Handling a Whipsaw Stock Market
NEW YORK (TheStreet) -- Analysts and investors must be suffering from whiplash as January 2014 comes to an end. It wasn't only the stock market that did not perform as expected. U.S. Treasury yields were supposed to rise, but they fell. Gold was supposed to decline but it rose.
The price patterns for the five major equity averages began the year influenced by numerous quarterly and semiannual levels from my proprietary analytics in what I described as a "tangled bowl of spaghetti." These pivots became magnets preventing strength to risky levels to the upside, and avoiding the downside that would signal that the stock market bubbles have popped.
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At the beginning of the year, my theme for 2014 was simply stated as, Stocks Begin 2014 With Inflating Bubbles. My stock market call continues as stated: the five major equity averages will decline to their 200-day simple moving averages at some point this year as a "reversion to the mean." Dow Industrials will likely be the first to challenge this test.
So far this year U.S. Treasuries have declined, which is not what almost every economist or market strategist predicted. The yield on the 10-Year note (2.69%) began 2014 with a high at 3.04% and declined to 2.66% this week, with my quarterly risky level at 2.63% and the 200-day SMA at 2.54%. The yield on the 30-Year bond (3.63%) was as high as 4.00% on Dec. 30 and declined to 3.61% this week with my quarterly pivot at 3.80% and the 200-day SMA at 3.60%.Gold ($1242.20) has also surprised Wall Street in January. The low for the second half 2013 was $1181.4 on Dec. 31 and gold traded as high as $1279.8 on Jan. 27 still below its 200-day SMA at $1318.1 with a quarterly risky level at $1385.0. Crude oil ($98.23) traded as high as $100.75 on Dec. 27 then traded down to $91.24 on Jan. 9, retesting its 200-week SMA as oil has done in every year since mid-2009. Gold has been below its 200-day SMA since the year began and once back above my quarterly pivot at $93.35 could test its 200-day now at $99.12.
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