Weekend August 11, 2013
The America's Cup Races draw small crowds. Chambers of Commerce in league wit cities are always dreaming up some project guaranteed to lure big bucks to town. Here is another example where the City failed to ask the right questions. And the formula at $100 M a boat is too expensive resulting in a mere four ''boats' in the field. I suspect they need to go back to mono hull boats that look and sail like boats with limited tecno gadgets allowed, you know, like real sailors...
Stocks appear to be topping, bonds making a bottom, gold and silver set to rally while the US Dollar has pulled back.
Internal Indicators for Stocks
Last weekend we noted that the US Market was the only one making new highs. This weekend it appears more and more that those highs are in. The main panel is the A/d line with exponential 13 and 34 day MAs shown. This displays a clear double top and probably five waves complete from the November lows. At top RSI has dropped below fifty confirming topping action as the actual index makes a secondary high. At bottom the NY AD volume is also looking toppy.
So it appears stocks have topped for the time being.
Thirty Year Bond Yields
RSI and MACD are topping for bond yields. The increase from 2.5% to 3.7% since last year is a 48% increase in rates. This is why holding long term bonds at this point is so dangerous. One is exposed to huge potential drops in price of the bonds, bond prices move opposite yields.
I would expect yields to drop now as the stock market retreats. I am of the opinion that the 30 year bull market in bonds is ending.
Aussie and US Dollar
Currencies US Dollar and Aussie Dollar Weekly Chart
This weekly chart shows the reversal of the US buck and it reversal at the very bottom of the Aussie Dollar in red and black. If gold and silver are going to rally they we will need to see some upside in the currencies of commodity producing countries. We have that here.
GLD Paper Gold
Here the Chakin Mondey Flow Indicator has almost come back to neutral, suggesting the most intense selling is behind us. Central Fund CEF closed Friday at a 3.6% discount to NAV. I have speculated CEF would have to return to a premium to support a rally, it is not there yet.
I suspect we have a short term rally at hand. Numerous sites are specualting that THE bottom is in on gold and silver. I am not so sure of that. Gold and silver bottomed before stocks in 2008 by about five months.
There are ample reasons to be wary of the always treacherous Sept-November months ahead. This September is an especially interesting time in the Middle East with numerous cycles coming together at that time. Whether that is supportive for gold or just more violence remains to be seen.
Our parallel to 1972-73 or 1976-1980 with Carter continues very well on track. The Real Clear Politics Poll this week has Obama down -7.5 with 51.1% disapprove and 43.6 % approve. Obama declines to meet with Putin saying Putin is still re living the Cold War. Perhaps he is living a the Hot War in Syria as Assad holds on despite our call for him to leave the country months ago. Nineteen embassies were closed this week, scheduled to re open today. How long before all this negative social mood really makes itself felt in the markets we cannot know. But stocks look toppy for now.
Recall that we thought the April 22 high in stocks was significant. As it turns out, it was much more significant politically than market wise. Opinion wise it was a transition from positive to negative for Obama. The markets have made a higher high since but the summation index previously shown is screaming non confirmation. This week numerous photos appeared in the WSJ of demonstrations in Egypt against the US, Obama, and our current Ambassador to Egypt. ON hte WSJ Editorial report today, Brett Stephens notes that Al Qaeda is back in a big way despite the Administration pronouncement that ht War on Terror is over.
The negative sentiment on display here will eventually work its way into markets. A similar current of discontent was building against Nixon early in his second term.