May 10
19
While I’m not an advisory service and am definitely not a “traders” blog, I do understand many of my readers especially like to know my latest thoughts when market(s) are volatile. So here are my latest thoughts as of this writing:
U.S. Stock Market – We’ve been in the “eye” of an economic storm. And while I continue to believe the back end of this “history-making, end of an era” tidal wave of economic, political, social and spiritual hardship will be unprecedented , I’ve since March 8, 2009, allowed for one “mother of all bear market rallies” to take place. While certainly not enjoying all the fruits of what has been an incredible bear market rally, I also didn’t stand in front of it and see much of the gains enjoyed in the previous downturn vanish.
It’s been my opinion for many months that a top of historical proportions was going to be made in 2010, and I had looked for it by the June/July time frame. I believed it would be the beginning of a multi-year, if not multi-decade period where the stock market trades like the Japanese market did for 20+ years. The lows would be the March 2009 and the highs wherever we topped out this summer.
This bear market rally has been almost straight up with no real corrections of any size. The bears drew many lines on the way up, only to have the “Don’t Worry, Be Happy” crowd run over them on the way to the most recent highs. It appeared on more than one occasion (most recently at the beginning of the New Year) that the bears could gain control again only to see the market make new recovery highs. Can they do it again?
While I believe the vast majority of the money created in all the bail-outs and easing has not been used properly and will only compound future problems, it still was a ton (as in trillions) and it has given some life to a feeble economic recovery that may still have a few months left in it.
When in doubt, I like to turn to technical analysis especially since the market has become so much more of a traders market than 20+ years ago. With this in mind, this is my best guess (in case you didn’t know it, all we soothsayers make at best are educated guesses):
The S & P 500 held (at least for today) key support around 1,100. If broken, the last line of support the “Happy” crowd could lay claim to that their “new bull market” is still intact would be the February lows around 1,044. If the “Happy” people still have some “party” left in them, the 1,100 holds this week and we begin to work higher in the next couple of weeks. If we close below 1,100, the tug of war “flag” would be back on the bears’ side and they would win the battle if and when we close more than 2% below the Feb lows.
Gold – For several years and hundreds of dollars lower, there have been several gold perma-bears who have predicted the end of the gold market more times than the Vancouver Canucks failed to win the Stanley Cup (you know, I had to find an excuse for that plug). And each time gold takes that one step back in—the “2-up and 1-back” scenario I’ve spoken about for years—they wipe the dust and blood off themselves, suffer their usual amnesia of past predictions, and many in the press publish their thoughts without any questioning of their horrific track record. That would be just laughable if it didn’t lead to so many people getting all worked up about their comments and bombarding me and others (with their latest hogwash) who have been so right when these folks have been the laughing stock of anybody with a memory.
Don’t be an idiot. The ultimate dunce cap has always gone to Tokyo Rose and, like this video says, doing the opposite of the village idiot has paid off over and over again ( He thinks by now associating his latest negative views with others, that gives him some sort of credibility. It would if it wasn’t for the fact he has been wrong all the way up to now). Will he be right sometime? Absolutely, just as a broken clock is right twice a day. But for almost a decade the clock has won every day, two-zip.
As noted earlier today, I was hoping to see gold close in the $1,185 – $1,190 area. We touched it and came close to closing there. In a perfect world, opening lower tomorrow and then closing above $1,200 would all but do the trick for me. The only hiccup I see near term is Tuesday’s gold options expiration. There were a ton more calls written at $1,200 than puts, so the correction came as no surprise and this fact was one of the reasons I turned short-term cautious last Wednesday evening.
We remain in the “mother” of all secular bull markets and my 2010 target remains $1,300 – $1,500. I understand why some felt they must email us but please, no more emails about the three gold perma bears who can’t even beat a broken clock – Nadler, Kaplan, and Klapwijk (Sorry Bill but Jeff has actually made a bullish case now and then). This trio makes the NJ Nets look like world champions based on wins. In all seriousness, they can’t hold a candle to Jim Sinclair or Bill Murphy, both of whom have been spot on regarding the long-term movement of gold. And the $800 predictions? Yes, we can get to $800. When we hit $2,400 they split it 3 for 1.
U.S. Dollar – As previously noted, it was overbought and is now consolidating. I’ve projected as high as 92 on the U.S. Dollar Index, but that would be a superb shorting area if and when we get there. I would actually wear a Canucks jersey if the Canadian dollar could ever get back to 90. I would also back up the truck and go long at that level, but I don’t think we’ll ever see it again (but after 25+ years, I’ve learned never to say never – except when it comes to Tokyo Rose).
U.S. Bonds – So much money was created and for now it finds happiness in U.S. bonds. I suspect the asset allocators are near to taking profits in bonds and putting some of that money back into stocks. Longer term, I’m avoiding two things: bonds with any maturities longer than 2 years; and considering anything Tokyo Rose has to say as anything more than a cheap laugh.
Oil and Gas – Oil at $65 or below could get interesting on the long side. Avoid natural gas both human and otherwise.
Special Note – I will update my Tracking List and Grandich Clients by early next week but for now know it looks like the summer swoon came early this year. I’m cash poor and regret being so as there are some compelling speculative buys. I’m at the very worst a strong holder and if I can convince the wife to sell some CDs early I…….. scratch that idea. I want to live.
