Hello traders everywhere! Adam Hewison here, co-founder of MarketClub with your mid-day market update for Monday, the 25th of March.
CYPRUS PUTS LIPSTICK ON A PIG
As the world waited with baited breath this past weekend, the powers that be put together an agreement so Cyprus would not fall out of the Euro and off the face of the earth. I say, it's like putting lipstick on a pig, it still doesn't change the fact that it's a pig. The banks have serious problems in Cyprus and potentially in other countries and "putting lipstick" on the situation may look pretty, but it does not alter the real core problems with the banks.
I do not expect this band-aid fix on the Cyprus banks is going to solve the problems of the banking sector. When the banks do eventually open, what will be the mood and actions of the general public? I still expect that the public will make a concerted move to remove their funds and move them to another area which has a greater safety factor.
It would not appear the bureaucrats have factored the actual mindset of the public into their equation. The potential of losing your money while it is on deposit in a bank has not been seen since the 30s and should not be brushed off lightly. The recent events in Cyprus have been a seismic occurrence in the minds of the public in terms of trust and safety in banks. That trust may take a very long time to restore. Restoring this trust could be an incredibly difficult feat, as once the glass is broken, it is hard if not impossible to put together the pieces.
IS THE MARKET LOSING STEAM?
The S&P 500 has reached our earlier targets of 1550 to 1560 and the DOW is just short of our 14,600 target zone. We see little indication that the overall longer-term trend is waning, the same cannot be said for the short term trend that appears to be losing steam. A possible negative divergence has formed on the Williams %R indicator which indicates some further consolidation and corrective action in equity prices.
GOLD CONTINUES TO FRUSTRATE THE BULLS
The gold market continues to move sideways, as it builds a base to perhaps move higher later in the year. This morning is no exception as gold is under pressure, pulling back from the recent highs seen last week. Look for this base building period to continue as the problems of the world overshadow gold.
POTENTIAL CHAOS AHEAD
March 27th - Budget Resolution Expires (SOLVED - Maybe can kicked down the road until September)
May 19th - Debt Ceiling Suspension Expires
Have a great trading day,