Sunday, September 14, 2014

Market breadth – Some Worry Now:

Just the repeat once again on market breadth “The Advance / Decline Line (AD line) is one of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.”

The last time we looked – back in August 18 the S&P500 was at all time highs and the NYSE A/D was still not confirming the recent advance - a sign of thinning leadership. Now the breadth problem is acute as displayed in our latest NYSE A/D line chart. Now we see both the S&P500 and the lower A/D Line failing to break above their respective July 2014 highs – so now we need the A/D line to hold at the early August lows to complete a shallow A-B-C type correction

Thursday, September 4, 2014

The problem with gold:

Investors and traders in the gold complex are running out of patience in reaction to the slump in the sector following an early summer rally. Nothing is working be it seasonal, Russia or the so-called extended global equity markets.

I think our dollar/gold chart pinpoints the real problem – the strong U.S. dollar which has been the go-to place – well since early summer. As we can see the price relationship is somewhat inverse – dollar up – gold down and vice-versa as displayed by the lower US$ vs. gold study. The big disappointment for gold investors was due to the early summer advance in spite of the dollar advance – this appeared to be a set-up for a dollar peak which did not occur. Let us see if the US Dollar index trades back up to the 84 level – or the $23 level on the UUP – and then look for the gold complex to rally.

Friday, August 29, 2014

The 100-yr Dow & the Next Big Thing

Secular trend Rules

A secular up trend will contain at least 5 bull and bear cycles and usually will introduce “The Next Big Thing” or the Dominant Theme, which will persist for 20+ years and eventually end with an asset bubble or a crisis.

A secular down trend will contain at least 3 bull and bear cycles one of which will be a Granddaddy Bear. The Granddaddy will be the largest bear in the series in terms of duration and magnitude. It is usually the 1st or 2nd bear and is typically introduced by a Crisis which in turn will kill the current “Big Thing”

Some past Asset Bubbles and Modern Crises

The first automotive boom of 1909 through 1927, the Nifty Fifty buy-and-hold bubble of the late 1960’s, the second automotive boom of 1946 to the Arab Oil Embargo of 1973-1974, the Dot Com technology bubble late 1990’s and the U.S. Housing Bubble of 2005 – 2007 and the Subprime Lehman Brothers crisis of September 2008.

Note the recent break of the Dow up and out of the 2000-2013 secular bear – likely driven by a new Dominant Theme – any suggestions?