The S&P is at a critical juncture right now. Support at just above 1540 was recently tested, which lines up with the 50 day MA. Meanwhile, RSI and MACD, which had been negatively diverging (i.e. going down while the index went up) for a couple of months continue to fall. Volume, which was contracting during the early part of the year as prices rose, is now beginning to rise as prices correct. This is another warning sign.
Earnings season is also well under way, with little to be excited about, given the mixed bag of results. And, like the last 2 years, such an unexciting earnings season may just lead into the typical spring correction. The Bollinger bands did signal a change in direction a couple of weeks ago, as noted on this blog – so I continue to bet that U.S. stocks are a bigger risk than normal at this time.
The TSX continues to underperform the US markets. The index has fallen below its key 200 day moving average (blue line)—and, as the chart below shows, this index has a tendency to peak in March or April quite predictably.
I remain 40% cash in my equity model, which was raised in March, and continue to hold low-beta stocks for those postions I do own.
Thanks Vancouver seminar attendees
Last week’s MoneyShow and West Vancouver seminars were a pleasure. My thanks to the great folks who attended the presentations. The two events had an abundance of informed pleasant people – and I appreciated the kind reception. I had a great time, I love your city, and will do my best to be there for next year’s show.
As you know, last week saw most commodity stocks get hammered. Well below 52-week lows, I was tempted to buy some gold and copper stocks I’ve been watching. But I didn’t have the nerve… Even though they have rebounded somewhat, my fear is that a coming correction of the S&P would also drag down the TSX… leading to possibly lower prices in resource stocks.
Is this a reasonable hypothesis? Or was last week’s major fall indeed a unique buying opportunity?
I totally agree Andy–firs, you dont want to catch a falling knife. And as you mention, there will be influence by the US performance as if and when it starts its pullback. I’m avoiding resources largely, and all higher beta plays.
I WAS READING ANDY ON COMMODITIES AND YOUR COMMENT ON IT. WEDNESDAY SAW METAL AND ENERGY REBOUNDING FROM OVERSOLD LEVELS RETRACING BACK TO THE 200-DAY MOVING AVERAGE FOR $WTIC .NEVERTHELESS, ENERGY AND METAL COMMODITIES REMAIN IN A NEGATIVE TREND, CHARACTERIZED BY A SERIES OF LOWER-HIGHS AND LOWER-LOWS. ALSO, A NUMBER OF COMMODITIES ENTER INTO A PERIOD OF SEASONAL WEAKNESS AROUND THIS TIME OF YEAR, RANGING WELL INTO THE SUMMER MONTHS… I AM ALSO AWARE OF YOUR LONG TERM CHART (PAST BLOG) ON COMMODITIES AND CYCLICALITY. IS IT TIME TO GET RID OF COMMODITIES FOR GOOD? ARE WE IN A BUBBLE SITUATION SIMILAR TO THE NASDAQ AT THE TURN OF THE MILLENIUM?
Yes, I believe this is an oversold bounce. Gold may get back to its old support level of 1550–but I am skeptical therafter. I am a longer termed bear on commodities, but do supspect many counter-trend rallies will provide trading opportunities.
And as you mention, the big, big cycle on commodities came due in 2011 right on schedule. Quite amazing, really. Copper, oil and gold peaked then and are down since. Sometimes cycles seem kind of erie in their accuracy.