Got back from vacation last night, and my priority was to look for any glaring opportunities, covered below. I will catch up gradually on mails, comments, etc. I have updated the short term models page and will update the others in due course. Below are models for the Dax and CRB which show potential upside from now into the end of next week.
Stocks finally corrected then, and yet we now see a very oversold Nymo – below – which is a good signal for a bounce. Plus, Rob Hanna’s Capitulative Breadth indicator jumped to 6, where 7-10 historically implies capitulation and a market bottom of some kind. Together, they suggest the market won’t fall away here but will bounce soon, if not to a new high then to a partial retrace of the falls. I have therefore bought stock indices for a bounce.
Source: Stockcharts / Cobra
Gold and gold miners are the other opportunity I see. Here is gold miners bullish percent versus the gold miners ETF at a level which has historically been a great buy.
By various oversold/overbearish indicators, gold and gold miners look a buy opportunity here. Bernanke’s remarks whilst I was away that implied no QE3 caused another sell off in gold, but I believe that’s just part of the final clear out of weak hands. Gold does not need QE3 whilst negative real interest rates, central bank demand, money supply increases and real inflation data all remain supportive.
Regarding ‘threats’: China slowdown, Euro debt re-escalation and Economic Surprises downward trend, there is some positive news on the former, but worsening on the latter two.
Here are the latest OECD leading indicators. China has flipped to the positive since last month’s readings.
ECRI’s leading indicators for the US also finally moved into the positive. Euro debt has flared again though, through Spain. Here are Spain CDSs. Italy CDSs are also trending up but not quite as critical as Spain.
Here are Economic Surprises for the main global economies, which continue their downtrend but remain just positive. US Economic Surprises are similar.
The situation in stocks, Euro debt and economic surprises shares some similarities with the first half of 2011. Then, stocks exited their strong uptrend in Feb 2011, as Surprises dropped and Euro debt came to the fore, but stocks traded overall sideways into July, with opportunities long and short. As we did not see major topping signals with our recent March 2012 top, I suggest we may be in for something similar, and the quick reaching of Nymo and CBI bounce signals supports this. My projected bounce window is into 21/22 April, so the end of next week.
US earnings kicked off yesterday and will be influential on the markets, but we won’t get a feel for an earnings trend until next week.
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Some interesting further reading from Zeal, arguing that QE3 is neither forthcoming, nor necessary for further gold price gains…