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10/05/2005
Broken Trends, by Victor Niederhoffer

Many trends seem to have been broken this week. On Monday, bonds fell to a two month low at 113.24, just a few ticks above its 5 month low of 113 1/2 and the Eurodollar fell below 1.20 to $1.19 for the first time since since July, reaching its lowest level since December of 2003.

Crude oil fell to 63 before closing at 63.90, the lowest level since Aug 5. On Tuesday, November soybeans closed at 562,  down 19.5 cents, and within striking distance of their February 2005 low. Corn is in similar 1 3/4 year-low territory.

Stocks have shown a beautiful symmetry, going up from 1216 on Sept. 21 to 1232 on Oct. 3, and then down to 1216 again in one day -- today. The decline in S&P today from 1232 at 230 to 1224 at 3 pm was one of those disruptive large moves that happens very rarely. Indeed, only 13 this big since the new century.

However, it's not chance that all these down moves occurred in conjunction with each other. They signal, they lead, they pilot fish. Nor is it chance that the market would go down on Dallas Fed Richard Fisher's remark that the inflation rate is at the upper end of the Fed's tolerance zone on a day when all these deflationary lows were being set. Talk about being behind the form.

Of course it's always so much easier to describe than to predict. But we can count. 

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