We are making a couple of observations about our IDW that we think suggest the re-flation play is “rolling over.”

• The rate of increase is clearly in decline.
• The inflation play has been in decline since the start of 2010 and if history is prologue to the future, the equity markets and thus most likely the IDW will be down for the year.
• Our moving average intensity reading has fallen from an optimum +3 at the start of 2010 to the mildest of inflationary reading, that being +1.  In other words, the momentum of all but the longest term moving averages are no longer positive (inflationary).
• Gold is holding up extremely well, vis-à-vis a basket of all manner of commodities that being the Rogers Raw Materials Fund. That suggests the paper market is not about to come back at the expense of gold. 

As this was being written at about 1:00 NY time, the Dow was down more than 54 points. The plunge protection team must have been at work lately in trying to con average people to stay in the stock market, because in something like 20 of the last 22 first day-of-the-week trading sessions, stocks have gone up. That kind of manipulation clearly makes it more difficult to short this market. If you are inclined to trade, you might want to consider shorting by using the ProShares Short S&P 500 (symbol – SH) on Tuesdays and then getting out by the end of the week. The trend is clearly lower for these stocks. We want to preserve capital as much as possible so we can pick up a few points on down days to offset losses from our stocks.