Next Step…………..with more thoughts

S&P 890 is a big level of resistance, if the market can clear it and hold, real buying will commence.

8:01 AM CST

More Thoughts:  8:45 AM

One thing to keep in mind here is that what we have seen since the low last week would appear to be an easy money first bounce, bonds are holding their gains, the dollar is down, and gold is rallying.  But that may not be the case and what these three markets do from here will provide a gauge to how much higher the stock market is going to go.  

One of our macro analysis pieces is the ratio between two ETF’s, SPY and GLD, ie S&P 500 and Gold.  It allows us to get a macro reading on the big picture of funny money versus real assets. This ratio made a double top high at 2.36 (SPY over GLD) and defined the real top of the stock market (on May 30th and July 5th, 2007).  It now appears to have made a double bottom at 1.01  (October 9th and November 21st) and has moved up to a current 1.07.  If the ratio  sustains further upward moves, the stock market rally will be ok, if not, funny money has taken over, and in the long-term view we think that will be the case.  For now, however, the ratio says stocks are the best bet.

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