We have long maintained that the projected long-cycle low on the S&P would be around 640 to 660 and that it would occur around the 2011 period. Last weeks’ market action of making a new low in the S&P for this cycle means to us that the long-cycle low is being made now. By moving up the timing the number will more than likely be higher than the original 660 projection. So we are in that 640 to 740 area where the market should bottom.
Obviously we squandered an opportunity to be short for the final cycle low move from the January 6th rally high at 940. Now the main thing is to watch for confirmation that the low is completed. Two indicators that we are watching involve gold. The first is the gold/financial ETF ratio of XLF/GLD, a print ratio greater than 0.095 would work. The second is a daily close on April gold futures under 930, a critical support level. On Friday this contract traded through 930 but bounced back above it to the 940 level this morning.
The EMA ETF Fund NAV was 845 at Fridays close. No change in positions until we see a bottom confirmation. At that time we may make some allocation and leverage changes.
8:25 AM CST