Bernie Mitchell’s Fib Commentary April 23

The top projected to arrive 4/17 – 4/18 came on schedule — was followed by a sharp drop — and subsequent bounce into options expiration. After the Fed concludes its meeting on monetary policy on Wednesday, which will provide no new information, the market should continue to correct, taking SPY to a maximum 133.27 (a 6% giveback from the high). After the decline runs its course, one more rally is likely, but this time destined to fail, as the New Economy sector, (the one holdout) will not confirm a run to new highs. The upshot: Eventually a deeper selloff of the 10% – 12% variety is in store this year, with SPY targets 128 – 125. Large cap high dividend stocks will provide a relative safe haven, and suffer the least through the correction, with the OEX only coming off about 7%!

Relentless illegal naked short selling pushed the miners to 7 consecutive weeks of new lows relative to the metal. Obviously, we were way too early in our call for a miner rally, but believe the time may finally be here. The evidence: An all-time low in Weekly Range, generated the strongest Bullish Weekly Squat going back several years. An historic number of Bullish Momentum Divergences (5) going back to 9/28/11, suggests that when the turn comes it will be jaw dropping. At the same time, quality miners are sporting PE’s in the 7 – 8 range, when historically they traded for 15 – 25 PE’s. Is this a new paradigm with “gold in the ground” becoming worthless? Don’t think so! As an aside, we blame the spineless management in not vociferously voicing outrage at the hedge funds and HFT’s engaged in this illegal practice of discrediting gold investments. The remedy of course, is to take the companies private, and refloat the shares. when the gold cartel is finally broken (as it must) a few years down the road, at multiples of the current price.

The Dollar closed the week lower Next stop is 21.76, a level it held on 2/29. The likely scenario is for several more weeks of range trading, before a decisive move lower, and eventual new lows.

Little movement in rates. The catalyst for rates will come at the Fed meeting on Wednesday. Further hints that QE3 is off the table for now, should see a firming in rates, and the opposite could see TBT trade to 17.85. Longer term higher rates are coming with TBT trading to 21.96.