The big news over the weekend was across the sea in Japan where the Japanese Prime Minister, Junichiro Koizumi, received broad support of his ideas for reform. Last month the parliament turned down his plan to privatize the post office, which actually manages about 25% of the household savings. Koizumi took his plan to the people who overwhelmingly voted to give him authority to make the changes he wants. Koizumi is widely thought to be the one to overhaul the Japanese structural problems that have plagued the country for fifteen years.
The Japanese stock market has reached a four year high and could be the best place to invest our money. We have hoped that the world economies would follow the US economy down into the fall and then we could invest in the international market. This particular event could mark an intermediate top in that market but we have been keen on the ETF, EWJ, for a couple of years. We will take a harder look at it after we see a good break in the US market.
Speaking of the US market, stocks decided to stage another rally and break the Wednesday highs that we thought might hold. Well, with the Japanese celebrating tonight the US futures are also partying a little, not much but a little. It is Monday and the market likes to kick off the week with a little upside mostly that we want to sell into at this point.
The mining stocks decided to participate in Friday’s rally and gave us a new relative high in that complex as measured by the HUI. The HUI set a closing high in mid-August at 217.85 and Friday it closed at 220.23. Meanwhile, the little gold fund, BGEIX, we follow made a new high as well at 12.33, after being at 12.13 for a mid-August high. You may recall that we got you in at 9.71 on May 23 (check the archives for the Sunday evening post for May 22) for a gain of nearly 27%. We continue to hold.
This looks to be an exciting week in the stock market as we have seen the Dow push back to its summer highs. The resistance should hold due to the lack of solid momentum in the market as well as the NASDAQ indexes still quite a ways from their August highs. There is significant overhead resistance here and we think it will hold. With our forecast of much lower markets into October, we better see something in the way of downside pretty soon. Have a good week of trading and come back here everyday for our latest thoughts on the market.
Dow Industrials: 10,678.56 +82.63
BGEIX: 12.33
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2 comments:
LIFE IS GOOD! Colts win, Great St. Loius weekend with the family, Cardinals won Sat. Night, and I beat Perkins in the AGFBL kickoff weekend 54 to 52 on the strength of my COLTS defense. 13 seconds from a shutout and sacks and turnovers for everyone. Stover missing 3 FG's also helped to preserve the victory. What happened to the Vikings? Was Moss that important?
In market news, I want to register a little disbelief in the whole rally thing. It seems like blow after blow is dealt to the markets and all they can say is "Well this should prevent the fed from raising interest rates" Are rates really only 25bps from a market collapse? Is this tiny increase in rates the harbinger of the dip we've waited for? It appears that that is the only thing this market is afraid of. And if they are only afraid of inflation, I've got news for them. It's already here.
Love the 27% increase. great return for this market especially.
Erick
Colts good, Vikings not. Hopefully they can regroup.
Always good to give Perkins a run and start out with a win. Congrats on the win.
As long as the Fed can continue to provide liquidity, the market can seem to move up. Right now there is pressure on the Fed to stop raising rates. If the economy falters to cause a stop in the rates, the stock market will not like it very much.
The market is not afraid of anything at the moment. It didn't even go down in the face of Katrina, rising gas and oil prices, or the threat of rising interest rates. We are in great anticipation to see what does push it over.
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