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The US markets remind me specifically of the point in time where Internet stocks were beginning their runs yet not included within the major indices. There was a divergence between the returns made within the S&P 500 and DJIA and those made by groups outside the index. When they were added we entered the final blowoff phase. Expect the same with mining stocks. The NASDAQ’s recent strength looks like a laggard rally and possibly signals a top being put into place. A couple of days ago P. Arthur Huprich of Raymond James pointed out in an interesting piece that MSFT, GOOG, CSCO, AAPL, INTC, ORCL, and RIMM account for 25% of the movement of the NASDAQ. That is very interesting information indeed. This is not to say that we will have a major top but since the tech bubble collapse growth has been difficult to achieve outside of a few firms and tech stocks have become the market laggards. The Yen depreciating alongside the dollar makes me bearish on the Japanese market despite rising exports and profits. This is another trade in the Asian cycle which is coming to an end as the laggard and tertiary markets begin to outperform the more established ones. Gold looks ready to make a run at $850 after Friday’s strong finish. Silver may be on the verge of making a technical breakout as well. A lot of people are piling into gold and silver which is beginning to make me nervous. We may have a bit of a pullback but get ready for a wild ride the next six months. Financials will remain in the markets crosshairs with all of the news that is coming out this weekend. I saw this and more in the 3rd quarter reports. The best thing to say is the quicker we get to liquidation the better. This comes from someone who witnessed the S&L bailouts first hand. All the dancing around is well intentioned but helps no one in the end, although the dance does have a purpose.
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