Falling Gold is Key
The next upward phase of the stock market off of the March 2009 lows will be marked by a much different complexion than the reflation, everything rallies move, that has been seen over the past 14 months. You pick the phrase, but some key descriptors will be austerity, slow moderate – solid growth, deficit reduction, higher interest rates, green build-outs using U.S. sourced product (green energy so far has been 80 % foreign sourced), lower unemployment, etc.
So at the moment, and maybe for the next three or four months, we are in the process of cleaning out all the bad stuff from this last phase of trying to “Get back to Even”, the Jim Cramer legacy. A real new economy will involve not doing the same stuff we did from 1982 to 2008.
In looking for the key indicator of when the turn to a new real economy is starting, watch gold, high gold prices are not part of this coming phase.
Markets today are continuing the roll around the mid point of this clean-out process. A lot of the action continues to happen in the S&P futures in the overnight sessions lately. The wide roll area basis the June S&P is 1036 to 1106 with the 1070 area kind of a pivot point.
The three value levels that we see on the cash S&P index at the bottom of the clean-out phase are 1005, 923 and 878. The first level will be used by us to start exiting short positions and the third level will be key to start buying for us.