Gold Stocks Lose Luster

The markets were a little more full of zest today than the coma I have found them in lately. That's not to say it was a good day for the bulls, unless you call a little bond rally good for bond bulls. Otherwise, oil, gold and the stock market were down today. The NASDAQ stocks seem to have performed better than the Dow and SP500 stocks over the past few days.

Tonight DELL reported earnings that were in line with expectations with revenues below DELL's and analyst's estimates but still the stock was up a dollar in after hours trading. Tomorrow we will see if DELL can indeed hold the market up. Don't forget it's Friday the 13th.

We have been patiently waiting for the HUI index to go down less than gold. More specifically, we are thinking that gold will go down and the HUI will hold or go up. That is the signal for us to start to think about buying gold mining stocks. Well, today I checked the HUI during the day and found it down $8 near the end of the day, finishing down 7.12 at 172.83. So, I checked gold because with the big drop in the HUI, gold had to be down big. Well, it was down but only $6, again less than the HUI. Gold did break some support And, PAAS, was trading under 13 today before closing just above it at 13.02. We still need to be patient here with the HUI breaking below 175. The dollar continued its strength today closing at 85.49, above the April highs, and looking to move up to resistance in the 87 to 92 range. This should put added pressure on gold.

Like we said in the Wednesday Update, we need to reassess our position with this break of 175. It may be headed down to 163, at which time we would be inclined to take a harder look at it. But, remember our thought is that the HUI must not drop as much as gold, otherwise we are looking for more downside in both the metal and stocks. We'll be looking closely to see how the trader's commitments look on Friday evening. As we said the commercial's net short position dropped 30K contracts last week but the number was still large.

The stock market seems just about ready to be over with this latest rally phase. Today the Dow managed to close under 10,200 in a quick sign that the trading range of 10,200 to 10,400 may have ended today. (This in spite of oil dropping almost $2 to close at $48.54.) We should see confirmation of that tomorrow in order for it to be true. With DELL out tonight, the futures are indicating a positive opening but there is a lot of time between now and Friday's close. In any event, the market seems ready to drop right here. We will monitor the signs tomorrow and give you an update for Monday morning.

Have a great weekend and happy trading.

Dow Industrials: 10189.48 -110.77