Slow Weeks Ahead

For the week last week, the Dow Industrials managed to gain about 100 points or 1%.  The Dow was the best performer of the indexes we follow, with the SP500 up about a half of one percent and the NASDAQ Comp actually Down a little.  

Gold, from its highs on Monday morning near $540 a ounce, closed down nearly $40.  We are fairly confident that the recent price highs in HUI and Gold are solid tops with buying limited to retracing some of the losses since then.  

Meanwhile, the bond market keeps moving up in spite of the Fed’s recent interest rate move.  The ten year Treasury is at 4.44% while the overnight Fed funds rate has moved up to 4.25% as of last week’s Fed meeting.  That’s 19 bps of spread for ten years of inflation.  

The stock market has signaled a high for us to pay strict attention to, that being the highs set over the past two weeks in all indexes.  The main one the world watches is the Dow Industrials and its high for the last few weeks has been the 10,950 level, maybe more like the 11,000 for most observers.  We are extremely bearish against this high.  If the highs of the last few weeks get penetrated to the upside, we will need to reassess but for now, it looks like those will be tough ceilings.

There were two people in the news this weekend, one a bull, Tobias Levkovich, and the other a bear, Robert Shiller.  They both are looking at the same market and coming to very opposite conclusions.  We would, of course, have to side with Mr. Shiller and say that the market is still too exuberant.  He reminds us of the Dow 36,000 forecasts that were written in a book by that title in 1999: “…a sensible target date for Dow 36,000 is early 2005, but it could be reached much earlier.”  As the CNN article says, “Or not.”  Maybe we should take a poll and ask when you think the Dow will hit 36,000…or not.

There are several noteworthy items coming out this week such as the ICSC Store Sales Index, the PPI, and November housing starts on Tuesday with durable goods orders and November new home sales on Friday.  Until tomorrow, we remind you to Be careful and Be selling into good rallies.

Dow Industrials:  10,875.59   -6.08
RYVNX:  18.72
TLT:  90.70
BGEIX:  14.49  (we are dropping this from our watch list)
BEGBX:  13.43