Monday, April 06, 2009

We Were Hoping Michigan State Would Win, Big Ten

Top Line: The market sold off in early trading on Monday but then rallied the rest of the day. This action is what we like to see...except for GDX which seems to keep going down every day. It will come back soon and zoom higher in a few months.

Monday didn't offer us much in the way of new information but it did look like we were going to have a crushing down day. It ended stronger than most thought it would. We are still looking for a very strong rally in the not too distant future with the Dow jumping to near 10K. This rally will be accompanied by a chorus of naysayers who will tell you every step of the way that the market is overbought and should be sold.

As we mentioned in our last post, we are keeping our eyes on the volatility indexes and they should provide valuable clues as to when these naysayers will finally be correct. In the meantime, the VXO is still over 40 today.

We thought we should mention GDX due to its percipitace fall in the last few trading sessions. We were strongly recommending buying GDX last month when it fell below 30 and now it is getting close to that mark again. Certainly, if you have some funds available, GDX is starting to look very attractive again. Always remember that mining stocks, which GDX is a fund of mining stocks, are extremely volatile.

If you don't think you can handle that volatility, you may want to try something else, like maybe skydiving or base jumping. When dealing with some of these sector stocks/funds, they do tend to be volatile but that gives us the best upside potential, too. But, you need to be able to withstand the likes of GDX when it drops from 38 to 33 in a couple of trading days. Fortunately, our entry price is quite a bit less than that so it doesn't feel too bad.

We are so bullish on GDX that these buying opportunities seem unfair because people shouldn't be allowed to get in at such low prices. We worked hard to get it down in the teens last fall. They aren't going to be able to get those prices again for a very long time. We remind you that you should never chase these stocks or any others for that matter.

We watched Michigan State lose to UNC and the Twins lose their home opener to the Seattle Mariners. It wasn't our night, but we did watch it at Home.

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