(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers.)    

THE RALLY IS LONG IN THE TOOTH

January 25, 2013

The stock market rally is long in the tooth.  Our long time subscribers know the proven success of our complex algorithms that detect buying and selling by Smart Money in real-time.

These algorithms are now showing that Smart Money is now beginning to lightly sell and the buyers are less sophisticated individual investors.

Here is an eye-opening statistic.  In a test going back to 2000 if an investor used $100,000 to buy popular stocks every time the market is as overbought as it is now and used a 7% stop-loss order, the investor would today be left with only $23,000 — a big loss of 77%.

The point is to be cautious and limit the new buying here at this time.

It is worth repeating that a better time to buy will be on a decisive breakout or on a pull back.

The U. K. economy shrank 0.3% in the last quarter.  If the conditions do not change Britain is likely to dip into a recession again.

Japanese yen continues to weaken on the new prime minister’s policies and Japanese stock market continues to march higher put is overbought now.

Euro is strengthening on remarks by the ECB Chief Draghi.

Gold futures are at $1657, silver futures are at $31.45, and oil futures are $96.15.

S&P 500 resistance levels are 1500, 1513, and 1530; support levels are 1480, 1474, and 1465.

DJIA futures are up 24 points.

CHINA PMI JUMPS, SMART MONEY TAKES ON MOMO CROWD IN GOLD

January 24, 2013

Our long time subscribers know that we take data coming out of China with a grain of salt because of lack of transparency.  For new subscribers we do put a lot of faith in data coming out of HSBC.  HSBC is one of the largest banks in the world and is based in London but it draws its roots from China;  it is the old Hong Kong Shanghai Bank.

Our method depends on leading indicators.  One of our most favorite leading indicators for China is HSBC’s  Flash Purchasing Managers Index (PMI).  The news is that the PMI leaped to 51.9 for the manufacturing sector.  This is indeed very good news for China.

As is usually the case, our algorithms show that the momo crowd started buying gold in Shanghai on the good news.  However, as Europe woke up, Smart Money started meeting the momo crowd with sells.  Lately, it has been unusual for Smart Money to sell gold under $1700.  Typically Smart Money has been seen selling aggressively over $1740.

In trading so far, the buying by the momo crowd has not been able to contain selling by the Smart Money.  As a result, gold is falling.   Let us see if the momo crowd takes a stand right here around $1671, the area of strong support.

The stock market continues to be very overbought and caution is warranted.  As we have stated before, it is best to wait for a pull back or a decisive breakout or blow out earnings from leading companies before initiating significant buying.

Apple is down about $50 and is not helping the sentiment this morning.

Gold futures are at $1672, silver futures are at $31.79, and oil futures are $96.13.

S&P 500 resistance levels are 1500, 1513, and 1530; support levels are 1480, 1474, and 1465.

DJIA futures are up 19 points.

DEAL ON DEBT CEILING

January 23, 2013

It appears that Washington is heading towards pushing the can down the road on the debt ceiling. Obama seems to be in agreement with the Republicans on a short-term extension to April.  This lessens the short-term risk in the stock market.  However, market is still overbought and sequestration is still ahead.

IBM and GOOG reported better than expected earnings.  The most critical earnings report today is AAPL after the close.  The key in AAPL’s report will be how many iPhone 5s are sold.  Consensus expectations is 48 million.

Gold futures are at $1692, silver futures are at $32.25, and oil futures are $.

S&P 500 resistance levels are 1500, 1513, and 1530; support levels are 1474, 1465, and 1450.

DJIA futures are down 2 points.

TWO MAJOR DEVELOPMENTS FOR GOLD AND SILVER, MIXED EARNINGS

January 22, 2013

There are two new major developments for gold and silver.

India, traditionally the largest importer of gold, has increased the import duty on gold dore bars from 2% to 5%.  The announcement came right after the increase in import tax on gold to 6% from 4%.  This is obviously a negative development for gold.

On the positive side, the Bank of Japan has raised the inflation target to 2%.  The BOJ has also decided to pursue open-ended monetary easing similar to the Federal Reserve in the United States.

This morning the momo crowd continues to buy gold and silver.  No buying by Smart Money is being seen.  There is no change in our previous ratings on gold and silver.

This mornings four DJIA components reported earnings; TRV reported much better than expectations, DD reported slightly better than expectations, VZ reported much worse than expectations, and JNJ reported slightly worse than expectations.

The stock market continues to be very overbought.  It is prudent to hold off most new purchases until there is a pull back or there is a decisive breakout, or earnings reports from leading companies justify buying right here.

Gold futures are at $1692, silver futures are at $32.02, and oil futures are $95.58.

S&P 500 resistance levels are 1480, 1500, and 1530; support levels are 1465, 1450, and 1444.

DJIA futures are down 10 points.

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