Tuesday March 20, 2012
The Big Picture nia the NYSE
One of the pleasures or writing the blog is exchanging ideas with others about 'the Big Casino.'
A particularly alert MP reader alerted me to the above instance. The NYSE, a much broader profile of stocks that the SPX, is up against its downtrend line from the 2007 top. This is a slow moving monthly chart, though the reader specifically mentioned the weekly. I looked at both. On the monthly the MAs have all come together on the MACD panel at bottom. So, it could go either way, hence the question mark in pink!
Social mood moves the markets. At the lows of the last two years, the headlines were littered with speculation about how much lower the market would or could go. Now at a fresh high, we are awash in speculation
- Apple is worth whatever triple digit number one can name, dividend paying funds must buy the stock ( as though they had not already anticipating this) and hey how high in the four digits can it go
- Now that 1370 has been breached, the market HAS to go to 1440 or perhaps 1525
This weekend I posted a link to one site that suggested 1475, as good a guess as any I suppose.
To put this in perspective, our blog title after all, the mood between the August 2011 and October 2011 low was, how much lower can or will this go? At the October low when we bought, speculation on even lower prices was rife, the DOW plunged 400 points and that was it.
Now we have the exct opposite of the herding instinct. Traditional technicians cite lines in the sand of 1340 and 1370 as must do Maginot Lines. I did note that Felix Z. was going to cover at 1370 creating a double buy on his short. I assume this happened in most computer driven models. Now that the shorts covered, the market zoomed to 1400 or so, and this morning Europe is down 1 %, the market has run out ov buyers.
Daily NYSE
The different indexes display different patterns. The NYSE here has just poked above a downtrend line. THe SPX is a good deal higher as is the OEX thanks to Apple. But as I say the NYSE is a much broader indicator.
Remember that the market is literally driven by computer generated buy signal. Most are trend following based on some regression formula. For a look at how much work has gone into such prognostication look at RATS - regression analysis of a time series. Go ahead, click on some of the links on that page and simply scan the pages, never mind the complex math. My point here is that lots of time and effort has gone into attempting to simulate reality, or at least the combination of millions of decisions every day in teh stock market. Now that many of those decisions are made by machine, similar conclusions abound. This all works, until as Maggie Thatcher remarked about socialism, we run out of money.
Markets run out of money, and social mood, at the same time. Darn, that's good I need to remember that as an intro to my book!
Markets the world over have now duplicated what happened to the US in 2008. Rampant speculation in real estate from skyscrapers in emerging countries to absurdly high prices in Vancouver, Rio in Brazil, and China will [play out just as they did in the US.
GDXJ versus the Dollar
This a ratio chart of GDXJ versus the US Dollar. The ideal buy was our suggestion at the end of September. Is similar situation setting up? Despite my recent misgivings about gold and silver, it looks like it. The US dollar dropped quite a bit the last two days suggesting a temporary top, gee could the Euro rally amid the never ending Greek default talk, you bet it could.
Eenrgy Services
The Energy Service sector is about where it was when I exited in February. It is turning up here after a correction. If the dollar drops, energy service and GDXJ will get going.
So where are we? I suspect the pattern of third, fourth and fifth waves in a final move up will keep all the computers warm and supply plenty of grist for the techs featured on market watch. But the same scenario of the last two years seems to be playing out with stocks and oil higher into April or later.
I still have my HDGE positions and will put orders in to accumulate GDXJ and Fidelity shares of gold and Energy Service. We will buy some gdxj while everyone else piles into Apple.
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