September has Slow Start

September 1st didn’t provide much in the way of bullish moves for the stock market, well, except for precious metals, more about that below. For stocks, the day’s action was a bit volatile but with a downward bias. Volume was again stronger than we’ve seen this month but not as strong as yesterday. With this being the stronger part of the month, we haven’t seen a big push up.

You may think we have been discounting Katrina in this discussion. Well, for some reason the market doesn’t seem to think that Katrina’s aftermath is much to worry about. Yes, gas prices are up but the day to day life is going on in the rest of the world. Relief efforts are slowly coming to the New Orleans region but as it relates to the market, there doesn’t really seem to be any visible trouble. Stocks have managed to shrug off $70 oil so what’s $3 gas, apparently not much to the market.

We have been sort of waiting for next week before initiating any additional shorts but this market seems very weak even with the chunky volume of the last two days. It almost looks like there has been a bit of easing in the somewhat oversold situation the market has found itself in the last week or so.

The place that bothers us most is the mining stocks. We saw the support near 200 for the HUI index and now are looking back with dismay that we didn’t add to our position during that dip. On Tuesday the HUI closed under 200 at 198.79 and today it closed at 213.43 about a seven percent move in two days. PAAS, our silver mining stock traded as low as 14.87 on Tuesday but closed today at 16.37 for a 10 percent move if you could have caught the low, not likely. We saw the BGEIX gold mutual fund print an 11.19 on Tuesday evening this week and tonight it closed at 11.90.

This move in the HUI correlates to a steep drop in the dollar the last two days. This trend should be watched closely as it should give some clues to what the bond market will do. In the convoluted way that the market thinks these days, the dollar's logic goes something like this. With Katrina, there is some feeling that the Fed will have to stop raising rates. What was the headline on CNN, "Will Katrina make Greenspan pause?" I didn't even read the article but this is the type of thing that makes Katrina bullish in the stock market--the logic lacks a little if you are truly looking at Katrina for what she is, a deadly storm with long term negative implications for the economy and the country as a whole.

Well, tonight is the last Post for the week. We will post something Monday evening when we return from the long weekend. We trust your weekend holds something special for you. Have a good one and we’ll be back next week.

By the way, Happy New Year, for those of you who know my thoughts on the start of the year being the Labor Day weekend. It has to do with getting ready for a new school year. It seems this year is the first year in a long time that there hasn’t been someone in our house going back to school in the fall.

Dow Industrials: 10,459.63 - 21.97 (continues below 10,500)
BGEIX: 11.90