4um: Market WrapUp (11-22-05)

Title: Market WrapUp (11-22-05)
Source: Financial Sense Online
URL Source: http://www.financialsense.com/Market/wrapup.htm
Published: Nov 22, 2005
Author: Ike Iossif
Post Date: 2005-11-22 20:47:56 by Arete
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Keywords: (11-22-05), Market, WrapUp
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RATIO ANALYSIS

One of our favorite types of analysis is ratio analysis because it tends to reveal when the historical numerical ratio between correlated markets/sectors is at extreme points, and thus, ripe for reversal.

We like to buy gold stocks when the gold/XAU ratio is above 5.00, and sell when the ratio dips below 3.75. We are a long way from an entry point now. Moreover, as the ratio gets closer to 4, we ought to see a minor reaction, but we don't expect to see a top until the ratio gets closer to 3.5-3.25.

Another ratio that we follow closely is the one between the XAU and TLT. Notice in the previous instance we did not get a sharp counter-trend move in the XAU until the ratio exceeded 1.40.

Investors need to pay attention to the direction of interest rates versus the price of gold/gold stocks. Notice that the XAU began to rally from the 105 level as the TLT bottomed around the 88 level. The lesson here is that interest rates have risen to a level that do impact the price of gold/gold stocks, and sooner or later something will have to give. We believe that bonds will end up having to give. We will see higher interest rates and higher gold prices because the "inflation horse" is out of the barn!

Notice that an SPX/BKX ratio below 12.5 is still near its all time low. The implication is that the banking sector remains grossly overvalued. In the face of higher interest rates, investors appear to have misplaced their hopes.

The 30-Yr Bond/BKX ratio appears to be telling us that the banking sector is still in the process of making a long term top, while interest rates are making a long term low.

The QQQQ/QQV ratio is telling us that the QQQQ is near a top.

The SPX/VIX ratio is telling us that the SPX is near a top.

The OEX/VXO ratio is telling that the OEX is near a top.

The NDX/VXN ratio is telling that the NDX is near a top.

Summary

The ratio analysis is telling us that more likely, we ought to expect an intermediate term top in equity prices sometime within the next 2-5 weeks, a counter-trend move in the XAU in the 122-124 zone, to be followed by another rally above 130-135 within the next 4-6 weeks.

Last but not least, we would like to make one more comment about oil. Notice that it has "dug in" the $57-$56 zone. If it continues to hold for the next 2-3 trading days, we would expect a break above resistance at $60, and a subsequent rise above $80. Our top three stocks in the oil complex would be: MRO, OXY, and UPL. For more on oil please visit: http://www.streetiq.com/profile.shtml#MARKETVIEWS

Ike Iossif

Ike Iossif
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President Vladimir Putin on Tuesday said he backed the Central Bank's plans to double its gold reserves, as the government set out measures to boost the country's faltering gold industry.

"I support the proposal that the Central Bank pay greater attention to precious metals in forming our gold and foreign exchange reserves," Putin said, Interfax reported. Putin was speaking during a stopover in Magadan, the capital of Russia's gold mining industry, after a visit to Japan and South Korea.

Last week, the Central Bank said it was planning to raise the share of gold in its reserves from 5 percent to 10 percent. In reaction to the announcement, world gold prices reached an 18-year high on Monday.

Iranian President Mahmoud Ahmadinejad has suffered further embarrassment after his third nominee for the key post oil minister was rejected by MPs.

Mohsen Tasalloti, the director of a petrochemical development zone in southern Iran, was dogged by rumours over his personal life and fortune.

The Majlis rejected the president's first two nominees for lacking experience in the oil sector.

Nearly two-thirds of the MPs present voted against the president's candidate in a session.

The BBC's Tehran correspondent, Frances Harrison, says parliament's rejection of three candidates over the past few months is an unprecedented challenge and a huge embarrassment to the new president.

He has denied claims that he has a US green card residency permit and that his daughter is a British citizen.

Shanghai. November 23 INTERFAX-CHINA - Local residents and company officials in Harbin are currently coming to terms with an abrupt termination of the city's water supplies, which are thought to have been contaminated by an upstream petrochemical facility. Rumors about terrorist attacks and impending earthquakes are creating panic throughout the city, and most bottled mineral water and soft drinks have already sold out.

The water in Harbin, the capital city of northeastern China's Heilongjiang Province, was cut off on Wednesday following a second announcement by the government the previous evening. Locals told Interfax that the water cut has caused serious difficulties, and despite attempts by the authorities to clarify the situation, it has led to considerable panic.

"We are totally relying on the mineral water we bought in recent days, which has caused us a great deal of trouble," an official surnamed Sun with Heilongjiang United Petrochemical Corporation, a local trading company, told Interfax on Wednesday.

"We are not going to take a bath these days. Fortunately it's not summer," said Sun.

Fears of pollution caused made it necessary to suspend the water supplies, said the official local government statement released on Tuesday evening. The possible health threat was said by the municipal environmental protection bureau to have arisen from an explosion at PetroChina Jilin Petrochemical, which lies close to the banks of the Songhua River.