Sunday, May 01, 2005

... and That Makes 10

In the last Wednesday Update, email version, we commented on the Dr. Jekyll and Mr. Hyde type market we were in, one day up and the next day down. In that Update we said that the market had done that, in terms of the Dow, for eight straight days. Friday makes 10 straight days of back and forth action.

Tomorrow morning we should probably watch for a down day but Monday being the first trading day of month, that doesn't seem likely. We will see. Actually we are hoping for a little bit of a rally this week into Friday's Employment news so we can get some more short positions established. The market is prepared for the Fed's impending increase in the funds rate but they are all waiting for some news on the future course of rates. Our guess is that the market will cheer any news out of the Fed at this week's increase but time will tell. So, it's the beginning of the month and the bulls are happy. We don't know why exactly due to the poor performance in March, but who knows what makes bulls tick, not this contrarian.

We received our first comment to the blog last week, thanks. The reader asked about the possible signs of when to buy PAAS, our favorite little silver mining stock. We have been cautious on the metals due to the incredible drop in their prices of late, so much so that the 200 day SMA in PAAS has turned negative, a bearish sign indeed. See the comments for more info but if the Fed does decide not to raise rates, possibly have to wait for June for that, it would give us the first solid fundamental shift in the precious metals. But, for now, I don't think we need to get too aggressive here. I checked the commitment of traders for last week, very bearish as they increased their net short position by over 25,000 contracts.


Anonymous said...

I understand that some of your readers are sophisticated when it comes to the markets and trading, but what about us newbies. Precious metals are nice, but scary. Any advice specifically for those of us who invest mainly through a 401K now and want to conservatively branch out? What's the next step?

Glenn said...

The best way for you newbies to invest in the market is to stay with mutual funds and ETF's. That way you still get good diversification and fairly easy trading. The question then becomes in what to invest. That's a good question but not for a comment here. This question deserves more than a comment in the blog posts. To that end, I will devote part of the regular Wednesday Update email version to further explore some answers to your questions. Thanks for your question.