Stocks came crawling out of the gate Monday, ushering in the new week with a display of heart-corroding tedium unseen since….last week. Or the week before that, come to think of it. Look at the graph if you think we’ve exaggerated. It shows the Dow Industrials in a relentless dither that extends back to early April. The range from highs to lows is about 300 points, an unnatural compression that we might expect to give way to an explosive move at some point. Oftentimes such moves are telegraphed by Bollinger Bands, which compress and decompress according to whether a stock is range bound or breaking out. The bands are quite constricted at the moment, suggesting that the Indoos may not continue to mark time for much longer.

So which way will stocks break when they finally do? Our hunch is higher, even though that is not what we are feeling deep in our gut. However, when we are unable to come up with a single good reason for stocks to rally,  that’s when we are most likely to assume a rally is coming. There is some technical evidence to support this, and we trotted out the bullish argument recently in the form of a paean to Goldman Sachs (GS).  The stock, which quite clearly has captured the hearts and minds of Wall Street these days, does not look like it wants to go down. To the contrary, it looks like it’s fixing to rally to at least 144, a Hidden Pivot target we broached here the other day. That would represent an ascent of nearly 20% from these levels, but if GS were to fall to 107 in the meantime, we’d be ready to back up the truck and buy ’em at that price, since that’s about as much of a correction as we could see over the near term.

 Gold Outlook: Bland

Regarding Gold, yesterday’s bland forecast came within four ticks of nailing the June futures’ intraday high. What more to say?  In the aftermath, with the June contract down $12 from its 919.70 peak, we wrote as follows in a mid-day update:  We’ve lost count of the number of rallies that have merely met the minimum requirement without going the extra inch that would have signaled real strength. Indeed, bullion appears to be marking time, unable to make much headway in an investment environment that still genuflects to paper, promises and political remedies.  Investors’ apparent faith in the tooth fairy does not bode well for the prospect of  recovery; however, as long as the economy does not appear to be getting much worse, which is the case at the moment, we might as well get used to the upward drift of shares “for no good reason.”   

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