U.S. Stock Market - April 12th Week In Review

Lots of record highs were posted this past week among major U.S. stock market averages The S&P 500 Index posted a record intra-day high at 1.597.35 and a record closing high at 1,593.35 on Thursday, April 11^th. The Dow Jones Industrial Average posted a record intra-day high at 14,887.51 and a record closing high at 14,865.14 on the same day (4/11). The NASDAQ Composite Index posted a new “reaction” high at 3,306.95 on Thursday which is up 161% from its March 2009 low, but still 35% below its all-time high at 5,132.52 set in March 2000 in the “Dot Com” bubble. Other major indexes like the Russell 2000 and the Dow Jones Transportation Average failed to post record highs last week, but they are both very close and can not be considered so-called bearish non-confirmations.

Here are Friday’s closing marks, with changes from Thursday’s close, and also with changes on the week, respectively:

                                                              Friday’s Change                          Weekly Change

DJ Industrial Average               14,865.06       -  0.08     -0.00%        +299.81           +2.06%

S&P 500 Index                           1,553.30       -  4.50      -0.28%        +  35.55           +2.29%

NASDAQ Comp.                        3,294.95       -  5.20      -0.16%        +  91.10           +2.84%

Russell 2000 Index                       942.85       -  4.20      -0.44%        +  19.55           +2.12%

DJ Trans. Average                     6,143.75       -21.11      - 0.34%       +106.39           +1.76%

The latest investor sentiment indicators are mixed. As reported in Barron’s this weekend, the Consensus and Market Vane weekly surveys show 77% and 65% bullish, respectively, on the U.S. stock market. The odd man out is the latest weekly AAII survey which shows only 19.3% of individual investors are bullish while an incredible 54.5% are outright bearish. This latest AAII survey is extremely puzzling to me, but probably shouldn’t be ignored in any market assessment.

Gold/Silver? Friday’s collapse in the precious metals futures, ETF’s, and related mining shares came as a complete surprise to me. The U.S. Dollar Index was mixed against most major currencies on Friday, so we can’t blame the plunge in gold/silver prices on strength in the Dollar. Sure, Cyprus is expected to be a seller of a relatively minor amount of gold from its reserves to fund its recent bailout agreement with the EU/IMF. And yes, India has imposed stiff import tariffs on the yellow metal which has curtailed demand there. However, the long lists of positives for Gold/Silver (central bank purchases by China & Russia, among others, and record “debasement” of currencies through debt monetization programs in Japan and the U.S., among others) clearly support precious metals prices. To explain Friday’s panic selling in Gold/Silver (GLD and SLV down about 5% on the day), we can probably look at hedge fund [forced] liquidations, margin calls, and a major breakdown in all technical chart support. While I view Friday’s collapse as “climactic” and part of a terminal “washout” of weak longs which will inevitably be followed by a V-shaped rally, no one can say for sure when that rebound will begin in earnest. For my managed accounts, I bought Gold/Silver mining stocks on Thursday and then added to these positions on Friday. Needless to say probably, my timing was less than ideal, but I still believe there is a major advance coming in this market.

Bottom Line: In recent columns here, I have been looking forward to a potential peak in the S&P 500 Index on Monday, April 15^th. While I remain convinced that a major correction in the U.S. stock market is imminent, the timing of this actual peak remains illusive. I would like to see early strength this coming week (and maybe even new record highs in both the SPX and the DJIA) followed by a key intra-day reversal to the downside before sinking my teeth into any meaningful short positions.