Other than Irene ripping up the East coast over the weekend, nothing dramatic happened, at least nothing that would send the market to the dumps. In fact, a couple of good things showed up that could help the market take a ride up. The best thing is consumer spending rose in July after dipping in June. Another is that Irene did little damage to the East coast refineries. And still another is the second and third largest banks in Greece plan to merge, a step many have urged to increase lending and boost the financial sector of that country. Yet none of the above will do much, really, to curb the ubiquitous undercurrent of fear, which brings me to a question …
What will trigger the bursting of the gold bubble? When is it likely to happen? How low will it go?
Gold is a finicky creature. It tends to grow fat on fear in bad times, and tends to stay in shape when inflation threatens. Since core inflation is not an issue these days, gold is growing fat on fear. So, when the fear stops, when the breathless media has more good than bad to report, and when the players in that crowded trade think the trade is over, then the bubble will burst. When that will be is a matter of economic and political reality, meaning, when the debt and deficit issues are addressed meaningfully, and when the economic indicators are consistently good, look then for the trade to reverse strongly. How low it will go is a matter for the market to decide. Consider, though, it has risen astronomically. Consider as well, Newton’s third law of motion – for every action there is an opposite an equal reaction. Now, onto another question …
How many years do you think until there are better conditions in the American stock market?
Well, barring any catastrophic event, I don’t see a market recovery in terms of years. In fact, I see a strong fall, at a minimum. I am a believer that Japan’s recovery this fall, lower oil prices this the fall, and the movement into the major buying season this fall will boost global economic growth, thus causing the GDP to go up. After that, who knows, as everything depends on the sustainability of a global economic recovery, meaning as soon it takes root, then off to the races we go. Just one more question …
I liked your article on trading and broken promises of the so-called experts. This has been my experience also. My question is, what trading software do you use? I am a fan of John Colby’s Stockcharts, but I need trading software also.
Experts, smexperts. The market, like gold, is a finicky creature, and predicting her behavior is, well, a shot in the dark at best most of the time, especially these days. Having reliable software that helps with that is a plus, and as I have said before, I use VantagePoint Intermarket Analysis software to guide me.
Is everyone ready for another week in the amusement park?
Trade in the day – Invest in your life …
