Jul

17

Investing Systems Research Lab Blog Post for Week of July 19th, 2010

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Before I get into this weeks post about the stock market, I wanted to share an interesting read on gold.

As you long-timers know, we have always stressed that gold and silver are necessary components of a diversified portfolio. We have discussed it at length over the years and probably ad-nauseam for those that listen frequently. This a a great article that drives home the salient points and is well worth the read.

http://www.zerohedge.com/article/hinde-capitals-ben-davies-gold-market

The question is not if you should own gold as an investment, but how much to own and when to buy it. I will save my long answer for next Wednesdays show, but be sure to watch the Sunday night show where Doug will interview John Rubino from DollarCollapse.com. It will air Sunday night, July 18th at 8:00 PM Eastern Time and will be available to watch on demand after that at http://www.markettoolbox.tv.

Speaking of Gold, it’s mandatory to look at the weekly chart of GLD to see where we are and what to expect.

GLD is nearing a critical juncture over the next few weeks and we want to watch closely. The price is nearing the lower end of the channel support, which coincodes with the 30-week SMA.

GLD and the price of gold may indeed get taken down with a weak stock market. It would make for a perfect cover by those that conspire against gold, but on the outside chance it decouples this time around, we want to acutely aware. Seasonally speaking the summer months are weak and boring for gold and silver and that’s fine. This fall we expect to see some action, hopefully to the upside, but be careful what you wish for…

Gazing at the chart above, if the uptrend holds and the 30-wk MA holds and GLD doesn’t close in the red alert square, we could be looking at a significant fall rally. IF the price breaks down through these key levels, the risk is a pullback to the 1000 level, at which time I will have many things to say about it.

Capital currently dwindling on the sidelines may find it’s way into the yellow ellipse (and metal) and the real party starts in the green rectangle above. Never lose sight of the fact that someday in the future we expect a gold rally that will take our breath away and put us somewhere near the top end of the channel again.

I remember a quote:

politicians shun gold as it acts as a barometer whose price announces how a government is handling their country’s fiscal and monetary affairs

Throw the central banks and the FED and JPM into the mix and it is definitely not in the “powers that be’s” best interest to let gold reach it’s intrinsic value in fiat currency, infinity…

I will likely offer more random thoughts on the subject verbally on future shows.

Honestly, $ilver is the one to watch. Silver, as a long-term investment is my best idea right now. Funny, it’s been my best investment idea for a long time and the ounce I keep in my office dated 1990 demonstrates I was 10 years too early on this one. Nevertheless, if you have grandkids or know someone in their 20′s, let them know if they are able to save money, the true investment of the future is physical silver and they should work out a long-term accumulation strategy and a good time to start is with the price under $20.

One day in the future the idea of buying silver under $20 will be a joke. Don’t let it be a missed opportunity for those you know. It’s a different sort of investment and it’s one of the few things I suggest averaging down on. Since 1990 I have been averaging up, but that fine too.

So the Weekly chart of SLV looks very constructive. Silver is very volatile, but notice how well it has held up in this environment, even with the severe pullbacks in gold these recent weeks.

That lower trendline is some very significant support for SLV as it goes back to the fall of 2008, when “investments” were in a liquidation environment.

Watch closely as silver marches towards the apex of this triangle and keep your eye out for a break to the upside. Be sure to watch the chart of JPM closely if this happens. There may be an inverse correlation.

The best thing that can happen, and the likely scenario, is that SLV chops around for a few more weeks into the yellow ellipse and then breaks one way or the other.

The seasonal chart of gold shows that September is traditionally a good month for gold and happens to coincide with inflection points on the charts above. Whoa..it might be an exciting fall.

So we will be watching closely to see how this battle plays out in the second half of the year.

In the short term anything can happen and there are many forces at work, but in the long run “the people” of the world are slowly awakening to the fact that gold and silver are the only true money and it transcends both time and geography. It always has…

On to the stock market…

Well, this past Wednesday, the pivot scan turned up 69 short trades out of the 200 OEX and SPX components. The short setups were posted in the Research Lab. as of Friday we only have 2 new pivot high short signals, but I will tell you this. I personally looked through 1000 stock charts and almost everything looks like a short. It can’t possibly be that easy eh?

Just a couple weeks ago, right after the 4th of July Holiday, we were getting pivot low long signals on tons of stocks, then everything reversed last Wednesday right when the SPY bumped it’s head on the 50-day SMA.

So let’s take a quick look at the daily SPY.

The red ellipse seems to be the likely area for next week, in which case we will brace for a potential visit back to the Danger Zone.

If for some reason the computers are being programmed to thwart the obvious shorting bonanza, it will be apparent at the trendline break, with a push above the 50 day SMA. In which case we can rejoice at the fact we formed a lower low and look forward to green ellipse and the 200-day SMA. Wouldn’t that be sweet?

There is literally a ton of overhead resistance on the chart as we were pointing out last week. The path of least resistance seems to be down unless some really good news break out soon. It seems lately even the good news only provides a fleeting rally so it would have to be significant. Perhaps a second stimulus?

This week is anyone’s call but we think it will be tough trading long for the foreseeable future. All this is consistent with our Monthly long-term timing indicator, which gave a sell signal at the end of June.

The Widows and Orphans are safe on the sidelines in Fiatscos. Hopefully they aren’t loaning the government that sidelined currency for 10 years at 3% or worse for 30 years at 4%, but that’s for another conversation.

The nice thing about the Research Lab is that, as you know, every day it will pick something that goes up, usually significantly.

Case in point from Friday, the Alpha List:

It doesn’t get any better than that folks, especially when it comes to computer generated stock picks.

Have a great weekend and join us Monday morning as we take the open as it comes. As usual we will find stocks or ETF’s that move up and show you what we look for on the charts.

See you there!

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Jul

10

Investing Systems Research Lab Blog for Week of July 12th, 2010

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Last week we got the tradeable bounce we have been discussing. The market was quite oversold and the pessimism had gotten pretty extreme, so it was definitely due.

Part of the reason for all the bearishness was the fact that everyone’s long-term signals flashed a sell, including ours at the end of June.

Even though last weeks rally may carry into this week a bit, there is a ton of overhead resistance on the charts.

On the Monthly chart we see that the SPY is still below the 10-month and 30-month moving averages.

While we managed to rally out of the Danger Zone for now, we are clearly not out of the woods and expect to revisit this area in the future.

The Weekly chart shows that we are well below the 30-week moving average, which is the main one to watch on the weekly. The 10-week has crossed down through the 30-week, which is not a good sign. It’s similiar to the “death cross” you hear so much about where the 50-day crosses the 200-day moving average to the downside. Decision Point actually used that as their “long-term sell signal” last week.

Here’s what they had to say about the current environment:

Bottom Line: A new long term stocks SELL signal has been generated based upon a “death cross” (opposite of “golden cross”) of the 50- and 200-EMAs. Decisions in the intermediate and short term now need to take this into account. Nevertheless, short term indicators continue to be bullish and and there are now positive divergences on medium-term indicators. So we have a positive theme developing in a negative longer-term context, but we should consider it to be a temporary development.

On the daily chart we can see we are right up against the 20-day moving average. While we might get some follow-through, we expect the rally to get turned back at the trendline.

So we expect the next couple weeks to be fairly choppy as we head into the beginning of earnings season.

In earning season, rather than focusing on the overall market, it will be more important to see the numbers and guidance from individual companies.

It should truly be a stock pickers market as they say over the next few weeks.

Any stocks you are holding or trading, be sure you are aware of the earnings date so there are no surprises.

Here are some stocks we will be watching this week.

Join us Monday morning at the market open in the Research Lab as we take the stock picks and mark up the charts.

Have a great weekend.

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