Last week we noted the breadth drop in the NASD stocks. During the big Monday sell-off, the number of NASD stocks over their 50 day moving average had dropped to a mere 27%. Well cancel that memo. The big gap on the chart caused by the sell-off was filled this past two weeks. The number now stands at 43% and jumped, gapping up Thursday. The SPX did likewise and now 66% of the 500 stocks are over their 50 day moving average.
We mentioned that late August tends to be positive for stocks. That seasonality is living up to its legend. In 2007 stocks rose during August and into September. Finally stocks succumbed to selling in October. During the next two years the NASD lost 75% of its value. For now, the trend is our friend and it is up.
Google/Alphabet is the only one of the Magnificent Seven tech stocks not participating in this rally. Apple and Amazon are showing strong performances. The momentum indicators are about to kick in which will drive prices higher. The Industrials’ previous high was around 41,250. Thursday it closed at 40,295. Taking out the previous high looks quite likely now.
Gold has been in a sideways trading range since April. It has been bounded by $2,300 and nearly $2,500. Thursday it closed up $13 to $2,455, mid-way of Thursday’s range. Gold and silver are still trading at a discount to the gold price on the Sprott fund site. The high for silver Thursday was $28.58 with a close near that at $28.41. That too is bullish. Understand that the U.S. is spending one trillion dollars every 100 days. The U.S. is borrowing that money. Congress is spending money it does not have. The dollar is fiat currency, it is worth something because the government says so. This is not the case for gold and silver which are real money. I define real money as the kind politicians cannot print from trees. Eventually the discount on gold and silver will turn to a premium and the rush for metals will be on.
Crude oil closed up Thursday. Our bell weather Apache (APA) has also closed the gap from two weeks ago. Here momentum looks to be turning up as well. Transocean (RIG) rose 3.5% and still trades at a heavy discount to book value, about 60%.
So the outlook for stocks, metals, and oil is solid for the next few weeks.
