Start of a New Week

Friday was good to our precious metals positions as well as some of our shorts with the NASDAQ being down strongly; but, here we are facing a new week and new challenges. The stock market is uneasy and overbought. The top from two weeks ago is still well in place and we had a good nonconfirmation when the SP500 pushed to a new relative high but all of our other indexes stayed below the previous week's high.

Friday's commitment of trader's report (after the close) was not too bullish for metals but I think we are now into watching the mining stocks for further clues. The pattern is very much in place for further upside and we continue to recommend buying on weakness. Tonight gold is down and so is silver which could set up a nice pull back in the early trading on Monday. We are watching PAAS, well, maybe we should say trading PAAS with the full intent of seeing it cross to a new relative high against last week's 15.40. PAAS made a perfect low near 14 last week and now should move above 15.40.

The strength of the move over 15.40 should give us a good indication of the power in further upside. If it can't do much over 15.40, then we know to get out of our position. We think a move well above that number is possible--there are never guarantees however. We just want to follow what the market is telling us. Our main index, the HUI, hit a high of 195.73 last week and closed Friday at 192.07 up 7.33. We saw a nice pullback last week from that 195.73 high to 181.67 and now 195.73 is the number that should be exceeded, and fairly soon, for us to think the gold bull market has started.

In economic news this week, we will get to see some hint on inflation as the PPI, Producer Price Index, will be released on Tuesday and the CPI, Consumer Price Index, will be released on Wednesday. These are potentially gold and silver movers and we need to be careful as these reports come out. There are bond market and stock market considerations as well because this will give good clues as to what the Fed may be forced to do later this month at their rate setting meeting. We already think that the bond market topped the day of the Employment report, June 3rd when it decided to do a key reversal, with a big outside down day.

The market is also looking at triple, or quadruple, witching with options and futures expiring on Friday. That is always an interesting day and we all know where most of the players are, bullish this month. There could be some excitement this week, this being June and all. The next two weeks could be decidedly bearish given the market is overbought and the players are all bullish.

Happy Trading, be careful.

Dow Industrials: 10512.63 +9.61 (trying to hit 10,500)
BGEIX: 10.67 ( a new high for the move, we are in at 9.71)