The Nasdaq also closed below the 200 day moving average for the last three consecutive days confirming the break. So looking at all the major indices, the bears have a weak advantage over the bulls going into trading on Monday, June 20th, 2011.
Looking at market internals, the percentage of stocks on the New York Stock Exchange that are trading above their 50 day moving average has fallen to 19%. Anything below 50% shows a bearish bias. This supports my thesis that the bears have an advantage over the bulls going into trading next week.
The VIX is another market internal indicator that favors the bears. For the first time in a very long time, the VIX has an uptrend rating. I have been saying for weeks that with the VIX in a downtrend, the PUT or short hedging doesn't support the bears. That has changed this week. Keep in mind though that the VIX is very volatile by nature (also called the volatility indicator) and so trends can be very short lived.
The U.S. dollar still has a very weak downtrend rating. Yes it's formed higher highs and higher lows, but it's not quite enough for us to upgrade the trend yet.
Large cap gold mining stocks are in a strong downtrend as evidenced by GDX. A Burial Cross where the 50 day moving average crosses below the 200 day moving average is imminent. I've been warning subscribers about the downtrend in mining stocks for many weeks now. I hope you moved to the sidelines long ago and are awaiting re-entry from the safety of cash. Small cap gold mining stocks are also in a strong downtrend.
GLD continues to have a strong uptrend rating. I told you many weeks ago that GLD was the better place to be than mining stocks. I hope you've been able to profit from this advice.
XLF is in a weak downtrend. The 50 day moving average has broke below the 200 day moving average forming a Burial Cross. Folks, XLF began leading this market down back in May. It broke below the 200 day moving average which suggests that eventually the major indices will do the same.
Oil is in a downtrend. It broke below the 200 day moving average last week. I recommend you wait for confirmation of this break before getting to excited about gas prices coming down.
The drop in oil is anti-inflationary. Oil is the biggest contributor to inflation there is.
Our inflation indicator DBA is in a downtrend and DBO is in a strong downtrend. These are our food and energy inflation indicators and they allow us to measure the current threat of inflation. Inflation is on the decline as demand drops off and the economy weakens. When you hear a lot of these gold bugs talk about hyperinflation being on the way, their old school. Their taking recycled logic from somebody else and they haven't updated their views since May when everything changed. Don't listen to main stream media.
Don't listen to Kitco. Don't listen to gold bugs like Peter Schiff, Doug Casey, or the Aden Sisters. Don't listen to anybody. Just add DBO and DBA to your stock list and stay up-to-date on the threat of inflation yourself. Remember, inflation goes up as we go into a rip roaring bull market and businesses raise their prices because they can. The Fed has to step in and raise interest rates to cool things off. That's an inflationary environment.
A pro-longed recession or worse, a double dip recession, is not an inflationary environment. If a rapidly growing economy leads to inflation, then a weakening economy must be anti-inflationary out of logical necessity. This is why you see DBA and DBO drop off. Prices got too high for energy and food and demand went down because most people don't have the money to pay the higher prices. This drop in demand for food and energy has caused prices to drop.
The big negative fundamental analysis reports last week were the Empire State Manufacturing Survey and the Philadelphia Fed Survey. On June 15, 2011, the consensus on the Empire area was a growth of 14 points, instead a negative 7.8 reading shocked Wall Street. The hope was that the next day, the Philadelphia Fed Survey would fair better. The consensus for the Philadelphia area was a growth of 9 points, instead a negative 7.7 reading confirmed the day earlier Empire Survey. It is clear that we are experiencing a significant contraction in the manufacturing sector. Another negative is the big decline in the six-month outlook as what were once expectations for very solid growth are now turning into expectations for only marginal growth.
Fundamental analysis reports that have the greatest chance of moving markets next week are:
Wednesday - June 22, 2011 = FOMC Meeting Announcement
Friday - June 24, 2011 = Durable Goods Orders, and the GDP release
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