Ryan Puplava's Blog

It has been a wrenching month to hold energy stocks with the dollar rising steadily in August and in September, pushing commodity prices down. Gold has fallen from $1320 to as far as $1183. West Texas Intermediate has fallen from $100 a barrel to $86.50 at the time of this report.

It’s time to do a technical checkup on the market. There have been a couple of trends to note recently that indicate where investors should bias their equity allocation. As I have mentioned a few times lately, there has been a large concern over valuations in the market.

As I’ve been hearing the pushback to the market’s gains, there are a few that are louder than the rest. I guess if you say something enough times, it becomes truth. Unfortunately for the general population, not many investors are savvy enough to do their own statistical analysis nor do they have the databases...

It was a very interesting setup leading into the Fed meeting this week. The Consumer Price Index (CPI) has been rising as of late. Expectations were that the Fed would tighten its language over interest rates and inflation as a result of the recent climb of CPI.

Since 1976 increases in the price of energy have had the highest correlation to 10%+ corrections than valuations, interest rates, or Fed tightening (see image below). The development of a fresh rise in energy prices will need to be watched by even the most bullish of economic forecasters.

The market was hit with a “significant (stimulus) package” today as Mario Draghi pointed out in his conference call. The head of the ECB also said that they aren't finished, which helped pushed markets into new record territory.

So the second estimate on first quarter GDP was released today – down 1 percent instead of up 0.1 percent. This was the first decline since 2011. Does that mean we’re headed for recession? The financial press has defined a recession as two negative quarters in real GDP. Is 0.1 percent really a decline worth noting? I think not.

There seems to be a prevailing consensus in the market analysis I’ve been reading, that head and shoulders patterns are always reversal patterns and their completion is inevitable. Not True. Often, they can form, what we call, continuation patterns – i.e. consolidations.

Based on current comments and economics for Europe, it is likely we may see a drop in interest rates at the June meeting if inflation drops again mainly to counter the rise in the euro. The rise in the euro has been caused by economic recovery and capital inflows.

The Dow Jones Industrial Average closed at a new 52-week high yesterday — with little fanfare. While the Dow Jones Transports and the S&P 500 are close behind, the Nasdaq Composite and the Russell 2000 are still well below their previous 52-week highs.