Things Are Looking Up
12/28/2011 7:30 am EST
After the storm comes the calm, we're reminded by Pam and Mary Anne Aden of The Aden Forecast.
The markets are stabilizing. The precious metals and resource sector seem to be looking for a bottom, while the stock market has hints of a possible New Year rally.
The currencies and the yields also look like they may be bottoming, which in other words, is saying that the dollar index and the bond market may have reached their highs already. We'll soon see.
Better economic news out of the US, and with the European Central Bank essentially bailing out the region's banks in its Long Term Refinancing Operations (LTRO), all this added to the stability. Stability is a start in this jittery market, but we'd still like to see more of this before buying new positions.
The stock market in the US and in many global markets are looking better. The VIX, for example, is falling as it reached a five-month low last week. When this index declines, it normally coincides with a rising stock market. That is, if they continue to move opposite, it may be leading the market into a renewed rally.
The Dow Industrials above the eight-week resistance at 12,230 would do it. The Dow Utilities Average reached a new high as well, and also may be leading the way up. The housing index is also at a high. Keep an eye on the October highs, as a break out will be a bullish move.
Crude oil is also getting a boost from geopolitical tensions. In fact, when looking at gold and oil together, you can see that both are in major uptrends above $1,525 and $93, respectively.
While gold could still decline further, and even if it does, it will stay in a bull market. It bounced up from last Thursday's lows, and by staying above $1,575 it will now continue to base from that low.
Gold and silver will begin to look like weakness is behind them once they close and stay above $1,700 and $33, respectively. Silver is basing near $29, which is a great place to be buying new positions.
Continue to buy gold on weakness. Gold shares also look like the downside is limited.
The US dollar reached a high last week, but it's now resisting at the highs, while several currencies including the Canadian dollar (oil boost) look set to rise. The yen is also looking toppy, which means its safe haven may be changing. The Canadian dollar would look good above .9900.
The yields are also basing, with the 30-year yield staying above 2.80%. If it closes and stays above 3.10%, bonds will turn down, which would be saying that investors are feeling better about the global economy.
We may soon be buying new positions.