An Alert to Pending Change
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"
- 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
- 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
- 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
May 5, 2009
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