Since this whole blog is about speculating, I am going to spend today speculating about what is in store for the markets moving forward. One of the great things about software innovations is that we have so many great tools to use. Of course it is also a negative to have so many tools to use because we wind up chasing our tails with too many things on the screen at once. At times price projection from software like this are incredibly accurate, and at other times they are just outright dead wrong. I never hang my hat on these types of things, but if I am leaning one way for some reason it is always interesting to check to see if these projections match my predisposition.
The above chart is that of the weekly Bernanke 500, and I have been consistently stating in here that I thought we would have a bounce, then a larger move down. Interestingly enough, the forecast above does match that. Only in this whacky world we are living in now would a vote in the parliament of a country that is bankrupt accepting a second loan that they have absolutely no chance of ever repaying, be a bullish development for stock prices. If you were a bank and were not forced to do something like this would you do it? Of course not. I also heard some pinhead named Bo something or another on FOX last night screaming at the top of his lungs that all doctors should accept all patients regardless if they have the ability to pay or not. It is morons like this that support business practices that would bankrupt any company, that are pushing us off a cliff. One of my sisters is a surgeon and I have talked with her at times about medicare patients and how they charitably take X percent of them per month, knowing they are taking a huge loss on them, and they do it charitably. However, they keep it I seem to recall at about 8% of their total patients. Who could blame them? I am certainly never going to agree to manage anyone's money that I would have to pay them to manage and get nothing out of it. Who in their right mind would ever done anything like that?
This dim whit on Fox does not seem to understand that in this great world of his malpractice insurance is six figures alone annually, so if you get paid 8 to 10 cents on the dollar, your business goes under immediately. Of course he spoke of no solution, and this dude I think is generally a conservative. If guys like this want things socialized we will be Greece on steroids very soon. I just mention this because it is one of many things that are going on that are going to matter very soon in my view. We are now rallying up into some resistance areas as the month and quarterly end mark up game goes on. I always found it interesting the way funds to the window dressing at the end of the month. They need to be able to show that they own the right stocks on the dates of these cut off periods, even if they just bought them. Investors want to see their fund owns the stock du jour of the moment, the Apple's and IBM's etc. If they look at the funds holdings and see that some of these big name companies are not there and the fund is lagging at all, poof withdrawals. This forces these folks to always have the pretty stocks in the window at certain times even if it means they bought them 30 seconds before the close and have not made any money on them. Aah the world of perception we live in.
Aside from any of the political and economic views that might bias me, the chart above says it all, we are retracing in what I am calling a downtrend now. If this does happen to be another leg in the bull market we will just continue upward from here so we are at an inflection point give or take a day or two. We are bouncing strongly off the 200 day which many people really give a lot of weight to. Place your bets.
The next projection I find interesting because it projects counter to what many people are looking for right now.
This is the pride and joy of our comrade chairman, the 30 yr Bond. Many are saying we have only one way to go here with rates and that is up, since the other day we actually had a negative intra day rate on the one month. On the surface it is hard to argue that unless you are Japanese. If you look at the long deflationary cycle they have been in, the rates over there have had nowhere to go but up yet they have gone nowhere at all. If we do get a stock market decline resumption, there is no way in my mind interest rates will rise. These two markets have a very tight inverse correlation. The one scenario for higher rates would be a huge stock market rally and an economic rebound. If that were to occur, we would likely see rates rise which ultimately would clobber the stock market about 6 months later. There seems to be about a 6 month lag between big moves in rates and when it effects stock prices. I have been looking in the near term for a Bond market decline as I have been mentioning in here which may have begun here in the last 2 days of course opposite the large move up in the Bernankes. I have not shorted Bonds yet.
These two forecasts are in line with what I am expecting, time will tell if they turn out to be correct. I do not trade off these anyway, it is more support of what my other tools are telling me. So far we have a stock decline and bond rally, so what does that mean for Gold? The bugs would tell us if the grass grows or your dog farts that should mean Gold will rally. If there is a sale at Nordstroms, Gold should rally. I have told countless people over and over to research the store of value notion, so if you have not done that it is on you. The projection here shows what I have said over and over.
IT IS NOT IN THE DATA
Here we see just a sideways projection while at the same time a huge decline projection for stocks. This is consistent, there is no historical relationship between Gold and times of strife in the stock markets, NONE. This does not mean it will not go to $6000 like some predict, for all I know it will. The point is that it will not be due to the stock markets crashing if they do. This forecast also matches my view on Gold which I don't really have a feel for one way or the other at this point, so sideways makes sense.
I was reading yesterday an article about the dollar being voted by some international panel of "all stars" as more than 50% likely to not be the worlds reserve currency 25 years from now. Alot of good that will do you today. You had better be damn sure you are right about an investment you are going to hold for 25 years, it is hard enough being right about what will happen a few days from now. Also, during periods of coin tosses your odds can be just over 50%, so this means in the next 25 years you basically have a toss of the coin probability that the dollar will no longer be the world's reserve currency! Boy I am glad I have that going for me.