Thursday, April 26, 2007

Second Close Over 13K

Market Action:
Most of the action in the market took place in the NASDAQ 100, NDX, due to AAPL earnings news we mentioned in our last post. The other indexes basically treaded water with the SP 500 actually down on the day and the Dow itself up about 15 for another up day in the string of never ending up days, now 18 of 20.

The news from MSFT after the bell should have the bulls getting ready for another up opening on Friday morning but for some reason the futures are not showing much in the way of strength. Even the Asian markets are down tonight. All of this could change by the time the market opens in the morning so we have to be patient.

Precious Metals:
With the break in the precious metals complex on Thursday, we thought we would at least mention them tonight. Gold was down about $10 and silver about 50 cents, both moves are significant due to the technical position of the drop. Looking at the charts of both metals, they have failed once again to get back to the highs of last May. They have both held up along with every other asset in the world but have not gone to break the previous highs.

We have heard the phrase, “The markets are all one trade” and we know that means that the world has been full of liquidity for risky assets so they trade up. This concept is best seen in the US stock market the past month but it is not lost on the commodities, especially the precious metals. We think this time the precious metals will drop in order to cool some of the hot bulls. We believe gold can get back under $500 which is where we think there may be some more interesting trades for us.

Meanwhile, the HUI, our favorite gold mining index, has traded between 270 and 370 since it fell hard from last year’s high of 401. Thursday’s close reflects the drop in gold with the index falling to 343 and, we think, on its way back down to 270 or slightly below. We wanted to let you know we are keeping our eye on the complex.

Of course, no comments of precious metals would be complete without some mention of the US dollar. The dollar has been kicked to the curb so to speak. There are no Good bulls willing to step up to defend the dollar’s honor. We thought since the contrarians have to step in to show a little love to the down trodden that the dollar was a good place to spend some energy. Thursday’s rally doesn’t make for much positive press but it does show that the dollar can bounce back and with the precious metals retreating, this may be the opportune time for the dollar to shine, that probably means a silver dollar but…you get the idea.

We have little in the way of advice on the stock market except to watch the lead of the precious metals. We are Not convinced that everything is “one trade” but we do think that the markets will all go down together and this will happen sometime. The break in the precious metals gives us a glimpse that the time may be ripe for a rollover in the World stock markets. We are looking to next week for a showdown but we wouldn’t be disappointed if it started on Friday after the good news from MSFT.

Dow Industrials: 13,105.50 +15.61
VIX: 12.79
HUI: 343.27
QQQQ: 46.55
QQQRS: 0.47 bid
QQQRT: 0.72 bid
RYVNX: 15.22
RYAIX: 20.44
RYCWX: 32.64
TLT: 87.85
BEGBX: 13.98

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