Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21
Dow Stock Market Trend Forecast 2021 - 3rd Apr 21
Gold Price Just Can’t Seem to Breakout - 3rd Apr 21
Stocks, Gold and the Troubling Yields - 3rd Apr 21
What can you buy with cryptocurrencies?- 3rd Apr 21
What a Long and Not so Strange Trip it’s Been for the Gold Mining Stocks - 2nd Apr 21
WD My Book DUO 28tb Unboxing - What Drives Inside the Enclosure, Reds or Blues Review - 2nd Apr 21
Markets, Mayhem and Elliott Waves - 2nd Apr 21
Gold And US Dollar Hegemony - 2nd Apr 21
What Biden’s Big Infrastructure Push Means for Silver Price - 2nd Apr 21
Stock Market Support Near $14,358 On Transportation Index Suggests Rally Will Continue - 2nd Apr 21
Crypto Mine Bitcoin With Your Gaming PC - How Much Profit after 3 Weeks with NiceHash, RTX 3080 GPU - 2nd Apr 21
UK Lockdowns Ending As Europe Continues to Die, Sweet Child O' Mine 2021 Post Pandemic Hope - 2nd Apr 21
A Climbing USDX Means Gold Investors Should Care - 1st Apr 21
How To Spot Market Boom and Bust Cycles - 1st Apr 21
What Could Slay the Stock & Gold Bulls - 1st Apr 21
Precious Metals Mining Stocks Setting Up For A Breakout Rally – Wait For Confirmation - 1st Apr 21
Fed: “We’re Not Going to Take This Punchbowl Away” - 1st Apr 21
Mining Bitcoin On My Desktop PC For 3 Weeks - How Much Crypto Profit Using RTX 3080 on NiceHash - 31st Mar 21
INFLATION - Wage Slaves vs Gold Owners - 31st Mar 21
Why It‘s Reasonable to Be Bullish Stocks and Gold - 31st Mar 21
How To Be Eligible For An E-Transfer Payday Loan? - 31st Mar 21
eXcentral Review – Trade CFDs with a Customer-Centric Broker - 31st Mar 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Financial Markets Impacted by Economic Realities that Continue to Favor Inflation

Stock-Markets / Financial Markets May 27, 2008 - 12:11 PM GMT

By: Chris_Ciovacco

Stock-Markets Best Financial Markets Analysis ArticlePrior to the holiday weekend the markets learned the median price for existing home sales declined 8% from the year-earlier period. More concerning was the inventory of unsold homes climbed 11% resulting in a backlog which would take more than 11 months to clear based on the current rate of sales. While a record average gasoline price of $3.875 a gallon may have distracted many economic observers, we should not forget the prior positive economic impact related to the housing boom. Approximately 74% of all new jobs created between 2000 and 2005 were related to housing in some way (agents, brokers, construction workers, architects, etc). As of this writing, there appears to be no sector of the American economy ready to step forward and fill the void being rapidly vacated by housing. As a result, calls for an end to stimulative Fed and government policies may have been premature.


Investors Are Taking A Step Back From The U.S.

After a sharp correction in any asset market, it is not unusual for investors to play the bounce all the way back to the market's 200-day moving average. This is known as basic support and resistance trading. For the market to clear the 200-day moving average (resistance) you need fundamental buyers to step in and help make the final push higher. As a market approaches the 200-day moving average many investors ask, “Do I really want to own this based on the long-term fundamentals?” In the case of the S&P 500, the initial answer appears to be "no".

The S&P 500 Fails To Clear Its 200-Day Moving Average (red line)

After a significant and protracted downturn, long-term investors should wait for any market or asset class, including the S&P 500, to clear its 200-day moving average before committing significant amounts of capital. If the March bottom turns out to be “the bottom” and the start of a new bull market, there will be plenty of time to profit from the new trend.

The dollar has been unable to sustain any type of trend-breaking rally with the negative economic clouds hanging over the U.S. As shown in the chart below, a serious move toward the dollar's 200-day moving average has not been within reach , which means it remains firmly in a downtrend.

Dollar's Recent Rally Is Faltering

Dollar Chart

The U.S. bond market has an important tug-of-war going on between safety and inflation/debt. Similar to the U.S. dollar, U.S. government bond investors show confidence in the U.S. as a whole and the government's ability to meet its obligations when they buy bonds. In the current downturn, the desire for safety has prevailed to date. With massive trade and budget deficits, along with a falling dollar, it is only a matter of time before investors begin to question the safe haven status of U.S. government bonds. As economic and currency risks rise, investors will command a better return on their U.S. government bonds. A higher return on government bonds means higher interest rates for mortgages, credit cards, business loans, etc. Higher interest rates would not be welcome in an economy saddled with debt. There is nothing yet too alarming about the chart below, but it bears close watching.

10-Year Treasury Yield: Rising Bond Yields Are Bad For The Unbalanced U.S.

Stocks trying hard

The charts below of U.S. financial and housing stocks show little to get excited about as of the market's close on Friday, May 23, 2008.

Financials: A Dead Cat Bounce?

Financial Stocks

Housing Stocks Continue To Hit A Wall At 200-Day Moving Average (red line)

Financial Stocks

Commodities Are Strong, But Economic Weakness a Concern

While commodity investors are well versed in the India-China demand story, it is prudent to acknowledge the historical correlation of annual GDP (YOY % CHG) and the CRB Index.

GDP & CRB Index

Commodities: What Is Driving Prices?

  • Hedging, investment, and speculation
  • Loose monetary and fiscal policy
  • Weak U.S. dollar
  • Expensive to drill, mine, refine, and ship
  • Regulatory hurdles to adding capacity are high
  • Declining production rates in some markets
  • "Flat World" demand from India, China, etc.

Commodities: What Should We Be Concerned About?

  • Speculation
  • Cyclical nature of demand / economic weakness
  • Volatility even within context of secular bull market

CRB Index Continues To Make New Highs

CRB Index

Crude Oil Adds To Economic Concerns

CRB Index

Gold: A Close Above $955 Would Be Bullish

CRB Index

CRB Index

    Chris Ciovacco
    Ciovacco Capital Management

    Copyright (C) 2008 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

© 2005-2019 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

6 Critical Money Making Rules