The stock market keeps on going. With the lockdown opening up, it's focusing on better times ahead. And it's generally ignoring the bad news, suggest Mary Anne and Pamela Aden, editors of The Aden Forecast — and participating speakers at MoneyShow's Virtual Event on June 10-12.
The divergence between Wall Street and Main Street is huge and it's something we're watching closely. At this point, the stock market is mixed. Our leading indicators remain bearish and several of the stock indexes are still below their 65 week moving averages, which is also bearish.
The PTI, however, remains bullish (see chart). At the same time, Nasdaq is approaching its all-time highs. But the others like the Dow Industrials are well below their highs, for the most part.
The bottom line... the market is mixed. It could rise further short-term, but times are still uncertain, and anything is possible. We're in uncharted territory and what's happening is unprecedented.
That being the case, this market is high risk and we feel it's best to stay on the sidelines, at least for the time being. The precious metals, for instance, are doing much better than stocks, risk is low, and the upside is wide open. That's where your focus should be.
Gold has been holding near the highs for seven weeks now, while silver is breaking out and both have a good future ahead. But first we're keeping our eyes on an upcoming downward correction.
With bonds and the U.S. dollar now in decline, the safe havens are taking a back seat for now. Plus, gold shares have already started their decline. Some are holding up better than the others, but pressure is on for a further temporary decline.
Gold's 15 week moving average is quickly getting closer to gold's key $1680 level (see chart). If gold breaks below this level, the D decline will be underway, and silver will likely follow. They both have plenty of room to decline yet stay in a bull market. HUI is vulnerable for gold shares by staying below 284.
Interestingly, interest rates are starting to rise. As you can see on the chart, the 30 year yield is leading the way. It's above its 15 week moving average, at a three month high and the 10 year yield is following.
We've been showing you how oversold interest rates have been, which means they're poised to headed even higher, especially now that the rise is getting underway. This is going to coincide with an ongoing drop in bond prices, so continue to steer clear of all bonds for now.
Also interesting, the U.S. dollar index appears to be breaking down, despite higher interest rates. It's moving as a safe haven, and the dollar index is now vulnerable below 98. A bearish outlook would be reinforced below 95, and a big dollar decline would be confirmed below 93.50. Continue holding your cash in U.S. dollars for the time being, but that's starting to change.
Several of the currencies are looking a lot better. And even though this has not been confirmed across the board, the tide is probably shifting away from the dollar to other stronger currencies. We'll soon see, and we'll keep you posted. One of the exceptions is the Japanese yen. We recommend selling it if you have it.
