Pull the trigger with confidence.

We all know that we are supposed to “sell in May and go away”.  Everyone says so.  And so far in 2021, that looks like the operative strategy, since stock prices have been chopping sideways, just like they are supposed to. 

If the DJIA is going to follow its typical Annual Seasonal Pattern (ASP), then the sideways choppiness is going to continue and get more dramatic, all the way until October.  That’s what the ASP says should be happening in a “typical year”.

I have been doing this job... Read More

The big winners in 2020 were the FANG stocks which dominate the Nasdaq 100 Index (NDX).  They outpaced the SP500 Index (SPX) by a pretty large margin.  But now in 2021, there is a big adjustment going on, as those outsized gains of 2020 are getting digested and consolidated. 

This week’s chart shows the NDX:SPX relative strength ratio.  It is super easy to calculate.  Just take the index reading of the NDX, and divide it by that of the SPX.  If the line moves upward, it means that the NDX... Read More

There is a big lump in the births data that is relevant to the current situation in the real estate market. 

Home prices as of March 2021 are up 13.2% from a year earlier, according to the Case-Shiller Index.  And actually the correct name of that index is the "S&P CoreLogic Case-Shiller National Home Price Index", which does not exactly roll off the tongue.  This rapid rise in home prices is unfolding as Americans are realizing that they can work from home just about anywhere, and they... Read More

As detailed here back in January 2021, the movements of gold prices tend to get echoed about 20-1/2 months later in the movements of long term interest rates.  The replication of gold’s movements is not perfect, and we really should not expect perfection almost 2 years later.  The fact that gold’s movements have any correlation at all to interest rates 20-1/2 months later is a pretty amazing discovery. 

The relationship says that bond yields should be reaching a temporary top right about... Read More

GLD and IAU are the two largest of the gold bullion exchange traded funds (ETFs).  Not surprisingly, investors like to push money into them and pull money out as gold prices rise and fall.  The real fun comes when investors don’t follow that model.

Gold prices are back up to above $1800/oz, after bottoming below $1700.  But the total combined assets invested into GLD and IAU has barely budged from the recent lows.  That is actually a bullish development for gold prices, because it means... Read More

There is a dominant cycle in gold prices with a period of 13-1/2 months.  But its behavior is more complicated than just saying that gold makes a bottom every 13-1/2 months. 

The first interesting aspect of this cycle is that around the time of the cycle’s peak, gold usually makes a mid-cycle low, like a camel with 2 humps.  Even more interesting is the point that the arrangement of the tops on either side of that mid-cycle low gives us information about what lies ahead.

In a case of... Read More

I have been writing professionally about the financial markets since 1995, and in all of that time I have almost never referenced valuation.  It is not because valuation does not matter, but rather that valuation does not give any useful insights to solve my puzzles about what the market is going to do and when.  Valuations can get way more stretched than they ought to, in both directions, and so noticing that they are stretched (or not) is of really no functional use.

Stretched valuations... Read More