Markets: Looking for a Top AND a Bottom

December 22nd, 2013
in contributors

Will Both Stocks and Gold Reverse?

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The Bulls manned the pumps full-blast today (Friday 20 December 2013). They drove the Dow to a 108-point intraday gain, which cooled to a 42-point gain by Closing time. The S&P 500 followed the same pattern, closing Up 8.72 points, as did the NASDAQs, to a slightly lesser extent.

Follow up:

The "photographs" of that late-session "cooling" process are revealing. We see price jumps upon Opening; then a slowing-down; and finally a peaking and an unmistakable rollover in each of the Indexes. There was a noticeable release of pressure during the final hour of trading, especially in the Dow Industrials. Within that group, Boeing, Disney, Home Depot, IBM, Pfizer, and Verizon turned Down meaningfully during the final hour; and in large part they were responsible for the result in the Index itself.

Please take a few moments to inspect the Indicators on the charts which I've attached to this note. ADX is very high; the Stochastics have been "running along the ceiling" of their ranges; there is a "Crimp" between Bollinger Percent B and Chandelle 1; and there is a Blimp between Chandelle 1 and Chandelle 2. These are bearish warnings.

I think it is possible that prices peaked and turned Down today. If that is what has occurred, then the new all-time High in the Dow becomes 16287.84. If the peak did not occur today, then it and the turn are very, very near. I'm not going to put too fine a point on "calling the top."


Of much greater importance than the appearance of a putative top will be an event or events which CONFIRM that top. In that vein, a drop in the Dow beneath its December 18 Low (15808.92) and a drop in the S&P 500 beneath its December 18 Low (1767.99) will signal the end of the Great Rally from March 2009, and therefore a switch in the major underlying trend from Up to Down. Forget about the numbers as the Dow and the S&P stomp around the landscape looking for a final High, and focus instead on those two Lows. They are the "money numbers."


Watch Gold and Silver.  Almost everyone disdains them. The cards are stacked way over to one side, against Gold and Silver. Famed commodities trader Jim Rogers says that he "wouldn't buy gold right now under any circumstances." Not ANY circumstances? Silly boy! He will be kicking himself that he ever said that. What a setup for a rally! Gold may decline a little more, but it's gathering strength while everyone is looking the other way and when no one loves it. ('Twas always thus). There will be some very nice op.tunities in Gold (and likewise in Silver) very soon; so cuddle up close, and y'all get to know each other again. At least get the conversation going.

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