Tethering On The EDGE Of A Cliff ??
Looks like more and more analysts are getting to be quite bearish lately. That’s what a few down days in the market can do to you…but is the future all that dark? As a pure market technician I’m not yet so bearish, if at all. From the fundamental side, well hell if I know. I’ve never been able to figure out fundamentals or maybe I’m just too lazy to try. Anyway, fundamentally I’ll leave that up to those who are more knowledgeable than I. Today I will just take a quick look at the overall markets to see what, if anything, this reflects upon the prospects for the precious metals.
The U.S. market (as shown by the S&P500 Composite Index) has been on a tear since bottoming out in late 2011. The trend has been bullish ever since the intermediate term moving average line crossed above the long-term line in Dec of 2011. At the present time there is no indication of the intermediate term line crossing back below the long-term line anytime very soon. Unless the Index itself drops suddenly to about the 1900 level the intermediate term trend looks to remain bullish.
The long-term momentum indicator (30 Week RSI) however, is giving us some note for caution. It shows that the Index has been moving higher over the past year or more under a uniform strength, with only a slight increase and decrease as one would expect. It has now hit its upper range and one might expect some hesitation in the Index as we have had in the past. Note, this would, at this point in time, be only a hesitation within a long term bull move. The intermediate term momentum indicator (not shown) is somewhat weaker and has shown a negative divergence versus Index action. I would be inclined to keep an eye on this intermediate term momentum for a move into its negative zone for a very bearish signal but this is not expected for some weeks at the least.
From this one can deduce that the long-term market is still bullish as is the intermediate term market. “Investors” should not worry at this time while speculators might want to wait to confirm the next market direction before speculating further.
There has been some concern recently about the fact that Warren Buffet has been “selling off” some of his stock and holding a lot of cash in anticipation of a bear market ahead. Having seen a chart of his cash holdings over the years this does not look unusual for him as he has had a large cash reserve often, in bull and bear markets. He is likely to use this cash and pick up bargains after a bear market value decline, but a cash reserve by itself does not seem to indicate a bear market ahead.
Warren Buffet is a disciple of Benjamin Graham, the “Father of Fundamental Analysis”. The philosophy here is that you buy value and hold for the long-term. You do not speculate and do not worry about bull or bear markets. So, how has this worked for the Berkshire-Hathaway stock over the years?
The dark middle line represents the average yearly growth rate for BRKb over the past 18.5 years. This suggests a growth rate of something slightly over 4% per year. Yes, if you were a speculator you might have gotten in during 2009 and are showing a considerably better growth. BUT long-term “investors” would not be speculating. The chart does suggest that there is still some possible upside potential available but this might be limited versus the recent advances.
The very long-term momentum indicator (RSI) is showing a negative divergence -- and the stock does look like it might be very close to some kind of top. But all that’s speculation.
Please go to the archives for my previous June 22 commentary (http://www.gold-eagle.com/article/beware-deadly-gold-fever ). Nothing has happened since then in the precious metals to revise my previous comments. We need a decisive move through the 1400 or 1200 levels to know what the future will hold. Most likely the upper level will be breached, but that is yet to come. As the greatest trader to grace the markets would suggest, wait for the move to be confirmed before jumping in and risking capital. Should the overall market (see the S&P500 Index) go bearish, then one might expect gold to firm up and move higher.
Have been away for a while and not fully up to speed…so the comment today is brief.
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Merv is a retired Aerospace Engineering consultant. He is also a retired market technician with over 40 years of market experience and research. Merv received his certification as a Chartered Market Technician (CMT) in 1992. Developer of many technical techniques and programs which he has been using in his previous Technically Speaking with Wil-Arm and Technically Precious with Merv commentaries posted throughout the globe. Developer of several gold and silver Indices, Merv continues to update his Merv’s Gold & Silver 100 Index and Merv’s Penny Arcade 50 Index and reviews them during his periodic on-going Technically Precious commentaries.