Wednesday, April 01, 2009

A Nice Pop For April Fools Like Us

Top Line: Wednesday started with a giant thud as predicted by the futures action on Tuesday evening. The opening bell was the low of the day and the market quietly moved up most of the day. Probably more to come.

In our last post, we suggested that the market might drop in the next day or two. That seemed to be completed this morning with the huge down opening. The market failed to break through the lows of the past few days.

These shallow selloffs is what the Update expects for the most part as we rally this spring. The market doesn't want to let anyone in and will probably not give us a meaningful selloff until we have many more participants who are convinced the market is going up. Then we can have a good selloff.

This evening the futures are firm and the Asian markets are up again, enjoying the strength on Wall Street today. The last two days, Japan has rallied 6%. We know that the trading session is not over this evening in Japan so anything can still happen but a 6% move in two days isn't too bad.

Turning to the gold mining complex, we were interested in the higher GDX price today without much movement in gold. We have been saying that the gold miners are very cheap compared to the price of gold. The relationship of miners to gold is simple. The higher the price of gold, the higher the value of the miners. It's like the miners have the gold mines and the amount of gold in those mines fluctuates with the price of gold. Assuming extraction costs don't change too much from day to day, the value of the miners should go up with the price of gold. Ok, it's maybe not quite that simple, but you get the idea.

The other thought is that the miners generally foreshadow the price of gold. If miners are rising, then gold the metal should follow suit. Today gold didn't move much but GDX jumped nearly 5%. GDX closed at the highest level since last fall and gold is now modestly under its highest price. Going back a year or so, when GDX was over 50, gold was about where it is now. This doesn't really bolster our position over periods of time but it does indicate that GDX is well undervalued. It would be nice if we had a few more days like today to get us back to better balance between gold and GDX.

And, we know why you come here...yes, Jackson pictures. We learned that Jackson took his first steps on March 31st so we went to see for ourselves this evening. There are no pictures of the event but we did see him walk. He is pretty confident in his walking. The first we saw him walk, his mom stood him up and he walked from the kitchen through the dining room into the living room and into the hall and then into mom and dad's bedroom and into their closet. Unbelievable.

Anyway, here are some older pictures of him, from a few weeks ago before he could walk???


Having a bath and shampoo after dinner with Gramma.

Examining Gramma's doll to see if her eyes and nose worked properly.
Chillin' with Cali at Grampa and Gramma's house.

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