Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14
Bullish Silver Stealth Buying - 24th Oct 14
Blood in the Streets to Create the Gold Stocks Investor Opportunity of the Decade - 24th Oct 14
Swiss ‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern - 24th Oct 14
War And The Law Of Unintended Consequences - 24th Oct 14
Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - 24th Oct 14
Saudi Move to Cut Oil Prices Is Now Russia's Biggest Economic Threat - 24th Oct 14
US Stock Market Top Is Now In Sight - 24th Oct 14
New Profit Points in the Shifting Balance of Power, Welcome to Saudi America - 24th Oct 14
QE Failure & Folly Of Paper Mache, Treasury Bond Integrated Lifeline Patches - 24th Oct 14
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Stock and Commodity Markets Bullish Set-Up vs. Europe, Downtrend

Stock-Markets / Financial Markets 2011 Oct 09, 2011 - 09:19 AM GMT

By: Chris_Ciovacco

Stock-Markets

Best Financial Markets Analysis ArticleFor the past eight weeks, this market has been difficult for bulls and bears alike. I do not recall a more difficult two month stretch in terms of volatility and the magnitude of the ups and downs. Here are the peak-to-trough losses for a few ETFs since the spring 2011 highs:


  1. Silver (SLV) down 43.3%
  2. Gold (GLD) down 17.0%
  3. Emerging Markets (EEM) down 33.1%
  4. Germany (EWG) down 40.1%
  5. Australia (EWA) down 32.0%
  6. Copper (JJC) down 36.8%
  7. S&P 500 (SPY) down 20.9%

As we prepare for next week, both the bulls and bears have something to hang their hats on:

The Bullish Case

  1. Recent economic data points to positive GDP numbers for Q3 and most likely Q4.
  2. Friday’s employment report was able to exceed low expectations.
  3. European leaders have left the public denial stage and are openly admitting their banks need capital.
  4. As we noted on October 6, when the S&P 500 hit the recent low of 1,074, there were numerous short-term bullish divergences on the daily charts. These divergences are similar to set-ups prior to a 14% bear market rally that began in March 2008. The video below outlines bull/bear clues to watch for in the coming weeks, including a bullish turn up in the S&P 500’s 50-day moving average (which has not occurred yet).

    After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen modes

The Bearish Case

As we outlined in detail on October 5, a quick fix to satisfy the markets is unlikely to materialize in Europe. According to the Wall Street Journal:

“The news stories about a big-bang recapitalization of EU banks are overdone,” says Sony Kapoor of Re-Define, a financial think tank he has set up. “The EU has neither the money, nor the political will for action on such a scale.” Indeed, German Chancellor Angela Merkel implicitly recognized in Brussels on Wednesday that there is no consensus that a European-wide recapitalization is necessary, points out Stephen Lewis of Monument Securities in London. The German government was ready to recapitalize German banks, she said, “if there is a general view that the banks are not sufficiently capitalized.”

Bloomberg notes bank recapitalization does not address the root of the problems in Europe:

Even a recapitalization of European banks may fail to reassure investors because they will still question the ability of governments to meet their borrowing costs. Injecting capital into Europe’s banks won’t provide the “silver bullet” that is needed to solve the crisis, said Huw van Steenis, a banking analyst at Morgan Stanley in London. It needs to be done in conjunction with measures to shore up sovereign debt, he said. “The banking crisis isn’t going to be resolved until the sovereign crisis is resolved,” said David Watts, a strategist at CreditSights Inc. in London. “Capital isn’t the way to go because the needs are too big and will weaken the sovereign.” Banks would need to raise about 148 billion euros in the event of a 60 percent writedown on their holdings of Greek debt, 40 percent for Portugal and Ireland and 20 percent for Italy and Spain, Kian Abouhossein a JPMorgan Chase & Co. analyst, wrote in a note to clients Sept. 26.

The bears have control of both the short and long-term trends. The chart below is as of Thursday’s close. There is nothing particularly bullish about it. Price is below the 50-day (red); it closed below the 20-day (blue) on Friday. Both the 50-day and 20-day have negative slopes, which is bearish. The green parallel trendlines have impacted price since early April - they all have bearish slopes. The pink parallel trendlines have impacted price since the August 8 low - they, too, have bearish slopes. Price faces possible resistance from the 50-day and the twin trendlines near 1,181.

Resistance

Commodities and precious metals have been flashing deflationary and bearish signals in recent months. Stocks and commodities did not perform well in the period August-November 2008. Using this link, compare the chart of the silver ETF in 2008 to the present day. The charts give specific bull/bear levels to monitor in SLV.

The Dexia Bank bailout highlights the scope of the problems with bad debt. Dexia ironically passed the recent stress tests with flying colors; according to the Financial Times “it not only passed the exercise, it emerged as one of the safest banks in Europe”. Bloomberg reported on October 8:

While France and Belgium have rushed to protect their local units, hurdles to an agreement remain as they wrestle over responsibility for assets hit by the crisis that has caused the bank’s short-term funding to evaporate. Dexia’s troubled assets are being folded into a “bad bank” and could amount to as much as 190 billion euros ($256 billion).

The S&P 500 stalled on Friday at logical resistance levels after Italy’s and Spain’s debt ratings were cut. The ratings changes brought the problems in Europe back to the forefront of investors’ minds. If the bears maintain control of the market, we will continue to favor a menu of deflation-friendly assets as outlined on October 4.

Ciovacco Capital Management

    Copyright (C) 2011 Ciovacco Capital Management, LLC All Rights Reserved.

    Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com

    Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. As a registered investment advisor, CCM helps individual investors, large & small; achieve improved investment results via independent research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions. When looking at money managers in Atlanta, take a hard look at CCM.

    All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

    Chris Ciovacco Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014