As the markets continue to stabilize and climb, fear falls away. When fear dissipates, gold retreats. Today the SPDR Gold Trust (ETF) (NYSEARCA:GLD) is falling sharply once again. The gold ETF is trading at $152.55, -2.02 (-1.31%). The GLD will continue to see downside until $148-$149. At that level it will see a solid bounce higher.
Last week, the S&P 500 Index reached a high on February 19, 2013 at $1530.94. Since that high in the S&P 500 Index there was a sharp plunge lower into February 26, 2013 when the S&P 500 Index traded as low as $1485.01. On February 22, 2013, CNBC brought out the Kansas City Fed President Jim Bullard to assure investors that the Federal Reserve Bank was going to continue its $85 billion a month mortgage back securities and U.S. Treasury purchases. Believe it or not, the stock market only sold off for two days at that time when Bullard appeared on CNBC. Many traders found this rather ironic that this important figure in monetary policy would be brought out so quickly.
Today, CNBC brought out Laszlo Birinyi who has been a perma-bull for as long as I can remember. The next person on the CNBC guest list was John Paulson, a frequent guest that is also always bullish. This coming Monday, CNBC will be featuring Warren Buffett who is the most bullish person in the world. Remember, Warren Buffett bought Goldman Sachs Group Inc (NYSE:GS) when the stock was trading around $125.00 a share and watched it trade down to $48.00 a share before the U.S. taxpayer bailed out the stock. The average person just can’t afford this, but Warren Buffett knows what stocks are going to be bailed out before he ever gets involved with the company. He is called an angel investor, but he is really just a smart investor who has smart and important political ties. Buffett bought Bank of America Corp (NYSE:BAC) in August 2011 around $7.00 a share and watched that stock drop to $5.13 on October 4, 2011 before the stock made a final low. Today, BAC stock trades at $11.29 a share. Mr. Buffett will certainly come on CNBC and talk the market up as he usually does.
Whenever all of these bullish talking heads come on the most popular financial news program it is usually a sign that someone is getting nervous about the stock market. This bull market that began in March 2009 is now four years old, so it is certainly long in the tooth. The Federal Reserve still has the pedal to the metal when it comes to low interest rates and massive easy money policies. This is unprecedented by the central bank. After all, the Fed funds rate has been at basically zero percent since December 2008. Private equity firms are buying up most of the single family real estate in the U.S. creating a false sense of home ownership; but this is the world that we live in. Stock market leaders such as Apple Inc (NASDAQ:AAPL), Cliffs Natural Resources Inc (NYSE:CLF), Freeport-McMoRan Copper & Gold Inc (NYSE:FCX), and J.C. Penney Company, Inc (NYSE:JCP) have plunged recently. These are not signs of a healthy stock market, they are signs of a central bank inflated market. Traders should always be on guard when the perma-bulls get marched out on CNBC.
One of the hottest stock markets in the world has been the Japanese stock market. The highly followed Nikkei 225 Index has rallied higher by 3200.0 points since mid-October. Anytime an index surges higher by more than 35.0 percent in such a short span of time it does make traders and investors wonder how much further this index can trade before pulling back or staging a meaningful correction.
Traders and investors should now expect a pullback and possibly a correction to take place in the highly followed Japanese stock market. Recently, Japan’s Finance Minister Taro Aso stated that he wanted to get the Nikkei 225 Index to reach 13,000 by the end of March. Devaluing the Japanese Yen (Japan’s currency) is the tactic that the Japanese government and Bank of Japan (central bank) are using to inflate their stock market. While it has been working it does not come without repercussions. Anytime any country devalues their currency it will ultimately lead to inflation. As many of you know, Japan has been fighting deflation for nearly 20 years now, so I guess they are thinking that they need to really inflate their markets.
As a technical trader we know that markets can only travel so far before pulling back. It does not matter how much money printing and inflationary tactics are taking place. At certain technical points markets will pullback or consolidate before moving higher. You see, institutions that are long the Nikkei 225 Index will simply want to lock in some gains and this will cause the markets to pullback regardless of any government effort to prop up the market.
It looks as if the Nikkei 225 Index has now reached a level where a pullback or possibly a correction should occur. The Nikkei should have near term daily chart support around the 10,500 level. This is a level where the Nikkei 225 index could see a decent bounce according to the charts. Another way to play the Japanese market is to use the iShares MSCI Japan Index Fund (NYSEARCA:EWJ). Some leading Japanese ADR’s that trade in the United States could also be affected. Leading Japanese stocks such as Sony Corporation (ADR) (NYSE:SNE), Panasonic Corporation (ADR) (NYSE:PC), Toyota Motor Corporation (ADR) (NYSE:TM), and Canon Inc. (ADR) (NYSE:CAJ) could pullback if the Nikkei 225 Index declines.
Research In Motion Ltd (NASDAQ:BBRY) continues to head towards the key $10.25 level, given out weeks ago. When this stock was trading near the 52 week highs of $18.00, I said it would pull back to $10.25. The current price is $12.64, -0.61 (-4.64%). It is almost there. At that level, technically it will become a long again for a good, strong bounce.This stock is a great swing trading stock and I will play it many times, long and short in the next year. Enjoy this level and profit.
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Chief Market Strategist