Wednesday, June 26, 2013

Is Hurricane Tapernanke in the Rear-view Mirror???


Today's solid 150 point move to the upside is certainly compelling.  And it begins to chip away at the drubbing that the markets have taken in the past week.

But, caution is likely to prevail among many given that the market is seemingly in a mode where it trades up on bad economic news…today’s Q1 GDP downward revision was quite notable, yet the market loved the ‘non-tapering’ implication.  At some point, that slower growth and depressed consumer spending is likely to damage corporate earnings!  And earnings are what should drive equity prices, with a splash of emotion…not the other way around!

One standout from today's rally was Gold (GLD) and related companies, such as Yamana (AUY).  Is the rout in Gold over?  Coming to an end?  Or more to go?

The price action certainly has the stench of a forced liquidation....a wrong-levered-long who at $1,700/oz saw $2,000/oz as a "no-brainer", and was forced to bail when margin calls emerged.  Whether that's the case or something else, the reality is that Gold (and other metals) have been hammered to lows not seen in years!  At times like this, it's generally the case that one final "whoosh" of a sell program drives out the nervous-nelly-longs, and gets us to a bounce-able level.  We're on the lookout for that.....

 Finally, many of the higher dividend paying stocks, aka "bond substitutes", bounced a bit today.  But the volume numbers on the upside were dwarfed by the tidal wive of selling that got them to these levels in recent days.  Again...watching for signs of relenting on the downward pressure.....

Please continue to visit Soos Global Market Musings for updates.

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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
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Additional Disclaimer: currently long many stocks/ETFs including AUY, OHI, XLU.  Positions may change at any time without notice.

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