TDEN

The chart on SPY looks identical to that of the QQQQ. As I indicated in the last update GLD is also at the bottom of it’s long term uptrend channel. Since Jan. 10 the SPY has been in a descending wedge that many times indicates a reversal. With everybody expecting more selling, sentiment extremely negative, selling volume large on the way down, the vix already spiking about 45% and the markets way oversold, I believe we are heading up with the Nasdaq, Chinese stocks, financials, Gold and miners leading the way. I also expect the U.S. dollar to decline.

The alleged headwinds to the market are:

1) Greece – About 6 months ago Dubai was going to bring the world economy down and now it’s Greece. While I am sure that Greece is a lovely country, the notion that financial problems there are going to bring the world markets down is laughable at best.

2) Slowdown in China – China’s economy is going to slow down from about 10.7% growth to 10%. We wish we could have a slowdown like that here.

3) The World Economy Grew Too Fast – I find this one to be really hilarious. First the pundits said the Obama plan would never work. Now that the U.S. racked up 5.7% GDP growth last quarter with many companies turning in record profits they are saying we grew too fast with the implication being that it can only be downhill from here. With the economic recovery just getting started and much of the stimulus kicking in this year we should expect further upside economic surprises.

4) A Jobless Recovery – Many companies just announced that they will start hiring in the spring.

Some stocks you may wish to consider buying are AMZN, AAPL and GOOG. These are high beta stocks and are extremely volatile but they will be the first to hit new highs if the market does move up. Some Chinese stocks to consider are CTRP and CRIC. CTRP has a virtual monopoly on Chinese travel arrangements and CRIC on Chinese real estate information services. If you wish to play gold, GLD is the etf for a straight play on the price of gold and GDX is an etf for gold miners. A new etf with the symbol GDXJ that covers junior miners recently came to market and this could move even faster than GLD and GDX.

Except for extremely long term investors this is not a buy and hold market so sell 1/3 of your shares if the S&P hits 1120, 1/3 at 1150 and 1/3 if it hits 1200. Move your stop loss up at each target price.

Companies like Google and Goldman Sachs reported blow out earnings but there was a sell on the news effect when the President started talking about regulating banks. Some democrats are now saying that they will not support Ben Bernanke’s reappointment as Fed Chairman. China has also announced it is tightening credit at least temporarily. According to some analysts that I follow and who live in China, that country is not in a bubble economy at all as they run a cash economy. Bull markets climb a wall of worry and that wall seems bigger than ever now but there is a wildcard present in the form of the politics that is currently being played out.

While some technical damage has been done to the major indices, the market is sending mixed signals and is clearly going through a period of indecision. Some stocks have cratered, some have pulled back to support levels and others have rallied. Corrections are perfectly normal in bull markets and the market has already corrected 5%. The markets quickly moved into oversold territory so I would expect at least a bounce to the S&P 1120 area. The bears are in all likelihood aggressively shorting this market so if there is a rally it’s possible that short covering could push the market to new highs. In any event I do not see any reason at the present time to panic.

Ben Bernanke will probably be reconfirmed and that may be the impetus needed to send the market higher. If for some reason he is not confirmed, that would be extremely negative for the markets as it is unclear who would take his place and what subsequent Fed policies might be. With Bernanke in control we know that he is going to continue to flood the markets with liquidity until the economy is self-sustainable.

Unfortunately the Republican Party starting under Bush and Cheney has become the Republican Party of old: pro-rich and screw everybody else. Their economic plan calls for reduced spending, cutting taxes and increasing interest rates. To implement those proposals at the present time would be economic suicide. The Republican’s exist for one purpose only: to oppose the Obama administration.

Now there are allegations that Timothy Geithner was involved in some sort of cover-up regarding the AIG bailout and that Bernanke had to have known about it. I’m not exactly sure what was allegedly covered up but I’m certain the Republicans will milk it for every ounce they can squeeze out of it. From what the Republicans have been saying, they could care less if the market crashes and people’s IRA’s get wiped out yet again. They’re a real bunch of working class heros.

I was watching a special on the great depression and while people were lined up in droves at soup kitchens just to eat, Henry Ford was on the radio expounding the benefits of hard work and enterprise. It is difficult to work hard and be enterprising when you can’t find a job, can’t borrow money, and can’t pay the mortgage. Thanks Dr. Henry, that’s just what the dying patient needed, a good pep talk. I’m sure he must have been a Republican.

Here is a 2 year chart of GLD. You will notice that it has been in this wide uptrend channel since August, 2008 and it is now sitting near the bottom of the channel. The stochastic is in oversold territory and has consistently rallied to some degree off these levels. While the U.S. Dollar has rallied and could possibly rally more, I believe that this is just another bear market rally and the downtrend in the dollar will eventually resume.