Checklist for a Top

The comments above & below is an edited and abridged synopsis of an article by Bob Hoye

The real estate market is weakening. Residential real estate peaked two years before 1929, and one year before the stock market peak in 2007. Another problem will be the collapse of the debt bubble in cars, and the unwinding of credit card debt, which is up to the highs of 2007.

Financial history calls for a high around now. London and European exchanges tend to complete big bubbles in May/June. New York could rally into September. It is uncertain if that rally would be to a new high.

The banks will likely lead the general market down. The other leader on declines, Transports, peaked in March and declined to mid May. It rebounded last week, but breaking below the 50-day would resume the warning.

Commodities have been declining since the start of the year, along with the declining dollar. The DX will strengthen later in the year and this will hit most commodities. One of the features of the post-bubble world is a long bear market in most commodities. Another feature is a chronically firming senior currency, which is still the US dollar.

This will likely confound central bankers whose commonsense/theory quotient is out of touch with reality.

Base metals have not responded to the weaker dollar. In trading below the 20-week exponential moving average, the action is in line with the other industrial commodities. The index found support just above the 200-day moving average; metals could trade sideways for a few weeks.

Industrial commodities could trade sideways for some weeks. August is the time to officially worry about seasonal weakness into late in the year.

Our other comfort for positioning gold stocks is to have the gold/silver ratio going down, which is not the case. Gold stocks are underperforming bullion at the moment.