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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Odds Favor Further Downside For Stocks and Commodities

Stock-Markets / Financial Markets 2010 Nov 16, 2010 - 10:57 AM GMT

By: Chris_Ciovacco

Stock-Markets

In the very short-term, risk assets have negative alignment of the fundamentals and technicals. Concerns about excessive debt in Ireland seem to be moving toward a band-aid resolution, but the market could turn its attention to Spain or Portugal in short order. From a technical perspective, we have short-term MACD sell signals on the daily charts of the S&P 500, gold, silver, copper, and the euro. We have short-term MACD buy signals on the daily charts of the U.S. dollar and the VIX.


There is very little conviction behind the move in the VIX, which means risk assets could still surprise on the upside, especially if the S&P 500 can hold above 1,195 on a closing basis. If we see a close below 1,195, the chart below shows some areas to watch on the downside.

The early caution flags for the current pullbacks in stocks, precious metals, and commodities came from the currency markets. In the October 11th post, U.S. Dollar Could Rally in Coming Weeks, we outlined concerns about record negative sentiment toward the greenback. We were also concerned about support levels relatively close by for the dollar. The dollar has now rallied over 4% from its November low, putting downward pressure on stocks, gold, silver, and copper.

On November 9th, in the Dollar, Euro, Gold, Silver, and the VIX are Poised for Reversals, we outlined numerous concerns related to the elevated odds of short-to-intermediate term reversal of the “risk-on” trade. The elements remain in place for a market correction.

The CCM Bull Market Sustainability Index (BMSI) has not made a new high since Monday. More importantly, the CCM 80-20 Correction Index has not made a new high since October 8, 2010. Both occurrences are indicative of a weakening market – both have raised yellow flags for the bulls. Our concerns outlined on November 4th in Debt Concerns Could Dampen Inflation Trade still apply. We believe the Fed’s quantitative easing program (analysis) will help push asset prices higher (QE investing resources) in the intermediate-term, which may occur after a correction of 3% to 5% from the recent peak in the S&P 500.

By Chris Ciovacco
Ciovacco Capital Management

    Copyright (C) 2009 Ciovacco Capital Management, LLC All Rights Reserved.

    Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com

    Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. As a registered investment advisor, CCM helps individual investors, large & small; achieve improved investment results via independent research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions. When looking at money managers in Atlanta, take a hard look at CCM.

    All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

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