A major objective of all the money printing, government intervention, and low interest rates is to create positive inflation, which includes asset price inflation.
Asset inflation helps heal sick balance sheets and repairs a portion of the lost "wealth effect".
When gold lies dormant, it means reflation is not working all that well in the minds of market participants. Gold’s recent breakout may indicate that in the minds of market particiapants reflation of assets is working. That mind set results from the fear of future inflation caused by money printing, intervention, etc.

Crude oil also can lend support to the relation case as market participants look for ways to protect purchasing power and profit from slowly improving fundamentals. Regardless of whether or not crude oil can hold the recent breakout as of the close Friday (10/15/09), the primary trend for oil will remain up.

The CRB Index is a basket of commodities including, but not limited to, copper, sugar, heating oil, wheat, live cattle, crude oil, platinum, natural gas, and soybeans. The CRB Index also experienced a breakout this week contributing to bullish reflation trends evident across many markets.

Stock Market Remains Healthy

On Friday, the S&P 500 will be trying to hold above its 89-week moving average (green line in chart below). As of Thursday’s close the 89-week stood at 1,066.83. As you can see in the spring of 2008, the 89-week acted as resistance. A sustained break above 1,066 would provide some support for the current bull market (resistance becomes support).

Expecting More Of The Same Also Involves Risk Management

We often say:

We will expect to see more of the same (bullish trends, higher highs, and normal corrections), until we see significant evidence to the contrary.

By Chris Ciovacco
Ciovacco Capital Management

Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com

Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. As a registered investment advisor, CCM helps individual investors, large & small; achieve improved investment results via independent research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions. When looking at money managers in Atlanta, take a hard look at CCM.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

Chris Ciovacco Archive

Comments

Victor
16 Oct 09, 09:45

Stock Market Remains Healthy

confused.

A few months ago you wrote

Highest Probability – New lows / continuation of bear market.

Moderate Probability – Cyclical bull – higher highs – followed by retests or new lows.

Lowest Probability – A sustainable bull market (secular).

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.