This Week

Friday’s action was a reversal of Thursday’s strength, including a potentially decisive channel exit for Apple, and Spain CDSs reaching new highs.

I maintain the expectation of upside into the end of this week, into the new moon. There are some key US earnings out this week. Last week’s opening set produced a beat rate of 75%. If Spain becomes more accute, or earnings disappoint, and we make a lower low on the indices, I’d be looking for more evidence of capitulation or positive divergences, such as on the Nymo. Only Spain debt is showing signs of stress currently. There is no notable contagion elsewhere. However, it is a large economy with peak debt rollover requirements this year, so clearly a threat.

Economic Surprises remain in their overall downwards trend, whilst still positive, and ECRI leading indicators remain in their uptrend, now at 1.4% positive. PFS recession leading indicators show no current likelihood of the US slipping into negative growth.

Gold miners are into week 9 of a potential perfected DeMark buy set up this week. The US dollar is pressing for the decisive triangle breakout against the Euro.

Two great posts by Tiho at his Shortsideoflong Blogspot on Friday and today.

OK, to sum up, I expect a push up in stocks into the end of this week. If we get that, I may exit my bounce longs. If not, I’d look to add more lower down on signs of capitulation or positive divergences. In the medium term, I still expect overall sideways action for stocks, with global leading indicators still on the up, but economic surprises on the down, with us having seen no regular major top indicators at the March top, and having fairly swiftly reached oversold Nymo and a washout in bullish sentiment. I maintain the better opportunities are in gold and miners, which are due lift off. But the US dollar may hamper this. Continued stress in Spain debt may weaken the Euro versus the dollar.

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14 thoughts on “This Week

  1. Thursday the US Treasury rebuys short-term bills with newly received tax receipts, adding liquidity, but not necessarily bullish unless it exceeds banker expectations. I’m guessing expectations around $35 billion, above 40 bullish and below 25 bearish.

    May 6 European elections, particularly the French, should be market movers. Wondering if and how this ties in with the full moon

    1. Just read your blog post and while my thinking is pretty much the same I don’t have near the time or ability to express it as well as you do. Added SSoL to my A-list of blogs. Very appreciative of the work you and John do, and it is most generous of you guys to share it.

  2. The Bradley Model calls for the high of 2012 to be Mar 16. That has been right on so far. It calls for a severe decline for the rest of the year, interupted by a six week rally from 6/12 ti 7/28. It also calls for a little rally from 4/11 to 4/23, which is correct so far as well. After this weeks option expiry and the full moon, all systems go to the downside.

  3. My Norwegian solar trader friend Jan sent me this chart showing a combined 1 and 6 month cycle for the Norwegian stock index. It rather echoes my expectation of up into the end of the week and then down again, but the down is quite significant.

  4. All models updated Tuesday morning. The key messages are: (1) Sunspots are still fairly contained, but the last few days have been increasing – once they pick up we should see greater commodities speculation and inflation, (2) Forecast geomagnetism for the next 3 weeks is a little lower, giving the overall short term outlook a flat-upward bias – an end to the down pressure, and (3) Seasonal geomagnetism is less in the months ahead, so we might see that upward bias continue.

    1. John,

      I’ve been having another close look at timing the next solar peak. We mentioned before that the first decline in the Smoothed Sunspot Number (SSN) is probably the best time to exit commodity longs, as that reliably marks the solar peak.

      I have a concern though, that because of the way the SSN is calculated, it will be very difficult to time these exits – this is because the SSN is calculated as an average of the current month’s mean sunspot number plus the previous six months’ means plus the projected next six months’ means. In other words, an SSN for any particular month cannot be definately confirmed until six months after that month.

      So I’ve been looking at the reverse in polarity of the north (Nf) and south solar (Sf) polar fields (which occurs at each solar maximum and minimum) to see if published measurements could be useful in confirming the timing of the next solar peak. The sun’s polar field strength for both northern and southern fields is measured by the Wilcox Solar Observatory and published here: http://wso.stanford.edu/Polar.html#latest When Nf=Sf then the solar peak has occured.

      The filtered figures at the right hand side show the 2000 peak at 25 February 2000, and the 1980 peak at 21 January 1980 – so there is no doubt they are a very accurate and timely way to determine each peak.

      Looking at the figures for the current cycle 24, we can see that the sun was heading for a peak sometime during 2012 until Sf reversed and started to increase in strength during April 2011 (interestingly, this marked the “mini” commodities high mentioned by Kent in previous posts). Even more interestingly, the Sf is still increasing slowly, so we are effectively edgeing away from a solar peak (temporarily, I presume).

      So I’m wondering if inflation and commodity price mania will have to wait until Sf turns back down on course..? The longer this situation continues, the further the next solar peak will be pushed back.

      Regards,
      Mark

      1. Interesting stuff, thanks Mark.

        Nasa’s latest update still predicts Spring 2013: http://solarscience.msfc.nasa.gov/predict.shtml

        I note though this one guy thinks we already peaked:
        http://19dx072.suijs.info/?p=119

        If we have already peaked then it would have been around November time last year. But, more broadly peaks in sunspots so far in cycle24 were around Mar, April, Sep, Nov 2011. I note silver and oil peaked around April 2011, agri around March, gold around Sep. So you could make a case that it all occurred last year and Kent is right. And it would mean a geomagnetism peak and recession should be imminent.

        But then I have to go back to my wider analysis on gold and oil and say they should go higher in 2012. Solar cycle 24 looks like it’s going to be weak but really strong cycles in the past didn’t translate into the biggest market manias. And without knowing that guy’s credentials I side with Nasa, and assume their monthly update on the peak prediction is roughly right.

        It’s food for thought though. Adds to the uncertainty. Preston may be right about the shakeouts in gold getting weaker. But until gold or any of the commodities make a new high (or something quite opposite), we shall remain in this limbo.

    2. Yes, I am reasonably certain that cycle 24 has not yet peaked – it seems that a solar peak cannot in fact occur until the Sf and Nf measurements converge and cross over, thereby creating the polarity reversal (this is what marked previous solar peaks). So, with Sf turning back up unexpectedly during the past year, it has merely delayed the convergence while creating what resembled a small peak.

  5. It would appear to me that all these shakeouts in gold, the two FOMC meetings and now IMF, seem to be getting weaker.

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