We Are Likely Close to a Capitulation Bottom


Author Larry Berman

Posted: 5 June 2012 re-posted from etfcm

Gold is breaking out, financials are breaking down, energy stocks are cheap and getting cheaper, and they are selling the utilities, which likely means we are close to a capitulation bottom.

The TSX did not make a lower low last week while most stock markets globally did. This bodes well for the commodity stocks and golds in particular making at least a short-term bottom. But if we are correct and the world is slowing significantly, not just because of Europe, but because of China’s harder landing scenario, then commodities do not bounce very high unless we see a massive coordinated central bank QE effort (which cannot be ruled out).

So traders, expect markets to be tough and focus on the daily and weekly charts for reversal signals. Right now, the weeklies are oversold enough and trying to at least make a short-term bottom with the better seasonals in June and July to support the bounce. The fall could be nasty once again especially with the US political theatre likely to be major fodder for the late night circuit. How can it be funnier than Palin-McCain you ask…it’s so sad it has to be funny.

 

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