Are stocks topping?

16/11/2009 by Philinje.

If equities decline, we could see a rise in the dollar. While this doesn’t guarantee a drop in gold, it will probably have an effect in the short term. Gold is spiking today in Asia to a new all-time high and is currently at $1130.

Here are three articles with pretty compelling evidence of why equities might decline quite soon:

http://bespokeinvest.typepad.com/bespoke/2009/11/breadth-not-yet-confirming-new-highs.html

http://www.hussmanfunds.com/wmc/wmc091109.htm

http://www.marketoracle.co.uk/Article15052.html

You can see in the last article how the current rally has re-traced 50% of the fall in 50% of the time, as well as a variety of timing cycles. Hmm.

If gold corrects, and sooner or later it will, a number of sources are talking about $1020 as the low. And maybe we get near 80 on the dollar index. The high that follows will be meaningful - either we get to a new all-time high (possibly near $1250) or we get a lower high, increasing the risk of a major decline.

As of right now a number of cycles have converged saying yesterday through the 18th will be a major turning point for equities. Gold could see some downward pressure as a result, and then the next high could be in December or early January. There is some chance we will see $1250 to $1350 into early next year, like March-April, and then a decline into October. Continued strength through the next decline will be quite telling.

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