Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Jeff Saut: Gold Polished for a Breakout?

By

Maybe - but now is the time to harvest profits, hedge your bets.

PrintPRINT
Editor's Note: The following article was written by Raymond James Chief Investment Strategist Jeff Saut. It has been reproduced with permission for the benefit of the Minyanville community.

Nine and a half weeks.

This refers not to the movie with Mickey Rourke and Kim Basinger, but rather to the current buying stampede - will it eclipse the record upside skein of 41 sessions?

In Last Week of the Selling Stampede?, I wrote:

"I have suggested the lows were likely going to come with either a whimper or a bang. Indeed, on CNBC last Monday, I said the bear case was now completely on the table. Typically, when the bear case is on the table, at least 90% of the stock market's decline is already priced into the various market averages.

The question then becomes, does the decline end with a whimper, or a bang? A bang would be a selling climax, like the one seen at the 1987 lows. A whimper might just be like the pattern seen at the 1974 stock market lows, whereby the DJIA made a selling dry-up low.

Recall the events of the 1974 bottoming sequence. President Nixon resigned in August, and the DJIA declined some 27% into its October low of 584. From there a stutter-step rally ensued that would lift the senior index 15.5% (to 675) before peaking in November. The Dow subsequently declined to a new 12-year low, which undercut the October low of 584, and in the process totally annihilated optimism by registering a new bear market low reading of 577 on substantially reduced volume (read: selling dry-up).

And that was it: The DJIA rallied into the new year, and, on January 27, 1975, a Dow Theory buy signal was rendered; the rest, as they say, is history. Worth mentioning is that the rally off the December 1974 low began as a short covering bear-market rally, but turned into a bear-market bottom that was never breached.

Whether that pattern plays this time remains to be seen, but I think the major market averages are at/close to at least a tradable low - maybe more."

At the time, while every indicator suggested the stock market was going to bottom that week, I had no idea that the equity markets were about to embark on a buying stampede of such proportions. Indeed, it was some 8-10 sessions later that my firm deemed it a buying stampede.

Alas, life can only be understood in retrospect. Nevertheless, today is session 35 in the buying stampede, and I remain cautious. There are 2 things investors should consider: Firstly, I can find no instances whereby the equity markets have gone back down and broken below a major low (like the demonic 666 low recorded by the S&P 500 (SPX) on March 6) in only 6-8 weeks. Three months later, yes, but not after only 6-8 weeks.

Second, everybody's waiting for the worst to happen -- for the second shoe to drop -- but it's already happened. As I've said, "If it gets any worse than it was at the November 2008 'lows,' and the subsequent March 2009 'undercut lows,' they might as well close the NYSE, and I'll retire."
< Previous
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE