Midmonth-Charts with a Long Term View

[actr]

"Mid-Month Charts with a Long-Term View"

Quite often we lose clarity of thought due to the short-term gyrations of the market. Thus, I find it important to regularly examine the markets from a long-term point of view, even when our intention is to trade on a short-term basis.

DJIA
The Dow Jones Industrial Average is up against long-term resistance. If it is going to pull back, this is the area where it should do it.

http://www.financialsense.com/Market/iossif/images/03/1021/indu.png


DJTA
The Dow Jones Transportation Average is struggling with its 80 month M.A. (Moving Average), which usually brings strong resistance. Notice that the long-term resistance line has been penetrated. If it does get above the 80 month M.A., the next upside target should be the 3000-3050 zone.

http://www.financialsense.com/Market/iossif/images/03/1021/tran.png


SP500
The S&P 500 Large Cap Index has broken above long-term resistance which is positive, unless it turns out to be a "bull trap." The key support level is 925. Also notice that the next meaningful resistance is at the 40/80 MMAs around 1110-1130.

http://www.financialsense.com/Market/iossif/images/03/1021/spx.png


NASDAQ
The Nasdag Composite Index is struggling with its 40 month M.A., which usually brings strong resistance. If it does get above the 40 month M.A., the next upside target should be the 2100-2160 zone.

http://www.financialsense.com/Market/iossif/images/03/1021/compq.png


CRB
The 240 level needs to hold.

http://www.financialsense.com/Market/iossif/images/03/1021/crb.png


Oil
The West Texas Light Crude Oil Index is in the middle of its $25-$37.5 range and it can go either way. If the $25 level is penetrated, a large double top will be activated that targets $12.5.

http://www.financialsense.com/Market/iossif/images/03/1021/wtic.png


HUI
The AMEX Gold Bugs Index is right at the middle of its long-term rising channel. It can go either way. It can accelerate to the upside or come back and re-test the 165 level.

http://www.financialsense.com/Market/iossif/images/03/1021/hui.png


U.S. DOLLAR
The next support level for the US Dollar Index is at 90. Below that, it can go to 85. (Notice the opposite directional channels of gold/US dollar)

http://www.financialsense.com/Market/iossif/images/03/1021/usd.png


UTILITIES
The Dow Jones Utility Average indicates resistance at 270 and support at 220.

http://www.financialsense.com/Market/iossif/images/03/1021/util.png


BANKING INDEX
The Philadelphia Bank Index indicates resistance at 945 and support at 800.

http://www.financialsense.com/Market/iossif/images/03/1021/bkx.png


WORLD MARKETS
Notice that major overseas markets are at or near significant overhead resistance.

http://www.financialsense.com/Market/iossif/images/03/1021/hsi.png


http://www.financialsense.com/Market/iossif/images/03/1021/nikkei.png


http://www.financialsense.com/Market/iossif/images/03/1021/ftse.png


http://www.financialsense.com/Market/iossif/images/03/1021/dax.png


THE RUSSELL 2000
This index is at the top of its range of the past 6 years. After 8 months of a straight up move, one has to wonder where the fuel will come from in order to continue higher. If it does overcome resistance, the next upside target should be the 600.

http://www.financialsense.com/Market/iossif/images/03/1021/russ2.png


THE WILSHIRE 5000
This index is up against its 40 month M.A. If it can overcome resistance at 10318, the next upside target should be the 10600-10750 zone.

http://www.financialsense.com/Market/iossif/images/03/1021/wilshire.png


The charts are telling us, that from a short-term point of view, investors may be able to squeeze a few more gains out of the market, because there is still room to the upside by about 5%-7%, depending on which index we're looking at. However, from a longer-term point of view, the markets are approaching significant resistance without having experienced even one meaningful pullback in eight months. Thus, the odds of a significant pullback (8%-15%) in the next 2-3 months are rather high.



VOLATILITY
Next I would like to examine, the relative VIX and VXN, which I prefer a lot more than looking at their absolute levels. (The relative volatility index is a ratio calculated by dividing the stock index by the absolute volatility index.)

http://www.financialsense.com/Market/iossif/images/03/1021/ndxvxn031018.png

http://www.financialsense.com/Market/iossif/images/03/1021/spxvix031018.png


By examining these two charts, we can make two observations:

a) Investors' preference for risk is as robust as ever! Short-term, this is positive for the market, because it indicates that investors find it in their best interest to be risk takers, thus they are net buyers of stocks (markets don't go down when there is a plethora of buyers!) It is when the volatility ratios begin to come down that signify a change in investors' preference, meaning they find it in their best interest to be risk averse, and become net sellers of stocks (markets do go down, when there is a plethora of sellers!)

b) Although investors' preference for risk remains robust, it is also at levels, that in the past has NOT rewarded investors for the risk they were taking! Notice that the SPX/VIX ratio is very near its most recent tops at points D, E, and F. More importantly, there have been only three times that the ratio has shot up higher (points A, B, and C) and all three times resulted in declines in excess of 10%. In addition, the ratio is now as far from its 250 day moving average as it was at the top in September of 2000 (notice the distance between points G and G' for the SPX/VIX ratio, and the distance between points F and F for the NDX/VXN ratio) a time that also did not reward investors for the risk they were taking.

Therefore, from a short-term point of view, risk takers may be able to squeeze a few more gains out of the market, but from a longer-term point of view, the odds are beginning to stack against them.

[actr]

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Technical Overview

Euro/dollar
Last week's range: 1.1600-1.1855 (Up)
Previous range: 1.1549 – 1.1813 (Down)

Euro/dollar saw the expected slight upmove during the past week and it remains once again within a rising channel but in an inside range. What’s different now is that the euro/dollar is at a crossroads: it either make a new high and pummels its way above 1.2000, or it will start a more sustained decline in order to alleviate its medium-term overbought conditions.

A break higher is confirmed only by a close above the 1.1929-1.1932 area. That’s followed by 1 1.2028 and then by 1.2090, the target of a bull flag formed between December 6 and March 21. If it can reach that high, then the euro/dollar will then angle toward the medium term line rising since August at 1.2300, but this is very unlikely.

The pair faces support at 1.1750 and a break higher would be negative. The euro/dollar would then fall to test the 1.1700 area. If it can surpass this area, then the upside should be over for the time being and the euro/dollar should challenge 1.1635 and then 1.1583. The pair should not reach as low as 1.1549 by the end of this month.

NEAR-TERM: Mixed to slightly bullish

MEDIUM-TERM: Slightly bullish

LONG-TERM: Mixed


http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image020.jpg


Dollar/yen
Last week's range: 108.75 – 110.57 (Sideways)
Previous range: 108.29 – 110.29 (Up)


Dollar/yen made a nice recovery last Monday, but that was a one-day wonder and then the pair went sideways to lower for the rest of the week, to end virtually unchanged. It remained in an inside range and it will struggle to exit from it this week. Of course, the Bank of Japan would rather see it break on the upside, but that’s another story. The pair remains severely oversold and it will remain under selling pressure for as long as the price gap between 112.70 and 113.58 stays open.

Once again, the key level remains the 50-point pivot at 109.15 that targets 109.65 and 108.65.

Below 108.26, support is found at 107.95 from the 50-point pivot that targets 107.45 and 108.45. Further support is seen at and then at 106.78 and then at 106.75 from another pivot, which targets 106.25 and 107.25.

If it can rebound, the dollar/yen must first vault over the 109.90 area and then over the 110.14-110.29 region. Further resistance then comes at 111.60 from the Gann 50-point pivot, which targets 112.10 and 111.10, and then at 112.40.



NEAR-TERM: Mixed to slightly bearish

MEDIUM-TERM: Slightly bearish

LONG-TERM: Mixed

http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image021.jpg

[actr]

Japan
Japan released a string of positive indicators in the past week and this adds to confidence that the economic recovery is growing roots.

With help from the tenacious Bank of Japan’s interventions, the trade surplus widened a seasonally adjusted 8.9 percent to 986.1 billion yen in September, its highest in more than three years, due to increasing exports to the US and China. Exports grew 3.4 percent, and imports rose 2 percent.


http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image003.gif



Meanwhile, the tertiary activity index, which tracks demand at retail and other services, rose a seasonally adjusted 1 percent in August after falling sharply in July.

Also underpinning was the third quarter consumer confidence, which rose to 40, its biggest gain in 4 1/2 years, from 37.3 in the second quarter. However, a reading below 50 means pessimists outnumbered optimists.

UK
The pound shot up sharply since Wednesday after four of nine Bank of England policy makers voted to raise interest rates this month, increasing speculation that the central bank will increase rates as soon as next month for the first time since 2000.

The data point out to sustained, if not red-hot, economic growth. The UK economy grew 0.6 percent in the third quarter, the same as in the second quarter, as services growth more than tripled, and retail sales rose faster than expected by 0.6 percent in September August’s +0.5 percent. GDP edged lower on an annual basis to 1.9 percent in the third quarter, compared with 2 percent in the second. The UK growth is surpassing the Eurozone economy, which stagnated in the first half of the year.



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Meanwhile, the third quarter industrial production was unchanged from +0.2 percent growth in the second quarter and construction output increased in the third quarter compared with very strong growth in the second.

The quarterly CBI survey showed a small rise in manufacturers’ overall sentiment to -7 from –13 in July.

UK house prices are rising again, according to data published today by the Royal Institute of Chartered Surveyors. The RICS data show that in the third quarter the number of real estate agents reporting higher prices outnumbered those reporting price drops by a balance of 34 percentage points from a revised +9 balance in the quarter to May.

Canada
The Bank of Canada raised its 2004 economic growth forecast by a quarter point to 3.25 percent and said the Canadian dollar's surge this year will hold back exports and inflation. The central bank said its preferred measure of inflation will remain at or below its 2 percent target through 2005 as weak global and domestic demand this year keeps prices in check and the dollar's rise makes imports cheaper. The currency has risen 20 percent against the US dollar this year.

Still, BoC Governor David Dodge warned that there are significant risks to this economic outlook. These risks relate to the timing and magnitude of global demand, price, and exchange rate adjustments to economic imbalances. He emphasized the exchange rates and their effect on the Canadian economy and the uncertainty about the sustainability of US growth beyond mid-2004.

Canadian retail sales rose 0.3 percent to a record C$26.7 billion in August, reinforcing the Bank of Canada's view that domestic demand will buoy an economic rebound in the second half of the year. Excluding autos, sales rose 0.9 percent to C$19.6 billion.


http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image006.gif


Meanwhile, the leading indicators rose 0.7 percent last month, the largest gain in over a year.

The annual inflation rate rose 0.2 percent in September and 2.2 percent on a year-on-year basis, close to the Bank of Canada's target of 2 percent, suggesting the central bank won't need to change borrowing costs in coming months. Core prices rose 0.3 percent to 1.7 percent on a year-on-year basis.

Canada recorded a C$7 billion budget surplus in the fiscal year ended March 31, more than double than expected. The surplus was Canada's sixth straight and leaves it the only country in the Group of Seven nations to have a surplus. The G7 also includes the US, Japan, Germany, the UK, France and Italy.

Switzerland
The trade balance rose to 1.45 billion francs rose to 1.45 billion francs in September, the biggest trade surplus in approximately 10 years. Exports rose 6.9 percent year-on-year in inflation adjusted terms, while imports rose 2.9 percent. That brings the trade surplus for the year to date to SF5.3 billion, almost as much as the SF6.1 billion surplus for all of 2002.

Australia
Consumer prices rose 0.6 percent from the second quarter, as expected. From a year ago, prices rose 2.6 percent. That's within the central bank's 2 percent to 3 percent target.

This Week's Data and Events

United States
After a week of secondary data, this week’s economic agenda is full.

Monday will see the release of the new and existing home sales. The new home sales should see another strong report for September.



http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image007.gif


The volatile durable goods orders are likely to show only a small increase in September from August’s 1.1 percent decline.



http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image008.gif


Also on Tuesday there will be the consumer confidence and this report should show a better reading for October.


http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image009.gif


The FOMC will meet on Tuesday but it is widely expected to keep interest rates unchanged at least through the end of the year.



http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image010.gif


Thursday will see the Minutes from the September 16 FOMC meeting and the US employment cost index (ECI) for the third quarter.


http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image011.gif



Friday will see a slew of data. Personal income should be steady for September


http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image012.gif


The final University of Michigan consumer sentiment index for October and the Chicago PMI for October will be closely monitored.



http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image013.gif

http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image014.gif



Eurozone
Germany will release the all important Ifo report for business confidence in the Western part of the country on Tuesday. The October readings are likely to stall after rebounding steadily since April.




http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image015.gif


Italy will release its CPI for October on Thursday.

Meanwhile on Friday, Germany will announce its retail sales for September and France will release its unemployment for September on Friday.



http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image016.gif

http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image017.gif

Also on Friday there will be EU economic sentiment for October.


Japan


Japan will open its weekly economic agenda with the release of the retail sales for September on Monday.

It will continue with the release of the industrial production for September on Tuesday.


http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image018.gif


Thursday will see the release of the unemployment data for September.


http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image019.gif


Finally, the consumer sentiment index will be announced on Friday, the same day when the Bank of Japan will meet.

UK
The UK will announce its consumer confidence report for October on Thursday and the house prices for the same month on Friday.

Canada
Canada will announce its industrial production price index for September on Wednesday and the monthly GDP for August on Friday.

[actr]

Etwas verspätet die Analyse, aber gut;):

Past Week's Data and Events
United States
The dollar started the week on a strong note following surprising comments on higher interest rates by Treasury Secretary John Snow. However, Snow’s comments were promptly refuted by Federal Reserve Bank of Richmond President Alfred Broaddus, who said that some significant weaknesses in the economic outlook remained and that the sluggish job market posed the main risk to consumer spending. Broaddus added that a further pickup in productivity growth risked pushing inflation lower. The dollar eventually buckled.

The economic data were not first tier during the past week.

The index of leading US economic indicators fell 0.2 percent in September, the first contraction in six months, following a 0.4 percent increase in August. The decrease mainly reflected a decline in money supply. The report was largely in line with expectations. The Conference Board's index of coincident indicators, which measures the current economic activity, rose 0.1 percent in September from unchanged in August. The index of lagging indicators contracted 0.5 percent last month from unchanged the month before.

http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image001.gif

The number of Americans filing for unemployment benefits last week remains extremely high despite an apparent improvement. First-time jobless claims declined by 4,000 to 386,000 during the week ended Saturday from an upwardly revised by 6,000 jobs to 390,000 a week earlier. The pattern of revising upwards the previous week figures continues alarmingly unabated. However, holding these numbers just below the 400,000 mark hardly fools anyone - particularly those people who have failed securing a job for months or longer. Jobs creation in the US really equates jobs losses, and it’s becoming increasingly “fashionable” to export jobs abroad despite the domestic pain.



http://www.gftforex.com/resources/commentary/weekly/weekly-10272003_files/image002.gif


The US government posted a record $374.22 billion budget gap in the just-ended 2003 fiscal year. This surpassed the previous record of over $290 billion in the 1992 budget year. As a percentage of the economy, the deficit totaled 3.5 percent, the largest since 1993. In its final monthly budget statement for fiscal 2003, the Treasury also said the government posted a $26.38 billion surplus in September.

Administration officials warned the deficit, which they blame on sluggish government revenues and rising expenses related to the war on terrorism, may be even larger in the current 2004 budget year, which began October 1.

The US home builders' trade association said it expects housing starts and sales to dip from high levels reached in 2003 as mortgage interest rates edge higher in a recovering economy. Builders should break ground for 1.700 million new homes next year, down from 1.786 million units anticipated for 2003, the National Association of Homebuilders said in its forecast. The 2003 pace would be the busiest starts year since 1986.

The builders' group anticipates US GDP to grow by 4.4 percent next year, and for long-term fixed-rate mortgage interest rates to rise to 6.3 percent from 5.9 percent. The home builders expect the Federal Reserve to keep interest rates at or close to the current 45-year low of 1 percent through most of 2004.

Eurozone
The euro advanced across the board and this upmove was underpinned by outgoing European Central Bank President Wim Duisenberg, who suggested he's comfortable with its rally this year. ECB policy maker Matti Vanhala added that the currency's gain is perfectly normal.

The German economy will recover from a three-year recession in 2004 as accelerating world growth stokes demand for exports, according to the DIHK industry association. The share of managers who expect business to get better increased to 29 percent in October from 17 percent in the DIHK's June survey.

In the same vein, Germany’s six economic institutes forecast a recovery in 2004, in their twice yearly joint forecast. The forecast calls for growth in 2004 of 1.7 percent, down marginally from the 1.8 percent forecast in April. The forecast for 2003 was revised down to zero from +0.5 percent forecast in April.

The institutes expect the euro to stabilize at around $1.15 next year, making German companies more competitive. They also forecast that the ECB will keep interest rates unchanged at 2 percent through the end of 2004, as inflation remains under control. Finally, they project a slight narrowing in the government deficit, to 3.5 percent of GDP from 4.0 percent this year. That would be an improvement, but it would still be the third breach in a row of the Stability and Growth Pact’s 3 percent ceiling.

German producer prices were unchanged in September and up 1.9 percent year-on-year. This shows that inflation remains benign in Germany.

The volatile Italian industrial orders collapsed 1.7 percent in August, more than reversing the 1.2 percent expansion in July. On a year-on-year basis, orders contracted 11.6 percent. Domestic orders fell 13.7 percent year-on-year in August, while foreign orders were down 7.7 percent year-on-year.

Italian consumer confidence declined to 104.7 in October from 106.8 in September. This compares to a forecast for -104.5.

German construction orders contracted 6.7 percent in August from a 5.8 percent gain in July, and -7.5 percent year-on-year.

French consumer prices for September were revised down to +0.4 percent and to 2.1 percent year-on-year from+ 0.5 percent and 2.2 percent in a preliminary report. The EU harmonized gain was left unrevised at 0.5 percent.

Meanwhile, Italian cities’ CPI rose a tepid 0.1 percent in October as year-on-year inflation fell to 2.7 percent from 2.8 percent in September.


Confirming long-held suspicions, the Eurozone unemployment reached a 3 1/2 year high of 8.8 percent in July and may rise further this year.

Russia plans to cut the share of its reserves held in dollars and increase the share in euros. Russia will cut the dollar share in its $63.5 billion in reserves by 3 to 5 percentage points, and raise the euro share by the same amount. Last week, the central bank said it held 70 percent of its reserves in dollars and 25 percent in euros, so this would imply a move of about $2.5 billion dollars.

The French consumer spending rose 3.4 percent in September and 3.9 percent year-on-year, the fastest pace in over four years.

[actr]

Mid Week Market Analysis

(11/11/03)

As mentioned in the Weekend Market Analysis it looked like some selling pressure was going to take place in the near term and so far that has panned out. The Nasdaq has come under more selling pressure than either the Dow or S&P 500 but that is to be expected as it has been performing the best since last October. As I have pointed out before the Nasdaq has been able to hold support near its 50 Day EMA since last March and until this pattern is broken then the upward trend will remain intact. Right now the key area to watch in the Nasdaq is close to the 1880 level which is around its 50 Day EMA and also corresponds to its upward sloping trend line (black line) beginning from the mid March low.


http://www.amateur-investors.com/Nas5Nov03.GIF


To the upside the Nasdaq still has a longer term resistance area near 2050 which is the 23.6% Retracement calculated from the early 2000 high to the October 2002 low.


http://www.amateur-investors.com/Nas6Nov03.GIF


The Dow has pulled back some over the past 3 trading days but still is above its 50 Day EMA which is just above the 9600 level. As long as the Dow can hold support near its 50 Day EMA then its up trend from the March low will remain intact.


http://www.amateur-investors.com/Dow4Nov03.GIF


To the upside the Dow has a significant resistance area around 10000 which is its longer term 61.8% Retracement Level calculated from the early 2000 high to the October 2002 low.


http://www.amateur-investors.com/Dow5Nov03.GIF


The S&P 500 which encountered resistance last week near its longer term 38.2% Retracement Level near 1065 has pulled back some during the past 3 trading days but is still above its 50 Day EMA which is just above the 1030 area. As long as the S&P 500 can hold support near its 50 Day EMA then its up trend from the March low will remain intact.


http://www.amateur-investors.com/S&P5004Nov03.GIF


As mentioned earlier the S&P 500 did encounter resistance last week near its longer term 38.2% Retracement Level just below 1065. This will be a key area to watch in the weeks ahead. If the S&P 500 is able to break above the longer term 1065 resistance area then its next major upside resistance appears to reside at its 50% Retracement Level near 1155.


http://www.amateur-investors.com/S&P5005Nov03.GIF


For those of you that don't study Market History may not know that the current chart of Nasdaq (1990-2003) looks very similar to the chart of the Dow from 1920-1933. In fact they are acting very similar as the Dow finally bottomed in the middle of 1932 (point A) while the Nasdaq bottomed in the latter half of 2002 (point B). Then both rallied strongly for a few months (points A to C and B to D) before pulling back (points C to E and D to F) which was then followed by a strong multi-month rally (points E to G and F to H).


http://www.amateur-investors.com/_derived/Mid_Week_Market_Analysis_11_11_03.htm_txt_Dow-Nasdaq-LongNov03.gif

http://www.amateur-investors.com/_derived/Mid_Week_Market_Analysis_11_11_03.htm_txt_Dow-Nasdaq-LongNov03.gif


Also you may notice that after the Dow rallied strongly through the middle part of 1933 that it basically traded sideways from the middle part of 1933 through 1935 before rallying strongly again in 1936.


The question is will the Nasdaq follow a similar path to that of the Dow from 1932-1937 during the next 3 to 5 years?

[actr]

Weekly Charts"

Given that the market is experiencing a "pullback," I thought it would be a good idea to take a look at the weekly charts.

DJIA: It is holding above support which means the weekly trend is still UP. Resistance at 9900 (last week's high) and 10350. Support at 9750, 9500, 9230, and at 9000.

http://www.financialsense.com/Market/iossif/images/03/1111/indu.png

http://www.financialsense.com/Market/iossif/images/03/1111/tran.png

DJTI: It is holding above support which means the weekly trend is still UP. The next upside target is at 3050. It should be noted that the last time the Transportation Index was in the 3000-3050 zone, it was on 3/5/02, at that time oil was at $25 per barrel. Now it is at $30.85. Do you detect some disconnection between stock prices and the overall economic environment?


http://www.financialsense.com/Market/iossif/images/03/1111/spx.png


SP500: It is holding above support which means the weekly trend is still UP. Resistance at 1063( last week's high) 1074, and 1105. Support at 1044, 1018, 990, and at 960.


http://www.financialsense.com/Market/iossif/images/03/1111/compq.png


NASDAQ: It is holding above support which means the weekly trend is still UP. Resistance at 1992 (last week's high) and at 2100. Support at 1925, 1845, 1790, and at 1750.


http://www.financialsense.com/Market/iossif/images/03/1111/hui.png

HUI: Last week (10-31-03) we said: "It is holding above support at 212. From here it could pull back to 205-200, or, continue on to 230, and ultimately to 250. We believe a bit of consolidation is a reasonable expectation - in light of the divergence of momentum between the metal itself and gold stocks."

(11-7-03) It pulled back to 202 and bounced. However, it is not out of the woods yet. It needs to close above 225.


http://www.financialsense.com/Market/iossif/images/03/1111/usd.png


US Dollar: Above 94.25, it goes to 95.5. Below 91, it goes to 88.


http://www.financialsense.com/Market/iossif/images/03/1111/crb.png


CRB: Resistance at 252 and support at 244.


http://www.financialsense.com/Market/iossif/images/03/1111/wtic.png


Oil: It has support at 27.75 and resistance at 32.5


http://www.financialsense.com/Market/iossif/images/03/1111/util.png


Utilities: Resistance is at 257. Support is at 248. This is the weakest of the three major Dow indices.


http://www.financialsense.com/Market/iossif/images/03/1111/djr.png


Real Estate: (DJR) It has support at 170 and resistance at 178.


http://www.financialsense.com/Market/iossif/images/03/1111/bpndx.png


http://www.financialsense.com/Market/iossif/images/03/1111/bpspx.png


The Bullish Percent Indexes have formed complex tops after reaching multiyear highs, which indicates that the internals are getting weaker.


http://www.financialsense.com/Market/iossif/images/03/1111/pcratio.png


http://www.financialsense.com/Market/iossif/images/03/1111/qqv.png


http://www.financialsense.com/Market/iossif/images/03/1111/vix.png


http://www.financialsense.com/Market/iossif/images/03/1111/vxn.png


However, the Volatility indexes are still in a steep downtrend, which means the market's up-trend is not in any danger of being terminated, as of yet.

Overall, I believe we'll see a bounce from support levels, but I am not that confident that the ensuing rally will take the indices above resistance.

[actr]

Technical Review
by Eric King

Folks, the real bull market is in gold, silver and the CRB. For now I just want to focus in on gold and Richard Russell's favorite miner, the "big daddy" of the mining sector, Newmont Mining.

The following chart of gold shows the 65-week moving average has been supportive for gold since the 9-11 tragedy. This moving average also halted the decline in gold in April of this year.

Chart 1 Gold Weekly

http://www.financialsense.com/Market/archive/images/2003/Nov/12/Egold_wk.gif

In the following chart, we also see the long-term monthly moving average was supportive in the mid 90's. After acting as resistance in early 2002, gold broke decisively through this resistance on it's way up to the highs of February around $385 (New York). This moving average then became support once again, halting the decline in gold in the spring of this year at just under $320. Gold has since accelerated to new recent highs, closing today at roughly $395, a new 7-year high.

Chart 2 Gold Monthly

http://www.financialsense.com/Market/archive/images/2003/Nov/12/Egold_mo.gif


The following multi-decade monthly chart of gold shows a secular bull market in its infancy. Notice the MACD stretched to the 120 level at the peak of the previous bull market in gold in 1980, but it has only just crossed the zero line into positive territory very recently. Despite what some in the media are saying about gold being "tired," the reality is we are in the very early stages of what will in all probability be a very, very long secular bull market in gold.

Chart 3 Gold Multi-Decade Monthly

http://www.financialsense.com/Market/archive/images/2003/Nov/12/Egold_lt.gif


The following multi-decade quarterly chart of gold shows we are very early in this secular bull market in gold. Note the MACD is just making its way to the zero line, when in 1980 at the peak of the previous bull market in gold it reached as high as the 150 level! Also note the RSI crossing above the 50 line with conviction for the first time in over 16 years, which is also very constructive.

Chart 4 Gold Multi-Decade Quarterly

http://www.financialsense.com/Market/archive/images/2003/Nov/12/Egold_ltqt.gif

Next I would like to move on to Newmont Mining (NEM). My charts of NEM and my commentary were published by Richard Russell on June 17th of this year (charts are updated and current):

"The following chart of NEM shows the breakout you have been describing. Looking back at past advances from NEM the 100 monthly moving average has acted as excellent support when it goes into a 'bullish' phase."

Newmont had closed at $33.84 when that was published, but the current chart shows the nice continuation pattern towards the $45 area.

Chart 5 Newmont (NEM) Multi-Decade Monthly

http://www.financialsense.com/Market/archive/images/2003/Nov/12/NEM_mo.gif

"The quarterly chart shows the 50 quarterly moving average has been supportive during Newmont's bullish moves. NEM is attempting to break out above that resistance and a quarterly close above that area at the end of June would be extremely positive. Note the RSI breaking above the 50 line in '02 for the first time in many years which also looks constructive."

The updated chart shows NEM punching through the resistance and heading up strongly to the $45 area. RSI which had just broken above the 50 line when the above was published on June 17th, is now showing strong conviction for the first time in over 7 years.

Chart 6 Newmont (NEM) Multi-Decade Quarterly

http://www.financialsense.com/Market/archive/images/2003/Nov/12/NEM_qtr.gif

The next set of my charts and commentary were published by Russell on June 21st of this year:

"The following daily and weekly charts of NEM show 500 is an important number on both moving averages. This daily chart shows the 500 daily moving average which has acted as excellent support for NEM on a number of occasions since the beginning of 2002."

The updated chart shows how strong NEM has been during its latest advance. Although Newmont is extended above the daily support and may correct long-term, the action in NEM is very strong.

Chart 7 Newmont (NEM) Daily

http://www.financialsense.com/Market/archive/images/2003/Nov/12/NEM_day.gif

"The following chart of NEM shows the 500 weekly average has provided excellent support during bullish moves in Newmont. Recently that average acted as resistance in '02 as shown on the chart. NEM has just broken above this moving average for the first time in about 6 years. In this chart Newmont's shares briefly broke below the 500 weekly average in early '97 before having a tremendous snap back rally above the moving average. Its share price cratered in late '97 when it decisively broke this support."

Newmont closed at $33.60 when the above was written, again the updated chart shows NEM's strong upward progress closing today at $43.91. You can see the strength of the money flows as well.

Chart 8 Newmont (NEM) Weekly

http://www.financialsense.com/Market/archive/images/2003/Nov/12/NEW_wk.gif

"What does it all mean? It is possible for Newmont to shake back down below the 500 weekly moving average all the while staying bullish technically (above daily support) before breaking decisively above the weekly average and continuing it's long-term advance. Subscribers should keep this in mind and not be shaken out of Newmont if this temporary reversal was to occur."

The above still applies and the 500 daily and weekly averages will provide support on any declines in NEM if necessary. Not saying we will pull back to these averages, but they are there for support in the event they are needed.

For the record, Richard Russell did an excellent job of calling the dead lows of the gold pull back in April of this year:

"Today gold actually opened higher at $321.70...Also, although gold closed lower for five days in a row, neither the XAU or HUI confirmed by breaking to new lows. In fact XAU and HUI made their lows on March 27...My conclusion is that there's a good chance that gold is either at it's low, or that gold is in the process of bottoming."

Very nice call, Richard, and very fruitful for your subscribers who acted on that call by purchasing gold/gold stocks.

On May 6th of this year after the big shakeout in gold, Richard Russell published some of my gold charts and commentary, but the final portion of my commentary will be true throughout this bull market in gold:

"I hope all of your subscribers are keeping their eye on the 'big picture' with regards to gold and gold stocks. Smart money will take advantage of weakness in gold and gold stocks to accumulate while the weak hands are shaken out of what in all probability will be a very, very long bull market in gold."

The bottom line here folks is that when there are significant shakeouts or periods of weakness in gold and gold stocks, "smart" money will use those periods to accumulate positions.

As the title of the article says, "To the moon Alice."

Eric King

© 2003 Jim Puplava & Eric King
November 12, 2003

[actr]

Is Recent Stock Behavior Signaling Holiday Season End to Market Rally?"

The holiday party season is here in both real life and the stock market. Have you noticed that some of the people who you only see at these affairs tend to act the same year after year? These same tendencies occur with stocks. We already know that the market is going through a secondary correction in a primary bear market. The magnitude and duration of this correction has surprised many market observers including me. Some fundamental analysts believe as I do, that the current rally is being fueled by the same hot air that inflated the bursting bubble in March of 2000. Therefore, the question many people should ask at a holiday party is, when will the market resume its primary down trend? Evidence to help answer that question can be found in the behavior of some stocks during the sudden drop of the March 2000 stock market.

There are some stock chart characteristics I am seeing that lead me to believe that this secondary correction will be over soon. However, more evidence is probably needed to answer the important question of when the downtrend will be clearly established. Only at that time will it be safe to trade with the fundamentally righteous long-term downtrend. In this article I will examine two stock behavior patterns that occurred during the 1999 and 2000 party. The first is “Flight From Quality”. The second is the repeating of relative behavior of the Internet and Technology stocks.

The behavior of the low and high quality Internet and Technology stocks will soon provide us with insight as to when, the secondary correction will be over. The definitive topping of the higher quality Internet stocks will likely provide a signal of what big market-moving speculators are doing and not saying. Although there have been some clear signs that the lower quality Internet stocks have topped, additional evidence is needed to safely time and trade with a NASDAQ stock market top. The flight to and not from quality will also provide a secondary signal of when the market top has passed.

Flight From Quality

Before the NASDAQ market crash in March 2000, there was a flight from high quality blue chip large capitalization stocks. It was almost as if the momentum money was chasing speculative and blue chip technology stocks with such intensity that the oxygen was being sucked out of every other sector. Most non-technology stocks were in confirmed down trends by the time that the NASDAQ reached it March 2000 peak. This time around the flight from quality is not quite as broad. Small capitalization growth stocks and some blue chips have done well. I think it’s because there are not a lot of speculative IPOs to chase as there were in 1999 and 2000. Most of the former speculative NASDAQ IPO names have gone bankrupt. Although some blue chips have done well recently, they have not done nearly as well as the NASDAQ. However, as in early 2000, there has also been a flight from quality, as evidenced by the behavior of the large capitalization drug stocks. Johnson & Johnson (JNJ) is a striking example. Below is a chart of JNJ at and after the 2000 bubble burst. As you can see, the NASDAQ peaked at about the same time that JNJ hit the trough. Similar action was observed in other quality drug sector large capitalization companies. Last time after the bubble burst, JNJ went on to post a gain of almost 50 percent over the next 20 months, while the NASDAQ went completely into the tank for several years.

http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h1.gif


The same flight from quality is being observed in the drug stocks today. JNJ is clearly sitting on the bottom of support (at about 49), as shown in the chart below. Other large drug companies such as Pfizer seem to have bottomed, and by now appear to be in an up trend. If the relationship of large drug companies to technology companies is similar this time around (technology top corresponding to a drug stock bottom), then we may be near the top of the recent NASDAQ.


http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h2.gif


In 2000, the flight from quality indicated a capitulation of some owners of quality blue chips such as Johnson & Johnson. I’m sure many money managers fielded phone calls in the first quarter of 2000 from clients asking them to (finally) sell their blue chip stocks which returned 8% per year on average, in favor of those technology stocks that could go up 8% in a day! I wonder how many such calls are being placed today. In retrospect, the prevalent flight from quality was an excellent indicator of an impending market top. Although flight from quality is now also evident (to a lesser extent), by itself it only provides a secondary indicator as to when the correction will be over. The NASDAQ market top may be signaled when the large cap Drug stocks put in a definite “bottom”. But additional evidence of a NASDAQ market top would be needed.

Internet and Technology Stocks’ Behavior

In 2000, the lower quality Internet and Technology companies “topped” a few months before the higher quality companies did. I think that similar stock behavior may be happening again.

Internet Companies

The charts below illustrate the 2000 bubble peaking of two Internet search engines – Ask Jeeves (ASKJ), and Yahoo (YHOO). The lower quality more speculative company, Ask Jeeves, topped in mid-November 1999. Yahoo didn’t top until about the 2000 New Year. Although Jeeves figured out a way to earn some money, 3-1/2 years later the two companies are still similar in a comparison of their relative quality. I would expect that the lesser quality more speculative company, Ask Jeeves, would exhibit similar behavior at the near term market top as it did before. It will reach its peak price sooner than Yahoo. (If it hasn’t already.)

http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h3.jpg..
http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h4.jpg


The current one-year charts below indicate that indeed, Jeeves probably peaked about 5 weeks ago. There are several technical characteristics of the Jeeves chart that are appearing to be decisively weak. Note the plunging MACD histogram, and drop in money flow in recent weeks. If Jeeves stock continues to exhibit weakness at the stock market “party” I would expect that The Butler (“Jeeves”) is going to leave a bit early again! (It’s a strange party indeed where the butler leaves early. But what can be stranger than the current stock market?) By contrast, the Yahoo Inc. chart is still looking strong.



http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h5.jpg ..
http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h6.jpg


The chart of a lower-tier search engine, Findwhat.com, is shown below. This stock has clearly topped in September. The rising tide is no longer lifting all boats!


http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h7.jpg


A similar quality gap exists between Internet booksellers, higher-quality Amazon.com (AMZN), and lesser-quality Barnes & Noble.com (BNBN). In the 1999-2000 bubble, the lower quality BNBN topped a full two months before Amazon, in October of 1999.


http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h8.jpg http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h9.jpg


This time around (shown below), BNBN also topped before Amazon.com. (Barnes and Noble.com is now being taken private by their parent, Barnes and Noble at $2.50/share.) Amazon has seen three straight “down” weeks. Has Amazon topped? May be.


http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h10.jpg http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h11.jpg


Amazon bulls have argued that Amazon is no longer an Internet bookseller, but rather an “Internet Retailer”. Therefore to be more thorough, let’s look at a second-tier Internet retailer, Overstock.com (OSTK) in comparison to Amazon. The recent yearly chart below indicates that OSTK has likely topped in September 2003. Again, the rising tide no longer lifts all boats. The speculative Internet stock rally is clearly thinning out!


http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h12.jpg

Quality Technology Companies

Three of the highest quality yet overpriced technology companies, Cisco, Intel, and Ebay, peaked in March of 2000. This was at least one full quarter after the more speculative less profitable Internet stocks (as illustrated above), topped. The high quality technology charts are still looking strong. Once the high quality Internet stocks clearly indicate a top, it will be bad for the overall NASDAQ market and probably the entire stock market. This will be a sediment indicator that indicates what market-moving speculators are doing, and not what they are saying. (The market-moving speculators trading large sums of money tend to require the more liquid speculative names.) This indicator of speculator behavior is likely to be important for the overall stock market because the market is being driven mostly by speculation (see). Precedent from the 2000 stock market suggests that the overall NASDAQ market will top a short time after the Internet Stocks.


http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h13.jpg http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h14.jpg

http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h15.jpg


Low Quality Internet Companies (“The Dumpster out Back”)

If the low quality speculative names behave the same during this bubble-sequel, then there is further indication that we are nearing a stock market top. CMGI, which dropped almost to zero after forming a double top in ’99-‘00, has formed the same topping pattern at about 1.3% of its absolute peak value. Note the similar rise in price (on a percentage basis) before the double top was formed in both cases.


http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h16.jpg http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h17.jpg

Now let’s look at the still-NASDAQ-listed Internet Capital Group (ICGE). It was an “early topper” in December of 1999. For what its worth (not much as a company or market indicator), it topped in June of 2003. It’s interesting noting the recent surge of this low quality stock from $0.30 to $0.80 per share. This is typical of the recent market action of many “penny” stocks. It shows that the bear market didn’t scare out people who would flip shares of such low quality names. This is yet another piece of evidence of a stock market bottom not yet seen.


http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h18.jpg http://www.financialsense.com/Market/goldberg/images/03/1111/1113.h19.jpg


Summary/Conclusions

The behavior of the low and high quality Internet and Technology stocks will soon provide us with insight as to when, the secondary correction will be over. The definitive topping of the higher quality Internet stocks will likely provide a signal of what big market-moving speculators are doing and not saying. Although there have been some clear signs that the lower quality Internet stocks have topped, additional evidence is needed to safely time and trade with a NASDAQ stock market top. The flight to and not from quality will also provide a secondary signal of when the market top has passed.

All is Not Rosy at the Strip Mall

The cliché is that, “the consumer continues to do his job.” Well, apparently Wal-Mart and Target shoppers don’t watch CNBC. Although thanks to Uncle Sam, most consumers had more money in their pocket last quarter (to coin the headline slang), “Wal-Mart missed by a penny, and guided lower for the Christmas quarter.” Target also forecast a slower 4th quarter than its previous forecasts. This from Lee Scott, President and Chief Executive Officer of Wal-Mart, “I don’t think consumer spending is slowing, but I also don’t see the strength that many of you in the investment community appear to see.”

According to Reuters, “Many Wall Street analysts and industry consultants predicted a strong holiday shopping season, bolstered by an improving job market and rising consumer sediment.” This was not seen in the results of Wal-Mart and Target.

In general, retailers are selling at the high end of their historic valuations. Although things appear to be tough at the lower end department stores where guidance was lowered, things appear better at the higher end department stores such as Neiman Marcus, May Department Stores, Federated Stores, and JC Penny. They are generally maintaining their guidance numbers. So what’s going on? I think there is a consumer confidence gap between the lower middle class (Wal-Mart) shoppers and the upper middle class shoppers. The Wal-Mart shoppers generally do not have stock or mutual fund portfolios. They are not as tuned in to all of the positive economic jobs data broadcast on CNBC. They live the actual job losses and job loss threats through their personal experiences. In general, they are closer to the US’ geopolitical situation as well. Many Wal-Mart shoppers do not own homes, but those who do own homes are not seeing the same relative appreciation that the upper middle class is seeing.

By contrast, the upper class shoppers have rising stock portfolios that they see going up on cable TV and network news. Their rising portfolios confirm better economic conditions which are reported on cable via a daily bombardment of positive economic data. Their homes can sell for relatively higher prices in today’s market (for now). They feel richer; they spend.

There is a problem here. The consumer spending patterns in the upper middle class are too dependent on the confidence brought on by the overpriced and rising stock market. If for some reason, the situation were to change and something began to precipitate the inevitable reversion to the mean in stock valuations, then the required factors would be in place for a “run on the bank” in the stock market. Can a crash actually occur? The price to earnings ratio of the NASDAQ 100 is more than 77. Consumer debt is at historic highs. What do you think?

Today’s Market

It was pretty quiet in the stock market today. The bond market rallied strongly and DR Horton Homes (DHI) posted impressive quarterly results, yet homebuilders were only up marginally. It will be interesting to see whether the homebuilders put in a top last week. After spectacular gains yesterday, gold and silver were only down a tiny bit. In Internet Land, the “blue chip” Internet stocks, Ebay, Yahoo, and Amazon were all up. The lower quality stocks, Ask Jeeves, Findwhat.com, CMGI, and Internet Capital Group were all down. (Overstock.com was up a little bit.)

Dell reported good results and in after market trading, it’s basically neutral. No NASDAQ party tomorrow morning!

Have a great evening!

Martin Goldberg

Disclosure: Martin Goldberg owns shares in JNJ

Copyright © 2003 All rights reserved.

Martin F. Goldberg, MS, P.E.
Market Analyst

[actr]

The Market`s Top Is as Slippery as the Bottom
By Aaron L. Task
Senior Writer
11/13/2003 06:27 PM EST



Each day, it seems, the market has a new theme and focus, often running counter to the prior day`s trend. Such developments make life difficult for day-traders, but have not deterred myriad market watchers from attempting to pinpoint the market`s peak.

This cottage industry of top-calling mirrors the "bottom-pickers" of 2000 and 2001, and is occurring despite the inability of sellers to gain much traction.

After Wednesday`s big advance, for example, early declines all but evaporated Thursday afternoon as an earlier-than-expected upside surprise from Dell (DELL:Nasdaq) offset disappointing results from Wal-Mart (WMT:NYSE) and some lackluster economic data.

"The market has no memory from day to day and it is not likely a good strategy to extrapolate one day`s gains into the next day," observed StreetInsight.com contributor Doug Kass.

In the microcosm, retailers were one of the prime beneficiaries of traders` desire for economically sensitive names earlier in the week (Merrill upgraded several names Wednesday), only to be pummeled Thursday after Wal-Mart`s penny shortfall and lackluster guidance, as well as concerns about guidance from Target (TGT:NYSE) .

While major averages fell marginally, the S&P Retail Index shed 1.2% Thursday.
Taking the Dog(ma) for a Walk

Among the bearish contingent, a vocal minority, the postbubble Nikkei analogy continues to hold tremendous allure. In a nutshell, the theory is that financial markets (and investors) act in similar patterns in postbubble environments.

Since its March 2000 peak, the Nasdaq Composite has followed a very similar pattern to Japan`s Nikkei, which hit its peak on Dec. 31, 1989. Both averages hit significant lows about 2 1/2 years after their peaks and have behaved in a similar manner since then. As noted here, there have been some recent divergences in the pattern but many of those watching the analogy believe it still points to a mid-November peak for U.S. averages.


Bubble, Bubble ... Toil & Trouble?
The Nasdaq is still following the path of the postbubble Nikkei

http://images.thestreet.com/markets/aarontaskfree/15838.gif

Bubble, Bubble ... Toil & Trouble?
The Nasdaq is still following the path of the postbubble Nikkei

* Nasdaq`s chart is through Monday`s close. Source: 21st Century Alert



"If the uncanny Nikkei parallel from the early `90s is going to hold up -- and I think it will -- then we need to be on the lookout for a sucker punch to the solar plexus of the bullish majority," Dave Nichols of 21st Century Alert, which produced the updated chart above, wrote on Nov. 5. "The Nikkei analog lost a whopping 20% in about a month back then, and a corresponding move now in the S&P 500 would take it from 1060 to around 850." (A similar drop would take the Comp to around 1581 from its recent closing high of 1976.)

Earlier this week, Nichols suggested a strong rally above S&P 1060 would nullify the scenario, but declared: "A major decline is now staring us in the face, according to this analog. It`s also saying that such a bottom will be a pretty darn good place to get long."

Of course, there are significant divergences between the economies of the U.S. today and Japan in the early 1990s, as well as major differences between policymakers here now vs. there then, as Howard Simons observed in RealMoney.com`s columnist conversation.

For those discounting the Nikkei analogy, Steven Hochberg, editor of Elliott Wave International`s Short-Term Financial Forecast, has offered an alternative scenario: 1987.

The newsletter writer has observed similar patterns in the S&P 500`s ongoing rally from its March lows with the pattern of the Dow from Dec. 31, 1986, to its peak in August 1987. In addition, there`re now more than 50 weeks in which there has been a plurality of bullishness in Chartcraft.com`s Investors` Intelligence survey, as was the case in 1987, Hochberg noted. The analog is also based on similar wave patterns, he added.



Another Analogy to Worry About
Elliott Waver sees similarities between the S&P and the 1987 Dow

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Based on the 1987 analogy, the Elliott Waver targeted Nov. 4 or Nov. 6 as possible high points for the S&P 500. To date, the index has produced a Nov. 3 closing peak of 1059.02 and a Nov. 7 intraday high of 1062.39. (Close enough for government work, to be sure.)

"If the time relationships remain intact, then the S&P`s next low should occur on Nov. 20," which would be equivalent to Sept. 8, 1987, for the Dow, Hochberg wrote. "This low would then be followed by a sharp four-day advance to Nov. 26 -- [equivalent to] Sept. 14, 1987 -- and then another decline to a new intraday low on Dec. 4," equating to Sept. 22, 1987. "From this low, a sharp nine-day rally should carry the S&P up to Dec. 16 and then a steep decline thereafter," he continued.

Despite the draconian implications, Hochberg is definitively not expecting/predicting a crash akin to what occurred in October 1987. "Market crashes do not occur near market highs [but] after a period of declining prices, which has yet to happen in any appreciable way," he wrote, noting the Dow was 27 days past its 1987 peak before declines accelerated.

Furthermore, crashes "tend to be generational events" and 1987 certainly qualifies as this generation`s crash, Hochberg added. "Having said this, if the analog holds together there could be a severe decline coming in December; we`ll call it a `mini-panic,` for lack of a better word."

Given the market`s day-to-day (and intraday) swings, it`s hard to imagine accurately predicting its future with such specificity, especially given Hochberg`s recent track record. Faithful readers may recall he has repeatedly called market tops in recent months, as reported here on Sept. 12 and May 30.

Similarly, Hochberg (and Elliott Wave) has been quite bearish on gold`s intermediate-term prospects, having predicted earlier this year the metal could fall as low as $200 before embarking on a huge rally.

After establishing a seven-year high Wednesday, gold futures traded as high as $398.40 intraday Thursday but faltered to close down 0.2% at $394.30.

"Sentiment measures remain conducive to a gold high near current levels, as does the pattern of eight-year cycle highs," he wrote prior to gold`s latest failure to pierce the psychologically important $400 per ounce level. "So the weight of the technical evidence has not changed and our view holds that an important gold peak is near."

Meanwhile, many bears can`t seem to cotton why gold and stocks have been running higher in tandem of late. As discussed here, the Fed`s "reflationary" policies may be changing the inverse relationship between stocks and gold that investors all became so accustomed to in the 1990s/early 2000s.

This is yet another bit of bearish dogma -- "gold up = bad for stocks" -- that needs re-evaluating, even as folks such as Nichols and Hochberg seem unable or unwilling to change their outlook.
--------------------------------------------------------------------------------

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC`s editorial policy, he doesn`t own or short individual stocks, although he owns stock in TheStreet.com. He also doesn`t invest in hedge funds or other private investment partnerships. He invites you to send your feedback to Aaron L. Task.