Not much has changed since my last post. The gold market is still over-extended in my opinion, although there are fundamentals that will probably support this market for a very long time. The stock market is still swinging wildly from day to day based on whatever traders think the news is meaning at the moment. And bonds continue to stay at high levels when many analysts think this market has no business being where it is.
The above weekly chart of the gold etf shows the persistent uptrend, with a standard error band on the prices and the double stochastic in the sub-graph. Clearly the trend is still up. A previous negative momentum divergence failed to create much of a down-draft. The stalling did seem to let some of the air out of the over-enthusiastic sentiment. The market is trying for another impulse higher. The momentum on this one may start to wane. At least it feels that way. Maybe it is just wishful thinking. I’m very bullish on the long term but get nervous when the the boat is fully loaded on one side. It usually tips over. This market needs to rest and cure some of the wild projections. At least the annoying radio ads are slowing down just a bit. When they disappear it will probably be the next good entry point. I took a little off the table last week, which will probably insure it will head higher as I’m always too early exiting.
I still think that inflation can’t get moving until the employment situation improves. Any fed moves here seems to be like pushing on a string. Prices of most things will keep on a downward path (deflation) until more people are back to work so they have money to buy things. Until then there is no pricing power. Economic uncertainty is probably already priced in to the gold market. I think it really needs inflation to continue the bull trend, and that inflation is a ways away in my opinion. Same thing regarding the bond market. It seemed common knowledge that interest rates had to go higher. What everyone knows and thinks is usually wrong. Interest rates have continued to plummet and may very well stay down for a long time, even though this doesn’t seem logical or possible. The bond market sure looks like a bubble on a chart, but interest rates will have a difficult time rising if prices in general are falling and people are not working and buying things.
The stock market is still swinging with large multiple standard deviation moves from day to day, without making much progress in any direction. This should resolve soon. My inclination is bearish, but if there is a change in congress the market could get a big boost. Perhaps some of that boost is already priced in as most polls and pundits seem to think there will be large democrat losses. I can only hope. Perhaps the market would already be in a severe downtrend if the polls were indicating the other way.
I hope to be posting on a more regular basis. I’ve taken some time off this summer. It’s good to take time off to clear the mind. The market will always be there. Well, hopefully it will. I know there are many in the government who don’t understand the purpose of the markets and would like to tax traders unfairly, which would just move trading to other parts of the world. Hopefully those people will be gone soon.