After a pretty harrowing ride courtesy of sub-prime and Bear Stearns, it seems like all is quiet on the Western Front. Make no mistake about it, the fundamental problems have not gone away – but the market clearly believes the Fed can keep them “contained” (where have we heard that before). I still 100% contend the market was headed for a complete disaster had it not been for the Fed stepping in to save the day – and still remain weary – but we can all breathe a sigh for now.
According to this Marketwatch article, that sigh of relief is also supported by technical analysis that includes the following charts:
CONCLUSION
According to the article, “the S&P’s chances of clearing the 1,400-to-1,406 area look relatively good. If it happens, a decisive breakout would likely induce serious short covering — as well as natural buying — sending the U.S. markets on their next leg higher. Even more importantly, a breakout would confirm the March-through-April bottoming process, likely signaling a primary trendshift.”
For the many of you that are not well versed in TA (tech analysis) the article is a great read and helps explain the chart action.
For the gold bugs out there that think the gold ride may be over, I say quite the contrary. Why? Though a destructive US economy is bullish for actual gold prices, it most likely scared the hell out of investors that did not want to be invested in any individual stocks. If the pattern above actually plays out, gold itself may get weaker but gold stocks should actually get stronger with the reduced threat of a market meltdown.
At the end of the day, we may get a happy medium where gold is trading at a very healthy $800 – $900 range, which is more than economical for most exploration companies or small mining companies with quality projects.
Regards,
George