U.S. Market Successfully Tests Low; Miners Signal Strength
Steve Saville | Oct 06, 2015 04:56AM ET
I wrote in a TSI commentary published on Sunday that the S&P 500 Index (SPX) appeared to have completed a successful test of its 24th August low early last week. This view meshed with the price action and the fact that by some measures, most notably the Investors Intelligence Bull/Bear Ratio, last week’s test occurred in parallel with extreme negativity.
More evidence of a successful test of the low emerged on Monday 5th October when the number of individual stocks making new 52-week lows collapsed while the number of individual stocks making new 52-week highs rose significantly on both the NYSE and the NASDAQ.
The SPX is now less than 1% from substantial resistance at 2000. I suspect that this resistance will cap the SPX’s rebound for now, but that it will be breached before year-end. Based on a number of long-term indicators, I also suspect that the July-September downturn was the first leg of a cyclical bear market and that several months of range-trading will be followed by a decline to well below the 24th August low.
h3 The gold mining indices are finally showing signs of strength/h3
The gold mining indices broke out to the upside last Friday. Furthermore, the breakout was solidified on Monday when the HUI/gold ratio closed decisively above its 40-day MA for the first time since April.
The breakout could still be a ‘head fake’, but it should be given the benefit of the doubt until proven otherwise.
Kinross Gold (NYSE:KGC), the most under-valued of the major gold producers, broke above the top of a well-defined intermediate-term price channel on Monday. Based on this price action my guess is that it will rise to around $2.40 within the next three weeks.
h3 Ben Bernanke, Master of Tautology/h3
Former Fed chief Ben Bernanke has apparently argued that poor productivity has held back growth in the US. This is like arguing that growth has been held back by a lack of growth, since the ONLY way that per-capita economic growth can happen is via an increase in productivity.
As a run-of-the-mill Keynesian, Bernanke is clueless about how fudging interest-rate signals and creating money out of nothing make an economy less efficient. If he had a clue he’d be arguing that the Fed has held back growth in the US.
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