Gold has make believe value. There is nothing inherently valuable about gold. It is decent conductor of electricity. That’s about it. Oil at the present time is probably more valuable than gold. But that will not last either. Only reason gold is considered valuable is because certain amount of people said so. That’s it. It used to have value in medevial times, because it was rare and hard to obrain. There a many other more valuable things in today’s society than gold. Things that have real value as opposed to perceived value. Real estate was considered at one point safe investment that will hold value. Tell it to people that bought properties in US 15 years ago. Gold has only Mickey Mouse value.

We had an unbelievable bull run in last month and half. What was intersting about it is that it defied all the daily oscillators such as Stochastic and MACD. All of the signals that contrarians use were breached over and over. Stochastic oscillators just refused to come down after a six, seven bearish crossovers. And it still didn’t come down yet. I am talking mostly about market indicators such as DJIA and S&P500 futures. Previously the very same thing was happening with euro in opposite direction. Euro breached dozens of bullish stochastic crossovers and broke lower and lower and lower. 
Contrarian technical traders is a breed of traders that just took old investing mantra buy low – sell high and increased the frequency of their trading. Instead of using 2 years/weekly charts they watch their oscillations on 3 months/daily, or for contrarian day traders intraday 15 or 5 min time frames. 
Technical Trend Traders (turtles) do not pay so much attention to oscillators and crossovers. What they watch for most part is the price part of chart. They don’t base their entries on reversals as contrarians do, but rather on breakouts and continuation of trends. Where contrarian is usually placing his exit orders from long position, trend trader may be placing his buy orders combined with tight stops. Their trading philosophies just could’t be more different. 
My feeling is that partial reason for longer bull runs and longer bear runs in a recent past is that there is an increasing number of trend traders participating in the markets. Because these trend traders tend to keep their positions open through the smaller counter trends their money are not leaving the market until something really earth shattering stops the trend. 
I am not favoring either style as I believe both of them can be exploited successfully. Just being aware of the other clan can be beneficial to one’s preferred trading style. I am always more in favor of integral solutions where best is not black OR white but black AND white.

In my December Quo Vadis post I argued for DJIA go higher in January. You can see it here. Since then DJIA is up 338 points (2.75%)

http://www.traderhood.com/2011/12/27/quo-vadis

Gold behaved as I expected too. It rose above the it’s 1,600 resistance and is hanging at 1,658 at a moment. Gain of 3.62%.

EUR was real slow to gain as it was pounded daily with negative rhetoric in financial periodicals. On top of it S&P downgraded almost every European country with exception of Germany (and Slovakia) and Fitch is daily fear mongering the news with Greek default. In spite of all of that EUR finally started to gain and was able to bounce off the lows of 1.2623 and make 4 day uninterrupted bullish run to 1.2971. This is the first time since the beginning of November 2011 it was able to finish full uninterrupted stochastic upswing on dailies. Not even the S&P downgrade of the “whole” Europe could push it lower.

That said, I think EUR will get a short breather here before it can continue higher. I’ll be watching how far it will retrace now that stochastic on dailies is at 80%. A lot of the EUR will be again influenced by media, but my guess is now that it has been able to do full stochastic bounce, it will not retrace more than 50% and I will be increasing my EUR positions on resistance breakouts.

Both DJIA and gold seems to be slightly on overbought side and I would expect both of them to pull back a bit with DJIA having support at 12,250 and gold having support around 1,620.

AAPL is technically at overbought levels and I think a lot of the earnings news is already priced in upfront. Unless Apple posts totally unexpected (higher than any expectation) earnings, there will be the “buy rumor – sell news” pullback after the announcement.

Happy New Year gang!

DJIA finished it’s last week stochastic upswing. Now firmly above 80% curving down (see chart). This stochastic upswing (in conjunction with other things) was my basis for expectation of markets ending higher in December. One of the other things, that is still in play was, mother of resistances for DJIA @12,285. These things often times act like a magnet and price often won’t give up until it at least briefly crosses over. Which is exactly what happened. Now with stochastic on DJIA above 80% there is possibility for pullback, but my bet is it is again going to be only temporary, and low retracement pullback, before DJIA tries again to do decisive breakout above 12,285. Hopefully at the beginning of January.

One of the other reasons I am more tilted toward the DJIA breakout higher is gold. Although it is dangerously close to it’s own mother of resistances (1,600) and dropping again lower could create snowball, it already tested waters under it and came back. Further, it’s MACD is at a bullish crossover and stochastic is finishing downswing there as well. Gaining gold would put pressure on dollar, making it cheaper which would add fuel to DJIA.

One more thing is swiss franc. It seems to be overbought and reaching it’s zenith. If swiss franc will ease, as it seems it is technically ready to do, that would make euro rise and again dollar to weaken.

Politically Iowa caucuses are week away and there are strong indications that Ron Paul could win. I think that fact could put slight pressure on dollar as well.

Disclosure: I am long on euro.