The market is too strong to sell and too overbought to buy.
Box score – I have been wrong on the overall stock market but right on oil and gold/silver.
My view is that the market will (okay not has) record a significant high relative to significant lows of the past century. These would include 1932, 1982, 2002, 2009, and the COVID low of 2020. The result is an all time peak in optimism. Tom McClellan notes that the SPX has made a new high in five of the last six Fridays. Buying on Friday exudes more than usual optimism. The reason is that one is stuck with the trade until Monday no matter what negative news event might happen over the weekend. But new high after new high suggests, well, a final high will be coming. We have an echo of COVID trading with Gamestop rising 74% in one day this past week. The market is narrow in breadth. The result is that bear funds SH, PSQ, and HDGE have not fallen much.
The most reliable single indicator is the NYSE advance decline. It has been in a strong advance sing last November. It has not turned down. We will alert readers here and on themarketperspective.com when that happens.
Crude oil has ben in a narrow $77-79.99 trading range since May 2. It is slowly trending up from the May 14 low of $76.68. I still think a break to the upside is coming. Apache (APA), one of our favorite “proxy’ stocks,” bottomed May 2 at $29 and has risen to $30.59. A break above $31.50 will turn the trend up. I still own Transocean (RIG) and have increased the position. Of all the choices this may offer the most upside potential of all energy or energy service plays. The reason is that it trades at 48% of book value and has billions of orders on the books. No other driller on the planet has the offshore capacity of RIG. When oil traded at $125 in 2009, RIG was $130. In 2011, with oil over $100, RIG was $70. It has been under $20 since 2015, very out of favor.
The gold bugs are back. And no wonder in a world awash in debt. Gold reached $2,400 in April, backed off, and is trending higher now. Silver is playing catch up to gold and is knocking on the $30 resistance. Taking out $30 will likely see silver prices much higher. My choice is SLV, an ETF of silver bullion. For silver shares consider Hecla (HL) which jumped to $6.15 Friday. Coeur Mining (CDE) has jumped to $5.92. This rapid rise in these two is evidence of increasing optimism.
