The market has a four day trading week this week and Friday should be a light trading day. We don’t have any reason to change our stance on the market at this time. Our momentum indicators have just failed to confirm the new highs created in the market late last week, giving us added information to stay the course. The bullish sentiment being exhibited in the market place is the best indicator for us contrarians.
Right now we see the picture unfolding quite like we anticipated earlier this year. The bond market did push rates up somewhat and that is being blamed for the current housing dent that is occurring. So, as rates come down, they say, housing will pick back up. Actually, the media is starting to present somewhat bearish comments on housing, mostly due to the up tick in rates.
Here’s what we see: Gold is in the process of peaking, the stock market is peaking and not confirming the highs, the dollar is peaking but Treasury bonds are firming up, maybe signaling a recession coming up right around the corner. We don’t like predicting recessions but we like to anticipate what the market wants to do. We have been on the short side since early October and recently that call seems to have some holes in it. On the other hand, the market is getting tired.
We note that last week was options expiration which naturally contributes to a somewhat unpredictable week. We’re not trying to rationalize our position, just making statements about options expiration. The artificial highs set late last week should be retraced starting on Monday. Normally, Mondays are strong days but this week may be different.
There are very few asset classes that make reasonable sense to be in and we remain with the mantra that “cash is King”. We recommend staying away from the market and gold, too. The only place to be long right now in this country is the Treasury bond market. We have been sitting in the TLT’s for about a month and have seen no net change in the value of our asset. This is a good thing since we saw a drop of about 3% going into last week, being back to even feels much better.
Dow Industrials: 10,766.33 +46.11 (looks like a big number)
RYVNX: 18.82
TLT: 90.14
BGEIX: 13.59
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1 comment:
Glenn,
I'm just coming back from a 25 mile mountain bike ride with my brother's brother-in-law. We started this monring and rode trails all the way to San Francisco bay. My legs are killing me since my brother took me on a (2 dry heave) 2 hour ride yesterday. Oh how out of shape I am. If you want to find fitness the easy way, move to California. It is virtually state sponsored.
Enough about my vacation. Here is my question. Is it possible that our GLOBAL economy has entered a period of market diversity that squeezes out the idea of recession? The media and govt. manage their way into these soft landings and thus ensure growth and prosperity?. Does he rally in equities, gold, and everything signals the end?
Is this crazy talk. Maybe it is all the excercise?
Erick
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