Midweek Market Update – March 25th
With gold (briefly) exceeding $1,200 today, we’ve had a little more strength from this “counter-trend” bounce than I originally expected ($1,180-$1,200 range for a top). But that should not distract us from where gold’s Cycle is projecting itself, unless of course the bulls surprise us here and push gold over the $1,224 line. The trend-line I drew over a week ago has hit and the current Cycle timing and position is absolutely perfect for the bears to attack gold one more time. This is at least what I’ve been waiting for and expecting. Continue reading
Keep On Rolling
It’s ironic, and symptomatic of the bubble, that the economy is supposedly doing so well that world stock markets are at all-time highs…yet the FED cannot raise rates by even 0.25%. After a record 5 years of zero interest rates and one of the largest speculative bull markets in history, the FED is tacitly acknowledging that it has lost control. It has created an unsustainable bubble that it is not prepared, willing, or capable of deflating. The FED should be credited with staving off a depression, but its arrogant belief that it can micro-steward the economy through every twist and turn has resulted in equities being pushed uncontrollably to the upside. Continue reading
Midweek Market Update – March 18th
Today’s FOMC was bullish for most assets, as the FED indicated that it was just not ready to beginning raising rates. The FED’s ZIRP policy, designed primarily to encourage lending and speculative asset purchases, is clearly here to stay for a while longer. But for gold, this policy has done little for it over the past 3 years, as speculative money is much more concerned with chasing equity and bond markets higher.
Which is why we should be careful here and to avoid reading into a solitary $20 move on a bullish FOMC day. For starters, the dollar fell by a massive amount, this alone accounted for much of the gold increase. But also more importantly, gold was extremely oversold, being down for 12 of the 13 preceding sessions. Continue reading
Has the Market Met its Match
If we get another down week next week, it will make it four in row for the S&P, the last such occurrence was the October plunge into the last ICL. Before that event, you have to go back another 2.5 years to find a 4 week decline. Again, I just don’t believe we’re at a point in the Investor Cycle where we will see this type of decline.
Since the S&P made a short 31 day Cycle Low on Feb 2nd, we’ve yet to see any pivots within this Daily Cycle that we could associate with a Half Cycle Low. It is possible too that because the prior Daily Cycle was short, it will be preceded here with a long Daily Cycle. This is why the recent drop below the Bollinger Band, occurring on Day 26, (granted a little late) is the only noticeable event we can associate with a Cycle turn. Therefore, as it is too early for an ICL decline, the fact that equities are oversold, and the likelihood that the HCL just printed, we should expect to see a good bounce in this 2nd half of this Daily Cycle. Continue reading
Midweek Market Update – March 11th
Part of the weakness here can be explained simply by the parabolic rise in the dollar, there is absolutely no question this is impacting the price of gold. And considering how well gold continues to perform priced in all other currencies, we must then not lose sight of the dollar’s impact. So there is some relative strength underneath this decline, potentially something we might see shine through in the coming Investor Cycle.
But that said, this is still a decline into an ICL, and as stated early, they can get nasty! At this point, anything goes to the downside and I doubt $1,330 is going to hold in the coming weeks. What we can hope for though is a flush and run of the stops in that area, while the dollar tops, all followed by a V reversal. Continue reading
Still too many Bond Bears
Investors buying U.S. bonds are doing so knowing this is the widest premium over comparable German bonds in more than 14 years, highlighting the divergence between the US and Europe. With the ECB launching a program to purchase over $1T trillion in debt in just 15 months, it’s hard to see German bonds declining from their current position. And looking at Italian debt is also instructive. Even though Italy is in recession and is the 3rd most indebted nation in the world, Italian bonds yield over 1% below comparable US bonds.
I continue to believe that the FED simply cannot and will not raise rates in the foreseeable future. And because the spread between treasuries and lower quality debt is at record levels, I do not see US bonds experiencing a sell-off in the coming weeks beyond normal ICL profit taking. Continue reading
Midweek Market Update – March 4th
It is a tricky situation here in the bond market. I presented two 2 opposing Cycle outlooks this past weekend because we could not be sure if the Investor Cycle had ended. If it was over, then this was the 1st Daily Cycle and a move higher would be expected. But if it were not over yet, then a similar bearish scenario that has unfolded this week would be expected. Continue reading
What is different this time is that average investors are not participating. We simply don’t have retail investors – Joe six-packs – talking up the market. This group has been bitten twice in the last 15 years by getting into the market at the top of the 2000 and 2008 bubbles, and is essentially broke. So the market is relegated to “professionals”. From my twitter stream, I’ve noticed that these participants are unanimous in the belief that the world’s central banks can provide whatever liquidity is needed to sustain the move. There is a real calmness, even complacency, to the advance. Continue reading
Midweek Market Update – Feb 25th
Clearly, the evidence shows that this is now Day 7 of a new Daily Cycle. What we do not know yet, which is a common problem around ICL’s, is whether this is the 1st or 4th Daily Cycle. In short, this means that we don’t know whether this is Week 2 or Week 23 of the Investor Cycle. The distinction is huge, Week 2 means new highs are coming, while week 22 means a drop below the Feb 17th low will begin ASAP. Continue reading
Gas It Up
The COT reports show how speculators are positioned, essentially it is a reflection of investor sentiment. And the survey chart below confirms the same, as natural gas sentiment is now at 5 year lows. It is only near a significant Investor and major Cycle bottom do we find sentiment at such depressed levels. Although never a perfect timing tool, it is always an excellent contrarian indicator. And when matched with Cycles they offer a formidable combination. The only concern might be in being one Daily Cycle too early within this Investor Cycle call, otherwise the setup is there for an excellent return. Continue readingcategory.php