Sunday May 20, 2012
Poor people think about Tuesday all day Tuesday
Rich people think in terms of decades
Gail Sheehy, Pathfinders
The more I think about it the more I suspect that natural gas is today where gold was in year 2000. I strongly suspect we are experiencing tidal change in energy resources for the US whether the Administration embraces it or not. Long term investments in natural gas growth industries should pay handsomely.TMP will be spending more time investigating this industry.
The Dow had its worst week of the year
WSJ Weekend
Okay so is that buy or sell signal? News is news but what to do with it? We are closer and closer to an expected low. This may take the form of a final capitulation with the number of stocks sporting bearish patterns soaring to a new high.
Net New Highs New Lows
Now recall that the internals peaked in early February prompting our exit from long positions. The market stayed up in price b ut began deteriorating six weeks ago. Now this indicator has fallen below the 20 day MA. But the market has not registered the sort of OMigoddness spike low it had last October. Will that happen? We cannot know but we can know that if it does that will likely be a great buying opportunity.
Bullish Percent Indicators
This ribbon of all three bullish percent indicators at 50 in red, 150 in blue, and 200 in green gives a nice feel for how the market is descending, much better than an actual price chart, don't you think? While we cannot know when the exact bottom will be, we can scale in orders which we have been doing. This is why it rarely pays to buy all at once, at least until we get to an extreme like October 3. Note the three indicators have not bottomed out yet.
NASD NYSE Summation Index
Again I firmly believe that these charts of the internal indicators, something we emphasize her at TMP, are more revealing than price charts. The weekly bars are the NASD summation index. The blue line is the same measure for the NYSE. Now what do you see, what does this picture tell us? It seems to me that if history repeats, we are within two-three weeks of a low. Note the NASD summation index is right where it was in early August before that late August low. Could we get a bump up and then another final move down, could the market still spike this week, and then reverse. Well of course it could.AGain this speaks to the wisdom of a succession of lower orders.That way one averages down rather than guess where the actual low occurs without betting big on a one time purchase.
US Dollar
After an entire month of non-stop rally, note the dollar has been up every day in May, it registered an outside reversal day on Friday, see arrow. And RSI zoomed to a new high. Looks like at least a short term top for the Buck. Is that confirmed by the Euro?
Euro
At lower right the Euro bounced after a full month of decline. Note how far below the two moving averages it is now. This comes with massive negative publicity about Europe-relentless stories about Spanish banks (we put Spanish bank Santander in the lower panel to make the point), and of course the never ending story of what Greece might or might not do. Whatever that looks to be a low for the time being for the Euro.
Gold
We have suggested gold would find support at this triple bottom. It appears to have done that this week. Note the solid black bar at far right. It bounced right where we thought it would. And this lines up perfectly with a dollar high and a Euro low. Gold lows precede stock lows so that lines up as well.
Crude Oil
In our last weekly newspaper column, see earlier this week, we suspected oil would drop berlow $90. It appears on its way to doing that, the uptrend is at $80. With the low in stocks perhaps a week or two away, this looks like a real possibility, that we see a test of the uptrend line.
Central Fund
CEF bounced right where we thought it would. The price has jumped about a dollar in two days. So we are on track with gold and CEF bottoming before the overall stock market. I finally recommended GDXJ late this week.
GDXJ
A move to the 200 day MA is reasonable and back to 36, which would roughly be a double from here is not out of the question.
If rhe blog is going to get off the ground so to speak we are clearly going to have to register some out of the ball park recommendations that are wildly successful. I will introduce our newest recommendations in the next post.
Currently we have recommended Central Fund CEF, Market Vectors Jr Gold Miners GDXJ. Bothe are coming off their probable lows at week's end.
We are long HGT Hugoton Trust and SJT San Juan Royalty Trust.
I am probably early on RIG given the weak oil chart, it looks to be headed back to 38 so we suggest a succession of orders beginning below 40.
The GM chart looks a lot like RIG, and is probably headed below 20. So enter a succession of orders below 20.5. Buffet bought 10 million shares of GM. So he and Barack own the company.
The Bottom Line
The summation index and bullish percent charts suggest another week or two of lower prices before we hit final bottom in stocks.
Recent tops in the Dollar and Bonds with lows in the Euro and Gold suggest those markets have now begun to reverse. That is why I added the recommendation on GDXJ.
As always use portfolio and money management techniques. Do not go for broke on one issue, ever. Do not use margin. Alway investigate any investment as to its suitability for you.
Thanks for reading The Market Perspective
The Market Perspective bases its information on techniques and sources that have been found to be reliable in the past, and The Market Perspective tries to base opinions on sound judgment and research, however, we do not guarantee that future results will match past performance ands no guarantee can be made that advice will be profitable. The Market Perspective accepts no money for stock recommendations and is purely motivated by its own research in recommending any stocks. Put another way, the responsibility for decisions made from information contained in this letter lies solely with the individuals making those decisions. The editor and persons affiliated with The Market Perspective may at times have positions in securities mentioned. Nothing contained herein represents an offer to buy or sell securities. The Market Perspective encourages investors to be diversified, and to maintain sell stops and risk control over their valuable investment capital. No guarantee can be made to the accuracy of text or charts.
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