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An Alert to Pending Change

Bob Hoye
Institutional Advisors
May 7, 2009

  • The "good stuff" has been expected to rally out to April-May.
  • Copper soared 80% from 126 late in the year to 225 on April 15. This registered an Upside Exhaustion on our proprietary model, from which a test of the high was possible. This is being attempted now, but at lower momentum levels. The last such set up occurred at the cyclical peak two years ago.
  • The rally for lower-grade corporate bonds has been outstanding, with the junk yield declining from 42% in early March to 28.4%. The spread, over treasuries, has narrowed from a horrendous 3800 bps to "only" 2930 bps.
  • The S&P has rallied 36% from 667 in early March to 910 on Monday. This is registering a strong overbought on our Summation model. Any loss of momentum with a lower weekly close or a week with a lower low will set the stage for the next decline.
  • Other than natural gas, commodities have enjoyed rallies into the right time window. These include crude oil, grains and soybeans, as well as all base metals.
  • Silver has been expected to outperform gold until around now and the gold/silver ratio has declined to 69.
  • The Dollar Index was also likely to decline into this window.
  • One important event needed to meet all of out targets for the rebound out of a classic fall crash occurred today with Bernanke's statement that "We expect economic activity to turn up later in the year". This matches similar observations made by the establishment in April-May 1930, and was prompted by the same stimulus. The Fed chief explained that the positive note was due to the "Combination of a broad rally in equity prices and a sizable reduction in risk spreads."


May 5, 2009
Institutional Advisors

Hoye Archives

The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized.

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