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An Interesting Week For Gold!

 November 19, 2012 01:45 PM

Gold spiked up week before last, supposedly on concern that the fiscal cliff will not be resolved and Armageddon will follow.

But we told our subscribers that although the spike-up had our attention, that with our intermediate-term indicators still on the October sell signal, and gold short-term oversold beneath its 30-day m.a., odds were that it was only a brief bounce off the short-term oversold condition that would carry it back up toward another test of the resistance at the 30-day m.a.

And indeed at this point, its brief rally attempt continued but stopped exactly at the m.a. and it is declining again. Our initial downside target remains at about $1,650.

If the trendline does not hold as support the target will have to be revised.

Gold Mining Stocks:

The gold mining stocks have been in even worse shape than bullion over the last two years, plunging 38% from a triple-top last year to their low in May of this year.

They then put in a promising rally since July, moving up with the rest of the stock market.

But as soon as the gold stocks reached the overhead trendline resistance again in mid-September, they began pulling back with rest of the stock market and the bullion.

And the mining stocks plunged an additional huge 8.5% this week.

We don't know that there is anything in that regarding gold billion, or the rest of the stock market. But it was interesting to see.

Defensive Stocks Are Failing Again As Safe Havens!

[Related -Will Job Growth Kill The Bear-Market Signal For Stocks?]

[Related -Tackling China's Debt Problem: Can Debt-Equity Conversions Help?]

In times of uncertainty, and in preparation for market declines, Wall Street's advice to investors is always the same.

The market cannot be ‘timed', and cash does not pay enough interest to even keep up with inflation. So investors need to remain fully invested and continue to buy stocks, but can protect themselves by shifting to ‘defensive' stocks and sectors.

The advice has always been the same.

No matter what happens to the economy people will still have to eat, drink, and take their medicines. So food, beverage, and drug companies will continue to do well in an economic or market downturn. And the stocks of utilities and other solid companies that pay high dividends will also do well since the dividends will help offset a decline in the stock prices.

They do not explain that although consumers will still have to eat, drink, and take their medicines, investors will not have to continue to value the earnings of those companies as highly as they did in a rising market. Stocks that sell at 20 times earnings in the excitement of a rising market may only sell for 12 times earnings by the time a correction has made investors more fearful. So even though a company's earnings continue to rise, its stock will still be dragged down by the falling market.

The same holds true for the high dividend payers. They also do not escape the problem of investors not being willing to value their earnings as highly as they did in a rising market.

In fact, since defensive stocks and sectors are touted so heavily by Wall Street near market tops, driving their prices to more over-valued levels than other stocks, their subsequent declines often exceed the decline of the rest of the market.

It doesn't take much research to check it out, but unfortunately most investors aren't inclined to bother. However, that is my job, and here are the facts.

Utilities are traditionally among the highest dividend paying stocks. Yet the DJ Utilities Average plunged 60% in the 2000-2002 bear market, considerably more than the 50% decline of the S&P 500. And it plunged 48% in the 2007-2009 bear market, not much different than the 50% decline of the S&P 500.

Yesterday in the U.S. Market.

Finally a fractionally positive day after four straight down days. The Dow was down  71 points at mid-day but struggled back in the afternoon to close up 45 points, or 0.4%.

As is normal on options expiration days, trading volume picked up, but only to 0.95 billion shares traded on the NYSE.

The Dow closed up 45 points, or 0.4%. The S&P 500 closed up 0.5%. The NYSE Composite closed up 0.4%. The Nasdaq closed up 0.6%. The Nasdaq 100 closed up 0.4%. The Russell 2000 closed up 0.9%. The DJ Transportation Avg. closed down 0.5%. The DJ Utilities Avg closed up 1.1%.

Gold closed down $4 an ounce at $1,713.

Oil closed up $1.05 a barrel at $86.50 a barrel.

The U.S. dollar etf UUP closed up 0.2%.

The U.S. Treasury bond etf TLT closed down 0.1%.

Yesterday in European Markets.

European markets closed down sharply again yesterday.  The Europe Dow close down 1.8%. The London FTSE closed down 1.3%. The German DAX closed down 1.3%. France's CAC closed down 1.2%. Italy closed down 2.0%. Spain closed down 1.4%. Greece closed up 0.3%.

Global markets for the week.

Another very negative week. especially for gold stocks and Brazil. It was the 5th triple-digit down week for the Dow out of the last 7 weeks.

THIS WEEK (November 16)
DJIA12588- 1.8%
S&P 5001359- 1.5%
NYSE7931- 1.5%
NASDAQ2853- 1.8%
NASD 1002534- 1.9%
Russ 2000776- 2.4%
DJTransprts4891- 2.5%
DJ Utilities443- 1.1%
XOI Oils1,172- 2.4%
Gold bull.1,713- 1.0%
GoldStcks166- 8.5%
Canada11877- 2.6%
London5605- 2.8%
Germany6950- 3.0%
France3341- 2.4%
Hong Kong21159- 1.1%
Japan9024+ 3.0%
Australia4360- 2.7%
S. Korea1860- 2.3%
India18309- 2.0%
Indonesia4351+ 0.4%
Brazil55402- 3.4%
Mexico40830+ 0.4%
China2109- 2.6%
LAST WEEK (November 9)
DJIA12815- 2.1%
S&P 5001379- 2.5%
NYSE8053- 2.2%
NASDAQ2904- 2.6%
NASD 1002584- 2.7%
Russ 2000795- 2.4%
DJTransprts5018- 1.8%
DJ Utilities448- 4.6%
XOI Oils1,201- 2.0%
Gold bull.1,731+ 3.2%
GoldStcks181+ 1.2%
Canada12196- 1.5%
London5769- 1.7%
Germany7163- 2.7%
France3423- 2.0%
Hong Kong21384- 3.3%
Japan8757- 3.3%
Australia4482- 0.1%
S. Korea1904- 0.7%
India18683- 0.4%
Indonesia4333- 0.1%
Brazil57357- 1.8%
Mexico40677- 2.6%
China2166- 2.3%
PREVIOUS WEEK (November 2)
DJIA13093- 0.1%
S&P 5001414+ 0.2%
NYSE8234+ 0.5%
NASDAQ2982- 0.2%
NASD 1002656- 0.3%
Russ 2000814+ 0.1%
DJTransprts5110+ 1.2%
DJ Utilities470- 1.2%
XOI Oils1,225- 0.2%
Gold bull.1,677- 2.0%
GoldStcks179- 2.1%
Canada12380+ 0.7%
London5868+ 1.1%
Germany7363+ 1.8%
France3492+ 1.7%
Hong Kong22111+ 2.6%
Japan9051+ 1.3%
Australia4483- 0.3%
S. Korea1918+ 1.4%
India18755+ 0.7%
Indonesia4338- 0.1%
Brazil58382+ 1.9%
Mexico41761- 0.2%
China2217+ 2.5%


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