After spending the prior week moving in a tight, sideways rang or bull flag, all of the major market indexes broke out to the upside and a higher-high as volume ticked up 9.32% on the NYSE and 0.82% on the NASDAQ. With more stocks adding to the list of recent breakouts, the market's rally gains steam and credibility.
While we get a lot of questions regarding this latest gimmick of minting a $1 trillion platinum coin in order to circumvent the debt ceiling, we would first point out that this is news noise, and investors should focus on the price/volume action of the market and leading stocks. It is, however, simply another stop gap in the overall government financing scheme of "print-and-spend." The U.S. can mint coins just as easily as it can print dollar bills, and while the coin is claimed to be "non-inflationary" since it will never go into circulation, we fail to see how using a coin as collateral for the purpose of issuing more debt, ostensibly an inflationary act, does not serve to drive inflation higher. You cant create wealth out of thin air by printing money or minting coins. Ultimately, the dollar will pay the price, as will the purchasing power of those investors who have engaged in the formerly virtuous act of saving and investing their money.
The SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) both moved above their 200-day moving averages yesterday, and this could be the start of a recovery type of move pending a new, bona fide buy signal. Quantitative easing remains in effect at the Fed, the ECB, and the Bank of England, and we would tend to think that at some point this has to figure into higher commodities prices, including gold and silver prices. While phasing out QE3 has been suggested for sometime in 2013, the likelihood given the current state of the economy remains very small, thus we should see both GLD and SLV finish out their current basing patterns and break out to new highs sometime this year. On weekly charts, no breakdown in the precious metals is evident, and in fact the more than year-long consolidations they are still working on could easily provide solid launching pads for further upside at some stage. And as investors search for a fundamental basis for the market's current rally, we might consider the potential for an inflationary rally in equities.
LNKD traded sufficient volume for a pocket pivot buy point yesterday, although its high-volume breakout from a cup-with-handle basis is buyable on its face. LNKD gapped up sharply right at the open Thursday morning to qualify for a buyable gap up, but later retraced to drop beneath the required level to maintain a move of at least 0.75 x the 40-day Average True Range. Thus the buyabel gap-up was negated once it retraced below this level, but the pocket pivot and the base breakout both qualify as legitimate buy points. Earnings and sales have been very robust. Institutional sponsorship has climbed 4 quarters in a row as strong increases in the number of mutual funds owning the stock have been the norm. Some of the best funds out there, which we are familiar with from our prior experience as former institutional advisors for William O'Neil + Company and including top ranked Fidelity funds, have been steadily increasing their holdings of the stock over the past three quarters. LNKD is just another in an ever-expanding list of top-rated stocks that are popping ot of bases, one by one.