The Risk of Undesirably High Inflation

From Thursday ‘s FOMC Minutes: “A few expressed skepticism…additional purchases might complicate the Committee’s efforts to withdraw monetary policy accommodation when it eventually became appropriate to do so, raising the risk of undesirably high inflation in the future and potentially unmooring inflation expectations. One participant noted that an extended period of accommodation resulting from additional asset purchases could lead to excessive risk taking on the part of some investors and so undermine financial stability over time.”

Gold, SPDR Gold Shares ETF (GLD) rose above its highs of the previous 11 months on 10/4/12, thereby confirming its preexisting major uptrend.

Silver, iShares Silver Trust ETF (SLV) turned systematically bullish on 10/1/12 when its price 50-day SMA crossed above its 200-day SMA.

Silver/Gold ETFs Ratio (SLV/GLD) price 50-200 SMA spread has been narrowing since 8/22/12, and a bullish crossover seems probable in days ahead.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) turned systematically neutral again on 10/4/12, when it whipsawed back above its 50-day SMA. EFA/SPY remains below its 200-day SMA, and its 50-day SMA has remained below its 200-day SMA every day since 1/14/11. EFA/SPY has been trending down for nearly 5 years, since 11/27/2007, and there is no convincing evidence of any significant change in that major long-term downtrend.

U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) remains systematically neutral. The TIP/IEF 50-day SMA has remained below its 200-day SMA every day since 6/27/12, but the 50-200 spread is narrowing and a bullish crossover seems probable in days ahead.

The S&P 500 (SPX: 1,461.40) rose 10.41 points or 0.72% on Thursday. SPX has now retraced most of its losses since the top on 9/14/12.

RSI(14) based on SPX, now at 63.68, is approaching “overbought” again. RSI(14) closed at 74.74 on 9/14/12, which was nearly 2 standard deviations above its 20-year average, indicating an extreme overbought condition.

On-Balance Volume for the SPX rose for the fourth consecutive trading session but still has recovered little more than half of its loss from its minor high on 9/14/12, thereby demonstrating relative weakness and bearish divergence. OBV fell to its lowest level in 7 weeks on 9/28/12 and remains far below its highs for the year, 2012, thereby demonstrating major relative weakness and bearish divergence compared to the SPX price index.

NYSE volume rose 1% to a level 4% below its 200-day SMA on Thursday. Average volume has been trending down for more than 6 years, since 6/30/2006, and fell further in September, 2012, reflecting diminishing enthusiasm for stocks. NYSE Volume 50-day SMA and 200-day SMA both fell to their lowest levels in 13 years on Tuesday 9/11/12, and both are still trending downward.

The technical condition of the stock market does not support the excessive optimism of the bullish majority of stock investors and traders. Fed and ECB plans to buy bonds in unlimited quantities (with fiat currencies printed out of thin air and backed by nothing but a theory and a hope) do not guarantee that stock prices will continue to rise, especially now that the news is out. Typically, action is followed by reaction, and so a downside correction seems overdue. Choosing safety over risk still appears to be the most reasonable approach for conservative traders and investors.

*For extensive coverage of major global markets with illustrative charts, take a free trial for my weekly report —
click here.
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Hedge funds and equity mutual funds both lost money last year, 2011, and some are down again this year as well.

Meanwhile, one money manager made gains for 5 consecutive quarters; see:
Robert W. Colby Asset Management, Inc. (click here).

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The S&P 500 Composite Potential Resistance
1576.09, high of 10/11/2007
1552.76, high of 10/31/2007
1523.57, high of 12/11/2007
1498.85, high of 12/26/2007
1474.51, high of 9/14/2012

The S&P 500 Composite Potential Support
1440.24, high of 5/19/2008
1439.15, high of 9/12/2012
1428.98, low of 9/10/2012
1426.68, high of 8/21/2012
1422.38, high of 4/2/2012
1420.35, 50-day SMA
1418.71, high of 8/17/2012
1415.32, high of 5/1/2012
1396.56, low of 9/4/2012
1391.04, low of 8/6/2012
1389.07, Fibonacci 78.6% of April-June 2012 range
1388.71, low of 5/3/2012
1381.50, Fibonacci 78.6% of 2007-2009 range
1380.39, high of 7/19/2012
1374.81, high of 7/3/2012
1370.58, high of 5/2/2011
1363.78, 200-day SMA
1363.49, high of 6/19/2012
1362.93, Fibonacci 61.8% of April-June 2012 range
1357.38, low of 4/10/2012
1355.70, low of 7/2/2012
1344.56, Fibonacci 50% of April-June 2012 range
1340.34, Fibonacci 23.6% of 2011-12 range
1340.03, low of 3/6/2012
1335.52, high of 6/11/2012
1334.93, high of 5/31/2012
1329.24, low of 7/24/2012
1329.05, high of 6/7/2012
1328.49, high of 5/22/2012
1326.19, Fibonacci 38.2% of April-June 2012 range
1325.41, low of 7/12/2012
1306.62, low of 6/12/2012
1303.47, Fibonacci 23.6% of April-June 2012 range
1291.98, low of 5/18/2012
1289.59, Fibonacci 38.2% of 2011-12 range
1266.74, low of 6/4/2012
1265.26, low of 1/5/2012
1262.30, low of 12/27/2011
1257.58, Fibonacci 61.8% of 2011 range
1248.58, Fibonacci 50.0% of 2011-12 range
1244.80, low of 12/7/2011
1239.73, low of 12/1/2011
1238.81, Fibonacci 78.6% of 1,576.09 high
1234.81, low of 11/3/2011
1231.04, high of 12/16/2011
1228.74, Fibonacci 61.8% of 2007-2009 range
1226.64, low of 11/9/2011
1224.57, high of 12/19/2011
1215.20, low of 12/16/2011
1207.56, Fibonacci 61.8% of 2011-12 range
1202.37, low of 12/19/2011
1158.66, low of 11/25/2011
1121.44, Fibonacci 50% of 2007-2009 range
1074.77, low of 10/4/2011
1149.16, Fibonacci 78.6% R of 2011-12 range
1014.14, Fibonacci 38.2% of 2007-2009 range
1010.91, low of 7/1/2010
991.97, low of 9/2/2009
978.51, low of 8/17/2009
956.23, high of 6/11/2009
881.38, Fibonacci 23.6% of 2007-2009 range
869.32, low of 7/8/2009
666.79, intraday low of 3/6/2009
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Fixed-Income Investments

Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) fell below its 50-day SMA on 9/5/12, turning systematically neutral. TLT whipsawed back above its 200-day SMA on 9/19/12. TLT”s 50-day SMA has remained above its 200-day SMA every day since 6/24/11. Support 120.67, 118.05, 117.44, 115.69, 114.82, 109.69, 106.08, 103.20, 102.27, 96.31, 94.83, 93.14, 89.65, and 88.14. Resistance: 127.72, 130.69, and 132.22.

Bond, iShares Barclays 7-10 Year U.S. Treasury ETF (IEF) crossed above its 50-day SMA on 9/25/12, turning systematically bullish again. IEF remains above its 200-day SMA, and its 50-day SMA has remained above its 200-day SMA every day since 6/21/11. Support 107.23, 106.42, 105.84, 105.22, 104.77, 103.90, 102.51, 101.77, 101.36, 101.11, 99.79, and 97.66. Resistance: 108.99, 109.32, and 109.89.

Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) fell below its 50-day SMA on 9/25/12, thereby turning systematically bearish again. JNK/LQD fell below its 200-day SMA on 9/20/12. JNK/LQD 50-day SMA has remained consistently below its 200-day SMA every day since 6/1/12.

U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) rose above its 50-day SMA on 9/4/12, thereby turning systematically neutral. TIP/IEF rose above its 200-day SMA on 9/27/12. The TIP/IEF 50-day SMA has remained below its 200-day SMA every day since 6/27/12, but the 50-200 spread is narrowing and a bullish crossover seems probable in days ahead.
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Tangible Assets, Commodities

U.S. dollar ETF (UUP) 50-day SMA fell below its 200-day SMA on 10/2/12, thereby turning systematically bearish. UUP fell below its lows of the previous 10 months on 9/14/12. UUP closed below its 50-day SMA on 8/3/12 and fell below its 200-day SMA on 8/31/12. UUP’s Support 21.57, 21.07, and 20.84. Resistance 21.93, 22.36, 22.45, 23.14, 23.52, 25.84, 27.19, 28.97.

Agriculture, PowerShares DB Agriculture Fund ETF (DBA) turned systematically neutral suddenly on 9/17/12 when price crossed below its 50-day SMA. DBA remains above its 200-day SMA, and its 50-day SMA remains above its 200-day SMA.

Crude Oil, United States Oil ETF (USO) turned systematically bearish on 9/19/12, when price suddenly and sharply fell below its 50-day SMA. USO fell below its 200-day SMA on 9/17/12. USO’s 50-day SMA remains below its 200-day SMA, although that 50-200 spread has been narrowed since 8/3/12. Support 32.98, 32.45, 31.40, 29.02, 26.28, and 22.74. Resistance 37.17, 38.31, 40.29, 41.38, 42.30, and 45.60.

Gold, SPDR Gold Shares ETF (GLD) rose above its highs of the previous 11 months on 10/4/12. GLD turned systematically bullish on 9/20/12, when its 50-day SMA rose above its 200-day SMA. GLD price rose above its highs of the previous 7 months on 10/1/12, rose above its 200-day SMA on 8/22/12, and rose above its 50-day SMA on 8/3/12. Support: 168.34, 166.30, 159.56, 154.83, 148.27, 147.19, 143.97, 143.42, and 142.55. Resistance: 174.00, 175.46, 177.40, and 185.85.

Gold Mining Stocks ETF/Gold Shares ETF Relative Strength Ratio (GDX/GLD) rose above its 50-day SMA on 8/16/12, thereby turning systematically neutral. GDX/GLD rose above its 200-day SMA on 9/13/12 . The GDX/GLD 50-day SMA has remained below its 200-day SMA every day since 2/22/11, although that 50-200 spread is beginning to narrow.

Silver, iShares Silver Trust ETF (SLV) turned systematically bullish on 10/1/12 when its price 50-day SMA crossed above its 200-day SMA. Support 32.40, 31.46, 29.28, 26.87, 26.13, 25.34, 25.00, 24.44, 22.52, 20.73, and 19.44. Resistance: 34.08, 36.44, 40.23, 41.49, 42.30, 42.78, 44.71, and 48.35.

Silver/Gold ETFs Ratio (SLV/GLD) rose above its 50-day SMA on 8/16/12, thereby turning systematically neutral. SLV/GLD rose above its 200-day SMA on 8/31/12. SLV/GLD remains systematically neutral because its 50-day SMA has stayed below its 200-day SMA every day since 8/30/11. The 50-200 SMA spread has been narrowing since 8/22/12, however, and a bullish crossover seems probable in days ahead.

Copper, iPath DJ-UBS Copper TR Sub-Index ETN (JJC) price rose above its 50-day SMA on 8/21/12, thereby turning systematically neutral. Price rose above its 200-day SMA on 9/7/12. JJC remains systematically neutral because its 50-day SMA has remained below its 200-day SMA every day since 5/31/12. The 50-200 SMA spread has begun to narrow over the past few weeks, however. “Dr. Copper” is one of the better indicators of investor confidence (or lack thereof) in the global industrial economy.
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Spotlight on event stocks: Here is a stock screen I designed to pick out potential event stocks, both Bullish and Bearish. Sometimes, stocks with large changes in price and volume are later revealed to be deal stocks or are the subject of some other extraordinary events, positive or negative.

Bullish Stocks: Rising Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
1.53% , IXG , Financials Global LargeCap Value, IXG
1.00% , FDV , Value 40 Large Low P/E FT DB, FDV
0.75% , PEJ , Leisure & Entertainment, PEJ
5.99% , R , RYDER SYSTEM
7.66% , NIHD , NII Holdings, Inc.
0.58% , XSD , Semiconductor SPDR, XSD
4.53% , HIG , HARTFORD FINL
1.33% , IGE , Energy & Nat Res iS GS, IGE
0.26% , PBJ , Food & Beverage, PBJ
2.53% , RF , REGIONS FINAN
3.52% , NYT , NY TIMES STK A
1.33% , EWN , Netherlands Index, EWN
3.06% , MCK , MCKESSON CORP
1.36% , PXE , Energy Exploration & Prod, PXE
3.48% , SIL , Silver Miners Global X, SIL
0.63% , PJP , Pharmaceuticals, PJP
2.45% , TBT , 200% Short US T Bond, TBT
1.41% , EWK , Belgium Index, EWK
3.91% , MBI , MBIA
2.56% , HBAN , HUNTINGTON
2.66% , XME , Metals & Mining SPDR, XME
3.30% , AA , ALCOA
2.56% , PIN , India PS, PIN
1.26% , RPV , Value S&P 500, RPV
1.07% , RFV , Value MidCap S&P 400, RFV
1.19% , DGT , Global Titans, DGT
2.06% , RIG , TRANSOCEAN
2.36% , USB , US BANCORP
1.98% , UIS , UNISYS
2.14% , GRMN , GARMIN LTD
0.87% , NYC , LargeCap Blend NYSE Composite iS, NYC
4.42% , X , US STEEL CORP
4.36% , STLD , Steel Dynamics, STLD

Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-1.72% , PETM , PETsMART Inc
-4.39% , AVY , AVERY DENNISON
-2.26% , TDC , Teradata Corporation, TDC
-4.21% , MPEL , Melco Crown Entertainment, MPEL
-2.51% , KSS , KOHLS
-1.78% , ADSK , AUTODESK
-2.71% , QLGC , QLOGIC
-1.93% , ROST , Ross Stores Inc
-1.84% , MZZ , Short 200% MidCap 400 PS, MZZ
-1.74% , ISIL , INTERSIL CORP
-1.69% , HMA , HEALTH MGMT STK A
-0.11% , SUN , SUNOCO
-0.74% , WYNN , Wynn Resorts L
-0.59% , TLH , Bond 10-20 Year US Treas, TLH
-1.90% , PWER , POWER ONE
-1.14% , EQR , EQUITY RESIDENT BEN INT
-1.25% , TLT , Bond, 20+ Years Treasury, TLT
-0.74% , CTXS , CITRIX SYSTEMS
-0.79% , SBUX , STARBUCKS
-0.30% , PH , PARKER HANNIFIN
-1.48% , SDS , Short 200% S&P 500 PS, SDS
-0.08% , IGV , Software, IGV
-0.54% , AMAT , APPLIED MATERIAL
-0.59% , DOG , Short 100% Dow 30, DOG
-0.71% , SH , Short 100% S&P 500, SH
-1.31% , DXD , Short 200% Dow 30 PS, DXD
-1.24% , DPS , Dr Pepper Snapple Group
-0.46% , EZA , South Africa Index, EZA
-0.80% , WMB , WILLIAMS
-0.24% , LEG , LEGGETT & PLATT
-0.47% , LBTYA , Liberty Global Inc. (LBTYA)
-0.41% , DBA , Agriculture DB PS, DBA
-0.39% , JBL , JABIL CIRCUIT
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
4.08% Oil, Crude, U.S. Oil Fund, USO
3.75% Oil Fund PowerShares, DBO
2.66% Metals & Mining SPDR, XME
2.56% India PS, PIN
2.52% India Earnings WTree, EPI
2.17% Commodity Tracking, DBC
1.98% Mexico Index, EWW
1.75% Sweden Index, EWD
1.74% Financial Services DJ, IYG
1.60% SmallCap Blend EAFE MSCI iS, SCZ
1.59% Frontier Markets Guggenheim , FRN
1.52% Austria Index, EWO
1.51% Canada Index, EWC
1.48% Financial SPDR, XLF
1.46% Indonesia MV, IDX
1.46% France Index, EWQ
1.44% European VIPERs, VGK
1.43% United Kingdom Index, EWU
1.41% Belgium Index, EWK
1.40% Switzerland Index, EWL
1.33% Netherlands Index, EWN
1.33% Energy & Nat Res iS GS, IGE
1.32% Basic Materials DJ US, IYM
1.31% Spain Index, EWP
1.29% Italy Index, EWI
1.29% Materials SPDR, XLB
1.28% Growth EAFE MSCI, EFG
1.27% Latin Am 40, ILF
1.27% Financials VIPERs, VFH
1.25% Silver Trust iS, SLV
1.24% EMU Europe Index, EZU
1.24% Russia MV, RSX
1.23% Value EAFE MSCI, EFV
1.23% WilderHill Clean Energy PS, PBW
1.22% Foreign LargeCap EAFE MSCI iS, EFA
1.22% Europe 350 S&P Index, IEV
1.21% Thailand MSCI iS, THD
1.20% Financial DJ US, IYF
1.18% Dividend International, PID
1.16% Japan Index, EWJ
1.14% Capital Markets KWB ST, KCE
1.13% Germany Index, EWG
1.11% Malaysia Index, EWM
1.11% Global ex U.S. LargeCap Blend, ACWX
1.07% Energy VIPERs, VDE
1.07% MidCap Value S&P 400 iS, IJJ
1.03% Chile MSCI iS, ECH
1.03% LargeCap Value S&P 500 iS, IVE
1.02% Emerging Markets MSCI iS, EEM
1.01% Energy SPDR, XLE
1.00% Value MidCap Russell, IWS
1.00% Value LargeCap Dynamic PS, PWV
1.00% Dividend ex-U.S. DJ iS, IDV
0.98% Energy DJ, IYE
0.95% Transportation Av DJ, IYT
0.95% LargeCap Value Russell 1000 iS, IWD
0.94% Pacific VIPERs, VPL
0.93% Emerging VIPERs, VWO
0.93% Value VIPERs, VTV
0.93% MidCap S&P 400 SPDRs, MDY
0.92% Australia Index, EWA
0.92% Global 100, IOO
0.91% Consumer Discretionary SPDR, XLY
0.91% MidCap Blend S&P 400 iS, IJH
0.90% Value SmallCap VIPERS, VBR
0.90% LargeCap Blend S&P=Weight R, RSP
0.89% Singapore Index, EWS
0.87% Global LargeCap Blend MSCI iS, ACWI
0.87% Emerging 50 BLDRS, ADRE
0.86% MidCap Russell, IWR
0.84% Energy Global, IXC
0.84% SmallCap Value Russell 2000 iS, IWN
0.79% LargeCap Blend S&P 500 iS, IVV
0.78% Small Cap VIPERs, VB
0.77% Turkey MSCI iS, TUR
0.76% LargeCap Blend Russell 3000 iS, IWV
0.76% LargeCap VIPERs, VV
0.76% Blend Total Market VIPERs, VTI
0.74% South Korea Index, EWY
0.74% Growth MidCap Russell, IWP
0.74% Microcap Russell, IWC
0.72% Growth SmallCap VIPERs, VBK
0.72% LargeCap Blend Russell 1000 iS, IWB
0.72% Dividend High Yield Equity PS, PEY
0.72% Dividend SPDR, SDY
0.72% SmallCap Value S&P 600 iS, IJS
0.72% LargeCap Blend S&P 100, OEF
0.71% SmallCap Blend S&P 600 iS, IJR
0.71% S&P 500 SPDRs LargeCap Blend, SPY
0.71% Homebuilders SPDR, XHB
0.71% Telecom DJ US, IYZ
0.70% China 25 iS, FXI
0.70% Gold Shares S.T., GLD
0.69% Pacific ex-Japan, EPP
0.68% SmallCap Blend Russell 2000 iS, IWM
0.67% Dividend U.S. DJ iS, DVY
0.67% Brazil Index, EWZ
0.65% MidCap Growth S&P 400 iS, IJK
0.65% Dividend Appreciation Vipers, VIG
0.64% China LargeCap Growth G D H USX PS, PGJ
0.62% DIAMONDS (DJIA), DIA
0.61% Utilities VIPERs, VPU
0.61% Health Care SPDR, XLV
0.59% LargeCap Growth S&P 500 iS, IVW
0.58% SmallCap Growth Russell 2000 iS, IWO
0.58% Semiconductor SPDR, XSD
0.57% Utilities SPDR, XLU
0.57% Industrial SPDR, XLI
0.55% Growth VIPERs, VUG
0.52% Semiconductor iS IGW, SOXX
0.51% Water Resources, PHO
0.51% LargeCap Growth Russell 1000 iS, IWF
0.47% Consumer Staples SPDR, XLP
0.45% Bond, High-Yield Junk, JNK
0.42% Bond, High Yield Corp iBoxx iS, HYG
0.37% Bond Ex-US Treas, BWX
0.35% QQQ Nasdaq 100 Trust, QQQ
0.35% SmallCap Growth S&P 600 iS, IJT
0.29% Technology SPDR, XLK
0.26% Biotech SPDR, XBI
0.23% Info Tech VIPERs, VGT
0.22% Financial Preferred, PGF
0.20% Preferred Stock iS, PFF
0.15% Bond, TIPS U.S. Treasury iS, TIP
0.05% Hong Kong Index, EWH
0.04% Networking, IGN
0.03% Technology DJ US, IYW
0.01% Bond Treasury Short-Term iS, SHV
0.01% Bond, Emerg Mkt JPM iS, EMB
0.00% Bond, 1-3 Year Treasury, SHY
-0.01% Bond, Muni S&P ATM-Free iS, MUB
-0.03% REIT VIPERs, VNQ
-0.07% Taiwan Index, EWT
-0.08% Bond, Long-Term Corp iBoxx iS, LQD
-0.14% Bond, Intermediate US Aggregate iS, AGG
-0.15% REIT Wilshire, RWR
-0.24% Realty Cohen & Steers, ICF
-0.37% Real Estate US DJ iS, IYR
-0.40% Bond, 10 Year Treasury, IEF
-0.41% Agriculture DB PS, DBA
-0.46% South Africa Index, EZA
-0.71% Bear, Short S&P 500, SH
-1.25% Bond, 20+ Years Treasury, TLT