Thursday, April 19, 2012

Typical Topping Process

This is a typical topping process we are witnessing.  Most of the indicators have turned south and tomorrow is the last day for cycle top.  It does not mean that we will have huge sell-off from tomorrow. Actually we might see a green day tomorrow being Op-Ex.  As they say, topping is a process.

Gone are the days when the index will go up on the one way street no matter what. But I still do not have any target for downside. Will it be similar to 2011?

Given the fact that it is a Presidential election year when the incumbent grease the market to stay in power and huge liquidity around, I do not think a huge sell off like 2011 is in cards.

I am still waiting on the sideline without being short. One of the simple sell signal occurs when fast moving averages like 20 DMA crosses under slow moving averages, say 50 DMA. Right now they are coming close have no crossover has occurred yet.

Gold seems to be coming to a bottom but I would still wait for sell-off in equities to see how all the risk assets behave together. Here is a long term weekly chart of GLD.

As you can see, the price of gold is just touching the trend line. Even with the correction it has not broken the trend line yet. Gold may well cross $ 2500 in the next 12 months before the bull market in Gold ends.

Hope you all are in cash and cushy.  Thank you for sharing my thoughts and reading