Monday, February 05, 2007

Dull City

Market Action:
There was none except for the little 35 point burst about an hour into the session.  This followed the news that the January ISM Services (Non-Manufacturing) Index was a bit higher than expected.  This makes two days in a row, Friday and Monday, that have been as dull as can be.  

Precious Metals:
As promised in our last post, we wanted to make some comments on the metals complex.  We’ll start with silver and our favorite silver mining company PAAS.  There seems to be some disconnect between these two entities at the moment.  We have been watching for a good entry point into the metals and PAAS has been one stock we follow for a good opportunity.  But, that opportunity has turned into mostly a selling one.  PAAS has entered a new all time high in Monday’s trading.  Unfortunately, we think it is more like a sell signal than a breakaway buy signal.  

As for Gold, we saw it spike to a new relative high over $700 back in May of last year.  Since then it has been struggling to retake that number but has been failing in the $650 range.  We have reason to believe that this failure is due to in part to the significant bullishness in the complex along with the significant bearishness in the dollar.  

The message is that Gold will probably need to head down for a little ways before we are ready to buy into the complex.  The same is true for silver but the difference is that PAAS has been throwing off the scent of the trail.

For those of you that remember, we were suggesting to buy PAAS when it was in the four’s and we have actually traded it up until it got to about 18.  So, we have left quite a bit on the table now that it’s 29 but we do not think it is a good buy at this point.  We can’t suggest shorting it but we are going to avoid buying it until it gets back to the teens.

As for the rest of the precious metals complex, we will avoid it as well.  With the HUI at 333 at Monday’s close, there is little reason to get excited about any of these stocks.  We want to see the HUI head down into the 250-270 range before we get involved.

We wanted to let you know that we have been keeping our eye on the complex and will advise once we get to a buying point which seems to be down the road a ways from here.

The stock market trading of the last two days has given us little in terms of down side and instead has convinced us that there is one more spike left.  The Dow will make another new high soon, along with a relative new high in the SP 500.  We do Not believe that the NASDAQ Comp or the NDX, NASDAQ 100, can put in another relative new high but...there is a distinct possibility that from this boredom we will emerge with one last spike with which to put on some additional short positions.  

The NDX is the index we like to follow because we can trade it in so many ways.  The January high was about 1847 and with a close of 1795 on Monday, that index has a long ways to go to get to 1847.  The next spike up should take this index back up to around 1820 or 1825 with a burst, showing much price strength in the process.  The problem is that the high will not be attained and this “strength” will only be perceived and not real.  There will be much talk about the NDX type stocks in the next few days and that will help to lift the prices—so we can put on more positions.  Enjoy the bounce.

Dow Industrials:  12,661.74  -8.25
VIX: 10.55
HUI:  333.54
QQQQ:  44.12
RYVNX:   16.62
RYAIX:  21.21
RYCWX:  34.58
TLT:  87.32
BEGBX:  13.53

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