A Market Timing Report based on the 11-16-2012 Close published Sunday November 18th, 2012
UPDATE for 11-22-2012 based on 11-21-2012 Close: We either go down to retest at 1370ish or lower or have one more push up to 1400-1425 and then another serious corrective move.
I want to start out with something we can be thankful for, especially if the environment is respected as we use her resources. It is now said that the US will be energy independent by 2017 given the rate of expansion in our country’s oil and gas resources. I always predicted that the Saudis plan to control the oil supply would hurt them eventually. One day without real investment in productive and creative activities, they would be stuck in a sandbox of their own making. It will be a rude awakening for them when the oil cartel becomes irrelevant.
This price break on energy will be needed considering the mounds of debt this country is building up and the unfulfilled obligations that are now coming due in the way of baby boomer entitlements. We are already up that well know and aptly named “creek” and simply have the advantage over Greece of having the US dollar as the top reserve currency and not the Greek drachma.
This stock market correction will lead to another rally. That’s a “duh,” but the question is whether we ascend from here or from the prior summer lows or worse. Given the fact that we do not yet seem to be headed into a recession on an immediate basis, despite the slowdown, it’s likely that this fall will be contained at least by the 2012 summer lows. The caveat is that some are still predicting a recession.
On a technical basis, it’s a fool’s game to predict where the market will go once we are “in the middle” of a fall as we are now. The only market reaching last summer’s support is the tech market, so one could start buying there with a stop and a willingness to get back in if the market triggers your stop and then recovers. It’s simple, but not easy and not risk free. You have to be willing to give up a little to make a lot in the market. There is no way around that old adage.
As for the small caps we’ve been following on the way down, the Russell 2000 Index (RUT, IWM): http://www.sunandstorminvesting.com/ has been hit hard. Although it’s on a slight bit of support, there is room below as discussed at the link.
The SP500 Index (SPX,SPY) is attempting to find support once again, but despite any bounce, there is significant risk for a further fall as shown by the chart:
Gold (GLD) is in the process of attempting to find a bottom. The type of bottom is discussed in detail here, along with some insights on the best time to buy into an unpopular market and when to exit a popular one:
When the GLD ETF it reaches that point (the shoulder discussed), it will be a buy with a stop.
There is one interesting buy that popped up this past week based on Japanese monetary policy (see Pac Rim ETF in free report)
Where is individual investor sentiment this week? The AAII says bulls fell back to 28.82% from 38.50% and the Bears rose to 48.82% from 39.91% and the spread shot down to -20.0% from -1.4% last week. Last week I told you we were still in “danger.” This week, the -20% spread allows for a bounce for the first time in a while. That said, I can give you this bit of valuable insight. When there has been this much damage to the markets, the lows that are established are often retested. V bottoms are uncommon unless there has been massive damage to the markets as in March 2009. So be prepared to trade this next bounce whether it takes off from the current level or from the 2012 summer lows. And be prepared to take your gain and wait for the next test of the current or even lower lows.
Have a great week giving Thanks for all that you have in life!
Standard Disclaimer: It’s your money and your decision as to how to invest it.
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