Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21
Dow Stock Market Trend Forecast 2021 - 3rd Apr 21
Gold Price Just Can’t Seem to Breakout - 3rd Apr 21
Stocks, Gold and the Troubling Yields - 3rd Apr 21
What can you buy with cryptocurrencies?- 3rd Apr 21
What a Long and Not so Strange Trip it’s Been for the Gold Mining Stocks - 2nd Apr 21
WD My Book DUO 28tb Unboxing - What Drives Inside the Enclosure, Reds or Blues Review - 2nd Apr 21
Markets, Mayhem and Elliott Waves - 2nd Apr 21
Gold And US Dollar Hegemony - 2nd Apr 21
What Biden’s Big Infrastructure Push Means for Silver Price - 2nd Apr 21
Stock Market Support Near $14,358 On Transportation Index Suggests Rally Will Continue - 2nd Apr 21
Crypto Mine Bitcoin With Your Gaming PC - How Much Profit after 3 Weeks with NiceHash, RTX 3080 GPU - 2nd Apr 21
UK Lockdowns Ending As Europe Continues to Die, Sweet Child O' Mine 2021 Post Pandemic Hope - 2nd Apr 21
A Climbing USDX Means Gold Investors Should Care - 1st Apr 21
How To Spot Market Boom and Bust Cycles - 1st Apr 21
What Could Slay the Stock & Gold Bulls - 1st Apr 21
Precious Metals Mining Stocks Setting Up For A Breakout Rally – Wait For Confirmation - 1st Apr 21
Fed: “We’re Not Going to Take This Punchbowl Away” - 1st Apr 21
Mining Bitcoin On My Desktop PC For 3 Weeks - How Much Crypto Profit Using RTX 3080 on NiceHash - 31st Mar 21
INFLATION - Wage Slaves vs Gold Owners - 31st Mar 21
Why It‘s Reasonable to Be Bullish Stocks and Gold - 31st Mar 21
How To Be Eligible For An E-Transfer Payday Loan? - 31st Mar 21
eXcentral Review – Trade CFDs with a Customer-Centric Broker - 31st Mar 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Stock Market Bounce Coming - Sucker Rally?

Stock-Markets / US Stock Markets Nov 24, 2007 - 11:15 AM GMT

By: Brian_Bloom

Stock-Markets

The Dow Jones Industrial Index is now badly oversold from a technical perspective, and it looks more likely that the markets will bounce up than “collapse”.

Having said this, the most important chart in the array of charts seems to be the Dow Jones Industrial Index below.


(Courtesy Bigcharts.com )

If we focus on the On Balance Volume chart we see that, since October, there have been a series of falling bottoms – and about a week ago, the OBV fell to a new low. This constituted a “sell” signal. Since then it looks like it wants to rise because the there has been a series of three rising lows in the last week.

To give you some context, the chart below is the same chart, but it shows a 12 month period.

Since around May this year, the OBV has been hovering around the 5-7.5 billion share mark, and the OBV is now closer to the 5 billion mark.

If you now look at the next chart – which is the same chart dating back to 1998, you see that the OBV started rising strongly in mid 2003 – following what is known as a “non confirmation” by the MACD. In late 2001, the MACD fell to a low when price fell to a low, but in 2002, when the price fell to a lower low, the MACD low showed rising lows

Now let's focus on the MACDs in the three charts.

  • Note how the MACD fell to a lower low in November than in August (in the first chart)
  • Note the series of three descending lows in the MACD in the second chart
  • Note, in the last chart, that the MACD at -500 is far higher than the 2001 low of -1,000.

There is a formation on the 10 year chart above – which is known as a “megaphone” formation which has been slowly emerging in 2007.

Since about June, there have been three successive rising tops and also three successive falling bottoms in the price chart. This is a sign of confusion. The bulls have been increasingly bullish and the bears have been increasingly bearish.

That's why the On Balance Volume Chart is so important. It tells you who is winning the war.

The first chart above shows that, during the period when the megaphone was being formed, on balance, sellers prevailed. There was less volume changing hands when the three new highs manifested that there was when the three new lows manifested. Net, Net, selling pressure has prevailed. Having said this, selling pressure has been subtle. It does not reflect urgency so much as opportunism.

My interpretation of all of the above is that, with the market very badly oversold, it might bounce upwards in the very short term – but this will be a sucker rally. I don't think the market will rise to new highs.

So far, the above does not show signs of any coming “Panic”. More likely we will see a series of hopeful rallies followed by a series of agonising falls – with a bias to the downside. The 11,000 level seems like it will offer significant technical support, and the 13,000 level now represents resistance.

The days of easy money “day trading” profits are behind us.

Now let's focus on gold. Does this represent a “safe haven”?

The biggest single issue relating to gold is that it has highly emotive connotations. This is not an accident of history. There are significant practical reasons for this, which have nothing to do with “money” and which are clearly explained in my novel. These reasons cannot possibly be explained here, and so we need to cut through all the “theory” and look at the charts.

The first chart below shows gold relative to the $CCI commodity index on a weekly basis: (Courtesy stockcharts.com )

This is not an easy chart to interpret. From a bullish perspective, one could argue that – since April – there has been the emergence of a  “saucer” formation. If it breaks through the 1.9 level it might scream upwards relative to commodities.

From a bearish perspective, the MACD looks overbought as does the RSI.

Now, if we look at the daily charts, this is even more confusing:

Here the MACD looks like it is turning up, as is the RSI. Also, the price chart peaked and has been “neatly” consolidating as it pulled back to the 40 day Moving Average line – from which it is now bouncing up.

The saucer and the double top are clearly seen from the P&F chart below, and the three green Xs seem to show a healthy sign that the ratio will at very least consolidate around this level.

If we take a step back and look at the P&F chart, sensitised for a 3% X 3 box reversal, we see that a break to new highs will likely be very bullish. We could see the ratio rising to around 202

The question is whether this will arise from an “explosion” in the gold price, or a fall in the prices of commodities in general.

The chart below is a 2% X 3 box reversal chart of the $CCI commodities index

This is hardly a bearish chart at present, but it might pull back to (say) the 430 level.

It would be easy to argue that “therefore, the market is expecting inflation, and all commodities should rise, with gold rising faster than everything else.”

This argument is, in my view, too easy. The reason is that if the market was expecting inflation, the interest rates should be rising.

The following chart shows that, contrary to expectations, long dated yields are falling.

So, with all the above in mind, where does the argument lead?

Overall Conclusion

It looks like “negativity” is the dominant emotion in the market, but right now this is manifesting more as caution than fear. Investors are moving to protect themselves.

Some are moving to put their money into hard assets, whilst others are moving to put theirs into government bonds. If hard assets become the “flavour of the month” then gold will likely outperform all the others.

Will there be a market crash? It is possible but, based on the current technical situation (which might change) I doubt it.

Brian Bloom

www.beyondneanderthal.com

Australia, November 24th 2007.

Authors Comment :

Why do I doubt it that there will be a market crash?

Technically, the information above is biased slightly to the negative. It is not (yet) showing signs of panic. Fundamentally, if the market collapses at this point, it will be a collapse from which there will be no recovery. We quite simply cannot afford to allow the markets to collapse.

Having said this, we need to have a reality check here! Because our testosterone addled politicians cannot think beyond the next election, the world economy has no fall back to Peak Oil and/or Coal. If the markets collapse, the debt mountains will implode, against a background where the industrial “paradigm” that is required to drive the economy out of the financial quagmire that will result is not yet in place. The problem with solar power is that it delivers voltage but not amperage. It cannot drive machinery except if it is used to recharge batteries, and our electricity storage technologies are inadequate to that particular task. Can you imagine an industrial complex with three phase heavy machinery being driven by solar power? I can't. Solar power cannot even (practically) deliver sufficient energy to power the average home with one refrigerator, one TV set and a reverse cycle air conditioner. It can warm water during the day when the family is out of the house and it can charge batteries to allow the low amperage lights to burn at night. That's it. Without massive non-chemical energy storage capacity, solar power will never be anything other than a back-up energy system.

Nuclear power might generate electricity, but it has zero capacity to facilitate “spin-off” technologies of the equivalent of  plastics, textiles, pharmaceuticals, many chemicals and, most importantly, the internal combustion engine.

Wind powered electricity is a romantic dream. Sure, it works in areas where there is wind, and that is good. But wind is not ubiquitous across the planet and wind power also has no capacity to facilitate spin off technologies. I have no idea how many motor cars are in the “inventory” around the world, but I would take a wild stab that the number may be around 300 million or so. It was those 300 million cars (and those that were manufactured before them) that “drove” the world economy – the road building, the steel industries, the tyre industry, the gasoline industry which facilitated their technology, the insurance and finance industries that were associated therewith. Even the fast food industry was facilitated by the motor car, allowing McDonalds family restaurants to pop up along the highways of the USA. Solar powered motor cars or wind powered motor cars are not practical. How will we get from point A to point B when oil has run out? Hydrogen is an energy sink. How will we recharge “clean”, battery operated motor cars? With dirty coal fired power stations?

So where does that leave us? Are we screwed? The answer is “ NO! WE ARE NOT SCREWED!” There are alternative electromagnetic technologies which could replace fossil fuels, but no one is yet prepared to hear that this may be an option. These technologies are being rejected based on nothing more than prejudice. There is no theoretical reason (that mainstream physicists yet understand) why they could work, therefore they are impossible.  “Prejudice” is the biggest obstacle to human progress because it assumes that all that is known is all that there is to know.

To overcome prejudice is one reason I wrote Beyond Neanderthal . It explains these electromagnetic technologies and how they may generate spin off technologies; how they might clean up the environment and DRIVE the world economy forward by empowering every human being on this planet. It also explains how unscrupulous, power hungry egomaniacs have manipulated the religions of the world to artificially fabricate the so-called ‘Clash of Civilizations.'  When you dig down into the source documents of these religions, they all say the same things. If you would like to acquire a copy of this novel – targeted for publication end March 2008 – please register your interest at www.beyondneanderthal.com

Brian Bloom Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules