Stocks up, gold down - time for a change in thesis?

[nero3]

Re: Stocks up, gold down - time for a change in thesis?

Here you go Chris - might as well keep the old wheels of skepticism turning - at least to a token extent - even if only spinning just idly enough to ensure they don't seize up from too long a disuse. ;)



DOW and S&P looking singularly advanced in their deflation against gold here, aren't they? Any smallest risk we might now be verging towards testing the "overshoot" theorem for robustness? What an annoyance, to have to constantly reexamine one's premises.

Seems we've got a few people here at iTulip, (maybe recent arrivals?) who have read the core meme about hyperinflation, and are "backing up the truck" on gold here. Frankly, these charts make their decision look just a shade "late to the party" and overenthusiastic, at least relative to the DOW and the S&P.

These charts are looking just a little bit "mature" to this jaundiced pair of eyes. I'm interested in iTulip's thesis - that the US indexes are overwhelmingly likely to be moribund for the next four years while we remain mired in depression, and that meantime gold is the likeliest thing to rise with the inflation level instead? Four or five years, eh? Not looking overwhelmingly likely on these charts! Or gold would have to overshoot massively to the downside on this chart relative to the DOW / S&P to eke out another four years of trend.

BTW - I'm starting to see one or two deals on real property in upscale neighborhoods here that are practically making my eyes bug out of my head. And I remember this town from the late 1990's when it was really, really *dirt cheap*. These (one or two) deals are looking like 1996-1998 prices. Seriously.

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Are these images visible now? One is .GIF format (housing) the other is .JPG

It's going to be atleast 1, or perhaps even two, boom bust cycles before the dow and gold hit 1, as far I as am thinking.

[c1ue]

Re: Stocks up, gold down - time for a change in thesis?

I've been trading based on the thesis of a bear market rally.

Now I'm switching out and preparing for the end of said rally - i.e. beginning of next leg down.

2 weeks more? maybe less? Bart's 4/19 date is as good as any.

Poll doesn't have the option of Bear trading on Bear Market Rally

[goadam1]

Re: Stocks up, gold down - time for a change in thesis?

This poll is so odd that I can't help but think it is some kind of "bull trap" to call out the die hard bulls. Are some people just not reading around here. What wasn't clear about setting the life boats on fire. "Everyone in, the water is fine." This place isn't bearish. This place is like the sunglasses in "They Live."

But I'll be fair to the "Mad Money" crowd and ask for an opposing thesis that isn't based on chart voodoo.

[Master Shake]

Re: Stocks up, gold down - time for a change in thesis?

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In looking at this chart, if you were to connect the dots of the years from 90-08, you would see a sharp rise from 90-March 00, a contraction from 00-02, a smaller rise from 02-04, and a continued downward trend (regression to the mean?) since then. So, to expect the market to go to a more extreme (positive) valuation from here would be against the trend, no?

Regarding the USD winning (and continuing to win) the ugly contest against other fiat currencies, doesn't that bode well for hard assets (gold, oil, farmland)?

[stockman]

Re: Stocks up, gold down - time for a change in thesis?

IMHO it would be wise for bears to keep Japan's many cyclical bull rallies within their ongoing secular bear market in mind-

Nikk 040309.png

Already 9 years into our own secular bear a downward sloped range could still provide several year+ long cyclical bull moves.



Was that a train whistle I just heard?



WLI Edges Up http://www.businesscycle.com/news/press/1379/

(Reuters) - NEW YORK, April 3 (Reuters) - A measure of future U.S. economic growth edged up and its annualized growth rate reached a 23-week high though it was still in negative territory, suggesting clearer signs of economic recovery, a research group said on Friday.

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index climbed to 106.7 for the week ending March 27 from 106.2 in the previous week, which was revised down from 106.3.

The index's annualized growth rate resumed its recent upswing and was at negative 22.2 percent, up from the prior week's rate of negative 23.2 percent. The growth rate was at its highest reading since mid-October.

"With WLI growth rising to a 23-week high, an upturn in the U.S. growth rate cycle is now in clear sight," said Lakshman Achuthan, managing director at ECRI.

Train Leaving 2.jpg

Buyers higher and they have lots of cash. The sound of the train pulling out is a great motivator.

[nero3]

Re: Stocks up, gold down - time for a change in thesis?

In looking at this chart, if you were to connect the dots of the years from 90-08, you would see a sharp rise from 90-March 00, a contraction from 00-02, a smaller rise from 02-04, and a continued downward trend (regression to the mean?) since then. So, to expect the market to go to a more extreme (positive) valuation from here would be against the trend, no?

Regarding the USD winning (and continuing to win) the ugly contest against other fiat currencies, doesn't that bode well for hard assets (gold, oil, farmland)?

There is nil chance of deflation. It's impossible. And the low was in november.

Anyway, here are some stocks that clearly show the trend:


http://finance.yahoo.com/echarts?s=M...urce=undefined


Mos is good, POT and PBR is the biggest positions of george soros. Somehow, these stocks have been trending higher since november.

[stockman]

Re: Stocks up, gold down - time for a change in thesis?

Lukester- "What is the basis for the (very popular here) assumption that "market fundamentals alone" can permit any renewed sustained uptrend? Since when have market fundamentals driven shorter term market action? The very expression "The fundamentals must always reassert themselves" - clarifies the point by implication: fundamentals play an eventual game of catch-up to what the vagaries of the market produce. In the 1970's the markets staged numerous very sustained market moves which were in no way tightly correlated to any fundamentals. Also the mention that "the Mainstream Media is cheerleading this rally therefore this is another sure fire indicator it must be false". Since when do we consider the marginal contrarian value of what the mainstream media is spouting to be a reliable indicator of anything, contrarian or otherwise?

How many of the markets' most famous speculators have repeatedly pointed out the markets are composed of well over 50% mass psychology? We've had a highly compressed world class bear market even just this far. We quite possibly indeed are due for another severe leg down - but that is not the definition of being in the middle of a long term bear market."


Couldn't agree more.

In addition most underestimate the ability of the market to precipitate improvement in fundamentals. Often discussed as a magical 'discounting' mechanism but that misses the point that rising (or falling) stock prices themselves will alter the fundamentals (a fact NOT lost on the FED). The more psychology has shifted in the extreme the greater the possibility of a reversal in markets and sentiment.

With cash levels (AAII) at 20 year+ highs I think we know which is the crowded trade here.

My time I assume is shorter than most at itulip. I don't mind trading from either side- but when psychology becomes too lopsided I have found that the easier money is made taking the other side. I have read very little by itulip that I disagree with- and have grave concerns about the long term direction of our country. But itulip is taking a longer term position from an investment perspective- I do not view my positions in the market as investments. Just trades. So I am comfortable taking an aggressive long position at times (always with a stop loss discipline) for a trade based on psychology, market action and seasonal tendencies... in spite of my agreement with itulip's observations.

[WDCRob]

Re: Stocks up, gold down - time for a change in thesis?

Charts visible now Luke (in case no one else has said so). Thanks for posting them...

[Bruno T]

Re: Stocks up, gold down - time for a change in thesis?

Just a couple months ago it was "Gold up, stocks down"

Late last year it was "Gold down, stocks up"

And now it's "gold down, stocks up"

Did the underlying situation flip flop every 3 months? Nope.

Trillions in deficit spending and tens of Trillions in unfunded govn't obligations say gold will go up. Not much out there looks good for most stocks. Is Target going to have a rush of recently unemployed shoppers? Is BofA going to rake in huge profits while their credit card business starts suffering huge defaults from unemployed cardholders and commercial real estate is collapsing?

What's hilarious is that when we have these big run ups in the markets the headline is huge and trumpets it. But all the small type headlines beneath are nothing but bad news. The best they can say is "unemployment numbers not as bad as expected" or something like that.

Who said markets were rational in the short run? Never underestimate the power of wishful thinking.

[pwcmba]

Re: Stocks up, gold down - time for a change in thesis?

Are long term bottoms televised and marked in the media at the time they happen?

http://finance.yahoo.com/real-estate...ces-Hit-Bottom

"Nationwide, home prices will bottom out at the end of this year, according to the forecasters at Moody's Economy.com"

Whew - glad it's over!

http://www.youtube.com/watch?v=HvuiBmKV1yc

"The worst is OVER"

Whew - glad it's over!

[nero3]

Re: Stocks up, gold down - time for a change in thesis?

I've been trading based on the thesis of a bear market rally.

Now I'm switching out and preparing for the end of said rally - i.e. beginning of next leg down.

2 weeks more? maybe less? Bart's 4/19 date is as good as any.

Poll doesn't have the option of Bear trading on Bear Market Rally

I am not a trader, but an investor, that mean I don't short stocks, or "trade", but anyhow, I am investing on the thesis that we are weeks or months into a bull market.

[santafe2]

Re: Stocks up, gold down - time for a change in thesis?

I've been trading based on the thesis of a bear market rally.

Now I'm switching out and preparing for the end of said rally - i.e. beginning of next leg down.

2 weeks more? maybe less? Bart's 4/19 date is as good as any.

Poll doesn't have the option of Bear trading on Bear Market Rally

Seasonally, 4/19, (really Friday 4/17), is a good place to draw a line in the sand. Since I haven't really dusted off my TA Ouija board in about 10 months, I thought I'd take a look this morning and see if I agree with either the, A)new bull market thesis or B)bear market bounce is over thesis. After a quick review, I find neither point of view compelling.

New Bull Market starting now, (3/9)
I see absolutely nothing in the economy that would lead me to think a new bull market will emerge here. The run rate for our economy is about 33% lower than it was in the spring of 2007 and still moving down about twice as fast over the last 12 months as it did 2 years ago. Actual GDP will fall to meet this run rate if there's not a turn around very soon and I don't see a catalyst for this turnaround. As an example, we've lost over 5MM jobs in the US and job loss is still accelerating. I would say the chance that this is the beginning of a new bull market is less than 1%.

The Rebound is Over
This one is more difficult, but I don't think it's correct. I have to admit that the biggest reason I don't like the market to turn down here, (I'll use the DOW as a example), is the way it's performed at support and resistance lines. When a market is ready to turn the players exhibit more fear than we've seen.

I was also reviewing the relationship of the DOW to the 200 DMA and it appears the DOW will move closer to 9000 before hitting this resistance line. I like the market's chances to move up for a while longer but I don't like its chances of moving meaningfully above its 200 day average.

DOW040409.jpg

Disclaimer: I'm not longer meaningfully invested in the market.

[GRG55]

Re: Stocks up, gold down - time for a change in thesis?

...I was also reviewing the relationship of the DOW to the 200 DMA and it appears the DOW will move closer to 9000 before hitting this resistance line. I like the market's chances to move up for a while longer but I don't like its chances of moving meaningfully above its 200 day average...

I hope you're right on this, because it'll be another widows and orphans shorting opportunity...:p

[rdgmail]

Re: Stocks up, gold down - time for a change in thesis?

In a Bear Market rally in the U.S., it's not at all uncommon for stocks to rally to, and slightly above, the 200 day exponential moving average (EMA) before starting the next major leg down. I believe we are still in a bear market, and my opinion is that we haven't reached bottom. So the question is when we will get up to the 200 EMA before starting the next leg down. The speed of the current crash is rather astounding, so perhaps we don't get back up to the 200 EMA any time soon (currently about 980 for the S&P 500). But my main point here isn't to either predict stocks going up or down from the current level but rather to warn bulls and bears of the increased risk of whipsaws to the up or downside.

Thus, it wouldn't be a surprise, historically speaking, to rally to as high as about S&P 500 at 990 only then to turn around and dive below 700 perhaps even to 600 or less. (Check out the charts for the 2000-2003 mini Bear to see what I'm talking about as far as rallies just above the 200 day EMA only to be followed by plunges to new lows). In these circumstances, my opinion is to use a small amount of funds either short or long and then stick with your thesis. It could take weeks, months or more to finish the current rally. Ask yourself if you can keep your shorts (so to speak) if the market goes up another 20%, or will you bail out of fear? If you are a serious bear and don't believe the Fed and Treasury can print faster than debt and assets will deflate, you might as well wait until the S&P 500 (or whatever you're gambling with) gets closer to the 200 EMA, then short or buy puts. If you're long, you must believe the Fed and Treasury are printing fast enough AND sending that money to places where it will end up in the stock market. A lot more money with a lot less velocity doesn't do too much for most assets. In summary, if you are short or long, there aren't a lot of apparent bargains out there right now- to me. Good luck to all investors, er gamblers, out there, including me.

[Starving Steve]

Re: Stocks up, gold down - time for a change in thesis?

I remain steadfastly bullish oil, especially with dividends while I wait. All of the solar energy rubbish and wishful thinking from the Obama Administration just makes me more bullish oil, nat. gas, and atomic energy.

"Drill, drill, drill."