The blow-off in New York continued into the end of the week. Whereas on Thursday, the SPX gapped down and then spent the rest of the day rallying to fill that gap, on Friday just about everything gapped up and continued on with the job. Biggest sector rise was in Industrials (XLI) and Financials (XLF) two of the most aggressive areas of the market so investors have put their worries behind them again. XIV – my secret weapon – is still in its fabulous uptrend. It is so steep that it is a bit frightening but while it holds, I can’t step in front of this market. Talk about a train….
One thing to think about – could New York go absolutely crazy? Just something to keep in mind. My long term weekly semi-log charts are just creeping up the page. Either they have to roll over or really take off.
I mentioned on Friday that my Geniuses were only 65% committed to the market. It is not usual for a market to make a top when there is so much money on the side lines. Normally they like to be fully invested at any important peak!! For anyone that is not familiar with my Geniuses – each week a number of fund managers in New York indicate what level of funds they have committed to the market. Now it isn’t a fool proof indicator but can’t be ignored and as I just said, not usual to see so much money on the sidelines at an important market point. Therefore, I think what we saw on Friday was just part of their rush to get these funds into the market. Unfortunately, we won’t know until Friday of this week just how they are going, but I really need to see them all in before we see a peak. And then just to make things really interesting, I have seen them leveraged long at market tops and I have known them to have less than 10% of their money invested at a market bottom. So you can see why I call them my Geniuses!!
With all the talk of electric vehicles, I posted recently on my concern as to what that may mean for some of the current vehicle manufacturers. I had a look at the chart of Ford over the weekend. This bull market on Wall Street appears to have completely passed them by with the price still stuck in a major downtrend. Perhaps that is what is required – the last of these laggard stocks to have a rise, but I would suspect that the long term outlook for stocks such as Ford is not fantastic.
Strength in the US dollar really put pressure back on gold. We really need to give this time. I mentioned previously that I got really concerned last week when there was such an outbreak of bullishness when gold got back above $1300 as I would have preferred this consolidation to take place below this level. Doing it now anyway, but that little run up still worries me.
But the whole situation is at the behest of the US Dollar. It still hasn’t been able to break out of the sideways consolidation that it has been stuck in now for some weeks. Still the potential is there that it is forming a little head and shoulders bottom and it was looking a bit more likely that it could continue higher at the end of the week. Obviously if the dollar does break topside, then it will put pressure back on precious metals. A nervous time here so we need to be watching carefully.
Interest rates were higher in New York which of course is helping the dollar and weighing on gold. At the same time money is running out of bonds into stocks. – while this is taking place we won’t see a top in Wall Street.
Iron ore was better – thank heavens. I get worried when it has a 5 in front of it so a little more relaxed when it is back above $60.
The renewed strength in New York should continue to be good for our leaders that have been dormant for so long. XXJ (Banks) has had eight up days where XMM (Metals and Mining) has been down for the past three days. Just remember that it was the miners that were powering ahead from July while the banks did absolutely nothing. Another thing we need to keep in mind while the money is running back into the leading stocks – stocks that make up indices such as XSO and XEC have been having a boom for months. Leaders finally doing a bit of a catch-up.
But you can imagine the headlines if the XJO pushes through 6000. Let’s hope that Wall Street doesn’t run out of buyers before we do that.
Still plenty of speculative money around but I get a bit nervous about some of the commentaries we are seeing on individual stocks. Remember, most of them will end up the same way, these things always end. Very few of the stocks at the lower end of the market will deliver long term. Of course, everyone will always throw up FMG as an example of how much money you can make if you stick with a stock!!
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