People need to see and consider this because it is reality; it is what is indisputably happening right now, like it or not.
DIA-GLD ratio, monthly
People can avert their eyes, call me the most hated individual in GoldBugsVille or simply cancel from my service (they have done all three) because I have shown things like this that are gold-ugly and talk about the risk of not dealing in what is.
I too dislike what I think are some of the causes of the picture above, but the picture is what it is. Stocks are apparently entering a secular bull signal vs. gold (green MACD). Now, I am a smart enough chart twittler to know that charts do not rule the world, and the DIA-GLD ratio had also come to within a target zone. It hit 1.1255 before being repelled on gold’s post crash recovery. This is not shown on a monthly chart. The ratio is also getting quite over bought.
Still, the target allows for a little more upside and we’ll soon know if it is a grand new age of stocks vs. gold. I am watching for upside blow off targets to get short the market, so you know where I am at right now. But by being aware of the chart above, at least I’ll do what I do with eyes wide open and let the chart school me one day about how wrong I was if it comes to that.
After a perfectly good topping pattern was ruined by greed and momentum (I am just kidding, it was the market being the market and it never was a topping pattern) the Russell 2000 (a leader) made another pattern, which we immediately measured to target 990.
Russell 2000 daily
We could be just a few up days away from target and time to evaluate the status of the over bought and over loved stock market.
Well, if the future is measured in weeks I’ll buy the story for the short term. More and more I expect a bounce in many markets to continue as part of the hype of the broad market’s final up stage. I own many of the catch-up candidates but plan to be flat nearly everything by the time certain targets are registered.
NLR was bought yesterday as I tried to coax a breakout. Today it is breaking out. Again, plans are coming pretty clear now. I am starting to really like Bernanke and this market after all. And after the aggravation of the last half a year, that is a good thing.
Let’s see some widespread cheering going on as opposed to just the S&P and Dow. Then we may be getting to a pivot.
When the market broke my nice topping patterns in Semiconductors, Small Caps and Trannies it actually did me a favor. Well, initially it took some of my money as I was short a couple things. But now in breaking to new highs the market has formed some patterns with very discernable targets.
This is all I ask for. A seasonal pivot period, which may yet see the dumb money get very over bullish as a bubble inflated and strenuously over bought market zooms up to measured target. This is what I think is coming, and I think it will be playable from the short side.
Conversely, the precious metals have proven nothing other than the pain endurance that some people are able to display. I think there is a pivot coming there as well; a bull pivot. But I am not as clear on the targeting as I think I may be on the big market. I am certainly going to stay on the technicals though.
We’ll see how it shakes out, but I am getting a feeling this market is going to get really fun. Right now I am long some things like Asia and emerging markets and various individual items. But when the likes of the Transports and Small Caps attain targets, and assuming sentiment is where I think it will be, long is probably not going to be a comfortable way to be this summer.
That’s the way it is looking. Not because I want it to, but because it is. Meanwhile, here is one of my longs with a target noted. When (well, if) TDF reaches that level and a bubbled up US market is flying around way up in blue sky, it will be time.
Cue the Dow Theorists, cue the DT confirmation noise and cue 6500 for the Tranny should this break to blue sky hold.
By no means do I claim my trading has been very good lately. It has not been. But DDD just provided another 12%, and is now sold below the measured target of 44.
DDD, besides having a cool product that literally prints CAD models into solid parts, is one of a stable of ‘bull’ stocks I keep on hand for when I curse Bernanke, realize he is ‘winning’ (duh) and join the bull party.
All I can say is that I had a lot of angst in birthing this pig a year ago and now have the same in trying to kill it. I really have got to reevaluate the way I go about viewing momentum and try to be more patient with existing trends and realize that the market that the Bureaucrats have created is prone to extremes before the turns finally come.
It is going to be all the more satisfying when those gaps start filling after this move terminates. But I’ll be poking this thing short going forward and with a risk management style, can suffer 1000 little cuts along the way. Not a big deal. I’ll also trade a few bull stocks that look technically good along the way until everything looks about ready to come out of the oven.