Morning Market Thoughts
Good morning. We’re looking at a lower open this morning, and I think that’s a helpful development. Last night I suggested approaching this market from a short-term perspective, noting that a risky market would ultimately sting those who did not respect the risk. We’ve been in this sideways consolidation for the past few weeks, and the range has been nearly non-existent. If you switched from a candlestick chart to a line chart, you’d barely lose any information — the intraday ranges have been the tightest I can recall ever seeing.And there has been a bit of a divergence that’s worth noting — the Dow has fallen for 6 consecutive days, and the Nasdaq has risen for 5 consecutive days. So there is an obvious bias toward tech and biotech. You can look at iShares Nasdaq Biotech Index (IBB) and Market Vectors Semiconductor Index (SMH) and you’ll see where the strength is.
We’ll be watching oil again today. This morning, it’s back above $40/bbl, but it’s the recent steep trajectory gives me the sense that this may be an oversold bounce of a key technical indicator (the 200-day moving average) rather than a big turn in the trend. Be careful.
One of the more difficult thing for market enthusiasts is to think long-term when stocks are working…and think short-term when they are not. I’m not talking about selling your stock just because it wiggles slightly and pulls back. I’m just talking about being patient rather than taking action because you’re bored.
Focus on what’s working now. And what’s working now are biotech, select technology, and precious metals. Those are working now. Those are “short term” ideas that have actually become long-term ideas simply because they’ve been working for a long time.
Tech stocks like AAPL, GOOGL, AMZN, NVDA and STX are working. I reviewed several biotech stocks last night. IBB, LABU, CELG, etc. They’re working. Gold stocks? Pick one.
So focus on those that are rewarding you, and avoid the ones that are penalizing you. At some point, the buying will go elsewhere, and tech and biotech will no longer be working. We just don’t know when that point will occur.
I believe that gold/silver will work for longer than many expect. They tend to act well during times of uncertainty. And right now, there’s a lot of uncertainty out there (and I’m not talking about the really ugly and disgusting 2016 presidential election). I’m talking about a slowdown in China, weak emerging market economies, very weak economies in Europe, and an apparently booming economy over here that no one seems to be feeling, but that our President described last week. Wow, I never knew I had it so good. And it’s gonna get even better!
These types of weaknesses, in today’s world, mean that free money will be everywhere. Japan’s central bank is going to throw another $132 billion at the economy. This doesn’t surprise anyone, given Ben Bernanke’s recent visit to Japan. That guy epitomizes the term “one trick pony”. His trick works like crap, but it’s popular. And therein lies the wind beneath precious metal’s wings. When all of the central banks on the globe are printing money, money becomes basically worthless. Meanwhile, gold and silver keep chugging along. I’d rather have $20 worth of gold than a $20 bill. True, you can’t buy a loaf of bread with gold…but there will come a time when $20 won’t buy one either. So money should continue to be exchanged for precious metals until the central banks around the world start realizing that there is pain with every excess, and that simply trying to avoid the pain by printing money only prolongs the pain, and sets us up for excruciating pain when the medicine bottle runs dry.
That’s not likely to happen in a long time. (Look at a picture of Christine LaGarde. Is that the picture of competence? Google: “Lagarde negligence” for your answer.
So over the next several weeks, be an Olympian and go for the gold. The other metals are extended, but gold just continues to chug higher. Chug along with it.
See you in the forum.
–Dan
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