Most shares of commodity producers and related equities dropped during the first half hour of trading on both Thursday and Friday of this week, and then kept recovering for the remainder of each day. This sort of behavior within the commodity ETFs has bullish implications for the overall equities.
We anticipate a topping pattern for the stock market somewhere in the latter part of the summer, with S&P 500 possibly achieving 1450. If it surpasses this level, then the momentum traders will get very excited to buy in. However, that will be the time to sell our long positions to these traders and start accumulating the safe-haven assets such as US long dated treasuries (TLT), should they come back down to realistic price levels. As you have heard us say before, the financial markets have a way of punishing the mass investors that are betting in a highly popular asset and presently that would be the US treasuries as well as the US dollar. The reason is simple; they are all afraid of the currently unsettled economic issues in Europe.
If you can handle some uncertainty and small paper loss now by being positioned in advance of trend change, then you will be rewarded with handsome profits. As you have noticed in the past, we buy prior to a rally and usually sell well in advance of a decline. The market only rewards a small minority of seasoned traders.
Read this recent intelligent article from Mark Halbert of MarketWatch, commenting on the position of average market timers: Wall of worry remains quite strong. Commentary: Average timer continues to bet market headed lower.