Could the market actually DECLINE from here?
After moving higher and higher on lighter volume and narrowing breadth, the market is finally showing signs of breaking down. And at what should come as a surprise to no one, it's formed another broadening top pattern from September until now. The last push up may be over.
I'd be more confident of a reversal if gold had hit $1,300, which is the highest intermediate term target I have. However, there are other counts that could reverse it right here with stocks. I'm not going to get into those tonight, but I'm comfortable with them.
What could set this off is if Bernanke and Company start some type of coordinated effort to squeeze the dollar shorts, thereby taking down gold. They don't really want to see equities fall, but it can't be avoided if the dollar pops to the upside right here.
I've stated before that escalating gold prices make them nervous. As the price moves higher the airwaves are filled with inflation, inflation, inflation cries! This leads to higher "inflation expectations", which they DO NOT want to be confronted with right now. So, a little jawboning to rattle the dollar shorts may be just what the Dr. ordered.
So watch out for that this weekend. If it happens it's going to be brutal and swift.
I've included an interesting comparison for you tonight sent to me by David Brazee. For all those who think a new secular bull market is beginning, this should be a wake up call.
I'd be more confident of a reversal if gold had hit $1,300, which is the highest intermediate term target I have. However, there are other counts that could reverse it right here with stocks. I'm not going to get into those tonight, but I'm comfortable with them.
What could set this off is if Bernanke and Company start some type of coordinated effort to squeeze the dollar shorts, thereby taking down gold. They don't really want to see equities fall, but it can't be avoided if the dollar pops to the upside right here.
I've stated before that escalating gold prices make them nervous. As the price moves higher the airwaves are filled with inflation, inflation, inflation cries! This leads to higher "inflation expectations", which they DO NOT want to be confronted with right now. So, a little jawboning to rattle the dollar shorts may be just what the Dr. ordered.
So watch out for that this weekend. If it happens it's going to be brutal and swift.
I've included an interesting comparison for you tonight sent to me by David Brazee. For all those who think a new secular bull market is beginning, this should be a wake up call.
| Rally Comparison | 1982 | 2009 |
| P/E Multiple | 8X | 26X |
| Dividend Yields | 6% | below 2% |
| Book Value | Discount to Book | 2X Premium |
| Monetary Policy | Reducing money growth and inflation rates | Creating money growth and inflation rates |
| Fiscal Policy | Aimed at reducing nondefense spending | Aimed at accelerating nondefense spending |
| Deficits | Peaking and coming down relative to GDP | Surging to 10%+ relative to GDP |
| Global Trade Barriers | Were being torn down | Are being erected |
| Regulation | Deregulation in vogue | Re-regulation rising |
| US Dollar | Plaza Accord bull market | Mercantilist bear market |
| Household Credit | Balance sheets and participation rates expanding | Balance sheets now contracting |
| Tax rates | Income, capital gains and dividend taxes declining | Taxes Rising Now |
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