European debt and equity markets remained relatively uneventful for most of this week (and improved slightly), especially compared with the roller-coaster rides they provided in October and November.
That placidity has carried over to our market, and then some, last week's torpor was followed by extremely dull trading. What passed for interesting was the fact that over a couple of days the Chinese stock market experienced a pretty decent bounce; it remains to be seen if that turns into something meaningful.
The 2012 trading sessions to date have been so dull that my friend Fred Hickey, who publishes the High-Tech Strategist newsletter, dubbed these the "daily doldrums." That description is so apt that I've been tempted to change the name of the daily column I write on my own website from the Market Rap to the Daily Doldrums, or perhaps the Market Nap.
I'm sure that dullness will abate at some point. But the combination of a secular bear market, which has been under way for a decade or so, and money printing has basically turned the market into a giant taffy pull interspersed with periods of wild volatility. Just look at last year, when the Standard & Poor's 500 Index ($INX) traveled more than 3,000 points only to finish almost unchanged.
Bill Fleckenstein
Still on a short leash
For those who expect a downturn in stocks and are anxious to get short -- and I must admit I have thought about taking a shot at a stock or two -- I would note that on the night of Jan. 9, Juniper Networks (JNPR, news) preannounced, and after having been about 7% to 10% lower initially, at one point the stock was 5% higher before closing flattish the next day.
I think there are a lot of candidates that might have trouble winning at the earnings-season game of beat the number, but the response to Juniper's horrid news is hardly encouraging from the perspective of a short seller. Thus, the environment I commented on from time to time last year persists: Short positions don't work very well, yet longs don't either, generically speaking.
Fit to be turning the tide
Speaking of longs, it is interesting to note that Tuesday night some Microsoft (MSFT, news) executives at the Consumer Electronics Show said that PC sales were probably worse than expected in the fourth quarter. (Microsoft is the publisher of MSN Money.)
That brings up the question: Worse than who expected? Because I think pretty much everybody knew that PC sales were going to be crummy since (a) it is a market that is driven essentially by replacement demand and (b) the floods in Thailand disrupted the supply chain (although, to the extent supply was disrupted, that means this quarter and next quarter might be a bit better).
Nonetheless, after initially being hit for a couple of percent on the news, Microsoft quickly recovered the next day and is exhibiting a different personality so far this year compared with last. I think that this will be the year for Microsoft to "work," regardless of what the stock market does. This is a slight variation of my prior thinking, i.e., that if Microsoft didn't do well, stocks generically wouldn't either. It is a slightly more optimistic view on my part, but it is still just a guess.
This island may not be so deserted
For those who have been suffering with gold stocks -- that is, anybody who has owned them -- I am going to take the risk of venturing outside my area of competence and talk a little technical analysis.
It looks to me as if the large-cap gold miner exchange-traded fund Market Vectors Gold Miners (GDX) may have experienced a rather large island reversal as it gapped up to start the new year, and it held that gap for about five days. It subsequently gapped up again Jan. 10, although that gap was filled the following day. I think island reversals deliver a rather powerful psychological message about crowd behavior.
Of course, one of the problems with the GDX, and gold itself, is that gold gaps all the time (because it trades around the clock), so to some degree gaps are not all that noteworthy, and they almost always get filled in. However, to me it felt like the gap higher to start the year and the island reversal left behind, combined with other bits of data, may mean that the low we saw in late December will be the low for this decline.
Thus, the hatred and fear regarding gold, and especially gold stocks, which was so palpable at year's end, may be behind us. Obviously, this is all guesswork, but on Jan. 10, gold itself managed to climb back to the 200-day moving average, a possibility I mentioned last week (in "Ahead: Inflation and a gold rally") and a "line" that all the bears were wildly gleeful about when it broke.
I think the nasty decline and recent rally have left a lot of people behind. And nothing is more bullish for a bull market than having a large number of sold-out bulls, which I believe may be the case for the gold market right now.
At the time of publication, Bill Fleckenstein owned Microsoft and gold.
This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.
