May 30, 2013
Best Buy Co., Inc. (NYSE:BBY) is having a solid day, trading at $28.02, +0.98 (3.62%). The stock is up 150% from its 2013 lows of $11.40. While investors clamor to be long the stock, signs point to a topping out pattern that signal a reversal and fall. Best Buy looks like it is a much Better Sell.
Today, Best Buy is hitting a major resistance pivot trend line. After a 150% gain in the stock, this tells me downside is likely. Note the chart below. This is not just any random trend line of resistance. This stands out as a major level that warrants at least a 10% pull back if not 25%. A likely target in the next six months is $21.00.
May 30, 2013
This morning, the leading gold mining stocks are making a sharp move higher to start the day. Today, the popular and highly traded Market Vectors Gold Miners ETF (NYSEARCA:GDX) is trading higher by $1.29 to $29.78 a share. The gold mining stocks have been very weak over the past year. Recently, there have been many traders and investors piling in on the short side of the gold mining stocks recently, so any sharp reversal to the upside could cause a short squeeze in this sector. The GDX will have some intra-day resistance around the $30.00 level. Should a short squeeze occur in the gold miners the GDX could trade up to the $33.00 level on the daily chart.
Some of the leading gold mining stocks that are rallying higher today include Randgold Resources Limited (NASDAQ:GOLD), Goldcorp Inc. (NYSE:GG), Newmont Mining Corporation (NYSE:NEM), and Barrick Gold Corporation (NYSE:ABX). All of these stocks will usually trade in tandem with each other. They should all have further upside in the near term on the daily charts.
May 29, 2013
The 10 year bond yield pushed higher again today. It is currently trading at 2.15%. So why does this matter to the stock market? Why has the stock market all of a sudden gone from a straight up move to a choppy pullback? The reasons are extremely simple and I will lay them out below.
1. When rates rise, borrowing money becomes more expensive. As interest rates rise, housing will take a hit. The Federal Reserve has made it clear they believe housing is the key to an economic recovery. If interest rates jump, less Americans will be able to afford to borrow money to buy a house. The housing market will slow and the economy will follow. The stock market senses this.
2. The 10 year yield is now at 2.15. Yesterday, it crossed the dividend yield of the S&P 500. This means it is now more profitable to buy bonds than to invest in the stock market. Considering that the stock market is extremely high and possibly due for a correction, many investors are opting for the safety of bonds which are still going to pay out more than stocks on a yield basis. In simple terms, two investments, one pays you 2.15% with little risk while the other pays you 2.00% with a lot of risk, which one do you choose? The answer is obvious and a major reason why the stock market has started to get jittery.
These are the keys to understanding why interest rates/yields matter. The Federal Reserve wants to keep rates low so housing recovers, the economy does better, and money flows into stocks. The Federal Reserve keeps rates low by printing money in the form of quantitative easing. However, they cannot print forever. The market senses this and is beginning to react.
May 23, 2013
The NIKKEI 225 (INDEXNIKKEI:NI225) dropped 1,060.23 (-7.32%) to close at 14,483.98 last night. This was after a 30% rise in their stock market in the last 6 months. These type of sharp declines are a result of market bubbles built by Central Bank intervention. In the case of Japan and the Nikkei, the Japanese Central Bank has printed even more money than the Federal Reserve.
Bubble after bubble and bust after bust, the average investor is starting to get savvy. When a stock market can drop over 7% in one day and it is no big deal because it is just a small correction, something is wrong. In addition, the average investor gets in late to the party, usually near the highs. Therefore, the drop actually hurts them the most, often causing substantial losses.
Bottom line is, investors are usually screwed by buying high and selling low. They know the game Wall Street plays with pumping the markets and are finally saying ‘enough is enough!’
F#ck Wall Street and start making more money than the institutions who rape the average investor.
May 22, 2013
The CNN Greed & Fear Index is one of the best signals I have seen. I have followed it for some time and anytime it gets above 90 to Extreme Greed, a sell off or pull back occurs within one week. This has even been the case in a market manipulated by low interest rates and Federal Reserve massive printing of money. The Greed Index today just jumped over the 90 level, settling at 91. This to me signals a possible reversal in the coming days.