I’ve managed to find a few minutes to break my hiatus and warn about the current state of the market.
Everyone is fixated on this morning’s CNBC T. Boone Pickens’ interview. He said oil is going to $150 a barrel and blah, blah, blah. I don’t care about predictions. I’m bullish on crude oil because the price is rising. But the price of oil isn’t the problem. Instead I’ll refer you to the end of my May 10th Post.
Beyond more earnings being released and the performance of crude oil, I’ll be monitoring the price of gold next week. After a big drop on Wednesday, gold gapped higher from the open by 2% on Thursday and still added to their session gains. On Friday, the commodity dropped about 2% in the first hour of trading, yet ended the day with a slight gain. Gold’s performance, teamed with a positive reaction to the earnings from AUY, lifted the entire group 4% this week.
Since the BSC bailout, the S&P 500 and gold have been mirror opposites of each other. The S&P 500 bottomed in mid March, exactly when gold reached its apex. Naturally, as equities fell this week, gold rallied. If we see a long term reversal in gold, this market may falter.
The (still) weakening dollar is propping gold, and the precious metal is reversing its down trend. As a result, the S&P 500 is starting to fall, once again being dragged down by the financials. I wrote abut the rollover in the XHB last week, and the now the XLF is bailing on the broader market up trend. You should always be short somewhere; and names like C, CTX, PRU, MBI and others are perfect candidates.
