A thousand opinions appear daily regarding business and the U.S. economy, all in an attempt to forecast the forthcoming action of the market. There is only one study of the stock market that is worthwhile, and that is the study of the price action itself. As I write, the primary and secondary price trends are bullish. I’m now watching the Transports to see if they can rise above their previous record high of 8468. If they do, it appears to me that the Industrials will not confirm a new high in the Transports. If we do get a new high (unconfirmed) in the Transports, the stock market will be on the edge of a dangerous cliff. Until Transports test or close above 8468 we’re in a waiting game.
As far as precious metals are concerned, I believe gold has carved out a strong bullish base. The next target for Gold is to close above 1400. In the meantime, we wait patiently.
I continue to sense that public perception regarding gold is turning bullish. Yet, of the 363 million Americans who are alive today, I doubt if 1% hold any position in the precious metal. Thus the base is built for an historic rise in gold and silver.
For my own part, I’ll be happy if gold and silver remain in their trading ranges. Of course, if the precious metals break out to the upside, I won’t complain.
[Listen to: John Kaiser: Strong Economic Growth – The Real Driver of Gold Prices]
The world is waiting for the first revision on second quarter GDP. If second quarter GDP is revised to be 2% or less, it will be a great disappointment. My friend Gary Shilling believes we have entered a ten-year period of deleveraging and deflation, during which average GDP will be around 2%. If second quarter GDP is revised to be 2% or less, it will be a bearish shocker. If that's the case, I would expect the Fed to institute QE5.
Back in 1958 when I was running ads advertising Dow Theory Letters, the title of the ad was, "The Story Is In the Averages." I still believe the story is in the Averages. But, I should add, incorrectly interpreted.
From a Dow Theory standpoint, the question now is: Will the Transports or the Industrials be able to advance to a new record high? Therefore, I patiently await the action of Mr. Market.
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