Sector Investing

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Headline Charts Update:

http://headlinecharts.blog.com/

I'm a big fan of the ECRI Institute. They publish two important weekly indicators that look out about 4-6 months into the future. One is for economic growth and the other for inflation. The inflation gauge has been well contained for some time indicating subdued inflation despite the headlines about oil, gasoline and food. The economic growth indicator has plunged from its high in May-07 to its current level which is a 43-week low. Their current outlook is that economic prospects have clearly dimmed, but not yet indicating recession. Let's hope they are right.

This week's strongest area was gold and gold shares. Both have quickly become extended, and could sell off with the market if there is a re-test of the August lows. But strong gold make sense if the US Dollar weakens along with declining US rates. Strong gold also makes sense as central bankers add liquidity to unlock credit markets.



I don't use Bollinger Bands often, but probably should. GoldStockProphet.com had a really good post the other day using the bands and it inspired me to review the monthly XAU chart with the Bollinger band... and it looks favorable to me for gold stocks. Used in combination with the other indicators, Gold stocks look to be breaking out.



Gold has broken out above the recent highs ready to challenge the highs of April-2006. The shares have followed and the relative strength of gold stocks compared to the SPX is looking to break out as well.

Saturday, September 08, 2007
Saturday Bullish Percents

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Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.



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Red is a column of O's in a downtrend, blue is a column of X's in an uptrend. Below 30% is oversold, and above 70% is overbought. Yellow is a shift down, green is up.

This week's bullish percents are above. Gold and precious metals stocks finally joined all other indexes and industries and shifted higher to 29% stock with P&F buy signals. This is a 'bull alert' for this group, field position is excellent and risk is generally low with the stop out point close. A stronger buy signal would be issued if there were additional up-and-down in the bullish percent and then a bullish percent breakout above the current 29% occurred.

There were a couple very bad days in the market this past week, an awful jobs report, gloomy news all around... yet there isn't a single shift lower among all the bullish percents tracked here weekly. John Murphy made a very strong case against the equity market in his columns, and there is plenty of reason to expect retesting of the lows, particularly for financials and discretionary stocks, but so far these bullish percents are encouraging to me.