More on TED and Gold...and Japan
As the stock market shakes off the mini-slide from the days of the Japanese earthquake, stuff's happening that we've been covering, so it's time for an update.
The TED-Spread
We've been monitoring this item against its 50-day and 200-day moving average. It rose last week and broke through the 200-day - which was hovering over its 50-day. At the time, I explained how the last couple of times it broke above both of those averages, we had serious stock market corrections. So what about now?
Well, the first thing that happened was it sunk back below the 200-day. At that point, I look to see if it breaks back above. It did. Then I look to see if that holds. Right now it is, but I want to give it more time before I consider the break significant. Meanwhile, stocks have started creeping higher. In my opinion, they're creeping higher against any reasonable logic based on valuation. But then again, markets are frequently "irrational" and can continue going up for long periods even when they're clearly overvalued. But this TED-Spread action may be telling us that the mini-slide could develop into something more serious. All we need is for the TED-Spread to hold above the 200-day, for the market to start showing increased weakness and - what should be the nail in the coffin - for the 50-day MA to break above the 200-day MA, which is where it looks like its headed.
We'll keep monitoring.
Gold
Meanwhile, in the face of all the articles and commentary about how gold is in a "bubble," hardly anyone's noticed that it just set another all-time high today. One of the signs of a strong bull market - one that is not in a bubble - is that significant milestones like this pass virtually unnoticed. Sure, some writers (besides, of course, the "gold bugs") will notice, but there won't be much fanfare. If anything, we'll probably get the following: 1) puzzled comments; 2) comments about how inflation might be heating up (there's been some evidence of this lately); or, 3) this proves that gold is in a bubble. Inane.
Japan
While we're at it, you'll probably start noticing that news from Japan will start to sink into the background. But please remember those folks are suffering, even if things do start to get back to "normal."
First, there's all the sorrow and suffering from losing loved ones. Keep these people in your prayers.
Then there's the unknown of what economic impact the quake will have on Japan and the rest of the world - a work in progress. Initial estimates of tens billions in damage have already turned into hundreds of billions - the typical progression in situations like this where the government tries to minimize the perception of damage, until the facts make that impossible.
Finally, there's the nuclear reactor situation. News reports make it sound as if progress is being made. And perhaps the chance of a catastrophic crisis isn't so immediate right now. But I've been reading up on this sort of situation and the one thing that's clear is that the problem of the reactor spewing radioactivity into the atmosphere will go on, probably for months. Just look at photos of the reactors with huge holes in them. Use your common sense. There's nothing containing the radioactivity that's built up because of damaged fuel rods and the exposure of spent fuel rods to the air.
And for the time being, we can't conclude that a catastrophe has been averted. Lots can still go wrong.
But, of course, the media needs "hotter" stories to cover, so they'll back-burner this one until something really extraordinary happens.
The TED-Spread
We've been monitoring this item against its 50-day and 200-day moving average. It rose last week and broke through the 200-day - which was hovering over its 50-day. At the time, I explained how the last couple of times it broke above both of those averages, we had serious stock market corrections. So what about now?
Well, the first thing that happened was it sunk back below the 200-day. At that point, I look to see if it breaks back above. It did. Then I look to see if that holds. Right now it is, but I want to give it more time before I consider the break significant. Meanwhile, stocks have started creeping higher. In my opinion, they're creeping higher against any reasonable logic based on valuation. But then again, markets are frequently "irrational" and can continue going up for long periods even when they're clearly overvalued. But this TED-Spread action may be telling us that the mini-slide could develop into something more serious. All we need is for the TED-Spread to hold above the 200-day, for the market to start showing increased weakness and - what should be the nail in the coffin - for the 50-day MA to break above the 200-day MA, which is where it looks like its headed.
We'll keep monitoring.
Gold
Meanwhile, in the face of all the articles and commentary about how gold is in a "bubble," hardly anyone's noticed that it just set another all-time high today. One of the signs of a strong bull market - one that is not in a bubble - is that significant milestones like this pass virtually unnoticed. Sure, some writers (besides, of course, the "gold bugs") will notice, but there won't be much fanfare. If anything, we'll probably get the following: 1) puzzled comments; 2) comments about how inflation might be heating up (there's been some evidence of this lately); or, 3) this proves that gold is in a bubble. Inane.
Japan
While we're at it, you'll probably start noticing that news from Japan will start to sink into the background. But please remember those folks are suffering, even if things do start to get back to "normal."
First, there's all the sorrow and suffering from losing loved ones. Keep these people in your prayers.
Then there's the unknown of what economic impact the quake will have on Japan and the rest of the world - a work in progress. Initial estimates of tens billions in damage have already turned into hundreds of billions - the typical progression in situations like this where the government tries to minimize the perception of damage, until the facts make that impossible.
Finally, there's the nuclear reactor situation. News reports make it sound as if progress is being made. And perhaps the chance of a catastrophic crisis isn't so immediate right now. But I've been reading up on this sort of situation and the one thing that's clear is that the problem of the reactor spewing radioactivity into the atmosphere will go on, probably for months. Just look at photos of the reactors with huge holes in them. Use your common sense. There's nothing containing the radioactivity that's built up because of damaged fuel rods and the exposure of spent fuel rods to the air.
And for the time being, we can't conclude that a catastrophe has been averted. Lots can still go wrong.
But, of course, the media needs "hotter" stories to cover, so they'll back-burner this one until something really extraordinary happens.
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