Get your Friday night entertainment requests in. I have a feeling some relief will be needed tomorrow night.
Gold and Silver Thoughts
Loyal readers know I am a huge fan of both Gold and Silver. I was stopped out of my latest positions a little while back (first time ever) in Goldcorp and Kinross Gold for a minimal gain. It seems the miners never really took part in Gold's upside from around $850 to $1000 but rode the drop back down very hard to the downside. Quite a mess.
Today was another hit to both metals. While not a technical fan, the charts are not favorable and as long as this market rally has legs pressure is going to mount on the precious metals.
With an eye towards S&P 1000 and DOW 9500-10,000 I can see gold falling to the $750-$780 range through early summer, think July. Silver may see $8 in the same time frame. If those targets are met, I will be loading the boat on both through various channels, much like I did in the 2002-2003 time frame.
It kills me to write so harshly about my favorite market sector, but everything is telling me this is the way it will be. Not investment advice as usual, but a glimpse at MY plan going forward.
Top Ten Reasons Market Rally is Confusing
The current market run has many observers a bit confused, Economic Disconnect especially is included! Trying to assign reason to any real time market action is guesswork at best and foolish at worst. It is what it is.
In a David Letterman like manner, I will present the top ten reasons this market rally is confusing:
Reason Ten: The shadow world of "Quant Funds" is WAY over my head. Tyler Durden at Zero Hedge has some compelling data about volumes and market trades exploding among quant funds. This may mean something, or maybe not but either way it adds to a confusing picture. Latest quant post here and backtrack from there.
Reason Nine: Goldman Sachs reported great earnings (with some sleight of hand for good measure) and stated they really never needed government bailouts. JP Morgan was out today and one upped Goldman with the firm statement that JPM has NOTHING to sell into the new PPIP program. They did add that the program itself may be good for the markets, but again they do not need it. So what is the deal? Systemic banking collapse or over-reaction by the FED and Treasury? Who knows, but certainly it adds to the confusion.
Reason Eight: Every stock rising on any news and rising like crazy. See Liberty Media Corp through Slope of Hope today.
Reason Seven: Strange bull market behavior. Lifted this comment from an article over at Clusterstock: Professor says "Sustainable rallies "climb a wall of worry." This rally is climbing a wall of giddyness." true usually, but not this time.
Reason Six: Nouriel Roubini is getting little time on air and in print with his "We are in the middle of the recession" talk. I mean that is ultra bullish for that guy, and yet not much coverage.
Reason Five: After the Tech crash of 2000, nobody I know even mentioned stocks for over 3 years. Then they just talked about granite countertop 2x ETF's. Right now everyone I know is only talking about stocks and never stopped even after a 50% haircut. Bottoms tend to be more discouraging. Confusing again.
Reason Four: Ok, I will play "second derivative" and "green shoots" for a moment. If I submit that jobless claims are getting worse at a lower rate, what would be the area of employment that will make unemployment go down? Confusing indeed. Maybe less folks get canned, but they sure are going to be hard pressed to find other work!
Reason Three: If banks have turned the corner, did anyone notice the credit card loss estimates for JPM and Capital One escalating at an increasing pace? How's them second derivatives!
Reason Two: If banks were in such great shape last quarter, have they allotted for the huge wave of foreclosures set to pour in? Oh, remember that foreclosure moratorium from December to March? Yeah, it's over now. Get ready for some monster jumps in foreclosures. Will this matter? Not by the market reaction so far. Confusing again!
Reason ONE: Nobody knows how to price the markets. Some would have you believe that S&P 666 was the market pricing for the end of the world. So is S&P 865 only for kind of the end of the world? The banks are not all going to zero. But are they going to go up 20% a day forever? GM may or may not have a "surgical bankruptcy". The take home point is that prices right now are not tethered to anything and thus can go anywhere. This makes the rally, you guesses it, confusing!
Addendum: You simply must read The Automatic Earth introduction for tonight. Like, right now.
Have a good night.