Tuesday, June 06, 2006

Another DOWn Day

Tuesday’s market tried to show a brave face at the opening but soon the indexes were down on the day, this after a 200 point drubbing on Monday.  The Dow dived below the 11,000 figure for the first time in about three months so there exists a lot of over head supply to contain any advance.  The day must have been difficult for those who thought that a rally should ensue directly after a 200 point drop.  But, after a 120 point additional slide in the morning the Dow recovered nicely to close just above the magic 11K figure right at 11,002.

The market weakness has been “blamed” on the Fed for being hawkish with their tough talk on inflation.  With that talk has come a realization by the market, justified or not, that the Fed may raise rates again at their June meeting.  Ok, let’s be serious here.  The Fed is boxed in and really doesn’t know what it’s going to do or what it should do.  

The dollar recovered a bit on the possible rate hike but was the market weak due to that news?  We aren’t so sure.  You may remember last Friday’s jobs’ report being weaker, much weaker, than forecast.  That report gave the bonds a definite boost but the Stock Market was flat on the day.  Shouldn’t the market have been up on that news, too?  What we’re saying is that the Fed doesn’t have as much pull in their rhetoric as one may think.

Well, the market has been weak and will continue weak for the better part of the summer and going into the Fall.  It’s that time of year when I get to drag that tired old cliché out.  What will the market do, what should I do?  These are questions that we tried to help you answer before the May drop.  Now that the stock market has dropped a bit, what should be done?  We suggest selling rallies.  Sometimes we will be able to feel them but with a weak market like this, they are not going to feel like much of a rally.  

The pattern in the market is giving rise to a modest rally right here after another little dip.  This rally could be somewhat stronger than we have seen for a while due to the point in the pattern.  But, make no mistake, this rally whatever it may bring will be followed by a very strong down wave that will take most by surprise.  This should be a violent decline but it probably won’t start for a few days.  The pattern has not fully developed at this time.  Please come back tomorrow and thanks for coming here today.

The precious metals sector sank again today on the stronger dollar giving us a possible test of the recent lows over the next few days.  The prices on the mining stocks are really starting to get interesting and we are back to watching them carefully for possible opportunities.  The index we follow is the HUI which traded over 400 about a month ago is now trading about 20% less than that at Tuesday’s close of 318.  PAAS has dropped to the low 18’s again and that might look interesting soon.  If we decide to make a move, we will immediately post those thoughts/actions in these posts.

Be careful out there…

Dow Industrials:  11,002.14  -46.58
RYVNX:   21.55
RYAIX:  23.79
TLT:  85.08
BEGBX:  13.55

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