The Golden Cross

The Russell 2000 index is exhibiting a very bullish chart formation. Not only are there higher lows and higher highs, but I see an impending "golden cross" whereby the 50 day moving average is about to pierce its 200 day moving average on the upside. This tells me to buy and add to my small cap stocks now. I prefer to buy in the 680's, but waiting for this level may prove to be an expensive hesitation. All aboard!


Ok, I was early here, rut is a 518 as I write, October 22nd. I hate it when golden crosses fall down. Live and learn.

Answers to quell market panic...

1) Public Company Accounting Oversight Board has dropped the ball on Sarbanes-Oxley. We need to enforce this act ASAP. Many companies' books are completely opaque.

2) Bring back the short-sale uptick rule ASAP. Shorts can short indiscriminately causing market volatility.

3)Ban naked short sales. Shorts MUST borrow shares sold short.

4)Create a SWAP exchange via a consortium of banks which will enable clearing, settlement, and marking of swap positions.

5)Allow employees to sell or hedge company stock. Many people lost their savings because of this inability to diversify their future.

Banks are the market's engine....

An old adage on Wall Street, as goes financials, so goes the market. I think of big money center banks as the engine on the train that is the market. They were the first to go down and will be the first to come back up again. We are currently seeing money center bank strength as evidenced by the recent strength in the BKX (PHLX KBW Banking index). Whether this is massive short covering or real buying, I do think that this sector points to higher market levels in the future. If it is simply massive short covering, maybe its duration will be long enough to get us through the other side. I guess its always darkest before the dawn.

What About Deflation?

The financial media is all about inflation, but actually we have seen the forces of deflation in action. Houses, stocks, and now commodities are crashing in value. Wages are probably next on the list. Inflation makes these go up, not down. Maybe we are simply seeing a decline in the standard of living instead of inflation. I am starting to rethink my bearishness on the long bond. The long bond has been the place to be of late, as the forces of deflation creep into our lives. A rate cut would keep the forces of deflation at bay.