Stocks and gold rallied sharply today. The early morning session was caught up in the euphoria of the Microsoft earnings. The session was choppy, but every attempt at a decline with oil ratcheting up to new highs, was met with renewed buying. The S&P and Dow made more progress from the opening range, and had more to make up as their previous drop was more severe than the QQQQ, however the QQQQ did gap up nicely from the close of yesterday. It did give up a bit from the opening, as did Microsoft. However, the Qs did post a 1.66 percent gain for the day, and Microsoft was up 9.50 percent, after having given up a full point from the open. There is much anticipation of the Fed cut next week, which is expected to keep the stock rally alive, the dollar sinking, and gold marching up to the moon.
The above chart of the QQQQ/Nasdaq 100 shows the broadening formation that I had on the daily chart on the blog yesterday. The chart today is a 60 minute chart of the day session, going back a couple of weeks. You can see how unpredictable and random the swings are. The standard error bands on the price bars are widening, showing there is more random behavior. The bottom indicator is the R-Squared on a 30 period regression line. When the indicator is under the lower, yellow reference line it shows no descernable trendiness, and when over the upper blue line, there is trendiness. You can see how quickly the red indicator line fell below the yellow basis line, and has mostly stayed there through all this chop. Shorter time frame did have more trending characteristics. If the upper line fails to be overcome, the lower line will most likely be tested, and if it fails to hold, a larger scale correction could result.
Gold exploded higher today, up around $17.00 to a high that hasn’t been seen since 1980 (not adjusted for inflation). The trend is clearly higher. The R-Squared indicator in the middle sub-graph shows the trend is strong and persistent. The only negative on the chart is the drop off in volume over the last four days, and the generally higher volume on the down days. The contract shown today is the Chicago electronic contract, which displays volume in real time, as opposed to the New York contract where the volume is delayed by a day. The volume on the Chicago contract has been growing over that last couple of years, so it should be a fair representation of trading activity. I will try to get my commitment of traders charts posted, and if so I will post the gold commercials vs specs vs large traders on the blog on Monday.
I’m posting this very late today. Often on Friday I will go get a coffee and catch up on my reading. When I arrived at the coffee place, the barista asked how I was doing, as she knew I was a trader. I had a long face, so explained that I got out of half my gold position prior to the big move up today. She had a big smile on her face. She explained that she almost got out of her three shares of Baidu on that drop a couple weeks ago, but was glad she held because it was up big time today and she’s now shopping for a new car. On the way to my seat I saw a guy with a pamphlet with a headline about how to profit from the coming collapse in the dollar. It had a bunch of gold coins on the header. When I sat down to have my latte I couldn’t help but hear the conversation on the table next to me. Two guys were boasting about their stock market profits in Apple, Google, and a couple of Chinese stocks I never heard of. The funny thing is all these people were either not born yet, or were toddles during that crash of ’87. I guess that makes me an old timer. I didn’t say a word. I just smiled. They’ll probably keep making money for a while. I’ll probably keep grumbling that I got out of part of my gold too early.
And by the way, I wasn’t sitting in a Starbucks. That was another bubble-of-the-day at one time. It was selling at a huge multiple that was justified by many analysts because they were going to infiltrate China, and that growth would dwarf the huge growth already seen. I know many, including myself, were frustrated trying to short that stock. It finally paid off for some with much endurance. I never go to Starbucks. I live in a little artsy community on the right side of the lake from Seattle. The town prides itself in the art galleries, sidewalk cafes, and no franchises. But Starbucks did finally use some ruthless tactics to force out a small corner coffee shop, that at one time had been an old fashion bakery that was the prime meeting place in the center of town. Now it is a cold, unfriendly Starbucks. But there are still a couple of independent coffee shops in town. I’m sure one day Starbucks will overtake those as well and I may have to move to an increasingly hard to find Starbucks free location. At least the Starbucks stock bubble finally burst. All bubble do burst at some point. Many current bubbles seem to be getting to that point. But I digress.