The Stock Market…..Recovery Bottom Completion….with update
The recent market action leading up to today appears to be the final stages of base building for the coming years trading range. Basis the S&P 500 we see a market range of 800 to 1080 with the January 6th high of 940 being an important pivot point. From a technical standpoint one could say that the base is an invertered head and shoulders formation which started on October 10th 2008. The left shoulder would be the period of 10/10/08 to 10/28/08, the head being the period of 11/13/08 to 12/5/08 and the right shoulder being 1/15/09 to 1/27/09.
Yesterday we sold out half of our GLD gold ETF but kept the gold miners GDX ETF. To us gold valuations are an expression of four factors, chaos, chaos expectations, inflation, and inflation expectations. Prior to yesterday we had all but inflation. With the Stock market finding it’s roots we look for the chaos part of the equation to be lessened. Long-term, inflation, and probably more importantly, inflation expectations will no doubt move to the forefront again as the stock market approaches the expected 1080 level.. We may lighten up further on the gold sector today.
Also today the cash that became available yesterday after closing out out some T-Bond and gold positions is probably going to be put to work. We will keep you updated. More than likely it will be in the area of ETF’s that will benefit from the green buildout.
At yesterdays close the EMA ETF Fund Nav was 991.
8:25 AM CST
Update at 11:50 AM
In the EMA ETF Fund we sold half the GDX position at 32.72, and bought $ 35,000 of IBB (biotech ETF), $ 35,000 each of IYW and IGW, two tech ETF’s. The green buildout is going to be based on technology.