Market Leader Technical Targets
A subscriber asked if I thought the Emerging Markets had broken out. My answer is yes and no. We’ll start with the chart of EEM and work our way into an update that shows some technical targets for various leaders to the US market.
EEM has made a short term breakout only. Beyond that, I am expecting it to top out at target if the broad market tops out, amid an over bought, over loved sentiment burst as I expect.
Here is the fund I use to long the EM’s. A ‘W’ bottom and rebound above former resistance, now support. Target is noted.
The Templeton Dragon Fund (Asia, China dominated) has a nice pattern targeting 29. I will likely be selling this at or below that level.
Small Caps should be watched as a US market leader. 990 is the target now, based on the pattern measurement. Do you think sentiment will finally be over bullish at that level if it is attained?
Semiconductors point higher… for now. The ‘W’ targets 470.
Finally, the Transports, which just joined the ‘new highs’ party. The Dow Theory signal should be touted, other leaders should get near, to or through targets, the media should vigorously come on board with bull horns blaring (even if the tout is that it is all due to QE) and very importantly, individual investors need to knee jerk to a very bullish stance; capitulate to the bull if you will.
When seasonals are factored, just maybe we will have a top of some importance. This is the way the market looks to me right now. A blow off of sorts appears to be in progress and it could be an important one.
Commodities/Inflation Trade
Is copper putting in a ‘W’ bottom? That is what it looks like right now. Oil remains in its holding pattern, i.e. neutral for now. Uranium/Nuclear is starting to look interesting. Take a look at the chart of NLR, which has broken above the 50 day averages. Even the Rare Earths are bumping up.
Most commodities are still struggling with the 50 day averages, so this should be exceeded before any real enthusiasm whips up. The CCI index is at 539 and needs to get above 545 to exceed the 50 day averages. Long term interest rates have kicked up this week and if this continues, it would be in keeping with inflation expectations that are not quite dead yet.
Precious Metals
475 failed on HUI and now looks like this. Simply put, the breakdown if not immediately negated, will bring on a test of the lows and/or new lows. If that happens we’ll defer back to the weekly chart and its downside targets.
I understand all the reasons why gold stocks are a compelling buy folks. They come into my inbox every day in the form of bottom calling. I get that the precious metals sector may turn and burn one day leaving would-be buyers to scratch their heads as a 10% – 20% rally ignites in a day.
But the chart is breaking down again. The chart has been my friend for many months now and I know it has been friendly to many of you. I hope it is not uncomfortable for you to see your newsletter writer sound like he does not know who or what he is (I’m trading NUGT/DUST exclusively… no wait, I still want to trade individual names and look for investment!) but I’d just say that this is a market that has got most people feeling a little silly. I just do it publicly.
Besides, a healthy questioning of assumptions and orientations is the way to go. There have been too many people acting as if they know what the bleep is going on. They don’t. For what it is worth, I bought my value indicator, AKG yesterday for its net cash value. It sits (for now, anyway) as a lonely gold stock in a portfolio of mostly cash and a few bull stocks, as I await the changes illustrated above, that I believe are coming.
Gold and silver are contrarian no brainers right now, as I see in a lot of analysis out there. But the charts continue to say that 1524 and 26.10 must be exceeded or else get ready for 1150-1250 and sub-20 respectively (in the ‘paper’ market anyway).
Bottom Line
Big changes are coming. Those changes – from bullish to bearish – appear more readily definable on the broad markets than they do on the precious metals. Commodities are in a middle ground and along with long term interest rates should be watched to see if the indication is inflationary economic growth or continued economic deceleration.
Precious metals are compelling in some ways but technically, they stink. There seems to be a new fad out there telling community members to never mind the TA. But as long as it is working, NFTRH will continue to mind the TA, which has been on altert for 200 HUI points and one day will probably be wrong. The question is, how does one pinpoint that day?
