Large Is Taking Over

Large is starting to outperform Small. The theme going forward will be a narrowing market, with fewer leaders and the need to be able to differentiate between what is pulling the market upward and what is hanging on for the ride higher.

OEX is the S&P 100 – the 100 largest US public companies. See how OEX put in a higher low and is now testing the highs of October?
RUT is the Russell 2000 Small Cap Index. See how it put in a lower low and is now below the 50-day (Blue Line)?
Even if they both work their way higher, I expect Large to outperform Small.

As you can see, prices call easily stall out here for a few days, but it seems like the Distribution Days of the last few weeks have been resolved and that prices want to go higher.

Gold
Gold has broken out of an 18-month consolidation. That is a very positive development. The market sits around for a long time, then makes sharp moves, then sits around for a long time… Gold’s rally off of the 2006-2007 consolidation lasted for about 7 months and returned about 40%.

The Point and Figure charting method targets at least $1,240 for Gold on this move. I’ve been buying Gold for a long time and posting about it for at least a year.

How high does it go - $2,000, $5,000? I have no clue. I only know that the trend right now is up and looks like it can carry higher. I like the fundamentals and will own it until this move out of the 2008 – 2009 consolidation ends. Then I will evaluate how things look after the 2010-2011 consolidation…

For now, Gold is extended on a daily chart. I will look for a pullback into $1,087 or $1,064 before adding more.

Gold Stocks are breaking out of long consolidations. That tells me that the big boys are ready to start buying them. That confirms my Bullish thoughts on Gold and Commodities.

HL broke out of a 2-month base.

Newmont Mining (NEM) has broken out of a multi-month consolidation.

This may be my favorite chart in all of the markets. Royal Gold (RGLD) has broken out of an 11-month consolidation.

Barrick Gold (ABX) has also broken out of a long consolidation.

Commodities
Silver (SLV) has been much more volatile than Gold and is now sitting at the top of a 2-month consolidation. I want to own Silver if the big boys show up too break it out of this base. Watch for head fakes.

Crude Oil (USO) is now in a “base on base” formation. The second base normally takes a lot less time to form than the primary base, I am very interested in USO.

Berkshire Hathaway is trying to break out of a 3-month consolidation.

Industrials (XLI) are testing recent highs. If Industrials breakout, then the market probably has another leg up. If Industrials fail here and break down from a failed triple top breakout, then the correction has most likely arrived.

There are many good looking charts here –
Best Buy (BBY), John Deere (DE) and WalMart (WMT) are breaking out.

Mosaic (MOS) is trying yet again to break out.