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Bruce Pile
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Stock analysis is a serious hobby for me. I compete at Ken Kam's Marketocracy, where they do capital management using the best member mutual fund track records with extensive tabulations of alpha, beta, R-squared, and many other fund management evaluations. I've been running 4 funds there for... More
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  • Markets at a Red Light in a Big Intersection 2 comments
    Jun 12, 2009 9:16 PM | about stocks: GLD, XLY

    The rally is at a critical turn point having just made it through the 100 dma a month or so ago and now struggling to break and hold the 200.  This wouldn't be such a sticky wicket if the leader groups the broad market has been following were not at turn points themselves.  These groups, like retail and consumer discretionary, have already successfully forged through the 200 dma and accomplished a 50/200 dma crossover (the S&P 500 has not), but now these generals are at this juncture:

    The RLX Retail Index is in pretty much the same condition.  This triangle consolidation typically breaks sharply one way or the other.  A break to the downside out of the formation is also a break of the 50 dma and would likely pull the S&P 500 back from its attempt to take up residence back above the 200 dma and force some more bear shenanigans.  The volume pattern is perhaps more disturbing than the formation with a very clear bias to selling.

    Over at safehaven.com/sh... Marty Chenard has an article and chart showing a RSI indicator that stalled at the top of each rally during the 2000-2003 market and was breached only when the 2003 bull began.  Where are we now on the chart?  Right at the same level as the rally tops in the previous bear.  So we are at a turn point by this indicator as well.

    Gold is also at a technical intersection:

    The GLD is approaching a bull/bear turn point at around 90.  Like the XLY, a break of the formationto the downside is also a break of the 50 dma.  If you go strictly by the big volume days indication, you would expect the stock market to turn down and gold to turn up, acting like they're supposed to (inversely correlated).  But not so fast. There are many cases of both gold and the stock market making big moves together.  You need to look no further than the last bear-to-bull transition of 2001-2004 to see an example of this. 

    I suspect that, after the big run from the low,  the indexes are just doing a natural consolidation before continuing the bull move.  But putting a lot of new money to work right now is a little dangerous.  I raised some cash this week and will refrain from redeploying untill I see how these turns play out.

     

    Stocks: GLD, XLY
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  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    Have you explained that despite selling pressure domination, the market continues to trend up. What about the repeated and frequent spikes that keep turning a downtrending daily market back into an uptrend? It is pretty obvious that some hugh money and trading operations are supporting/manipulating the market upward. See Tyler Durnan's articles on the late day price spikes. What's you explanation of these? Seems to me that they totally invalidate charts as the charts would not be what they are without the spikes and the manipulation.Your guess is as good as mine as when this will breakdown, but it cannot continue indefinitely.
    13 Jun 2009, 04:19 PM Reply Like
  • Bruce Pile
    , contributor
    Comments (333) | Send Message
     
    Author’s reply » untrusting, I've noticed that too - the market seems to wilt and worry over the day, then it gets leaned on to the upside into the close. Frankly, I don't analyze much on an intraday basis, but my guess as to what's going on there is simply that the the quant funds and others who've reportedly been at about 45% or less net long up through late May are nervously watching the daily action to see if we get clobbered again, and if it looks like we're not, they dip a heavy toe in before the day is out. If that's the case, we may be in for a move down if they stop dipping! But my experience is that you can't get too enthralled with the short-term indicators (less than a couple months or so) because they are fickle and change so fast they wind up causing you to miss the bigger moves.
    17 Jun 2009, 12:27 AM Reply Like
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