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Mark Hulbert
March 29, 2011, 12:01 a.m. EDT
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How corporate insiders reacted to Japan
First Take "º
Amazon beats Apple to the music cloud
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) "” As expected, gold quickly recovered from the $50 plunge it suffered over a two-day period immediately following the Japanese earthquake.
( Read my Mar. 16 column.)
/quotes/comstock/21e!f:gc\j11 GCJ11 1,417, -3.00, -0.21%
Unfortunately, because of abnormally high levels of bullish sentiment, gold's near-term direction is now more likely than not to be down rather than up.
Consider the average recommended gold market exposure among a subset of short-term gold market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). It currently stands at 67%, which means that the average gold timer is allocating two thirds of his gold portfolio to gold and gold-related investments, keeping only one third in cash.
To appreciate just how much bullishness this represents, consider that the highest the HGNSI has risen to over the last two years is 71.9%, only slightly higher than today's reading. Over the last five years, furthermore, the HGNSI has never gotten higher than 75.2%.
In other words, the current HGNSI reading is within close shouting distance to what in recent years has been the highest level to which bullish sentiment has risen in the gold market.
According to contrarian analysis, of course, the odds are against the majority point of view "” especially a majority as big and strong as the one that exists currently in the gold market.
If you find this conclusion to be upsetting, I have a couple of things to say. First, you evidently are part of this strong bullish majority that is, from a contrarian point of view, part of the problem.
Secondly, and perhaps more importantly, bear in mind that contrarian analysis is a very short-term trading tool. To the extent it works, it anticipates market moves of just a couple weeks' duration.
So you can still harbor longer-term hope.
For example, it may very well be that gold will rise to the $2,000 level by year end, as fellow columnist Peter Brimelow earlier this week quoted Jesse's Cafe Americain website as saying.( Read Brimelow's Mar. 28 column.)
But if contrarian analysis is correct, gold's path to that year-end level involves at least a short-term detour first.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
Add Comment › · Recommend (2) · Post: Alert Email Print More Mark Hulbert March 23, 2011 How corporate insiders reacted to Japan March 22, 2011 Market now higher than before earthquake March 21, 2011 How bull market stacks up against history March 18, 2011 Old market timing theory, modern insight March 16, 2011 Gold's strange response to Japan Explore related topics Gold - 100 Oz (Comex) Comments Screener About Mark HulbertMark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD became a service of MarketWatch in April 2002. In addition to being a Senior Columnist for MarketWatch, Hulbert writes a monthly column for Barron's.com and a column on investment strategies for the Journal of the American Association of Individual Investors. A frequent guest on television and radio shows, you may have seen Hulbert on CNBC, Wall Street Week, or ABC's World News This Morning. Most recently, Dow Jones and MarketWatch launched a new weekly newsletter based on Hulbert's research, entitled Hulbert on Markets: What's Working Now.
First Take Amazon beats Apple to the music cloudAmazon.com unveils a consumer music cloud service in an effort to make its digital content service more competitive with Apple Inc.'s iTunes, writes Therese Poletti.
12:16 p.m. Today12:16 p.m. March 29, 2011
Most Popular Most readMost commented Start with $10,000 and retire a millionaire Tax the Super Rich now or face a revolution U.S. stock futures edge higher Ponzi scheme hits mystery hedge funds Home prices fall for sixth straight month in Jan. The best laid plans ... Tax the Super Rich now or face a revolution Gold settles lower on lack of safe-haven bids Disposable income falls as prices jump, data show U.S. stocks slide after late-session reversal Find a Broker Partner Center » MktwHulbert's Latest Tweets"Mark Hulbert: Gold market optimism at worrisome levels http://on.mktw.net/flIfBX" 11:54 p.m. EDT, March 28, 2011 from MktwHulbert
"Mark Hulbert: How corporate insiders reacted to Japan http://on.mktw.net/eHPRoZ" 11:28 p.m. EDT, March 22, 2011 from MktwHulbert
"Mark Hulbert: Market now higher than before earthquake http://on.mktw.net/hiiogO" 11:10 p.m. EDT, March 21, 2011 from MktwHulbert
"Mark Hulbert: Old market timing theory, modern insight http://on.mktw.net/eWkCsh" 11:48 p.m. EDT, March 17, 2011 from MktwHulbert
"Mark Hulbert: Gold's strange response to Japan http://on.mktw.net/hoBRwg" 11:07 p.m. EDT, March 15, 2011 from MktwHulbert
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