Slope of Hope Blog Posts
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Gold miners definitely are the forgotten sector of the rally from the October 2011 low in the S&P 500 at 1074.77 to this week's high at 1419.15. This rally amounts to a 32% climb, compared to the performance of the Market Vectors Gold Miners ETF (GDX), which is down 2.7% since its October 2011 low.
However, there just might be some cause for optimism, that the Street might feel compelled to rotate into the miners from other frothy sectors. Let's notice that the weakness off of the September 2011 peak has taken the form of a declining wedge formation, which in and of itself represents a correction that is nearing completion, rather than a major top ahead of a bear market.
Furthermore, Thursday's minor upside reversal came after the GDX hit a new multi-month low at 48.05, which held just above, and bounced off of, important multi-year support at 47.50. Thurday's low was not confirmed by daily momentum, or by MACD, which is climbing towards a near-term buy signal.
I have a provisional overall scenario for the next month or two that I'm expecting to play out. Obviously I may be mistaken, but it hangs together fairly well. On equities I think we are in a sideways type wave 4, which will be followed by a wave 5 up that will probably peak at a major pivot, either at 1442 SPX or slightly north of 1500. Given the proximity of 1442 SPX to where we are now there's a better argument for the higher target I think. That should take us into the seasonal high area late April to sometime in May. After that I'm expecting a big correction over the summer and we'll see what the bears can do with that, if any have survived this monster move up.
While that plays out I would expect new rally highs on EURUSD, and a major drop in bonds. As long as USD can hold uptrend support during that time, I then have a hugely bullish overall setup on USD that could see it spike up to over 90 while EURUSD gets crushed over months following.
Short term I'm a bit concerned by the support break on Dow yesterday, but it didn't last long and the recovery was strong. It is a warning signal though, and should we see a more definite break then there will be an argument that we have already made a major interim top:
I'll close today with a number of long-term charts, offered without commentary. Let us all contemplate them and the future they portend. Good night.