Monday, December 24, 2012

New Year: Divergence Ahead...L&C

I was going to call this piece, the Christmas Present, but there are too many lousy gifts out there as it is, not to mention the bad news in the media recently. What I am calling your attention to is this: there is a change taking place in the market and the signs of this divergence is your phone call.
When you look at the advance/decline line, you can see it clearly. From the lows of 2009 until October highs in this year, the change is occurring. The market in bull mode rendered a 20 to 1 ratio of new highs to new lows. Now, the tempo is 3 to 1 on NYSE, even on AMEX and 2 to 1 on NASDAQ. The market is breaking down. There are more indicators and yes, the fiscal cliff is a big part of it.
From a new high in September 2011 of over $1900 per ounce, it is now at $1659 and trending lower.
It began this year over $100 per barrel and held in a range from $90 to $110, but recently is falling as low as $77 with a present bounce to $88. The trend is down.
The good doctor of the economy is sinking. It has falling from $4.60 to $3.55 today. The trend is lower. These essential commodities are indicating less demand.
Finally, there are many leaders in the business world who see trouble ahead. I call to mind this leader because it has been correct in calls about the economy in recent years. The ECRI, Economic Cycle Research Institute calls for a recession in 2013. I would add this to the list. The government says that unemployment is down to 7.7% and I disagree. It is much, much higher. If you look at the actual number of people employed and compare it to the number of people employed before the recession and add the correlation of population growth from 2007 until today then, common sense tells you that the government is lying. The divergence in numbers is huge. Consider this tidbit. Our GDP has not reached 4% for 12 years straight and that covers the boom period. Take your profits and just sit tight. If the market implodes, you can buy what you want for a much cheaper price. Better safe than sorry, my mother would say.
Liars and Crooks: Congress and the President in the dealing with the fiscal cliff problem. The actual fiscal cliff is already law and it is a far better solution than whatever the above could come up with for our nation.