Top Line: The price drop we were expecting seems to have at least started. The prices of some of the commodity stocks, like GDX, have come into lows that start to look attractive...the problem will be that we can't hold them very long.
On Wednesday, the stock market got hit with two news items that put a little scare into the traders. ADP, the payroll company, said that job losses amounted to 693K in December, much worse than expected. This news comes a couple of days in front of the Real jobs' report out this Friday just before the market opens. Consensus for the Real jobs' report had been around 500K but this number started to get bigger right after the ADP report came out.
About the same time, INTC announced that they were not going to make their already lowered revenue estimates. The brand spanking new estimate is 23% below last year's number. This news hit INTC for about 6%.
There was another bomb that hit the street...Satyam Computer Services Ltd., a computer software services provider, said they had falsified earnings and assets. Satyam apparently means "truth" in Sanskrit. This brought memories of the Madoff scandal and sent shivers through the street.
Why do we bother telling you all this News? Well, other then the fact that the jobs' report was obviously coming on Friday, we didn't know about these other stories. Still, we had a notion that the market would come down. Now, the media has discovered the reason for it. Now that you know why the market went down, how do you use that information? Tough to do anything after the fact...
Ok, what do we do, Really? Since the gold miners were the first to indicate a possible break in the market, they may be the first to rally. The rest of the market could still be in a down mode until Friday morning when we get the real jobs' report. Do these new items surprise anyone? Would job losses of 500K or 1 million surprise you? No, the market Expects this news and will take it in stride. The fear this week may be the earnings reports beginning soon.
Whatever is causing the selling this week is giving us a buying opportunity but this is not a long term buying situation. The sell date for our long positions is coming up in the next couple of weeks so any buying we do will not be in our portfolio for long. We are expecting much higher prices in the next week or two. Pick a point to get in on your favorite stocks and then get ready to sell...we'll be looking for that point as early as next Friday, the 16th.
We like the commodities like gold and the miners. There are several others available. Oil took a 12% hit today after a big 40% run up over the past couple of weeks. This kind of move clears out some of the late arrivers. Now, it may be free to move back up again. There are several others. Speaking of late arrivers, that's what we would be if we are getting into GDX now here around 30. With GDX, we see the 200 day moving average is right around 37 and we see this stock getting very near that price in the next two weeks. We do Not guarantee anything. We will be Selling our GDX around those levels unless we get an even higher price. Enter at your own risk...this stock has doubled from its lows late last year.
On a final note, we received a very nice email from one of our readers. Thanks for the good word, DT. Your taking control of your savings and that is a great thing. We are pleased that you were able to take action. Buy low and Sell high. These rules are hard to follow but Very profitable. This game never ends so keep on playing even if things go the wrong way for a time. Just make sure you learn what you are doing right and wrong.