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Thursday, May 13, 2010
YEN AND YANG
For the time being the Yen has become a flight to safety vehicle for stock market drops, hence the title of today's post. It is now the Yin for stocks Yang. This market is setup very nicely for a rally and I have buy orders resting in the markets for it today where indicated. You can see several things on the chart above, every single one of them indicates a pullback against upward momentum. We also have the Pro Go accumulation/distribution line in GREEN indicating a ton of bullish divergence. This is a very good setup however, it is unlikely to trigger unless we get a sharp stock selloff. It appears the bulls have this back under control now, so I am not expecting a stock decline.
We never know in spite of how convinced we can be what will happen next, so I am prepared to short the indexes if we break down today. I just am not expecting it to happen. We know from last week in spite of all the BS coming out of Congress, that this whole house of cards is an accident waiting to happen that almost did last week. Due to this, if we do happen to break down, we could see another very sharp acceleration downward. Only in the world we live in now could lending money to someone who cannot possibly ever pay it back GREECE/General Motors, would it be bullish news. Hooray we just loaned a bunch of money to someone who is bankrupt, buy, buy, buy!!!
I was listening to Gretta Van Susteren on Fox news last night for a brief moment before I got annoyed with her ass kissing which I always do. She was adamant when talking to Steve Moore from the Wall Street Journal who is against bailouts, that we had to do it or things would get way worse. It it this mentality that will bring us down. A puny little financial fly on everyone's ass ( Greece ) cannot be allowed to fail because of their socialist policies. Why? As long as this mentality pervades the thinking of everyone, we will just be kicking the can down the road until ultimately the next wave down happens. Guess what, it will be worse than the first one due to what we have done to prolong it.
Some ideas fail, some businesses go out of business. It is the natural way of the world. Why does every idea have to be great? What Greece has done even though Barry obviously wants us to emulate it, has been an awful, unsustainable business model, and it has failed. So we all step in and support it. If you think what happened there cannot happen here, think again. Look at what is already happening with the great divider presiding over things. We now have states trying to dictate to other states what they should be doing, ala this immigration issue in AZ. Trust me, if we do get another very big economic psunami, this country could very easily reach the riot stage Greece is in.
I just veered into this to make people realize that even though we have a very strong stock uptrend, it is not built on the solid foundation these types of things typically are. As a result, it is vulnerable to shocks. We have essentially done with the stock market what the world did with Greece. It has been arificially propped up to a level it probably should not be at, with last hour buy programs sponsored by Uncle Sam. In summary, it does look like for the time being this thing has been saved, but we are not completely clear yet.
Here is something I found very interesting and it is a good sign for Gold Bugs. Due to the unusual upmove in GOLD and the Dollar at the same time, the Gold market is not over valued yet.
When we value it against the US Dollar as this does above, we are still not at an extended valuation level. As long as the Dollar continues to rally along side this, we could continue to climb here. This does not change my opinion on the bubble aspect of this, but I am not stupid and do not make it a habit of fighting trends that are this strong. I can argue all I want about this being a bubble but the fact of the matter is, until we get a valuation level that is extended like the price, I do not expect to see much of a decline.