Is January Effect Intact?

The indices took off at the beginning of the year and the thesis states that as goes the first week of January, so goes the month of January.  That did not work out exactly as planned with the market taking the next two weeks off to ponder the "economic crisis."

However, the past week we have seen a nice ascending triangle forming in the Russell 2000 index of small cap stocks and the next resistance and price target is $48.50.  While it is unlikely the index will finish up for the month, the trend is upward and may continue to mid-February as the stimulus bill becomes reality.  Maybe sell on the news?

GLD: Update

Commodities had a nice punch upward Friday and the technicals are continuing to look strong from the November lows.  A couple things look good technically:

1. GLD broke resistance as well as a long term trendline which it has been flirting with for a year.

2. The 50-dMA now has an upward slope and is approaching the 200-dMA, which would form a "Golden Cross."

Isn't this a flight to safety of sorts? We're sort of running out of asset classes to trust and all the liquidity has to go somewhere. A lot of people are saying the US dollar will benefit, but gold is/was extremely oversold and was due for at least a technical bounce. And I would add that commodities tend to move for prolonged periods of time and tend to overshoot both on the upside and the downside... at least that's the conventional wisdom.

The other side of the argument is that goldbugs tend to be nutjobs with overdeveloped limbic systems and you can never predict what they'll do... they might cash out all their holdings en masse to go buy ammo and Spam.

Eric and I are having a discussion on liquidity and commodities.

Liquidity: There's more liquidity today than there was 2 months ago and nobody is going to give it away. No loans, no mortgages. So it has to somewhere. Sure relative to two years ago there is very little liquidity, but not compared to 2 months ago.

GLD has gone from 68 to 88 in 2 months-- that's a bull market in anybody's book-- only TLT comes close and the technicals on TLT aren't as good.

Is TA any good for GLD? Maybe not since so much emotion goes into the gold trade, more than any other asset class it seems. But nobody can argue that the year long trend has been broken. What happens now is only a guess. It's risk/reward.

New liquidity will be hitting the market and there will be more in two months than there is today. Where will it go? Mortgages, car loans, Treasuries? Maybe, but my guess is that some will go to commodities, too.

 

Which bank(s) will be gone by September?

Tell me which of these won't exist?  If anyone can tell me, then I'll buy the others... but until then...

Great graphic from here.  And XOM's market cap is greater than all put together, or something like that.

GERN: Sold at $6.52 for for 34% gain

I had bought GERN on Jan 20 and sold this AM at the open on their FDA approval.  Thanks to Brian Shannon for the heads up.  Sell on the news, baby.

Sector Update: Health care

Yesterday I published my dissection of the sectors that will recover out of the bear market (if there is ever a recovery):   health care and staples are the predicted winners...

...and lo and behold, we have a deal with PFE buying WYE and calls on CNBC that this could be the initial move in a wave of consolidation and bull move in the pharma sector.

One other note on the SPDR ETF on Healthcare, XLV: this is basically a pharma ETF and contains no significant exposure to medical equipment or HMO's.  Stocks like JNJ are more diversified and acts like a healthcare mutual fund unto itself. 

AAPL Update

    

I have been watching AAPL and covered my short a couple days ago when it broke above 79.20... which in reptrspect was the message that earnings would be positive.

Yesterday, the NAZ got a little ahead of itself and overbought near the end of the day, so I opened another short positionon AAPL at $89 and set an after hour cover order for $87... and it triggered.

Cha-ching for a little trade.  Not greedy.

Jan 23: Futures Down, WYE, GLD up

Technicians would say that the market has indeed anticipated the bad earnings with their interpretation of the graphs, with Brian Shannon at alphatrends saying (ad nauseum) "this is a day trading environment" and T.LO telling us to go to cash in September, etc.

The market and TA have been telling us, what Mamis calls the message of the market. We don't necessarily know "why" the market keeps going down... we will only know "why" after the fact. We can only know the "what" and "the what" is that financials are dead. D-E-A-D. Period.

We can conjecture all day about the "why"... and it's fun to do: maybe 25% of banks are insolvent and will be gone in 6 months, maybe BAC and Citi will be nationalized, maybe Obama is a stealth Communist and the market is factoring it in, etc... but the reality is that we cannot know the why until after the fact.

Aberrations will occur, such as the recent January Effect, but these are counter-trend rallies that cannot be trusted.  Like Kappa Kappa gamma girls: it's okay to play with 'em, just don't marry 'em... and it's time to stop playing and get back to work.