The Wall Street Journal just posted a story on REIT valuations.

–The article states shares of REITs are trading at a premium to the value of their underlying assets for the first time since the height of the real-estate boom.

–Stock pickers believe that the valuations of REITs are a sign that these companies may be due for a correction.

–Goldman Sachs (GS) expects REITs to fall an additional 15% after the 10% sell-off in September.

Meanwhile, back at the office, Gold hit an all time high today and the S&P 500 closed +14.26 points or 1.37% at 1054.72.

The gold market is going to offer an obscene amount of trading opportunities, both long and short, in the years to come. The breakout today is big news.

Gold - Weekly Chart

Now, the big bad question is what to do from here. It has been my viewpoint that gold is vulnerable to a violent sell off–if there is a sudden risk aversion rotation into the US Dollar. Last night, there were rumors that oil traders would abandon the US dollar and attempt to denominate oil against a basket of currencies. These rumors make the rounds now and again, and they are always funny. Oil is not going to trade against anything else anytime soon. After all, if you were an oil trader, what would you like the contracts settled in? I prefer my oil settlements in dollars (just fine thanks). That said, not everyone thinks like I do. The rumors of oil re-denomination, a 25 bps rate hike in Australia and weakness in the greenback all pointed to the the new high in gold today.

I remain sidelined in the yellow metal for the moment, and it feels lonely. The move in gold is starting to be about momentum and trading the technicals–an endeavor which I have a decent track record.

The next chart speaks to the conspiracy theory of the day. Rumors of a derivative loss at Goldman Sachs (GS) between 9:30 and 10:00 AM PST. These rumors come up from time to time. I discussed my thoughts on Goldie in a prior post. I’ll leave them at that. Before you dismiss the Goldman oil rumors straight away, check out the price action. They traded in lockstep throughout the equity session. Conspiratorial as these rumors may be, the charts sure move together.

Goldman Sachs Vs. Oil

After the bell today, a slew of oil numbers were released. They all seemed inline except the distillate numbers, which were -2.9 million versus a flat estimate. Oil traded a tad firmer on the news.

Tomorrow before the bell we’ll see numbers out of Monsanto (MON) and Costco (COST). After the bell Alcoa (AA).

I am off to dinner with a vice cop turned lawyer turned trader. Reinvention is the mother of innovation. And the beat goes on.

The stock market showed strength Monday as we began the first full trading week of October. The S&P 500 closed +1.49% or +15.25 points at 1040.46. There were 5 advancers for every decliner on the NYSE. The Nasdaq Composite closed at 2068.15 or +.98% with 2.7 advancers for every decliner.

Oil showed weakness at the open of the pit session on the NYMEX at 9AM EST. After initially trading lower, it found support at the lows from Friday. It then showed strength for the remainder of the session and closed at $70.41–just below the high of Friday–off a low of $68.05.

Light Sweet Crude Oil - Pit Session

On Wednesday September 30th, Crude Oil and the U.S. Oil Fund ETF (USO) rallied strongly. Since that time, any attempt to take oil lower has been met with buyers. If a meaningful correction is in the cards in the S&P 500, the dollar needs to strengthen. The recent strength in oil has been due to dollar weakness. If oil is strong, the dollar is not. As the dollar weakens, stocks inflate. Oil is the key to the equity puzzle into the end of the year. For that reason, X is traveling around to oil rich nations and meeting with business leaders. Any data he gathers will be important to my year end positioning.

USO - Daily Chart

Gold closed higher by 1.5% in what smelled like a rally that was due to more than just softness in the greenback.

Gold Futures - Daily

I continue to see a deflationary–as opposed to inflationary–macroeconomic landscape and I am positioned accordingly.

Tomorrow is the William Blair Emerging Growth Stock Conference, ICSC/UBSW Chain Store Sales are due out at 7:45 EST–last 0.1%, Redbook Retail Sales at 8:55–last -2.3%.

After the bell this evening Mosaic (MOS) announced Q1 $0.23 versus $0.35 expected, revenues $1.50 billion versus $1.54 billion expected. Margins were 37% versus 52% year/year.

Research In Motion was notably weak today. After the bell we found out why: Bernstein initiated (RIMM) with an underperform rating and a $60 price target.

And the beat goes on.

Meanwhile, back at the office, my assistant Tonya just walked in and told me that she knows me better than I know myself, and that if I’d spend more time with her, she’d enlighten me on me. I told her she is not unlike many of the other women in my life—convinced of their numinous insight into my complexity. She then told me what to wear to several of my meetings this week, informed me that I need more sleep, and threatened to throw away my little paper phone book.

“You are the best, Tonya,” I laughed.

Then I asked why she hadn’t told me about the Greenspan comments.

“Because I don’t think they are a big deal.”

I told her I’d decide the significance of the remarks, and reminded her that I asked her to always tell me when Greenspan said anything.

“OK, fine,” she said. “Greenspan made comments on ABC’s “This Week.” He said Friday’s jobs report was awful. He is not in favor of additional stimulus. He finds it debatable how effective the current stimulus has been and is concerned about extended periods of unemployment as it erodes skills. Additionally, he sees Q3 GDP growth over 2.5%.”

“I know,” I told her.

“Well then why did you ask?”

Because I wanted to be sure we construed the information the same way.

“What is my schedule this week?” I asked.

“I haven’t decided yet,” she faded.

I turned to look and she was gone.

US stock futures sold off upon release of the nonfarm payrolls report at 8:30 AM EST this morning. After the gap lower open in the cash indices, the broad market measures recovered most of their early morning losses and traded in a range for the majority of the session. The S&P 500 ended lower by 4.64 points or .45% at 1025.21. After yesterday’s broad day of distribution, it was not surprising to see the market forces stabilize the price action. The question remains if this is just another retracement to be bought, or if we are seeing the beginning of a more meaningful sell-off. For the second week in a row, the S&P 500 closed lower–a situation not witnessed since the week of July 6th.

S&P 500 Weekly Chart

In addition to many other tells, I continue to keep my eye on the investment grade corporate bond market (LQD) which broke the uptrend that had been in place since early March.

LQD - Investment Grade Corporate Bonds

Next week, new data sets will zoom across the wires, prices will fluctuate, and fortunes will be made and lost.

All the while, the beat will go on.

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