Graham Summers’ Weekly Market Forecast (Market Leaders Tanking Edition)

With most of
Wall Street absent in advance of the long weekend, those few traders on the
street took advantage of the low volume to gun the market higher last week. This,
combined with end of the Quarter performance gaming resulted in the market
going positively vertical.

From a
purely technical standpoint the S&P 500 has bounced hard off of it 200-DMA.
We’ve now broken above the 50-DMA and are closing in on major resistance at
1,350:

As I’ve
stated numerous times before, stocks are always the last asset class to “get
it.” So with that in mind, we need to consider what other asset classes are
doing in order to determine if last week’s rally was based on anything real or simply Wall Street shenanigans.

First let’s
have a look at agricultural commodities. They lead stocks and other asset
classes during the QE lite/ QE 2 rally by several months. They also peaked
first in February 2011, well before stocks and other asset classes took a dive.
So they’ve worked extremely well as leading market indicators in the last year.

This has to
be one of the ugliest charts out there. Having fallen below their 50-DMA,
agricultural commodities have since been rejected by that line multiple times.
And we are now on the verge of posting a death cross: when the 50-DMA breaks
below the 200-DMA.

The picture
is equally ugly for Oil and Silver: the other two big market leaders during the
last year. Indeed, Gold is the standalone market leader that continues to hold
up relatively well, primarily because it’s now the “go to” asset to protect
against sovereign default risk:

In light of
this, it’s difficult to believe the stock market rally from last week as
totally legitimate and not by end of the quarter performance gaming by hedge
funds taking advantage of the light volume. This week’s action will go a long
ways to explaining what’s to come in the weeks ahead.

However, the
big picture remains the same: the Debt Crisis that began in 2008 is not over.
All we’ve done is kick the can down the road. And as Greece is showing today
(they’re already asking for another bailout within a year), the can isn’t going
much further.

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Good
Investing!

Graham
Summers

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Comments

[Zero Govt]

the problem for conspiracy theorists regards the recent (insane!) rises in US Indexes being The Fed or "Wall Street shenanigans" as Mr Summers claims is the fact all the Asian and European stock markets have literally followed the exact same (insane!) US rises

I say "insane" because the economy is looking pretty crap (again), the public sector is facing their deserved crash diet after decades of greed, glutoney and theft of other peoples wealth and yet the Indexes are on the up like they're living in LaLa Land

So whoever thinks the stock markets are a lead indicator of the economy is a patent moron. They are only an indicator of the investment communities mind-set of either stone cold reality and fear or, the human emotional flip-side of that, over-confident sweet delusion (see now) 

[Slap That Taco]

100% free and worth every cent.

I actually agree with some of these points.  You will NEVER get my email however.

I'd bet my survival guide is better than yours.

[Tenma13]

not sure thats possible. Does yours come with treasure? Thought not.