This morning we took a look at Gold and the
Streetracks Gold Trust SPDR
on our latest
weekly conference call (recorded call:
GLD has fallen as anticipated and come close to our downside target of 115 sooner than we expected. There are layers of support between 114 and 115 GLD. We expect these to be tested.
We note that weekly stochastics remain overbought in spite of this decline, and also note that the long-term trend remains up. This suggests that more consolidation, and not necessarily downside pressure, is needed before the next significant up move in Gold.
Over the longer-term, we continue to like Gold but expect to see choppiness over the next month or so. However, realize there is risk here -- Gold has outperformed commodities in recent weeks due to currency and market related fears, and could fall more if these fears abate.
For stock traders,
is likely the best looking stock on a technical basis, but could fall more if stocks and the
Euro Trust Currency Shares
pick up, which we expect.
We are looking for a new buy signal on the GLD to re-enter on the long side. Gold often has strong moves up in the fall and this timing is in line with the technical indicators.
It makes sense to take a quick look at sentiment. It is worth noting that anecdotal sentiment is about as bad as it can be, with bears quoted in everything from the Sunday NY Times to TV, and all over the Internet. The FRED Report is the only bull I can find right now. Should we hear continued bearishness and should the market recover, this would make us more optimistic.
Many technicians will not start to get bullish until the S&P 500 closes above 1140, which in our opinion is "gas in the tank" for the bulls. While we could certainly be wrong here -- the ingredients for a strong up move are certainly present, and this is what we expect.
The focus of the market could be changing from small-cap stocks to large-cap. We are still interested in mid-cap stocks and its ETF S&P MidCap 400 (MDY), and think there will be longer term outperformance, but note that large caps are outperforming for now. One way to measure this is to look at the chart of the S&P 100 iShares (OEF), an ETF focused on the largest 100 stocks in the S&P 500, vs. the SPDRs (SPY), the S&P 500. The OEF is looking a bit better for now.
A quick look at the Major Market Index (XMI), the old Major Market Index of 20 large cap stocks, price weighted, would tend to confirm this view. We compare these large cap indexes to the Russell 2000 iShares (IWM), and note that the IWM is lagging at this point. Bottom-line, we would like to see the IWM trade above 63 by the end of next week.
We remain positive on equities, and posit that we could have hit the lows for 2010 on this correction. More trading is needed to confirm this and the recent lows need to hold, but for now we like what we see!
Disclaimer: This article does not constitute a solicitation or offer to buy or sell securities. Interested parties are advised to contact the entity with which they deal if they desire further information. No representation is being made that the information herein is accurate or complete. Any opinions or estimates contained in this communication represent the judgment of Fredco Holdings, Inc. at this time and are subject to change without notice. Fredco Holdings, Inc, its employees, officers, directors, principals, agents, affiliates or advisers may from time to time provide recommendations with respect to, acquire, short sell, hold or sell a position in, the securities or instruments named or described in any report or information being provided herein, provided however that no buying or selling activity will be taken with respect to a security referenced in a report by such parties within three days of such report's publication. The information contained herein was prepared by The FRED Report, which is solely responsible for the contents of this report. Although Fred Meissner, Jr. is a registered representative of Lamon & Stern, Inc., neither Lamon & Stern nor any of its principals, officers, affiliates, agents or employees is in any way responsible for the contents of this message. More detailed information, including actionable alerts, is available to Fred Report subscribers or 30 day free trial at www.thefredreport.com.
Fred Meissner is founder and publisher of
. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report. A detailed bio is here: