New world financial system based on multiple currencies ?

On Bloomberg:

May 21 (Bloomberg) -- Soaring oil prices may cause an energy crisis that will eventually lead to a new world financial system based on multiple currencies instead of the U.S. dollar, according to a Rice University study.

Rising inflation fed largely by oil-producing countries will force Western governments to tighten monetary policies, undermining export-driven economies in China and India, according to a study released by the Houston-based university's Institute for Public Policy. That would undercut energy demand, ending cheap credit worldwide that is fueled by so-called petrodollars and further undermining the global economy.

``We think that energy markets may play an important role in bringing about a financial crisis that may transform the global financial system,'' the study's authors wrote. The U.S. dollar's status ``would likely come to an end.''

Trading Update

I exited my long position in SSO this morning at high 77s. All my indicators show the market is looking for a pullback. I entered SDS in two lots- one at 53.70 and next lot at 54.4. The timing of the second lot purchase was not very good. But I am very happy with the fact that I exited the long position at the right time and entered the first lot of market short SDS at a very good time.

As far as future trading is considered, tomorrow will provide a confirmation in either direction. But the bias is more towards the downside though.

AAPL has not been able to break 190s as I had earlier mentioned.

Gold continues to be strong. Made a BO above down trendline. US Dollar is hanging onto support.

S&P 500 break out & Commodities

After basically hovering near the down trendline for several days, the S&P 500 finally broke out.
Check how the down trendline acted as a huge resistance and also corresponded to the 50% FIB level. Yesterday, we had an inverted hammer (bears would call ) or shooting star(as bulls would call). Today's action negated yesterday's candle and is setting the tone for higher prices.

-We broke thru a big downtrendline from last Oct.
- Got above the 50% Fibonacci level.
- Today's candle travelled in the tail of yesterday's candle

I am playing this market long using the SSO(ultra-long S&P500). Picked in the morning around 12.

Also, I believe Oil is a bit tired here and would start resting. I sold most of my commodity stock holdings. Was playing long the commodities since March/April. Some of the stocks I played were:
-Steel- X, AKS
-Solars- SOL, FSLR
-Oil- BZP
-Metals- MEA
-Agriculture- AGU, MOS, FEED

If you pull up the charts of these stocks, you would see they had some very massive runs. I am just happy to be a part of it.

Still holding my GLD long which I picked on May 2 near 84.5 (corresponding to about 840s). I would like to see if GLD has the power to BO above the downtrendline.

Warren Buffett on US Dollar

From Bloomberg:

May 3 (Bloomberg) -- Billionaire Warren Buffett, the chief executive officer of Berkshire Hathaway Inc., said he thought the U.S. dollar will keep weakening against other currencies.

If Buffett, ``landed from Mars today with a billion of Mars dollars, or whatever they call them on Mars, and I was thinking about where to put my money,'' he wouldn't put it all in the U.S. currency, he said today during a question-and-answer session at Omaha, Nebraska-based Berkshire's annual shareholder meeting.

Buffett, 77, has made investments with the assumption the U.S. dollar will weaken since at least 2002, first with direct bets against the currency, and later with his first purchase of a non-U.S. company.

``The U.S. is going to continue to follow policies that make the dollar weaker,'' Buffett said.

Americans' preference for foreign goods causes the country to send about $2 billion in ``IOUs'' and assets overseas every day, putting pressure on the dollar, Buffett said in his annual letter to shareholders.

He also said today that he feels ``no need'' to hedge against currency risk when buying large companies outside the U.S.

Chart of S&P 500- Where are we now?

Last update was on April 21, 2008. Check that post.
Now, we are hitting the upper trendline. This is definitely not the best time to be playing on the long side. When the media is celebrating the upside of the market, I have taken a cautious stand. I have let go most of my longs and picked up some shorts. Some of the best shorts are listed here.
These stocks should perform worse than the market. They had very BAD REACTIONS to their earnings reports. The Dollar has moved above the dotted blue line. But OIL showed a nice move even with the upward move of the Dollar. This should get resolved in the coming week.

JPMorgan says no near end to financial crisis: report

Such news get published in International papers.

From Reuters:
FRANKFURT (Reuters) - JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) does not expect the U.S. financial crisis to end soon and will remain very cautious, its top executive said in comments published by a German weekly on Saturday.

"We can only speculate how deep and how long the recession in the United States will really be and how that in turn will impact banks," James Dimon told "Welt am Sonntag".

"But we are not done with the crisis for a long time," Dimon said, adding that it was not the company's job to make bets on the future.

April Job numbers by sector

As listed on CNBC:

Total change in non-farm payroll = - 20,000

• Private Sector = -29,000
• Natural Resources & Mining = -3,000
• Construction = -61,000
• Manufacturing = -46,000
• Services = +81,000
• Wholesale Trade = -10,600
• Retail Trade = -26,800
• Transportation = +1,200
• Utilities = Unch
• Information & Media = -2,000
• Financial Svcs & Real Estate = +3,000
• Professional & Business Svcs = +39,000
• Education & Health Svcs = +52,000
• Leisure = +18,000
• Government = +9,000

Construction and Manufacturing continues taking the heavy toll.
Educational and health services shows good improvements.