I increased into the Swiss opening this morning my long position in SPX (the US big cap index). I see a potential of a roughly 4 weeks window of a substantial retracement of the 20% crash since mid-October. Markets are over-sold as very rarely in recorded stock market history at a time when the world economy has not (yet) collapsed. Gold is on the verge of breaking an important resistance and has already shown quite some strength. It will not (yet) be a moonshot but gold looks a good representative for a beginning consolidation of real assets (food, metals, raw material of any stripe and shape). I hold the view that the immense and growing debt burden will lead to inflation and in the worst case of the “Weimar” ilk (Japan or USA?).
Here the SPX daily and weekly chart. It is significant and relevant how the ongoing correction has hit the 200 weeks moving average and was contained on the trend line. All indicators are extremely oversold. There is no crash that builds on such market internals – never in my life time. The SPX is the most important lead indicator and risk metric and all other markets emulate its move corrected by changes in exchange rate.
First the SPX weekly read:
SPX, daily window: a 62% FIBO retracement (2750) is a reasonable target for the current move and we should see it in the coming 2 weeks.
Markets were oversold as rarely in recorded stock-market history:
1. New Highs / New Lows: (the low 1.22!)
2. Bullish Percentage: Stocks in the SPX below their 50 days moving average on a point and figure chart (a rather good and reliable indicator/metric):
3. And finally Gold daily: looks constructive (nice break-out) if somewhat overbought.
4. The longer view – gold on the weekly chart:
Gold experts view substantially higher prices in the years ahead.