In what seemed like a holiday session, the markets barely budged Friday with the S&P 500 finishing down but only by 0.07 and the NASDAQ gaining 0.12%. Most of these gains came in the last hour which has been a pattern of late. From a technical standpoint the markets continue to rally and hold, although since those two massive gains wrapped around the year end, very little actual upward movement has occurred; part of this is the market has been in some form of overbought stage the entire year of 2013.
Let’s look at some longer term index charts tonight. The S&P 500 is testing September 2012 highs which in turn is testing 5 year highs. Which by definition mean the index is above the April 2012 highs. A case could be made that this will be the third major upward channel over the past year, although the fiasco around the fiscal cliff created a tremendous headfake. At the end of 2012 it was discussed that a potential “head and shoulders” formation was being created (the three green circles) but the big rally on Jan 2nd, most likely ended that idea.
The NASDAQ is not quite as strong although we generally have a similar pattern. This index has yet to reach April 2012 levels. For the market rally to continue one would think there would eventually be a rotation into this tech heavy index. You could still make the case for the “head and shoulders” pattern here until the 3200 level is breached.
Let’s look at gold and silver on these longer timeframes as well. With gold we can see a pattern of lower highs, which is bearish. There is a bearish double top that was created in August/September 2011 and the commodity has never seen those highs again. Then a lower high in November 2011, then an even lower high in February 2012 which was matched in October 2012. So until at least that level is beaten to the upside, there is no long term bullish viewpoint on gold. Now with that said one can see how important $1525 is to the downside – it has been hit three times over the past year+, and that is where buyers came in en masse.
Silver looks very similar and almost an identical analysis can be utilized, just use different numbers; a series of lower highs and $26 being the floor buyers show up at.
In interesting economic related news of the week, did you know French actor Gerard Depardieu fled to Russia to escape the now onerous top tax rates (which they tried to make 75%).
“I love your country, Russia — its people, its history, its writers,” the “Green Card” actor wrote in an open letter to Russian President Vladimir Putin. Nobody doubted that Depardieu’s decision to accept Putin’s offer of Russian citizenship stemmed from French President Francois Hollande’s plan for a “rich tax” of 75 percent for residents earning more than 1 million euros ($1.3 million). The French government has said it intends to revise its draft legislation after the country’s top court struck down the proposed law last month. Russia’s personal tax rate is 13 percent for most income, hardly comparable to Hollande’s punishing levy for the rich.