Happy New Year

Welcome to the start of a new year of trading. We are so looking forward to trading this market over the next year as many good opportunities are now presenting themselves and we should be in a good position to take advantage of them.

Last Friday the jobs report showed a modest increase of 169k new jobs created. At the same time the unemployment rate dropped to 4.9%. I don’t think that the New Orleans area will contribute good numbers to employment over the next few months. Who knows how the market thinks about the economic and financial consequences of Katrina. As I write this the bulls are driving up the futures in overnight trading so at least these traders think the worst is behind us as far as Katrina is concerned.

We take a far different view and have the opinion that the market will struggle over the next few months. Any distraction the Fed may have during this time will be over shadowed by the giant shrinking credit machine. We have repeatedly stated that the reduction in credit will push the market down due to housing cooling. More as it develops.

The precious metals arena has again become the focus for the Wednesday Update as we see a significant low being put in last week. Friday’s commitment of traders’ report showed some bullish accumulation by the commercials in both silver and gold corresponding very well with the bounce we saw in the HUI last week. A similar move happened over in the dollar except in the other direction. The dollar has broken down in the past several days and has blown through support. We mentioned earlier in the year that the dollar would go at least as high as the high 80’s and it seems to have peaked near 90.5 and now is back into the mid 80’s. Everything looks good for the precious metals fundamentally and technically speaking. (For more info please read the True Contrarian on the link to the left.)

Our position is to sell stocks into any rallies that develop and to buy precious metals. We should see some good performance from both of those strategies over the intermediate term. The stock market is in serious trouble over the short term.

Dow Industrials: 10,447.37 -12.26
BGEIX: 11.92