Monday, May 01, 2006

Bernanke Steps Back

May Day brings a chill over the market.  On Monday afternoon the Fed Head was quoted as saying that “It’s worrisome that people would look at me as dovish and not necessarily an aggressive inflation-fighter”.  In case you weren’t following the market, the flat line the market created in the better part of the day was decidedly not flat after the Bernanke’s remarks were disclosed.  The NASDAQ fell about 1% in 30 minutes before stabilizing just before the close.  The Dow dropped almost 100 points in that same half hour and closed down after a pretty flat but up day until the news.

We generally say that the first of the month is strong and today was not that.  We have said recently that the market should be volatile here due to turning down and the bulls not wanting that to happen.  With that in mind we don’t think that the market will fall off a cliff right here and now but little cracks like this show you the fragility of the market.  If the market was truly strong, then the market would have shrugged off the news even though it broke late in the day.  Since the selloff occurred at the end of the day, traders need to pay attention because that’s when the smart money trades.  Volume during that half hour was strong.

There really isn’t much new news to report this evening but we do want to mention something that we have talked about in the past, and that is the Silver ETF.  Late last week the silver ETF, symbol: SLV, started trading.  We were a bit disappointed that it trades at 10 times the price of an ounce of silver right or around $135 since silver is around $13.50.  That means there will be less shares purchased even though the percentage move is the same.  This is different than the gold ETF, symbol: GLD, which trades at one tenth the price of an ounce of gold.  This gives us a great opportunity to trade the metal which should be easier than trying to find some good silver companies (although, we do like to follow PAAS).  We’ll keep an eye on it and when we see a good entry point we will be mentioning it here.

We want to mention the big number of the week that comes out on Friday.  That number is of course the jobs report and we expect it to generate some market movement.  This would be in line with the current volatile nature of the current market.  

The double mantra has become…

Be careful out there and don’t forget to “Sell in May and Go away”

Dow Industrials:  11,343.29 -23.85
RYVNX:   18.76
RYAIX:  22.14
TLT:  83.20
BEGBX:  13.35

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