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  • Market Summary For Week Ending 5/31 0 comments
    Jun 3, 2013 4:06 PM | about stocks: GLD, GOOG

    A lot of sideways movement last week with many potential turning points for us to watch closely. A few observations from last week that we are actively working on:

    • Gold rolled over after an abc-type bounce from 1338 setting up a retest of the April spike low at 1325. The retest appears to be holding, although odds are Gold will break down and as will silver likely breaking 20 at the same time. The last time gold was this hated, we saw a 50% rally in 12 months! It's even possible for silver to create the bullish divergence if it holds above 20.25, while gold takes out 1325. This is because silver has actually rallied off its low with a potential 5 wave rise. John Templeton is famous for coining the phrases about how he did so well investing in Emerging Markets; "I buy straw hats in the winter", and "I buy when there is blood running in the streets". Both could apply to the metals at this time.
    • Crude has fallen as our model warned a week ago, after 97.50 rejected prices three times this month, and 90 is next support. If crude moves above 98 it will head toward 107 +/-3; while, a break below 87.50 is needed to turn this market bearish.
    • The Euro remains in a corrective neutral bounce; while the Yen futures are correcting their potentially impulsive rise from last week. 1.31 is resistance for the Euro, but 1.34 is stiff resistance. While, 1.27 should eventually give way. 1.00 is where the resistance is in yen futures, but 1.03 is stiff resistance. Only moving above 1.04 suggests the low came this month around .9650. Until then, .9150 +/-.0150 cannot be ruled out. With daily stochs now crossed up, the path of least resistance should be higher, as weekly and monthly stochs are ticks away from joining daily stochs to the upside.
    • Tbonds fell down through the 140'16 support level we warned about and tested 139'29, the lowest level since April '12. We moved out of TBonds and would caution anyone that gets short Tbonds now about the likely short covering spike that will be blamed on Fed action. However, the pattern allows a quick new low toward 138'24 first, but is not required. We are closely monitoring and guiding for our paid members through this.

    If you thought our "punch bowl" metaphors of the past are outlandish, they are making the headlines now. As futures on stock indices screamed higher on Tuesday (some above, others below) the Fibo 62% retracements of their declines last week. Wednesday opened with an opportunity to sell as we attempt to get back to the levels we should be at. Once "should" returns, the punch bowl will be empty.

    As always, the Case-Shiller Housing data provided more of the same expected news, showing an 11% (biggest monthly rise in 7 years - oh, like that wasn't a harbinger of disaster brewing) spike in Metropolitan Housing Prices in March. Since then prices have soared even further, putting most big cities into inventory shortages. Here in Seattle, at least in our neighborhoods, houses sell within 2-3 days of the sign going up!

    Consumer confidence surged to the highest monthly reading since Feb. '08. The level back then coincided with the end of the first bounce after the Oct. '07 peak. We all know the next move was a plunge as the herd believed they'd survived the worst of the decline and were ready to spend like they had for the past five years. Stocks rallied into May '08, for a wave '2 high, then crashed nonstop into the Nov. '08 low, bounced into the January '09 wave '4 high (which was 34% off the May high), before crashing again to the March '09 low. So, consumer confidence surging is not what one wants to see when trying to avoid stock corrections.

    The Dow's record high close on lower intra-day highs is a sign of growing weakness. Junk bonds, which we've discussed for two years as IMPD's (investments of mass portfolio destruction) are getting blasted as interest rates spike. We've discussed this for the past two years as the Black Swan that can be avoided, but probably won't by herd members.

    If there is one thing you don't want to see, among the many other things that hasn't YET peaked this Bull, it's record NYSE margin debt ...yes, higher than at the '07 and '00 highs! When the herd is so confident that it borrows money to speculate on stocks, it's as certain of the future as it was when it thought borrowing money it couldn't afford to pay back to speculate on houses and condos that weren't even built yet, ala '06, when Condoflip.com was born, and allowed us to buy and sell condos in Miami, in pre-construction.

    More bearish is the small 5 wave decline in $GOOG off the 925 level, definitely something to keep your eye on for the next move. We will be closely monitoring this area.

    Friday's Full Moon has inflective influence on the herd's mood for a couple days on each side of the lunar extreme, so this early ebullience today maybe the tail end of the bounce broohaha.

    Disclosure: I am long GLD.

    Additional disclosure: We are also short ZB.U and may initiate long or short positions for any of the positions mentioned in this article within the next 10 days based on our model.

    Themes: Bonds, Metals, Oil Stocks: GLD, GOOG
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