11/18/13 – 11/19/13
Yesterday, as we saw developing weeks ago, the Dow passed 16,000 on eased Taper worries and wide eyed bulls – both the DJIA and S&P recaptured all-time highs.
Gold continued to steady at 1,270, where it’s taking a wait and see attitude. Amidst what should be very bullish signals for gold via dove policies, the negative investor sentiment that has built toward the precious metal over the last 6 months is keeping prices down. A reasonable path from here is a trip back towards 1,300 with absolute affirmation of Fed policy, but ultimately we expect this unlikely bearish trend to continue to win this fight with weakness down to its next level of support around 1,200. As silver follows suit, we think a bounce back to 21 followed with a slide below 20 is likely.
In Play – $FB
With the attention that the stock has garnered since their infamous IPO and outstanding growth over the last two quarters, we’re keeping tabs. While we do believe Facebook has tremendous promise and growing presence in global ad world and increased revenue from acquisitions and instagram, the short and medium term prospects for the stock aren’t as exciting. As we noted last week, a break in the 46.70 support level marked a red flag for those looking for a turnaround to 52 week high levels. After the break, when the stock was unable to push past the 49.50 mark, it sold off as investors weighed both the previous breach of support and inability to test resistance as a sign that the stocks best days of 2013 were behind them. We agree.
New Levels, New Devils
As we rear past the unprecedented 16,000 mark, it’s not unreasonable to expect a pullback from these levels when debt ceiling talks resume in a few short weeks. Just the fear alone that the media will put into the market is enough to convince retail investors the run is over and it’s time to get out. Expect the normal drama constituted by the Obama Administration, Congress and every other inability to fix the real problems within our countries infrastructure to take it’s piece of the gains we’ve seen over the last 2 weeks. While it looks like a Fed Taper will not be as catastrophized as it has been in recent months, the budget debate takes the stage as the next headline drama to trigger a pullback and of course, be ineffectively resolved.
Patience is key in finding a top to this market. In due time. With Yellen, low rates and a raising of the debt ceiling in January – we don’t see much shackling a further run. Foreign markets have stabilized with central banks buoying sentiment in Europe, Abe-nomics running rampant in Japan (asset purchases 60 trillion+ Yen) and solid data coming out of China to keep Asian shares steady. Keep an eye on the conglomerate of issues festering in the Middle East. A slight pullback accompanied with frenzied media, profit taking and bears smelling a top triggers a pullback in the range of 15,300 and 15,800 before and into 2014 but over the next 6-8 months, US policies lead a march of the Dow into 16,000.