Apr. 1st weekend report
Stocks:
This incredible momentum run we’ve seen over the last two months is discounting something. Perhaps it’s another good earnings season. I tend to think it may be a positive jobs number tomorrow. Whatever the case may be the market has already discounted the “good news” so the probable response is going to be to sell when that news arrives. If the jobs number does come out with a positive print that is probably going to drive the dollar higher. That would put pressure on the market. Stocks have been trying to correct since the key reversal last Thursday but they’ve been supported by a weak dollar.
If the jobs number comes out poor tomorrow we will probably see an initial decline on Monday but I expect the dollar will drop which will probably act to continue holding the market up until we get into earnings.
One way or another I expect the market is looking to “sell” the news, we just don’t know which news it will be.
Breadth:
Not much has changed. Despite making new highs today the internals continue to look terrible. Dollar: We have a bit of a conundrum developing. For one the weekly cycle is going on 18 weeks so we should start down into the intermediate cycle low anytime. However the dollar has regained the 200 week moving average and the 200 day moving average has turned up. Both are signs that the dollar is now in a cyclical bull market. As long s the dollar remains in a bull market we have to be mindfull that the surprises are going to come on the upside. There is also a potential bull flag developing on the daily chart. Since I think the dollar needs to rally in order for the stock market to correct, and I doubt that earnings season is going to have any effect on the dollar, I’m leaning towards the jobs number being the catalyst to send the dollar higher and the market into the correction we’re waiting for. Bonds: I’ve noted in the past that the bond market often leads the stock market. Both the high yield and investment grade bond fund appear to already be entering corrective mode. So perhaps they are giving an early warning. Gold: Geez they sure aren’t going to make this easy. First off let me say again that I’m going to continue to be nervous about gold and especially the miners until the stock market corrects. Any significant correction in the stock market is and always has rubbed off to some extent on mining stocks. With that being said let’s jump in and see if we can make heads or tails of what’s going on. I think we all know what’s going on. The dollar is correcting so gold is rallying. Ultimately I think the near term direction of gold will be determined by whether the dollar breaks up out of the bull flag or if it has decided it’s time to move down into the intermediate cycle low. But let’s see if we can come up with a few plausible scenarios based on where gold appears to be at in its daily and intermediate cycle. First I’m going to give you the Dec. bottom scenario. So far nothing has happened to derail this cyclical count. That being that the last intermediate cycle low occurred in December and gold is now in a left translated and failed intermediate cycle that is now going on 15 weeks old. If this scenario proves to be correct then we should see gold break below the Feb. low at some point in the next few weeks. The next scenario is the February bottom. If this scenario is the correct count then gold is probably now in a very complex A-wave advance which may break above $1161 but probably will not make new highs. If this scenario is correct then gold should rally for a few more weeks before topping out and working its way down into the B-wave decline. If the stock market had already corrected I would be very confident that this is what we are in fact seeing. But since the stock market hasn’t corrected, and when it does I expect the dollar to rally, I really have no strong feelings one way or the other. I do know I’m hesitant to buy any miners in front of a potential sharp correction in stocks. Especially after the low volume gap up on GDX today. Those gaps have a nasty habit of getting filled and I expect this one will when the stock market corrects. Moving on to the daily cycle. Here things are just a muddied as they are on the intermediate scale. Now we are looking at the 24th marking the last daily cycle low instead of the 12th even though the 24th actually occurred outside the normal timing band for a gold daily cycle bottom. If gold breaks $1133.20 then we will have to re-phase the low to the 24th. Then if gold breaks above $1144 I think we are seriously going to have to entertain the idea that gold is in an A-wave advance. Unfortunately by that time it will probably be more than half way over. Like I said what a mess. We can thank Ben for this. The incredible ocean of liquidity is stretching everything. At this point I think we should just watch the jobs number tomorrow, and if it comes in positive watch to see what happens to the dollar. If it rallies then I’m going to guess that is going to be the “news” the market has been looking for to initiate the correction. If not then perhaps the market will hang in to earnings before correcting, even though that would again stretch the daily cycle way past the normal timing band. Short term indicators are still neutral. Portfolio: This section will remain blank until we get confirmation of the C-wave continuation (which I now consider very unlikely) and or we get through the impending correction. I do still have a little over 25% position in miners that I didn’t take profits on. I will continue to hold these positions. But new subscribers should just stay in cash at this point as we await the correction in the stock market or get a signal to buy in preparation for an A-wave advance in the gold market. Gary Investing in the financial markets can involve considerable risk. Past performance is not necessarily an indication of future performance. The information included in The Smart Money Tracker and The SMT subscribers daily updates is prepared for educational purposes and is not a solicitation, or an offer to buy or sell any security or use any particular system. Information is based on historical research using data believed to be reliable, but there is no guarantee as to its accuracy. G.D.S L.L.C., nor Gary Savage, do not represent themselves as acting in the position of an investment adviser or investment manager for funds that are not under their direct control and fiduciary responsibility. 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