FOR: 14 OCTOBER 2010, THURSDAY
We've been expecting a correction for the past week or so. The rally doesn't want to correct, as prices keep banging higher, resisting sellers with a pretty impressive strength.
At the same time, the US Dollar continues to be hammered against almost all currencies. Ben Bernanke, of course, is the master-planner of this scenario. He has stated his commitment to a weak dollar over and over again by proclaiming cheap money the salvation to America's personal depression, which has been gaining strength since 2008, despite billions (trillions?) spent trying to restart the American economic engine.
I see financial cheerleaders on the television cheering the bull market -- which is being driven at the cost of the US Dollar -- and I'm wondering if American analysts understand that foreign markets are being pushed higher at the cost of American workers. Indexes may move higher -- indexes now are anti-dollar investments -- but wealth of Americans, even if increasing through stock price appreciation, are NOT appreciating if the American investors are holding American stocks or securities that are paid in American dollars. Brokerage house statements don't show that the declining dollar means that, vis-a-vis foreign investors, American wealth continues to decline.
This devaluation of the dollar was attempted in the 1930's, with negative results. And we are following the same plan currently. If the dollar gets weak enough, this may encourage foreigners to buy American houses and buoy up the US housing market. Is that what Americans want? Americans being kicked out of their houses because their dollar is being intentionally devaluated, so that Europeans, Chinese, South Americans can come to America and buy houses that are now a value because of the government's devaluation plan.
Exports? Is that what this devaluation is about? Think again.
The Fed will do anything (ANYTHING) to try to inflate another asset bubble in America. The Fed's anti-dollar policy is an attempt to reiinflate the American asset bubble with foreign money.
Thailand and Brazil are beginning to recoil against hot money investors fleeing Ameerican investments for foreign investments, which are overheating their own markets -- and will result in crashes when the money is withdrawn.
Are you telling me there is no currency war? Think again.
The Fed is committed to higher stock prices as a primary fuel to an expanding economy. How much is the Fed helping this rally? Probably a lot. Is it a waste of money. Probably. I'm afraid its just a 'face-saving' job to try to get us to limp toward November -- both parties do similar things -- but I'm also keeping in mind that the money the Fed is spending to keep the stock indexes inflated is 'borrowed money', that is, its adding to the weight we are already carrying in other people's money, not our own money.
We're introducing a new indicator today -- M4 Accumulation -- which is pretty accurate in calling trading tops and bottoms. We are showing a list of issues which we recommend investors watch closely at this time, at either top candidates for bottom candidates. See the list and the charts below.
|^SSMI_D||6,455.13||Swiss Index Daily|
|GAZ_D||8.54||Natural Gas ETF|
|IAAC_D||20.55||Intl Assets Hold Co.|
|JPM_D||39.84||JP Morgan Daily|
|PG_D||62.63||Proctor and Gamble Daily|
|ERTS_D||16.76||Electronics Arts Daily|
|MRK_D||37.16||Merk Pharmaceuticals Daily|
|MTL_D||25.26||Mechel Open Joint Stock Company|
Stocks on the 'Bottom' and/or 'Top' list should be threatening to change direction. We've tried to simplify our charts as much as possible -- these have only three technical elements, plus price data. Let's looks at each chart and discuss what these three elements mean.
BCRX, Biocryst Pharma. M4 Accumulation (Top Pane, brown line) is bottoming. M4 Sum Plus (Bottom Pane, black line) has just jumped up to +1, bullish. T11 Simple (Bottom Pane, brown line) -- intermediate trend -- is not yet positive. It should turn up at the rally begins. Not a perfect picture. A perfect picture would have T11 positive also.
EWR, Quity Residential. Perfect picture of a bottoming stocks, in terms of our three elements.
GAZ, Natural Gas ETF. Not a great picture. GAZ has been punished for most of the year. GAZ tried to bottom in late September, but ran in to heavy selling (see M4 Accumulation flatten almost immediate after attempting to bottom, finally falling back into another decline). Note: Every flattening of M4 Accum tells us something about support and resistance. When M4 Accum is falling and then flattens, even for two days, this means that buying came in to disrupt the momentum of sellers. We see this in the chart below in May, after a spike turned into a decline. The flattning last two days in the M4 Accum -- but the price DID rally up for more than two days.
We had a bottoming in early June in the same stock, an ascent, then a two-day flattening, before a continued ascent. The two-day flattening (a notch in the M4 Accum) was the actual top of buying. M4 Accum turned down after the actual topping.
When M4 Accum hits +10 (its highest limit) or -10 (its lowest limit) and then flattens, this tells us less. We really need to wait for a change of direction when this happens.
There are two elements in place for this attempted bottoming (M4 Accum and M4 Sum Plus); T11, the intermediate trend is still negative. But the last failed bottom had only one element in place (M4 Accum), so this bottoming is, in fact, more promising than the last.
IAAC, International Assets Holding Co. All three elements in place for a rally.
JO, Coffee ETF. Only one element in place, M4 Accum. M4 Sum Plus has moved into the bear zone (1 to negative one) -- and the intermediate trend is also down. That doesn't mean we won't get a rally -- but it is much harder to rally unless the rally can turn those two elements positive.
JPM: All three elements bullish.
PG, Proctor and Gamble. All three elements bullish.
SSMI, Swiss Index. Two of three elements bullish. It is very hard for an index to really rally as long as T11 remains negative.
UBS. All three elements bullish. A rally is very likely here.
ERTS, Electronic Arts. We haven't liked this stock for a long time. It is trying to re-establish an up-trend. M4 Accum is the only element in the chart that is truly bearish. M4 Sum Plus and the T11 Intermediate Trend are both bullish. This doesn't mean that there won't be selling however.
HMA, Health Management. Sell Signal -- but not a shortsell signal. It is interesting how hard the stock fell yesterday however. This stock gave a sell signal in April that was not confirmed by T11; and the stock pulled back and then made another top. It gave another top reading in June that was confirmed by T11 -- and the stock fell apart. We don't recommend shortselling a stock unless M4 Accum and T11 are both negative.
HMY, Homestake Mining. Hard to be negative on gold mining shares. They are volatile, so they can respond with a large percentage move. Our view is that gold will be in a bullish move until about 2019.
INTC, Intel. Not much of a rally, in fact. M4 Accum is bearish, topping -- the other two elements are still bullish -- but you have to wonder why there has been so little upside movement during this rally. This chart is very bearish longer-term. Where are the buyers?
JPN, Japan Index. I'm sorry the price chart on this one is so hard to read. All three elements of this chart are negative. We would not be surprised to see a healthy decline here.
LODE.OB: Comstock/Goldspring Mining. Again, gold is going to be going up as long as Ben tries to outspend the the force of deflation. This is a volatile stock and only M4 Accum, at this point, is negative. People wanting to take profits could use this as a point to do that. Long-term: don't sell yet.
MRK, Merck Pharma. Seems to be turning down right about at resistance. Here, however, we see that the first top has been followed by a flattening out of the indicator. This means some (significant) buying has come in. It's possible that more buying will come in here. M4Accum is toppy; but the other two elements are positive. Note the spike decline in March has several points of flattening on the descending arc, each of which were attempts to stem the selling, attempts that ultimately proved futile. The chart itself is rather neutral. The old high in March is still lurking over everything. But the prices have established recent higher highs and higher lows.
One thing to keep in mind. M4 Accum doesn't rally to +10 unless there has been some buying. MRK has rallied a bit above the last high. This is not really convincing of an uptrend. That's why the chart is sort of neutral here.
MTL, Mechel Open Joing Stock Company. A flat rally from September's turn back up. M4 Sum Plus and T11 are still positive. But the stock has mad a flat move the last month or so and really needs to go lower to clean out sellers and get ready for another move up.
STD, Banco Santander. A skinny top in September that was followed by a flattening that lasted nearly a week; now more decline. The bottom two elements are still positive. The bank's rally over the last two months has been feeble, making us think we'll see lower prices.
VVUS, Vicus Inc. Broad topping process. There has already been A LOT of selling. Sometimes it takes T11 and M4 Sum Plus some time to catch up with M4 Accum. Not impressed with this chart pattern at all, at the moment.
VZ, Verizon Communications. Here's a great picture of a stock that fought its way through a selling top -- which is what the general market also did. This one fought its way through and established a new high. Impressive performance. It is interesting that M4 Sum Plus in the bottom pane also is dipping down to -1, Bear Country. This would be a pretty good place to take profits if one got in back in July.
Two of the three elements are now bearish. This one might be a fun issue to keep an eye on.
More information on the CGTS systems can be found at:
MICHAEL J CLARK
Clark's Gate Timing System
84 4 221 92210
Disclosure: NO POSITIONS TO DISCOLOSE.