Reuters: U.S. still looking for market plunge cause

So much is happening today I can think of about five different headlines and the one that I used above is probably not the most important.  A couple of the other headlines that I considered were “Gold Blowoff”, “Deflation Lurking”, “Europe not Monetizing the Fiasco”. 

So lets look at the three headlines that I did not use as they are really tied into one scenario.  If one looks back at the previous nominal Gold high it was about concerns over government bailouts and impending inflation.  Subsequently none of that really ignited, and gold retreated, now the European bailout has the gold bugs excited again.  I happen to believe that behind the scenes Bernanke had a part in the European plan and that it is designed around guarantees like the U.S. approach, rather than outright monetizing a giveaway.  That is why we did not see inflation roar after the massive U.S. effort.  I do have long-term concerns but things are not close to bad enough for the authorities to start monetizing the situation.

As I LOOK over what we have been saying since last August a few things jump out and still hold:

1) Deflation is core issue  ( recent commodity and oil prices are an indication).

2) Stocks were becoming overpriced since the October highs were breached.

3)China is headed for trouble (look at FXI prices since last summer)

4) Dollar is headed higher

5) Gold is a sell at this point in the cycle (wrong so far, but not for long)