Sometimes your gut is a better indicator than fundamental or technical analysis. I felt last evening that we reached an extremely bearish level in the U.S. stock market, often seen at or near market bottoms. I was looking for a washout bottom by opening hundreds of points lower and then closing higher. As it often does, the stock market decided not to accommodate me.
As noted last night, we’re entering a highly favorable seasonal period for stocks. Next week is effectively a 3-day week and often is an up week. The market was simply looking for a reason to have a good short covering rally and the announcement of who will be nominated for Secretary Treasurer was the excuse.
Ideally, another trading range for now and one final test of two key technical support areas for the DJIA could be what it takes to get me on the long side again. The DJIA held above its 2003 intra-day low of 7532 but I would’ve liked to see a test of its 2002 intra-day low of 7198. We shall see in the coming days and weeks what shakes out.
I personally almost pulled the trigger ongoing long the financials via the UYG-ETF. Here too, I hope to get another chance before years-end.
Gold had an outstanding day with major mining shares gapping up. By clearing $775, I believe a significant bottom at just under $700 has been put in. I suspect the Crimenex to attack it Monday but again, my gut says we could see a very nice rally into the New Year.
Oil is at a critical support at $50. This is where it bottomed in 2007 before launching its incredible run this year. Closing significantly below $50 IMHO eventually leads us to $40. The $40 area has been major support in 1991, 2003 and 2004. Stay tuned.
The U.S. Dollar continues to trace out a significant topping pattern. I would be aggressively short only with year-end book squaring beginning soon; it could make one final run to 90-91 before topping out.
Have a blessed weekend.
I’m a believer in gold going higher longer term but took a position in hgd (bear on gold stocks) near the end of the day on Friday. I’m down from my entry point but only just. I expect that with this unprecedented rally on Friday we may see some selling Monday as I also think the Comex will be reluctant to let gold get going too much as it screams to the market that things are pretty bad (although they clearly are). I expect some retrace on the gold stocks even if it is short lived – hence buying hgd. If you look too…unless you believe the overall bottom is in…the gold stocks often go down with the overall market unless gold is going up significantly (like today). The gold stocks have also had a few unprecedented runs in the last few months only to retrace…will this time be different? I’m with Peter that the bottom has yet to be put in on the tsx and DJIA so will hopefully see gold stocks come off some from here before they break out. For those holding positions in Snr golds…good on you…heck of a one day rally!
POWERFUL……POWERFUL NEWS !!!!
There’s some great news to share with you from a ‘Peak Oil’ believer. Click the link below (Or copy and paste in your browser) and you’ll see the solution to a great and troubling problem that could humble mankind’s progress. Look at the statement “19 Miles at a 30 Degreee Angle” and the overall length of the drive. This is the first announcement of the Lithium battery’s abilities. The expected range of 40 miles without using Gasoline seems to be achieved in the prototype.
Sure, we will still have to go through a wrenching depression, Federal spending will end in a hyperinflation and every other kind of economic nightmare that you can think of ending in a shambles of the U.S. economy. These are all solveable problems from our own creation, perhaps welcome to induce constructive change in time leading to renewal. They say that if the World collapsed tomorrow, within 6 months of a recovery all the money would again return to the same people with an economic recovery. Believe it !
Lithium and Nickel could be resources to consider. Toyota is developing a similar vehicle based on a Nickel Hydride battery, planning later to switch to Lithium technology. . 80 Pounds of Nickel is needed for each vehicle. My math a good while ago suggested that Nickel will become a critical metal. There is a big undeveloped deposit of Lithium in North America, as I recall.
This is a positive news announcement for the future of mankind. Technology again comes through and the U.S. still remains the leader. G.M.’s announcement of test results causes a shift in my long term thinking, Perhaps ‘OIL’ is about to enter the fifth and final wave ending maybe a decade from now when enough electric vehicles are on the road. Could Uranium be the fuel of the future?
Incidentally, I am on an informal list to purchase one of the first Volt’s from production around 2010. Wish me luck.
Someday, we may get this parasite government off our back and prosperity will return.
Http://gm-volt.com/2008/11/21/bob-lutz-chevy-volt-update/
I agree with you fully peter that there is good amount of panic in financial markets. I also agree that when we look back in history and try and find a parallel, data points make us bullish. However, we must also keep in mind that just like in a bull market, bullishness does not mean one should go short at the same time, in a bear market, bearishness is a common thing. When bullishness becomes a a little too extereme, market snaps and we have sharp bull market corrections. Similarly, in a bear market, stretched pessimism, triggers sharp bear market rallies. The difference between the bull and bear market is that unlike a bull market, bear market takes much lesser time to play out. Its like inverting the chart and compressing the timeline. Its this change in structure which people fail to understand, and they get on in the play to to hunt for the bottom. As a trader or investor, trying to pick a top of bull market is being foolish similarly trying to pick a bottom beocmes equally foolish.
One should first try to capitalise on the main trend and then if he wants with proper sfaeguards can affoard to risk some in playing the counter trend. Would you like playing a bull market or its bull market correction…. Same holds true in a bear market…
I would like to share a certain calculation I did:
US GDP= $14.5 TRILLION
LATEST ANNUAL PERSONAL INCOME = $12.58 TR
LATEST SAVINGS RATE = 0.5-1%
I am not going to go into why savings rate is lower (which we all know by now). Prior to the boom in financial markets and then credit markets of 90’s, savings rate use to stay around 6-7%.
Growth in personal income has been 5.8% CAGR over the last five years. Let me assume that the growth rate in maintained then after 5 years PERSONAL INCOME WILL BE $16.2 TR. Now for savings rate to go all the way up to 6%, total reduction consumption would be (5%to 6%*16trillion) = 0.8-1 tr. Such a vast reduction in consumer spending would have knock on effect on investment and global wealth and income creation. Therefore, the total impact will be much more than 1trillion (possibly an 8-10% reduction in GDP). A figure of more than $1 trillion would be more than total consumer spending of China and India combined and greater than GDP of India.
I would like to point out that actual income growth over the next 5 years will be much less than 5.8%. In a scenario of rapidly eroding wealth, consumer would have cut back much more than the previous estimates.
What all these things mean is that, the world has to adapt to a more frugal US consumer and the adjustment shall be everywhere, from EM companies to asset values. So any analysis that does not consider this, and just tries to do a historical comparison, is VERY SHALLOW…
Though large scale money is being pumped in the system, but it would not be enough to cure the asset deflation. Asset price is a function of allocated liquidity. One can argue that its becoz of intrinsic factors like cash flow for stocks and marginal cost for commo , is what determines price. But I believe those are drivers and not price level determinants.
Now the allocated liquidity is a summation of cash and leverage on that cash. As people become risk takers, proportion of leverage liquidity vis-a-vis cash liquidity increases. What we saw at the peak of this credit bubble was a gigantic tower of leverage liquidity. Now that leverage is collapsing fast, and as it does, it is not only creating a vicious cycle for itself but also for asset values it supports.
Now when we sit down and ascertain what to buy and what gains to expect, we should not get carried away by historical price points becoz unless that kind of COWBOY LEVERAGE is coming back, asset prices is here to see large scale de-rating for some time to come…. Like what we saw in Japan….
Now what the governments around the world is trying to do is replace some of that leverage liquidity with cash liquidity.But it shall be of little help becoz financial liquidity is function of trust and faith in the counter party, but with such deleverage, that trust and faith is rapidly diminishing. Hence, what becomes, is a Gigantic Liquidity Black Hole, sucking up funds from govts and Central banks……
Peter,
Canadian readers used to hearing the U.S. dollar in Canadian and vice-versa might not know what you mean by the U.S. dollar going to 90. They can see the U.S. dollar INDEX chart by entering the ticker symbol DXY at bigcharts. com.
At the same site, the ticker CCD gives the CDN dollar in U.S. currency (CBOE).
Another chart for the U.S. dollar index is at http://quotes.ino.com/chart/?s=NYBOT_dx
http://finance.yahoo.com/tech-ticker/article/133469/All-the-Wrong-Policies-Paulson-Gets-‘F-Minus’-from-Former-Regulator?tickers=GS,XLF,JPM,BAC,C,WFC
Took a flyer on citigroup on friday …nothing but a gamble….lucked out today.
Sold my citi for a nice profit today…..cramer is on board saying it could be a good buy now…so maybe a decent trader if it pulls…watching for a new entry