Starting back in February this year I began writing about the impending "stagflation crisis". OK, I know we're all tired of the crisis-syndrome right now but we needed a new crisis to worry about. After all, the housing crisis and the credit crisis are old news. This week's data from the US and Eurozone have showed just that...slow growth and increased costs. The energy and food price burdens can no longer be pushed aside or ingorned and it is looking like they are here to stay for a long time. Even if the inflated price of energy comes back down to actual production, processing and shipping costs (around $80/barrel for crude) it is unlikely to change the equasion before the end of Q1 2009 on a CPI or wholesale level.
Interestingly, last week's US retail sales numbers were somewhat positive and may be a result of stimulous or just the relentless spending habits of US consumers going down swinging. We will need at least two more readings on that to make a final judgement.
Look for currency markets to follow energy as we have moved into a sideways pattern on the majors. Short-term highs in Aussie and Yen will likely result in some consolodation until the next major news/release cycle. This is an ideal time to trade the technicals. Stay tuned for tonights ProSticks and Ichimoku reports.
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