Sunday, May 08, 2005

Employment Numbers Bullish???

Bullish at the opening, anyway. Friday's Employment data blasted the futures and the Dow up at the open, something we said would happen in any event; however, the bonds were disappointed in the strength of the numbers. The employment picture certainly looked brighter after the 100k better than expected number came out for last month and the two previous months had large upward revisions as well.

As expected the markets printed the high prices of the day near the opening with the SP 500 actually down on the day. The Dow and the SP 500 ended pretty much on the lows of the day with the NASDAQ 100 faring a little better than that. The bonds never recovered. The dollar was strong, besting its late April highs with a bullish chart pattern.

We were hoping to get on board the gold mining train this week so we continue to watch that market carefully. The possibility is strong that we are seeing lows in the prices of these stocks this month that may hold for quite some time. Finally the trader's commitments show a marked drop in the net number of short contracts, a remarkable 30k net drop. Gold seems to refuse to drop down much but we still feel the metal could go below $400 in the near term.

The Fed increased rates again last week with the possibility that it may be the last. Now, that is not what they said but what the Wednesday Update THINKS may happen. This is one good possibility for gold. The potential for higher interest rates have propped up the dollar for the Fed and Friday's Employment statistics also brought some strength to the dollar. As the economy gets stronger, interest rates should go least that's how the market seems to interpret the numbers. If interest rates don't actually go up at the next Fed meeting in June, the dollar could suffer, enhancing gold's chances. The Fed knows this and is concerned about this possible outcome.

We will monitor the situation in the gold to look for opportunities and if you really can't wait, go ahead and watch some of the gold stocks to find good spots to get in. Again we recommend the BGEIX fund which closed at 10.37 on Friday. To take advantage of the potential drop in the stock market along with the possibility of higher gold mining shares, you could look at BEARX fund as well, closed at 5.44 on Friday. Both of these funds are good possibilities at the moment.

Dow Industrials: 10345.40 +5.02

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