What a week we have had with the spine chilling spectacle of queues of people lining up in Cyprus to take money out of cash machines as the next stage of the European crisis plays out.
One angle of this to keep in mind when trying to track the stock market, is that it could potentially be a plus for US stocks – and perhaps precious metals – as people in Europe worry about just how safe their money is in the bank. There is a limit to just how much you can put under a bed!! Still no final decision on what is going to happen to Cypriot banks as I prepare these notes - perhaps my comments are going to be outdated very quickly.
Mid week I updated my notes when the S & P index had put in three small down days which I thought was quite bullish and suggested that the next leg up (to perhaps as high as 1600 to 1620) could be underway. Trading since then has kept me on edge but by the close of the week, things certainly look better in the US market but I would still NOT like to see last week’s low point of 1538.57 exceeded by much more than a point or two. Just keep it in mind that if I see that level as a line in the sand, other analysts could be of the same view so there may be an attempt to run any stops in that area.
The Dow actually looks more bullish than the SPX at the moment. As I have mentioned before, in the late stage of a market advance, investors tend to be attracted to the leaders as they are perceived to involve less risk – a fairly dubious belief to my mind. Nevertheless, trading in the Dow is looking like a clear Fourth Wave. The SPX and RUT look like they have formed little triangles over this past week – triangles are generally Fourth Waves. If this is the case, it supports my higher targets. My medium term indicator on the RUT has still not given a sell – this has remained positive since the November low.
Also – keep in mind – the SPX is so close to breaking topside, that I doubt the market would be able to forego that temptation. Could we even have a little feeding frenzy if it does?
I mentioned a couple of weeks ago that after underperforming the market for some months, Apple was actually trying to break its downtrend. It managed to do this in Friday’s trading. This is a plus for the market.
The pattern being formed by the Australian market and the SPX has diverged somewhat in the past couple of weeks. Australia outperformed by a wide margin from the November low but recently we have had a worthwhile correction. Our market looks like a clear ABC correction but for the moment I am going to continue to be guided by the performance of Wall Street.
The negativity on the outlook for iron ore is nearing the levels we reached last year when the price fell below $90. At the moment the price is locked in a very steep little downtrend so I can’t really call the price higher while it is stuck around here, but I am certainly watching things closely. This past week we have had major international broking houses recommending the sale of our iron ore producers. All I can say – IT IS A BIT LATE. Weeks ago I gave lower targets on BHP so I now tend to think they are a buy rather than a sell – well at least in the short to medium term. The falls in that sector have been pretty dramatic.
Precious metals are being negatively affected by the inability of silver to break out of the ZONE it has been locked in now for a fifth week. So frustrating as it just has been lodged between two dynamic lines for this entire time.
The other commodities are a mixed bag. Natural Gas has had a huge rise but at the end of last week it was looking a bit toppy.
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