the party is over - got gold?

  1. 9,081 Posts.
    New Game in Town

    Mark M. Rostenko
    Monday November 17, 2003

    Stocks slipped last week as the S&P 500 lost nearly 3 points, while the Dow and Nasdaq Composite shed 41 points. The dollar careened lower while gold flirted with the $400 level, having climbed to a new 7-1/2 year high. Crude oil futures closed at their highest settlement price in eight months.

    That wacky stock market sure doesn't want to bust, but all the danger signs I've been discussing in recent weeks continue to build. All my talk about waning upside momentum? Take a look at how the indices finished out last week: all of them on sour notes. The S&P 500 firmly rejected a stab at new highs to close lower and squeeze out what I'm going to step out on a limb and call a minor "triple top" formation.

    Of course, a triple top is no such thing until it is confirmed by a breakdown. But I'm willing to risk sticking my foot in my mouth because of all the action, or lack thereof, that has preceded the S&P 500's third attempt in the past few weeks to unsuccessfully extend its rally. The upside momentum simply isn't there, new highs are swiftly greeted by corrections and all that bullishness you hear about in the ridiculously high bullish sentiment figures doesn't seem to be translating into any meaningful gains.

    Meanwhile the Dollar Index, which tried to rally a couple of weeks ago, plunged lower last week and is now poised only fractionally from a new 5-year low. And gold, what I like to refer to as "the harbinger of all things economically nasty" is flirting with critical resistance at $400.

    A bull market in gold and a wicked bear market for the dollar. Is this the kind of stuff we should expect to support the stock market's waning momentum and propel it to new highs? Gold is a barometer for the health of the financial system. It doesn't rise to 7-1/2 year highs when the outlook appears positive.

    The good news that the stock market has been anticipating is out, folks. It came out over the past few weeks and the stock market could barely manage new highs. Oh sure, we got a minor extension of the "mini- bull", but where were the buyers? In a bull market, new highs should be greeted with enthusiasm, increasing volume and giddy buyers. We haven't seen that. Why not? BECAUSE IT'S NOT A BULL MARKET. It's one big fat phoney rally within the context of a massive, secular bear market.

    This is real simple folks: if it's not acting the way a bull market should, it's something other than a bull market. If you've noticed that the puppy you bought six months ago won't stop quacking and laying eggs on your favorite easy chair, don't expect him to start fetching the morning paper any time soon.

    Insiders are selling stock at a ratio of 59 shares to every 1 bought. That's a record. If it's a bull market, how come the folks who know more about their companies' prospects than anyone else are so bloody eager to unload their shares? Perhaps they're feeling guilty about their fat salaries and are trying to spread the wealth by offering a hefty supply of stock to the public? Yeah, that must be it.

    It's called "distribution", folks. And all the signs are pointing to it. The public is more bullish today than it was at the peak of the greatest bull market in history. And insiders are dumping stock like there's no tomorrow. The smart money is unloading paper garbage on the dumb money. And that's why upside momentum is so weak.

    All those happy dumb public buyers are being fed stocks by insiders who are eager to unload before the next wave of the bear hits. And all the suckers who were left holding the bag in March of 2000 have just happily loaded their bags up again. It wasn't enough to get creamed during the first tech-stock decimation. "Thank you sir, may I have another?"

    Meanwhile the smart money's quietly moving over to the new game in town: commodities.

    About three years ago in the pages of The Sovereign Strategist I began to speculate that the glory days for paper were over and that tangible assets would enjoy a resurgence of popularity and investment. That outlook seems to be confirmed by a stock market that has yet to recoup even half of its bear market losses while the CRB Index of commodities surges to new 7-1/2 year highs.

    The smart money has been buying gold for years. Silver is beginning to rock and roll. Copper's at a 6-year high. Platinum's at a 23-year high. Soybeans are trading at a 6- year high.

    All of these major moves in commodities have been going on totally under the public's radar screen. Gold stocks have been the number one performers for years, gaining 300-800% since late 2001. Commodities are in "stealth bull markets", racking up gigantic gains for the smart money while the public continues looking for "greater fools" to play the stock market game with, cheered on by the sleazebags on Wall Street who couldn't care less what happens to anyone, so long as they pocket their vig or commission on every transaction.

    The bear market isn't over folks. And the mini-bull market is gasping for air, exhausted, and on its last legs. You don't have to be a genius to figure out the big picture, people. Take a look around you: the dollar is plunging, gold is rising, billions upon billions are being spent on chasing after non-existent "weapons of mass destruction", and King Clowny Greenspan prattles on about the "risks" of "low inflation" while commodities surge to highs not seen since that dingbat was sitting on his backside supposedly "not aware" that we were in a stock market bubble.

    Does that sound like a recipe for big stock market gains? The rumblings of an emerging secular bull market? The powerful basis for a new era of massive economic growth? Get real, people. It's not gonna' happen. Not any time soon. Do yourselves a favor: turn off the television and buy some gold. In five years, send me a postcard from whichever island paradise you've decided to retire in...

    Mark M. Rostenko
    The Sovereign Strategist

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