Tuesday, October 27, 2009
The First Indices to Crack
The Russell 2000 small cap index ($RUT) has clearly broken its multi-month trend line as of the time of this post. Here's a 1 year daily index thru part of today's action:
The Dow Jones Transportation Average ($TRAN) is right there with the Russell 2000 (daily 1 year chart):
The first major cracks in this general stock bear market rally have occurred. Other indices are soon to follow. The decline may or may not be orderly and may or may not be fast, but it will be devastating to investor psychology. This cyclical-within-a-secular general stock bear market has a long ways to go. Gold and Gold stocks will weather the storm this time, unlike last year, but will still have corrections. This cyclical-within-a-secular Gold and Gold stock bull market has a long ways to go. Today is actually a good buying opportunity in Gold and Gold miners. The Dow to Gold ratio will get to 2 and may very well go below 1 this cycle. Nothing has changed, but investor sentiment is about to turn majorly negative on the stock market. The US Dollar may rally, but the Gold price will hold firm and I believe will rise significantly over the next several months.