the uptrend in oil has been broken by almost any trending metric you can use (50 day SMA, 200 day SMA or its uptrend line).

Commodities Don't Lie!

Click on the chart above to enlarge it.

So that's my main "beef" with this whole notion that everything  is all "peachy" out there and everything is fine. I don't think everyone is out there holding hands in a circle and singing just yet.

In fact, as a "bonus", I'd say the price of gold agrees with me too. If the U.S. and global economy is doing just fine, then why is gold running up to $1,200 and more at times and holding at such high levels?

If everything is so good, there should be no need for such high gold prices if the fears are low out there.

So definitely pay attention to what the Fed officials are saying BUT pay even more attention to what commodities are doing. They will tell the "true story" on the demand for these "nuts and bolts" that expand our economy (GDP).

If the CRB index and oil (in particular) isn't rising...you can talk to me until you're blue in the face about how good things are doing out there...but I'm not buying it if it doesn't show up in the demand for commodities.

Sean Hyman
Editor of The Currency Cross Trader
www.worldcurrencywatch.com

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