Dollar resumes year long down-trend as gold, $GLD, shows renewed strength; GMI remains at 6 (of 6)

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On Friday, GLD appeared to have had an above average volume move up,  closing above its 30 and 50 day averages. Green dots show reversals in daily 10.4 stochastics and 3 recent bounces off of a similar area of support. What is strength in gold telling us?

Perhaps the strength in GLD is reflecting resumption of the down-trend in the dollar that began in January. A weak dollar could be an ominous signal for the US economy.

 

The GMI remains on a Green signal.

 


Bouncing off support: $TTWO $CBAY $CAI $PII $SKX $OSTK $ALNY $PVH; window dressing coming

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Below are 8 stocks that are in up-trends and have found recent short term support. The third column shows the percentage above support the stock is as of Friday’s close. Note that OSTK is 26% above support and may therefore be extended. I am monitoring these stocks for possible purchase this week, unless support fails.

The GMI remains on a Green signal. Note, however, that we are in a post-earnings release lull when stocks often go sideways or down. This weakness would likely set the stage for the end of quarter and year window dressing rally, when mutual fund managers purchase the strongest stocks so their quarterly reports to shareholders make them look like smart stock pickers…

 

 

Higher interest rates will slay this bull–monitoring $GLD $TLT

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Over the past 50+ years that I have traded in the market, I have witnessed how Fed raised interest rates can kill a bull market. The risk from higher rates is extremely high now. This is because boomers, who are approaching retirement and own much of the wealth, would seize the opportunity to earn 3%+ on their money if it could be invested in relatively safe US treasury bonds. They will flee risky stocks in order to hang onto their portfolio gains achieved since 2009. So when the 10 year treasury bond, currently at 2.43%, gets to 3%, we should watch for signs of a market top as money is sucked out of stocks. The rush to the exits may result in a panic. (Right now, the GMI is strong and there are no signs of technical weakness, see table below.)

I therefore keep an eye on interest rates by monitoring the 20 year treasury bond ETF, TLT. As TLT falls, interest rates rise (Rate= Annual pay-out/TLT price), and the price of gold falls. This association occurs because international investors buy dollars with which to buy US bonds to earn the higher interest rates.  As the dollar rises in value the price of gold falls (it takes fewer appreciated dollars to buy an ounce), barring a general rise in investor fear. The daily chart below clearly shows this correlation between TLT and GLD–it is difficult to tell them apart. Note that both have been falling since early September, reflecting a move to higher interest rates. (By the way, it looks to me like we may get a rebound in TLT and GLD from oversold readings this week as the Fed meets.)

The GMI remains at 6 (of 6) and the GMI-2 is back to 8 (of 8). My conservative pension funds remain fully invested in mutual funds–for now. But I have seen some markets top early in the new year and it is currently opined that investors may be waiting to take gains in 2018 when tax rates could be lower than those in 2017. This strategy could create a rush to the exits in January…..

 

GLB: $ZAGG; $SILC on the verge…

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My scans picked up ZAGG which had a GLB on Friday. ZAGG has already tripled from its yearly low, has great earnings, an A+ accumulation rating by IBD,  and is in a yellowband up-trend. It must hold the green line, $17.10. See weekly chart….

A reader alerted me to $SILC which is close to a GLB. I always wait for the GLB to occur to see if it happens on above average trading volume. SILC has an A+ rating too but reports earnings this week, always a gamble….

The GMI remains Green, at 6 (of 6).