Just Stop Teasing Me

Let’s start off this week’s Alert with a quick glance at a chart of the S&P 500 Index for the past two months. As you can see, we’ve basically been mired in a trading range between 1,030 and 1,110 throughout this entire time. It’s as if the market was just teasing us here, tempting us to go in, but not really giving investors a sense of what its next move likely will be.

A few weeks ago, I said that new money could go into equities as long as you had a tight stop loss. I still feel that way, but I certainly would like this market to stop teasing us and make a move to the upside with some conviction.

Of course, we could see the opposite take place here, and the market could pull back with conviction. If we see the S&P 500 break below its 50-day moving average (blue line), it could mean the start of a year-end sell-off. 

But the real action of late hasn’t been in the stock market; the real action has been in gold. There is, perhaps, no more emotion-infused topic when it comes to investing than gold. I remember back in 1981 when lines formed to buy gold at $800 an ounce. Gold continued to go parabolic, and the lines seemed to get longer and longer. 

Most people who bought gold coins at that time still own them, and vow never to give up possession. Now, we seem to be in a similar spot with gold. I’m not saying gold can’t or won’t go parabolic again from here, but what I am saying is that I’ve seen this kind of action before. 

Below is a chart of the SPDR Gold Shares (GLD) over the past two months. Since Oct. 1, gold is up 20%. But since Nov. 1 gold is up 15%. Can gold go higher? Absolutely it can. Yet, I don’t view gold at these levels as an attractive buying opportunity.