Bull Market or Bear
Honest Money Gold & Silver Report
I have been bearish on the stock market for two years now. There were some major analysts, including Dow Theory icons, who were calling for a new bull market at the same time that I was warning of the mother of all bear markets. I respectfully disagreed with the experts. I got lucky and the rest is history: stocks fell off a cliff. They did not begin a new bull market.
The story is repeating again. Some are calling for the beginning of a new bull market. I disagree - again. This has been a bear market rally and I have been calling for a top near the Jan. highs and a sharp correction for weeks.
Back in the April 14th market wrap I stated the following:
The S&P continued to rally this week, gaining +1.52%. It closed at 869.60, just below significant overhead resistance at its Feb. highs.
If the market can close above the Feb. highs on a three day or weekly closing basis, it will likely make a run at its Jan high.
If the market corrects from here, which is highly probable, it still may make a later assault on the Jan. highs. Either way, I don't see the Jan. high being bettered.
The Feb. or Jan. high will mark the end of what is a counter trend rally in a bear market.
There are those calling for a new bull market. I disagree. This is the mother of all bear markets; and it is far from over.
The following chart and comments were then offered.
Next up is the weekly chart. Notice the negative divergences and the falling 40 week (200 day) moving average. That is some serious overhead convergence setting up.
The chart below is from the April 19th market wrap.
[Chart from April 17th]
Since the April 19th market wrap I have been warning that a correction was due and that the rally was closer to its end than its beginning. I was off by about 2 weeks on the exact call, but now the correction is here.
I have put on four short positions in the weeks just before the correction began, as reported in the market wraps, email alerts, and on my website's bulletin board. The following chart depicts the correction that is presently unfolding.
[Chart from June 23]
The chart shows the horizontal overhead resistance line connecting back to the January highs. Price has bounced off that level and has now broken below its lower diagonal support line.
MACD has made a negative crossover, which suggests lower prices are coming. RSI has turned down as well.
I do not think that this is the end of the correction, although an intervening bounce is not out of the question.
It is likely that the May lows will be tested before all is said and done. Later this year I expect the March low to be tested.
In the same April 19th report I commented on the correlation between the Aussie Dollar, Copper, and the S&P. It was suggested in the April report, and in subsequent reports, that a correction in the stock market would coincide with a correction in commodities, which is now happening.
Of even more interest is the correlation between the Australian Dollar, the S&P, and copper.
[Chart from April 17th]
The updated chart of the CRB index (commodities) shows the recent downturn coinciding with the stock market correction. The lower horizontal support trend line is being tested - it better hold or the next target is 380.
The good news is that the 50/200 dma crossover suggests that higher prices are likely longer term.
[Chart from June 23]
In keeping with the correlation shown in the April 19th market wrap report, between the S&P 500 and copper, commodities in general have followed suit, and are moving down in unison with the stock market.
Below are the comments and commodity chart from the June 6th market wrap report.
Commodities have been one of the best performing sectors since coming off their March lows. The CRB has rallied from approximately 200 to 260, a gain of about 30%. The chart below shows that presently the CRB is in overbought territory: both the STO and CCI indicators at the bottom of the chart are flashing overbought signals.
Notice that STO and CCI are rolling over and headed down. Follow the vertical lines that connect the indicators at the bottom of the chart, up to price levels that existed at the time of those same readings. All of the overbought levels coincided with topping areas that led to downward corrections.
[Chart from June 5th]
The financial crisis continues unabated. The various bailout schemes are not going to provide protection from the systemic risks that exist due to the structural deficiency's inherent in the currency itself.
Paper money is a promise to pay, not payment. We cannot pay off debt with more debt; or keep promises with other promises. This means there are more surprises down the road, as more shoes drop. There is never one cockroach. Where there is smoke, there if fire.
But crisis offers opportunities - we just have to take the time to look for them - in the right places, and at the right times; which is easier said than done.
My analysis of the markets has been spot on for most of 2009. Besides calling the various market moves in general, I have also recommended and bought and sold (booked profits) several commodity stocks, including gold and silver stocks. My S&P short position is now up about 6%.
These are trying times - economically, financially, personally, and especially in the preservation of one's hard earned savings, let alone profiting in the markets.
Every week I write a detailed market wrap report of approximately 30 pages. All the markets are covered with the emphasis on gold and silver and other commodities.
Most of us are too busy to devote a lot of time to analyzing the market, but that is what I do (along with writing on the financial crisis and the remedies to correct it - honest money of gold and silver coin).
If you want an easy to read, in-depth report on the markets, stop by the Honest Money Gold & Silver Report website and check out the vast amount of information available.
I am so bullish on gold that I am offering a money back guarantee to new subscribers if gold does not make a new high during 2009. You have nothing to lose and a lot to gain.
A free trial subscription is also available. A copy of the new book: Honest Money is FREE with every new subscription. That is an offer hard to beat.
Good luck. Good trading. Good health.
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