Market Timing Brief™: Without Central Bank Intervention the Summer 2011 Lows Are in Sight

Based on the 6-1-2012 Close published Sunday, 6-3-2012.

A pivot point it was!  And did the markets ever pivot down this week with the volatility index (VIX) exploding.  I continued to exit in steps as we just don’t know when there could be a coordinated worldwide money printing party again in the form of Quantitative Easing 3 in the United States.  That could upset a lot of Bear plans and cause a monster rally in stocks, so pride is not going to work well from here for either Bulls or Bears.  The lack of action to stem the chaos in Europe is to blame as is the lack of GDP growth worldwide.  Europe is contracting and we are slowing.

There are many who argue that we’ll avoid recession in the US, but the Economic Cycle Research Institute says at least a mild recession is coming as I’ve reported previously.  If we have both recession and chaos, how low could stocks go?  They could descend to their Summer 2011 lows.  That would hurt many investors in a big way.  Confidence would be maximum Bearish at that juncture.  We may not get there, but the world is not a friendly place for now and until there is more clarity about the economy, the fiscal cliff in the US (taxes rising in 2013), and Europe, IN THE ABSENCE OF CENTRAL BANK ACTION, stocks will continue to decline.  Central bank action will at least temporarily cause the market to act like a strung out heroin addict being hooked up to an IV bag full of narcotics.

I mentioned last week that the massive Treasury rally was a bad prognostic sign for the stock markets of the world, and it was.  Treasuries continued to skyrocket in price on Friday, along with a strong US dollar index.  The 30 year bond joined the 10 year in making an important new mutigenerational high!

My gold stock purchase (GDX) is finally paying off.  Gold stocks could turn back down if the general market heads too low too fast, but they may in the end lead the rest of the market up.  Silver (SLV) could go the way of 2008 again if the selling becomes too intense.  Look at the chart of 2008 to know the risk.  Silver was up but not hopping like gold was on Friday.  A note of caution.  It just depends on how low things go with the SP500 Index (SPX).  Gold is moving up because the Europanic scenario finally kicked in on the important support levels shown in last week’s GLD chart on my main site.  If you don’t know what the Europanic Scenario is, you can access the PDF on the private page with your password (see subscription link below).  Panic or not, we must sell the first break of support after this rally to be safe as one should have done last summer.  At least use some sort of trailing stop would be my opinion.

Oil stocks could hit the 2011 low and oil is already close to that spot.  Oil has hit prices that are below OPEC targets, so they will likely start grumbling and cutting back production soon.  The thing is, the economy could use an “oil tax” break, so if OPEC were to support somewhat lower oil prices, the economies of the world could actually pick up more easily.  OPEC does not routinely show this foresight!  It will be interesting to see when OPEC says “when!”

The NDX NASDAQ 100 (QQQ) / NASDAQ leadership has been broken as well.  Tech is kaput on the charts!  Apple (AAPL) below 555 again will spell major trouble for that stock. 

On Friday, banking ($BKX) broke and housing ($HGX, $ITB) was the worst of all the markets I follow here.  Without banking and housing, where is the recovery going to come from?

Not even drug stocks are a hiding place now.   They could be headed to the base of the huge channel they have been in since 2009-2010.

What does sentiment say?  The AAII data indicate that we may have hit a temporary low or be close to it, but if last summer repeats itself, we could see a rally followed by a retest of the low once or twice.  It does make sense that the market is susceptible to good and bad news now and that this could provide the energy for these ups and downs.  The end of the gyrations may only come after we’re through September, but I do not make those predictions very seriously.  Though predictions only lay out the possibilities, a repeat of last summer’s volatility seems possible. 

If you have not seen them yet, have a look at the charts from this week.

Links to This Week’s Market Timing Charts

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

The above is the text from the 5-28-2012  “Weekly Wall Street Sun and Storm Report™.  To see the current issue and this week’s ratings of all 35 markets I follow and receive the newsletter every weekend, subscribe here: 

www.sunandstorminvesting.com/subscribe-to-sp500tracker-newsletter-and-tips.html

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This entry was posted in gold, gold etf, housing, investment, Market timing, oil prices, S&P 500 Index, silver, trading, US Dollar Index and tagged , , , , , , , , , . Bookmark the permalink.

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