Tuesday April 24, 2012
One reader points out that our A B C interpretation is correct, thanks for ointing that out, Monday confirms he is correct. And now we have a spate of bad news
Sarkozy is the first French leader to not be re nonominated on the first balot since the 1950s
WMT is embroiled in Foreign Corrupt Practices Act allegations
Commodity prices are turning down across the board with WTIC and XME lower
The SPX breaks down
The breakdown in the rally from October is now evident. Our original thesis in Aprl is playing out. A 1300 target is realistic. We have been adding a mid MA of 125 days, between the 50 and 200. The area between the 125 adn 200 seems realistic for a low over the next few weeks.
HDGE
The mirror image is the fund that directly shorts stocks HDGE. It broke out yesterday a pullback today woudl be a buying opportunity.
Commentators never understand the relationship of oil prices to the economy. Oil prices are positively correlated to stock prices, higher prices mean the economy demands and can afford energy. Lower prices mean otherwise. So all who wished for lower pump prices get their wish, happy now Bil O Reiley?
WTIC
Notice the resistance at 102, up until early February. We exited stocks then and so stocks and oil went higher for two months. The drop below 50 in RSI at top is signalling weakness here, lower prices ahead. A drop below the 125 day MA at 10.86 will denote further weakness as it takes out the previous resistance level.
Metals and Mining
How weak is the real economic recovery, pretty weak. Come to think of it, one of our better students is an electrical contractor. He remarked yesterday that he has noticed lay offs and slow down at Home Depot. Here the XME failed at its NOVEMBER high, while the rest of the market has been rallying. Note the big drop at far right in yesterday's market. This confirms the breakdown in the energy sector. At bottom we posted the bullish percent index, and of course it too has broken its uptrend line.
The Dollar and Euro dance sideways both crossing up and down ofer their recent mid pattern trendlines.
Bottom line, the market is headed to our original target area of SPX 1300.
CEF
We began accumulating CEF a couple of dollars higher and have had lower and lower orders in. The drop yesterday seems to negate the idea that a higher right shoulder is forming. CEF is at a 2.6% premium to its Net Asset Value. It may well go to parity as it did at the end of December. We look for lower prices here which should set up a good buy.
Nat gas futures were up 3.86% yesterday as near everything else cratered. I wondered this weekend if the lower prices for Westport and the drop to 1.94 in futures would be enough bad news to find some buying. Well yes in the futures market, yes for HGT but no for SJT that dropped a dollar. Well, as we noted ti took gold four years to bottom around year 2000. We have positions in HGT and SJT.
The jump in price yesterday apparently center on the snowstorm causing energy demand to jump for the time being.
Thanks for reading The Market Perspective.
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