Friday April 11, 2014 6:00 AM CST
Our suggestion yesterday morning before the market openned was
It is time to be cautious.
Which reminds me to post a time along with the date. While Thursday began quietly it quickly morphed into a massive outside reversal day. It was time to be cautious indeed. One reader asked about my position, the answer is cash with a bit of EEP and a small core position in GSB. So yesterday was no problem for me.
A Comparison
I am writing well before the market open of Friday April 11 2014. I have meetings today as well as a newspaper column to get out before the meeting. So a quick update, much much more to follow this weekend. Above from top to bottom is the GDX Market Vectors Large Gold Miners, the Russell small cap index and the VIX Volatility INdex at bottom.
In 2008, Gold and the miners bottomed while stocks were still headed south. It appears the same sort of thing is happening in that GDX despite all the bearishness from some sectors is making higher lows. One can see a reverse head and shoulders pattern there. Two important lows were registered in 2013.
In the main panel the small caps are falling apart. Note the three big down days since mid march, those are the long red bars. Small caps will lead on the way up as social mood becomes more risk averse. Then the money leaves that sector embracing blue chips, which is exctly what has happened. The SPX continued to stay above 1840. We have noted that GOOG has fallen 14% since its split.
At bottom the volatility index is slowly making higher lows though that is scarcely obvious looking at the chart. The point is that the VIX is rising while the SPX hits resistance and the small caps start falling apart led by what were the high fliers like AMZN with its triple digit price earnings ratio.
As noted we are five years out from the March 2009 low. The topping has begun. Some sectors are perhaps already beginning their bear markets. Final highs may well be recorded in May, some will be lower highs to keep the crowd cinvinced that a buy and hold strategy is back and well and alive, hey its 1996 again, and wasn't that Bill Clinton in the newspaper yesterday, things must be back to 'normal.'
Things are back to normal as in a normal 18 year period of stagnation which sees massive swings in stock vlaues caused by massive shifts in social mood.
Stay tuned,it is time to book markt TMP again.
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