Friday, January 15, 2010

Stocks Down for the Week

The Dow Jones Industrial Average fell 100.9 points, or 0.9%, to 10,609.65 today, leaving the index off nearly 0.1% from the week-ago close.

The S&P 500 Index dropped 12.43 points, or 1.1%, to 1,136.03, down 0.8% for the week.

The Nasdaq Composite Index declined 28.75 points, or 0.2%, to 2,287.99, off 1.3% for the week.

This is a three year chart of the Dow Industrials.

The DJIA is at roughly a 50% retracement of its declines from all-time highs. This means there are a lot of people still waiting to sell when they "get even". There is no indication at all that the money firepower is there to take them out.

Notice also the "Batman formation" in the DJIA in 2007, and the similar formation in the current 3o day gold chart (It starts the first week of January for gold). Once Batman's neckline is broken the break tends to get serious. Gold traders you have been warned. (Long term gold holders, as opposed to traders, there is no reason to try and move in and out of the drop. It will be severe but it won't be long lasting, since the Fed should be back to serious money printing in no time.)

1 comment:

  1. Your chart of gold is most helpful.

    We are witnessing "gold flation" -- a rise in the price of gold, as real estate prices decline, GDP falls, U6 unemployment rises, CPI deflates, liquidity evaporates, or is drained by the Federal Reserve, and both bonds and stocks fall in value.

    The weekly and daily charts of gold relative to world stocks, show that one's wealth is best preserved by investing in gold.

    The chart of gold relative to stocks, GLD:VT, began rising from 2.35 on October 1, 2009, to 2.61 on today February 19, 2010

    The weekly chart of gold relative to stocks, GLD:VT, shows today's value of 2.61 to be strong resistance

    I strongly encourage one to own the gold ETF, GLD, in a trust account -- not a brokerage account, British Sovereign gold coins, and buy gold at Bullion

    The source of "gold flation" is the rising yield curve:
    1) the TBT to PST spread began increasing April 13th, then again October 1, and then December 1, 2009,
    2) the TIP to IEF spread began increasing May 4th, then again October 11, and then again December 14, 2009
    3) the IEF to TLT spread began increasing October 1, and again December 11, 2009
    4) the SCPB to LQD spread began increasing January 28, 2010
    4) the yield spread $UST30Y to $UST1M began increasing January 28, 2010
    5) the yield spread $UST30Y to $UST10Y began increasing December 29, 2010

    Yes the investment demand for gold comes from the rising yield curve, as gold started rising from $1,090 on December 30, 2009, as seen in your chart of gold.