Going Down

After making the decision to get out of our gold mining mutual fund last night, we watched with relief as the precious metals complex enjoyed a strong early rally. By the end of the day, the HUI, closing at 243.22, had recovered much of what it had lost since early Monday morning when it traded as 246.84. In fact, the close is the highest close in the HUI index since last November. With that high in place as of the close today, the BGEIX fund closed at 13.34, just a penny shy of the year high of 13.35 also set in November of last year. We are very happy to report that we were able to turn a tidy 37% profit since our entry point on May 23rd.

Enough of that, we have other business to take care of now. The stock market is very dangerous right now. The trading in the past few days has given us a good signal that the next move will be strongly down. The market leaders, housing stocks, have gone into a down move while the broader market has been moving sideways at best for the past several months, if not years, we don’t even want to talk about it.

We are now suggesting that the market should be avoided or sold. Those of you who have been sitting there on the fence or have been bullish, it is time to move. This is not the time to be bullish. The market has turned over and now is headed down. We can only hope that you have taken some money off the table as we waited for the market to go down. The stock market has managed to rally off the April lows near 10,000 in the Dow and now it wants to go down and at least test those lows.

For those of you who haven’t seen a major down move in the market, I think you are about to see one now. You all know that I am cautiously bearish most of the time but not tonight. Tonight, I am outright Bearish and am looking for a big drop right now.

We have talked about the market dropping into October for the last several months. We have said we didn’t really know what would cause the drop but we knew something would be blamed for the drop. So, the catalyst is a combination of several events like a rate hike sandwiched between two big hurricanes plus some other, not so prominent, news items.

Well, October is about a week away and the market is giving us a good signal that we should heed. There is so much complacency in the market but please don’t be complacent now. If you are in a 401(k) account, you have no tax consequences to releasing your assets from market exposure. If you are in taxable accounts, you have more difficult decisions to deal with, but we don’t think you should hesitate, even though you probably will.

If you have questions, simply put them out in the comment section. If you want to remain anonymous, you don’t even have to leave your name. We will try to answer any questions you might have.

In any event, protect yourself and trade well.

Dow Industrials: 10,378.03 -103.49 (well under 10,500)
BGEIX: 13.34 (our exit point, nice 37% trade)