Weekend June 22 2013
The Stock Market has probably posted an important high for the Year, and possibly since March 2009 on May 22, 2013.
The long bull market in bonds is coming to an end. Our 3..5% target on the long bond, 30 year, has been achieved. This has serious implications for all markets. The great stock rally of 1984-2000 was prompted by lower bond yields. This caused the public to look to stocks for greater gains. The tech revolution sealed the case shut. Now we are in reverse. Dell is going private, MSFT has gone nowhere for years, Apple is down from 700 to 450 or so. Only E Bay, Amazon, and Google remain. The point is that higher bond yields will draw money away from volatile stocks bringing stock valuations down. The bond market is expected to hit an intermediate low this next week.
Gold and silver finaly hit the 1250-1275 lows we expected. This could finally bring some sort of short lived relief rally.
NOTE - Readers have noted that multiple ETFs are now trading at substantial discounts. In normal markets this is the sign of a significant bottom. Considering that we are likely at the third high of an 18 year period of stagnation, with another severe downturn to follow, I suspect this is just a kick off for the big bear markets ahead. The exodus from markets has been so severe funds had to dump holdings from gold to muni bonds in to markets with no bids. Hence, the discount to NAV.
Please read our Friday post June 20 2013 if you have not done so.
Remember BRIC, let's check on how that idea is working out
References are to Weekend WSJ
The BRICS are breaking down as well.
From the top Brazil BVSP - Front Page Brazil New Middle Class Takes to Streets in Droves
Russia RTSI See page A 8 Russia President Promises Stimulus (to stimulate Lowest growth since the Financial Crisis)
India -Bombay Index - Page A 7 Kerry Pressed on Trade Issues Ahead of New Delhi Visit
China - Shanghai - Page A 6 China Faces Fallout of self-Made Cash Crisis
So much for the idea that the BRICS would lead the new world economy, all have troubles
Gold
Betting on the direction of gold is the latest roulette wheel fad. We have had this structure in mind since the April sell off. A weak bounce would target the last two highs outlined from 1425 to about 1475.
Sheer guess department, a relief rally to 1425-1450 is now much more possible. But I suspect the final low awaits in October 2013.
WTIC Crude Oil
Crude Oil has been bouncing up and down in this channel. When will it finally break down? We like to say that crude is the most volatile of all markets. This market may hold the key to a potential stock and gold rally in the coming week or two weeks. We will watch the test of the lower channel line.
Bottom Line
If in fact it is All One Market, the AOM may bottom this week in stocks, oil bonds, and gold. That would lead to some sort of bounce from very oversold conditions. As we say through all of this no market has held up better than crude oil. It bears watching for direction for other markets.
Our analog to 1973-74 is now underway. In that period stocks consistently fell for two years finally losing half their value. Overseas the USA lost credibility as it evacuated from its Saigon Embassy with terrified souls hanging onto helicopters. On the WSJ Weekend Television Report this weekend, the Editorial Board opined that Barack could be a Lame Duck by year end given his vacillations everything. Already the experts are coming to our view what is happening. That show is re broadcast on FOX Sunday today at 2 PM CST.
Now the President has said Assad has to go but does little to make it
happen. Vlad Putin plans to win this conflict. Study Putin's expression in this photo. The Europeans may think they are isolating Putin but he has the Naval Base in Syria. The WSJ report noted this as well.
Congress is completely polarized to the point that both parties are having a hard time finding Senate Candidates. That continues our 1973-74 parallel.
I am not turing this into a political blog. The point is that negative mood is showing up on the political scene first. It will soon spill into the markets. We conclude with this 45 day chart indicating that indeed
It's All One Market, stocks, bonds, gold, oil on one side, the US Dollar on the other.
thanks for reading The Market Perspective
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