Thursday Jan 5, 2012 6:40 AM CST
World Markets are pulling back after a week of consecutive advances. Yesterday we showed that such tests are bound to occur as more and more quant investing programs use the same algorithms.
Bullish Percent
The least risky point to invest was clearly August 8 when the greatest number of stocks were out of favor. The reason is that at that point, the selling was done. All that wanted out were out. Actually since then the market has become more and more dangerous to invest in. Why? As more and more pile back in we eventually will run out of investors. And at that point the market will top out. Note that just as the Bullish Percent indicator has touched the 200 bar MA, we get a pullback in prices, amazing eh?
SPX
Here time span is shortened to three months. Note our Santa Claus Rally began Dec 19-20 (oh come on now, you didn't believe me at the time!) Ten trading days later we have had seven out of ten advancing days. As the market crested yes the 200 day MA, it is now pulling back to test the break out. There is the usual bad news, the Euro is lower again, Greece will default, etc. But the real news is in as usual the Mideast.
In Jean Shepherd's The Christmas Story, one boy in the school yard dares another to put his tongue on the frozen flagpole. The ante is raised when he then
double dog dares him to do so!
I guess Iran has seen the movie as they have double dog dared the US to send one of its carriers back through Hormus. The WSJ has an editorial and an op ed on it yesterday. Our positions in energy have been well rewarded as a result however.
Crude Oil WTIC
Crude oil in the main panel usually moves opposite the US Dollar in green at top. But yesterday commodity prices, oil and gold, advanced even with a strong dollar. I suspect this is predicting a dollar pullback. Yes I have been saying that but one can see crude oil broke out to a new recent high yesterday. I extended the time back to the highs of May for some perspective on where we are here. Remember it's All One Market and now oil is the leader. Watch the charts, oil and gold should pull stocks up. IS $115 oil in the cards again, starting to look that way.
TLT a fund of govt bonds dropped 1.42 yesterday. So things are coming together as we have suggested.
Hourly Chart GDXJ
The real story is that after ten days of advance the hourly charts are overdone, here GDXJ looks like it needs to pull back to 24.75.
Yesterday Central Fund closed at 20.14 with a Net Asset Value of 19.82. ON a pullback I would expect
CEF to trade at or just below the NAV which should make that a good point to initiate positions.
http://www.centralfund.com/Nav%20Form.htm
By the way one really nice thing about Central Fund is that it is located in Canada- as is their gold and silver bullion. Which is to say in a stable country outside the USA.
More later thanks for reading The Market Perspective.
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