The Stock market continues overbought, giving all ample opportunities to raise some cash. The best thing to do is to consider moving out of some of your highly appreciated mutual funds and especially if you are in an aggressive growth fund in your 401(k), there you don’t even have to worry about the tax consequences. Normally, traders talk about tax loss selling at this time of year but with the market up so much right now you should be evaluating your exit points.
The gold market has shown us a lot of strength lately but not so much in the HUI. The gold itself is up as we write this (Sunday evening) about $3 in overnight trading. If you take a close look at the charts of gold (use GLD as a proxy) and HUI over the past month, you will see the spike in gold itself to what are new 23 year highs. The HUI has been able to break above its late September but not by much. This lack of resolve on the part of the HUI to break out with gold is ominous as the mining stocks generally move ahead of the metal, the other way around. We don’t have the courage to short gold but we don’t think this is a very good opportunity to get into it.
Our involvement in gold was for about four months from the lows of May to the highs of September. We have recently watched the BGEIX go above our highs of September but not by very much, maybe about 5% after our run of over 30%. We don’t mind leaving a little on the table for the current speculators. We think there will be a good pullback into the spring and we will consider getting back into gold then.
As for the stock market, we are concerned by the lack of fear and would not sleep very well at this point if we were exposed to long stocks almost of any sector. Yes, there have been sectors that Have moved up but here we are. What do you do now but sell this strength. The rally has carried these stocks up to unsustainable levels. And, our test for stocks is how they stack up against the new highs in the market. In general you would think that as the NASDAQ is making new highs, your stock should be making new highs, too. So, if that is true, then you may consider keeping it, but if it’s not true, you should take a serious look at selling.
We stand ready to look at your stocks on a technical basis only. All you have to do is leave a question in the comment section of the blog. You can even leave it anonymously if you want to. This will be one of the best selling opportunities of the next two years so we want to encourage you to act.
As far as AIG is concerned, I remember hearing a lot about the run it had back in late 2003 into early 2004 from about 57 to about 77, a very good move indeed for about four months. I said in January of 2004 that it would probably go to about 78, which it did and that would be the ceiling. AIG dropped hard on news to a low of around 50 earlier this year. Now, AIG has moved back up to near 70, admittedly a good move for the period, but look at where it is in regard to the market and its near term history. It was 77 two years ago and now it can’t even get over 70. This is a big sell right now.
Just as a reminder, when I owned this stock in my 401(k), we were given the opportunity to sell it in early 2002, I sold mine near 80 the first day I could. AIG is down about 15% since January of 2002 even with this rally from 50 to 70. This is pure hard technical analysis and, no matter what the fundamentals are, this stock has done nothing for over 3 years. The fundamentals are probably not all that good with AIG having had a tough hurricane season this year.
Be careful and be selling, “Cash is king” again.
Dow Industrials: 10,877.51 -35.06
RYVNX: 18.23 (This is an excellent price for you)
TLT: 89.50
BGEIX: 13.87
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