Wednesday, January 30, 2013

Are the markets telling us how close to the bear's bottom are we now?

Over the past several months I took a break from posting in the midst of the negative throng.

I'm back.

I am interested in the gold cycle as you know and all I saw was the inexorable gringing away of resource valuation and the legion of complaints about that situation.  The wide accusations of manipulation is but a single story line from a blame-oriented position.  I find that argument useless.  Everyone tries to manipulate what they think they control—that should be obvious.  The ones who think they control things are trying to—duh!

If you were in their position isn't that what you would do?   That is: try and protect what you have spent your whole life in.

But the truth is the harder they try and maintain their situation the deeper they have to go and at some point they will hit bottom.  They know this.  They are planning for it.  They will place themselves in position to remain wealthy and in control.  So the cyclical bear will turn—when they are ready.  Cry and whine as many do they should be paying very close attention.

This bear promises to make many wealthy people—especially those who already are.  But don't get caught in the rear-view morror on this one.  The whining is a trailing indicator that you are missing out—Don't!

On watch:


Here's a nice review of our accumulated circumstances in markets.  It kinda puts the present 'hope and fear cycle" into our time line.

Equities, miners nearing major turning points

In recent weeks we’ve written about the decoupling or negative correlation between the equity market and mining equities. As the miners take a hard turn lower and the S&P 500 continues higher, this current trend is all the more obvious. At the same time, commodity prices have been in a cyclical bear and have struggled to gain traction. Our forecast for 2013 is for these cyclical trends to shift. It won’t happen instantly but it will slowly evolve in the coming months and quarters. Today, we see that the equity market is ever closer to that cyclical top, miners are about to retest a major bottom and hard assets have a new catalyst.
First let us take a look at the miners. From top to bottom we plot GDX, GDXJ (larger juniors) and SIL (silver miners). It doesn’t take a technician to see where these markets are headed in the coming days. GDX will test $40, GDXJ will test $17 and SIL will test $19.50 and perhaps $17.

As we pen this, the S&P 500 is trading at 1501 and faces very strong 13-year resistance at 1550 as well as the all-time high at 1576. Look at the chart below. Does this look like a market you want to buy? How in the world will the market break past 13-year resistance, much less even sustain a breakout move after a four-year rally?

Nevertheless, the typical Wall Street cheerleaders, I mean strategists are predicting the usual 10-15% advance and are justifying that with the belief that the economy will strengthen and valuations will pick up. I guess they forgot that margins are at record highs and therefore corporate earnings have likely peaked. At the same time, the typical trader has hopped on board the trend yet can’t rationalize his long position beyond the idea that “it’s going up.” I guess they forgot about the ominous economic headwinds, stagnant earnings and the blatantly obvious massive resistance at 1550.

Beyond the technicals, one should see that sentiment is arguing for caution...

Read full article here.

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