Posted August 3, 2011 8:00 p.m. ET (10:00 a.m. AET) on Trading Diary.
Markets are approaching the tipping point at which they will confirm a primary down-trend. The probability of a bear market is around 75 percent, with 80 about as high as you can get at a turning point. As highlighted in May, every significant spike in crude oil prices in the last 50 years has been followed by a recession — and the current spike is likely to prove no different. Ben Bernanke will modestly decline to take the credit, but the initial groundwork for higher oil prices was laid by QEII. Prices had started to rise well before the conflict in Libya.
Investor flight to safety is clearly signaled by the sharp fall in 10-year treasury yields.