Real Estate, Oil, or Durable Goods?

The past several days have been sort of a slow bleed in the Dow Industrials (and the precious metals). We have repeated our "sell all rallies" cry and the market has been getting rallies and then selling off so you all must have some clout with the amount of transactions you make. Seriously, the market wants to go down and it is starting to succumb to the beat of the down drum. It's now a question of how far can it go down over the next couple of months.

This morning we found out that durable goods orders for July were down 4.9%, after forecasts of down 1.5%. That was enough to keep the market down for the opening but then the new home sales set a new world record of 1.41 million on an annual rate. That report sent the market up on the day before the new world record oil price over $67 slammed the market for over 84 points in the Dow by the close.

These events are all bad even though the market celebrated the home sales. Durable goods orders represent the type of things that go into new homes like a fridge, a washing machine and a furnace/air conditioner but they showed down 4.9%. But new homes sales were up, you say. Well, that is true but underneath that number was the number of new homes on the market, the so called spec homes (speculation homes, the ones that builders build hoping for someone to come buy them). The unsold homes out there is at a very high 4 months of inventory, assuming the current rate of sales. What happens if the rate slows, that would mean the number of months of inventory would rise. Well, maybe higher oil isn't such a bad thing for the stock market but it seems bad to have it so high.

And, more real estate news as yesterday we heard that the existing home sales dropped unexpectedly and that inventory of existing homes were at a 4.6 months. These inventory levels are starting to show some signs of the real estate market getting tired, especially taking the inventory build of new homes in today's report. We want to keep a close watch on these developments as the next few months go by. Some whiff of weakening in the real estate market will have a dramatic effect on the stock market. We will see.

Meanwhile, the talking heads on the TV are not connecting the same dots we are. I had an opportunity to watch a couple of "experts" on TV on Monday talking about the continuing real estate boom. They seemed to think that 'bubbles" are a regional issue more than a national or international phenomenon. Our position is that the housing market has allowed people to spend beyond their means and if that changes people will change the way they spend money and it won't just be in California. It will change the structure of the economy, maybe the global economy but especially here at home in the USA. And, it will feed upon itself, just like it did on the way up. Real estate is a much more difficult asset to sell than stocks so the effect will develop over a little time, so the more immediate effect will be felt in the stock market.

We are keeping a close watch on our precious metals holdings as well and have been disappointed in the short term that they have dropped so much. Our last post indicated that the commitment of traders' report was a bit bearish and now the HUI has decided to drop below the recent low near 200. We want to see one more good rally from here to see if we should stay in or get out. We mentioned the True Contrarian's site and have now read it. He is deeply bullish on gold and silver and we are getting a little cautious in here. His report is that precious metals typically show a low in late August so we will hope that today was that low.


Dow Industrials: 10,434.87 -84.71 (let's see, we're under 10,500 again, look out)
BGEIX: 11.30

Sunday Musings

Just a quick note for those of you who decided to come back here before Wednesday's post.

I checked the commitment of traders' report for gold and it has gone very bearish for those of us in the precious metals sector. We are not prepared to sell our little gold mutual fund, BGEIX, but we wanted to let you know that the building blocks for higher prices are not under the market as they were a couple of months ago when we got in.

The basic idea is that we don't want to fight against the commercials when we decide what to do with our positions. They are now heavily short and we would be foolish to stay at this party too long in the face of their positions. If the metals give us another pop in the next week or so, please take your profits.

One other thing you can do to find out what is going on there is to read the True Contrarian link to the left. He normally posts a new message on Sunday evening but not always, sometimes he posts on Monday or not at all. He will probably be more bullish than we are but it would give you a good sense of what is going on the precious metals market.

Have a great week and we'll be back in a couple of days. If something happens in the next two days there should be a post on Tuesday evening but, if not, we will post on Wednesday evening.

You know our position--stocks peaked in early August and all rallies should be sold. We will be especially watching for a buying opportunity in the fall or should we say autumn after the fall.

See you back here in a few days...

Dow Industrials: 10,559.23 +4.30 (wow)
BGEIX: 11.62

Google Boggles

The stock market tried to put on a happy face after opening down this morning. At least the Dow was able to muster a gain, to the tune of 4.22. The broader market wasn't doing so well and didn't finish all that well either. We are in the period of time that seems to show a lot of uncertainty with the market up one day and down the next. To me, this is a definite sign of a turn in the market.

The technicals that I follow are starting to turn over and the short term ones actually are showing some signs of being oversold. As you know, one of our favorite indicators is the five day average upside volume. The highs in this index tend to coincide with highs in the market. Tonight that index is at the lowest point since the first week of January when we had that big drop in the major indexes. The question now is, "Does this indicator work to show oversold conditions as well as predict short term peaks?" We don't normally look to this indicator for low points so maybe it's telling us that we are about to go down hard. That would not surprise us as the market has already turned over and is heading down. It's only a matter of weeks before we see a steep drop so maybe the 5 day upside volume indicator is getting us ready for a weak bounce in prices only to be followed by a swan dive. We will see.

GOOG is in the financial news today, making an announcement that it wants to issue 14 million more shares of stock. At the same time the Wall Street Journal said something about GOOG being a value play. Which is it??? Should GOOG be selling a "good value" or are they correct in selling out 14 million new shares? We have the opinion that GOOG is OVERVALUED contrary to what the WSJ may say. Since the article in the WSJ probably was written prior to GOOG's announcement, we think that the author may have been a little more cautious in his statements.

We also noticed an article on CNN today talking about the housing market and how prices are not going up as much as they have in the past several years. These are little things that we are trying to pay strict attention to due to our stance on the housing market being the fulcrum for the stock market.

In fact we think that this recent bond market rally, reducing mortgage rates, will not produce much in the way of additional activity in the housing market. If that truly happens, then we are going to be much more confident of our longer term forecast for much lower prices in stocks. If the stock market gets wind of some storm clouds on the horizon, there won't be much hesitation to sell especially now that the market seems to have rolled over. (The bond market was up today erasing yesterday's losses but forming a similar pattern to the stock market going up one day and down the next. )

Dow Industrials: 10,554.93 +4.22
BGEIX: 11.55 (this hurts after being over 12 in the last week)

PS Just a reminder that we are planning to be off the Blog until next Wednesday evening unless something big happens tomorrow or Tuesday. Please come back next week for more on the developing bear market...

PPI Cools Bond Market

Today's read on the Producer Prices, up 1%, was a little more like inflation to the bond market. Expectations were for half that and the "Core" rate was up 0.4%, quite a bit higher than the 0.1% expecations and too close for comfort for the bond market.

As the bond market was unwinding its gains from yesterday, the stock market was enjoying a little rally brought to us by HPQ and AMAT to mention a few. The stock market gains were somewhat muted by the end of the day as we see some very heavy trading going on these days, meaning, stocks are having trouble going up, not meaning heavy volume, which there really isn't.

You would think that with the kind of inflation the PPI brought this morning, there would be some upward motion in the precious metals but there was only a large thud. People must think that there will be more Fed intervention pushing up rates and causing less reason to purchase gold. That doesn't make sense but I don't know what is going on. We suffered a little setback in our mining position today. The uptrend in the mining stocks is still in place but we don't like these types of days as bulls in the metals market.

The internet virus or worm we had at work today was still operating and systems were slow and my PC rebooted several times this morning. We like to keep an eye on the markets during the day just because of events that may be going on due to news. Today kept us from that all together. Sometimes work gets in the way but today it was the internet/worm/virus. Hope your computer day was better. Anyway, productivity was poor at many companies around the country due to this virus/worm.

Dow Industrials: 10550.71 +37.26
BGEIX: 11.68 (ouch)

PS There will be no Blog posting early next week due to me being away from my computer. We will post tomorrow evening, Thursday, and then we will post on Wednesday next week unless something spectacular happens on Tuesday and then maybe Tuesday.

Down Day

The stock market had quite a bit of news today including a 0.5% increase in the CPI, which translates to about a 6.0% annual rate of inflation. But, don't worry, the Core CPI, you know the one excluding food and ENERGY, was only up 0.1%. The bond market didn't seem to mind one bit and was strong all day.

The other early news was from WalMart, John Deere, American Eagle, and Gateway. WalMart said net income was only up 5.8% the smallest quarterly gain in four years and said rising energy prices is forcing them to lower forecasts. Gateway, well, not that it really matters, was roughed up by about 20% (ok not much in real dollars as it closed at 3.11). John Deere dropped over 11% after announcing earnings and providing lower guidance. American Eagle was down almost 10%.

The market had too much to deal with today and fell 120 in terms of the Dow and about 1.5% in the NASDAQ. All in all a pretty rough day. The Dow closed at the lowest point since early July. So, will this downtrend continue?

Well, when the regular market session closed, HPQ (Hewlett) announced earnings and raised guidance pushing the stock up 6% after the news. And, AMAT announced earnings saying that they probably saw the low point and now things should be good from here. Eternal optimism for the stock market, a virtual nirvana. So, of course, the after hours market was alive and well pushing the futures up to get ready for tomorrow.

Our position? Well, let me see, no, we haven't changed our minds. We still are looking for a drop at least until October. Then we will reassess, until then sell rallies.

Gold is pushing through resistance in the $440-$450 area but the mining stocks are starting to get a little sloppy. We will probably be waiting for a good spot to step aside for a while. We are looking at the HUI near 220 with heavy resistance up around 240. If we get near that area we will be happy to take some profits.

Dow Industrials: 10513.45 -120.93 (almost blew right through 10,500 without stopping)
BGEIX: 11.95

PS So much going on today, I'm sure there was a lot that I didn't mention. I know I forgot to mention the big computer virus that struck many companies, including the one I work for. We were having some trouble with our systems all day today. I'm hoping to get back to business tomorrow, we'll see.

Another Selling Opportunity

Today the stock market staged one of those Monday rallies even though it started down a little in the morning. The reason stated by the media was that oil prices eased giving the market some added upside.

Well, we beg to differ with the media about the reason for the rally. Of course oil and gas have been going up without pause for several weeks now and at least here in Minnesota prices are 2.65.9 as I was coming home tonight. But if you recall during that same period that oil has gone up, the market was going up, too, daily fluctuations notwithstanding. The stock market is not reacting to the oil prices like they would have you believe.

In fact, today's rally was brought to you by "Monday" would be just as good an excuse since we have generally seen early month and early week strength just because it's a new beginning. We don't feel any particular compulsion to believe that if oil drops the market will rally, instead we think the opposite if at all. The market and the oil may have topped at the same time.

Another big headline today was the housing market and how prices have gone up a record amount in the past year. Meanwhile, Delta Air made an all time new low as it struggles to stay out of bankruptcy...

Today was just a little upside in an otherwise dull market. The top put in place in the first week of August remains our guide. If that is broken to the upside we will have to be patient again. For right now, we are extremely bearish and with today's rally, we had a great selling opportunity.

One big negative about today's rally was the low volume. The bulls need volume to sustain any type of advance. In the dog days of summer, that doesn't seem to be in the cards but we will see. Our position is CASH at least until October and then we will reassess.

Where are your investments going?

Dow Industrials: 10,634.38 +34.07
BGEIX: 12.00 (Gold was down hard and silver is under $7 again)

A Fresh New Week

Last Friday the market was soft on the heals of DELL's announcement on Thursday evening that the world was not as great as they had hoped. DELL managed to drop about 7.5% by the end of the day dragging down the market a little too. By the end of the day, the traders had enough of selling and bought some going into the closing minutes. I suppose it could have be some short covering ahead of the weekend.

There is not much to say this evening as we wait for trading to open in the morning. We are looking for continued weakness in the market over the coming months and recommend selling into all rallies that develop. If you have been following your own stocks over the past several months that this little rally has lasted, you have either noticed they haven't followed this up trend, they are weak indeed, or they have rallied with the market which means it's a good time to take some off the table. We will see how trading goes this week for more clues as to the topping process that has taken place over the past two weeks.

As far as the precious metals go and considering the gold bearish commitment of trader's report, we are getting very cautious this sector again. We have seen a nice run up but we don't want to lose out on some good profits. Let's see how they all trade on Monday to get a good idea of what we need to do. I have almost convinced myself to sell my position in PAAS on Monday especially if we get any strength in silver. I will keep you posted and report again tomorrow.

See you back here tomorrow.

Dow Industrials: 10,600.31 -85.58 (nearly back into the 10,500's)
BGEIX: 12.13

Dell Disappoints

The market decided to turn that frown upside down Thursday as the Dow pushed up to that 10,700 mark it tried to hold onto on Wednesday. Today was one of those remarkable days we have seen quite often, as a matter of fact, when the markets are ALL up. Bonds were up, stocks were up, gold was up $9, oil made a new world record high at $66 but the dollar did have a bit of a down day. Still, with all the other markets up, who was noticing the dollar waste away?

After peaking in early July, the dollar has traded sideways and down. The dollar (index) traded over 90 in early July and now it is just under 87. Gold on the other hand is at a 4 1/2 month high. Would somebody tell silver to run a little too. It is badly lagging gold at the moment even though PAAS is trading firm. We mentioned a few days ago that it looked like the precious metals sector was tired of going down and that little drop was the spring board to today's big $9 up move. We have such a nice profit in BGEIX right now but we will continue to hold for now.

After the bell, DELL, rhyming is good...pardon me. After the bell, Dell presented a pile of information (that was kind wasn't it?) that suggested the next quarter wouldn't probably be quite as good as they had thought. And, by the way, while revenues were up they were on the thin side this quarter. Now, you know that DELL can not be set aside as a one off problem due to the heavy reliance on DELL in the tech world(even though it only makes boxes). If they are saying revenues are going to be scaled back, the rest of tech land needs to take note.

And, the market traded down after the report such that the NASDAQ 100 lost about two thirds of what it had gained today. Several other computer stocks had some air taken out after hours. This is not to say that there can still be some partying but the air is thin up here and many stocks need to come back down a little bit to get some oxygen if nothing else.

Dow Industrials: 10,685.89 +91.48
Bgeix: 12.09 (twelve, wow, nice day, who recommended that at 9.71?)

PS Happy Birthday, Son

Reversal Day

Last night we failed to mention the two stocks of interest, AIG and CSCO. AIG had great earnings and CSCO did too but CSCO said some down beat things about the future. So, CSCO went down after hours last night and AIG was up. This morning saw a big pop in the Dow to the tune of about 100 points an hour and a half into trading--stunning when you consider what else is going on at the moment. But, that's the kind of effect a stock like AIG can have on the market.

So much for our thought that last week's highs would hold, at least in the Dow. Meanwhile, some of the other indexes were not showing that kind of strength and were not really close to moving back to last week's highs. For example, the NASDAQ COMP traded at 2220 last week and today's high was around 2185 and the SOX traded at 486 last week but only at 476 at today's high while the SP500 traded within 3 points of last week's high. The only one we follow that dared move above last week's high was the Dow and only a little bit over last week at that, about 20 points. And, if you look at the highs the week before that, today's high in the Dow was only a couple of points higher than that. We mention this because we want to keep our eye on the market rather than whoever is on TV at the moment.

But anyway, from that high about an hour and half into the trading day, the market leaked until we went out on the lows of the day with the Dow off about 20 points and back into the 10,500's again. We think today's reversal was important as it happened right at the point the market should have resisted an up move and it did. Looking at the charts, if you remember what an outside down day is and its potential, you see that the NASDAQ COMP and 100 both had nice outside down reversal moves today. This is a bearish chart because it means that people were very aggressively buying in the morning only to get sold later in the day without other buying to help them out. This kind of thing can cause short term fear--we are still sitting on the position that last week's highs are to be respected. We are very short against those highs.

The precious metals sector seems to have indeed turned the corner over the last couple of trading days and has shown some strength. We were a little disappointed in the move that our little mutual fund, BGEIX, had compared to the HUI but we will take it for now. There is a possibility of a nice rally right here. We will enjoy it. We have been patiently waiting for over a month.

The rout in the REITs continues today with IMH cutting its dividend by 30% or so and getting sold to the tune of about 15%. This REIT still pays about 15% in dividends annually but if you are getting touched to the tune of 15% in one day, you may want to hold off for a second.

FNM (Fannie Mae) continues to have troubles figuring out how much to report for earnings so could you all wait till, say, the middle of next year. How's that for you? Well, over the course of the last year, the stock has dropped from a high of 77 to today's 52. Some bull market in housing when you have the king of the mortgage makers dropping by a third.

Sorry for the long post tonight but today was a very important day in the market. The volume on the NYSE was the highest its been since late June when we had a couple of triple digit down days in a row. High volume, key reversal (outside down day), real estate is turning over and oil pierced the $65 level and all of these contribute to a very bearish outlook.

Happy trading--what I mean is be careful.

Dow Industrials: 10,594.41 -21.26
BGEIX: 11.60

PS Erick, nice golf round. But, you didn't mention how your indicator was doing??? Surely it must be following the pattern of what we outlined in this post. Great to hear from you.

Extra Innings

A couple rate hikes ago, we heard from Federal Reserve Bank of Dallas President Richard Fisher that the Fed was in the eighth inning of their ballgame of interest rate hikes. This implied to many that the ninth one would probably do it and today we had the tenth. Well, I guess we are into extra innings and you know how these games can go. You just never can tell when the error is going to come but you know that it will.

That all said, the stock market came out smoking this morning. Well, you know it's been down several days in a row and we just can't have that. I don't care that the Fed is going to raise rates or that the oil prices are never going to back down, let's buy 'em and so they did.

I don't get too excited about days like today. The market needed to ease some of the recent selloff and create yet another opportunity for the bulls to misstep. Last week's highs are hardly a distant memory to most market participants but not to us. Those are our guideposts this week and we are navigating in these treacherous waters to see if ... you know, I can't come up with another metaphor to complete this obsurd sentence. But, we do think last week's highs will hold and the market shouldn't really even try to test them.

This rally today is designed to throw the bulls off course a little. The point is that the market can go up in the face of all these negatives out there. That is supposed to give strength to the bulls. Well, be careful with that thinking going into the fall. (I always like that, falling into the fall, it's the little things that please me)

Our main focus has been the precious metals and their stocks. The little downturn they have experienced over the past several days seems to have exhausted itself over the past couple of days. Usually interest rate hikes are bad for metals--you know the whole gold doesn't have "babies" or have dividends so it gets more competition from bonds when rates are higher and the dollar usually likes higher interest rates for the same reason, both pushing gold down.

Anyway, today the gold complex was firm and we are more confident holding our positions.

Dow Industrials: 10,615.67 +78.74 (I know, I know, it's over 10,500 again)
BGEIX: 11.40

Tuesday: Merry Men from the Fed

I'm not sure what the stock market must be thinking at the moment. On one hand, there is oil at a new world record of $64 and, on the other, there is the Fed continuing to raise rates one notch at a time. Tuesday is one of those notches and the market will do everything in its power to buy the news. We think that the highs from last week will firmly hold any buying that may, or may not, happen after the announcement at 1:15 CDT.

With the incessant upward march of interest rates, the mortgage market will slowly heel to the lead of the bond market. The stock market, with its more less disciplined movement will continue to resist the tug of the bond market. As rates go up and stocks go down, there will be a natural tendency for people to move their money from stocks to bonds (no, we are not suggesting that anyone do this--our position is more to have CASH to buy selectively when the time is right).

Right now, there definitely seems to be a change in market sentiment overall. The stock market shows a fairly good top in place from last week's highs and we will watch that peak closely. The leadership has lost some direction and that may be too much for the broad market to handle. There is much time for the market to drop into October and, while a big drop is not imminent, it is looming. Prepare. Oh, and look for another 25 bps from the Merry Men at the FED.

The precious metals in general have done ok over the past couple of weeks but we thought they should do better given the surge in the mining stocks. Silver has gone under $7 again which may be shaking out some weak hands. Still, there is a nice profit in BGEIX and we want to be watching for more definitive signs of a reason to get out. The True Contrarian is quite bullish and for further insight on the market use the link. He didn't publish last week, so he was due, and he's a good read, so enjoy...

Dow Industrials: 10,536.93 -20.10 (Three down days in a row, and in the 10,500's)
BGEIX: 11.40 (pulling back from its recent run)

A New Era Has Begun

While there is much to say, I want to make sure that we mention that the real estate market is probably going to show some signs of weakness. The next couple of months will be filled with opportunities in the housing stocks on the short side. Take a look at the chart for HME, a REIT, (you can use the Big Charts link to the left) for a dramatic look at the type of scare the real estate market had last week. A 10% down move doesn't seem like much when you think about it but when you see in on the chart it gives you a better idea.

The bond market decided to break down a little instead of trying to make that bottom we have talked about. If we see rates rise some more here, the fall housing market could be in a world of hurt. This is the tip off to the stock market that things are not as they have been. Of course, the stock market participants can and have tried to ignore any bad news but that thinking is about to catch up with them. The sweeping change in real estate psychology can and probably will overwhelm any valiant attempts stock bulls may have to hold up the market going from here. Real estate prices will not fall a fast as stock prices in the first run and certainly will not be readily seen like stock prices.

Friday's jobs' report was a little upbeat but the stock market didn't really think much of it and declined on Friday led by housing stocks, not such a good sign. The bond market just went down, meaning rates went up.

We are getting prepared for a slow rollover of the stock market here and expect, as we have been saying for a couple of months that the decline should take us into October at the least. More the rest of the week, we should have an exciting week so come back every day.

Dow Industrials: 10,558.03 -52.07 (Do I see 10,500 again? I think I do.)
BGEIX: 11.52

Friday is the Day

We have set our sights on Friday morning as a key point in the markets. The big news on the Street today was that the bulls were lightening up ahead of Friday's jobs report, so we are not the only ones paying attention to it. This report is significant in so many ways such as giving us a better clue again how the underlying economy is fairing in general, how that will affect the bond market and in turn the mortgage market, the reaction the stock market takes to the news as well as bonds and the dollar and of course the metals, and will the Red Sox be able to win the World Series again? Oh, I just threw that one in there to see if you were keeping up.

This morning, the Bank of England Lowered its interest rates from 4.75% to 4.50% in a widely expected move (not to me). There seems to be some confusion in the world about the direction of the global economy. Britain is hopeful for better times ahead but wants to lower rates just to be safe. The ECB (European Central Bank) did not follow suit today but that could be just around the corner.

Tonight's post is mainly marking time waiting for the reaction tomorrow morning. As you know, the news doesn't seem to be very important, just the way the market moves on the news. And, don't forget the first move may be reversed, especially if it is an up move.

We saw how the market traded today in anticipation of the jobs report but don't really put much stock in that. The number is still unknown (to most of the world) so we have to wait like everybody else. We do expect the resolution to be to the downside but the bulls have managed to keep it up here for a while. Friday morning will provide you a very good clue about the next big move--which we think will be down.

In June the bond market topped at the very moment the June jobs came out and has not been able to get back to that level since. This week we may see the same thing in the stock market.

If there is something to report, I'll try to add my two cents after the report comes out in the morning. No Promises, but good luck after the number comes out. We are looking for some bear relief.

Dow Industrials: 10610.10 -87.49 (getting very close to that 10,500 again)
BGEIX: 11.61

PS There is some concern in the market place that Saturday's 60th anniversary of the Hiroshima bombing could be a target date for more terrorist activities. This could also weigh on the market later on Friday. I don't know where this stuff comes from I just report it.

Gold Shows Some Luster

While we wait, impatiently, for Friday's trading day, (you know, the one that has to trade after the jobs report) we at least had a good time watching gold today. Following the strengthening of the mining stocks yesterday even while gold itself was lack"luster", today's exhibit was fairly spectacular. Gold was up about $5 today following a steaming performance by the HUI of over 10 points almost 11. That is reflected in a nice move in BGEIX today, check it out below.

Gold is running into some overhead resistance near $440 but based on the move in the metals, it seems likely that it will push through it. Silver seems to be a bit of a laggard here and we're not sure why. Our PAAS position did manage a nice 5% move today, along with the HUI, despite the rather unispired move in silver.

This is the upside move we have been hoping to see in the mining stocks. (There has been some concern expressed in these pages that we might not get it.) We are getting to a point where we need to be thinking of an exit strategy even though the break out just occurred. We will keep you posted. For our BGEIX position we are up nearly 20% over the past couple of months. Good move. (My position in PAAS that I've traded twice and now hold the third time is up nearly 40%. Without the trades, it would be up 30%.)

But enough about me. Tell me how your trading has been going.

Happy Trading--get ready for Friday, only one more day to go.

Dow Industrials: 10,697.59 +13.85
BGEIX: 11.62 +0.51 Nice!!!

Erick has another comment after yesterday's post. I believe it sounds like deja tu.

Stock Market Eschewed

Rather than spend a lot of time discussing the trading day today, I thought I would concentrate on the comment we received from Erick (go back to yesterday's post and read it yourself). My central premise about the stock market continues to be that the end of the credit expansion will push the stock market over the edge.

I think it's important to understand that the ATM most people live in seems to be providing the ability for people to continue spending more than they earn. Today's report from Freddie Mac indicates that in the second quarter, 74% of their mortgage loans were cash outs compared to just 33% in 2003. The CNN article indicated that it was ok because most people were putting the money back into their homes by way of improvements, or they were using it for their kid's college education or to buy vehicles. There is some risk here.

There are other issues with mortgages like the ARM or neg-am or interest only loans that people are using to purchase homes. If rates go up, there could be a problem. We have indicated that the bond market seemed to be looking for a tradable bottom but so far that hasn't materialized and rates are indeed going up. We would be concerned about all those loans that will need to be increasing their payments should those rates go up.

One key point about the mortgages of today, there is little if any down required to purchase homes these days. Back in the 1920's, you needed to have about 50% down to buy a house and today...not much. But, the margin requirements on stocks is 50% now because of the 1920's rules that you only needed to put 10% down to buy stocks. If rates go up much at all, there may be a large squeeze on some of these mortgage payers. The unfortunate thing about all of this is that so many people are now dependent upon real estate for their financial lives, both their jobs and being able to use their homes as ATMs. We shudder to think what might happen.

Our advice has been and will continue to be, pay down your debt as much as you can. You are being given the opportunity to do so now but the temptation is to expand your debt. Be careful.

As for the stock market, we are waiting for Friday morning. The first week of the month is like this. Go take a look at the bigcharts on the links and use the symbol NDX for the NASDAQ 100 average and look at a five year chart, either daily or weekly. Tell me if you see anything that looks like a reason to be in stocks since January 2004.

See you tomorrow.

Dow Industrials: 10,683.74 +60.59
BGEIX: 11.11 (NEM and ABX were strong today)

ISM Manufacturing Index Shows Growth

Today the market found out that the ISM manufacturing index topped estimates and it is above 50 so it indicates growth. The bond market didn't like this number and the fact that oil traded at a world record price (on the back of the announcement of the death of King Faud of Saudi Arabia). Bonds (US Treasury) fell through last week's lows and are now back in the down trend line we have seen for the last couple of months.

The bonds should attempt a rally to get them back toward that June high but it doesn't have to happen. We think that the rates need to drop one more time and housing not to follow for us to see a pretty good sized crack in the stock market. That could be happening now. As I drove through my old neighborhood this weekend, I noticed there were many open house signs along the road. I wonder if they aren't selling quite as fast as they once did.

Not much to report in the stock market today which is why all the talk about the bond market. As you know, we think the sudden contraction in credit is going to be very damaging to stocks so we are paying particular attention to the bond market and the real estate market. We are hoping to get a whiff of danger from them although if we do see some obvious break there, the stock market will not like it one bit.

I noticed today that Ford and GM are going to be cutting prices on their 2006 models to be more competitive and give us value for our purchases. Do you suppose they are having trouble selling cars? That would be my guess but the "employee" discount program seems to have gone a long ways to unload some of their inventory; but, will their strategy to lower sticker prices without rebates be successful?

Dow Industrials: 10,623.15 -17.76
BGEIX: 10.98

GDP and Chicago Purchasing Managers

Happy Monday to you. Here, it is still Sunday evening and we are trying to remember what happened on Friday so we could report it. Now I remember, the GDP report came out which didn't have much impact on the market as it basically came in line with estimates. (I still think the deflator is too low "thereby", Erick, allowing an inflated GDP, such plays on words you can only get here at the Update.)

The two numbers that the market did concern itself with were the oil price rallying over $60 and the strong read from the Chicago Purchasing Managers. The bond market recoiled on that news and dropped hard fully retracing, and some more, the rally the day before (Thursday). So far, the bond market has held the lows set a few weeks back and we still think there will be a tradable low here, even though we don't really concentrate on the bonds for investments here at the Update. We still think the early June high will hold but as of tonight that is about 5% above where we are now and allows for a small gain.

Our favorite silver mining stock (which we own), PAAS, announced earnings on Friday and gave the stock a lift during the day but it didn't hold much of it. PAAS popped for about 5% during the day and closed up about 1.5%, still a nice day. PAAS has had a very nice run here in the past ten days from 14.50 to Friday's near 16.25. We have traded the stock three times and probably should have bailed out during the rally on Friday--some of us have to work. But, the mining stocks have done well since our entry point and we have been patiently waiting for some upside breakout which has not materialized to date. Meanwhile the traders' commitments were not very convincing last week either. We are near a point where we will pull the trigger and get out but for now we feel compelled to stay with the trade.

Monday is the first of the month again and we know that some strength may appear but we are again looking to the jobs report out on Friday to shed some light on the near term direction of the market. Our position is still that the market will be considerably lower going into October.

Happy Trading.

Dow Industrials: 10,640.91 -64.64
BGEIX: 10.90

Market Pushing Higher Again

The stock market continues in its tantalizing ways, makes you want to stay in and see what happens tomorrow. That strategy hasn't been too bad so far but we want to be cautious for an abrupt turn. The complacency in the market is almost eerie. Here we are at new four years highs in several indexes and all time highs in others. Why should anyone worry about the stock market going down? At the moment, we are just waiting. The strength in the market is there but it is just not convincing.

Gold and silver were strong today but not the HUI which is troublesome. We are concerned that the upside break is not coming. Gold has its own resistance about $30 above here and seems to have a lid on it over the past several months. Silver is a dollar off its highs from last fall and rallied strongly today. We had suggested buying silver below $7 which is where it was for several trading days in July. We are looking for a good run here but are getting a little impatient even though we have good profits in our mining stocks.

We have recently mentioned that the bond market seems to be trying to form a tradable low and today it made a fairly strong move up. The Treasury market would be the only one we would suggest.

Oil made a move over $60 today after reports of a refinery fire in Louisiana. Doesn't is seem difficult to you to believe that all four of these markets were up today? Oh well I guess we wait another day.

Have a great trading day and we'll see you back here late Sunday night.

Dow Industrials: 10705.55 +68.46
BGEIX: 10.92

Durable Goods Surprise

This morning the durable goods orders showed some surprising strength, coming it at +1.4%, given expectations of a drop of 0.5%. That news didn't do to much to the market even though the Dow did pop about 30 at the open and then faded; but, by the end of the day, the market managed a solid gain. The apparent reason given was the positive undertones in the Fed's Beige Book saying the economy is strong and inflation is tame. The Dow managed to climb above that 10,600 again and, as CNN put it, the SP500 eked out a new four year high--powerful talk. Good selling opportunities around now.

Not much else to report today so I'll pretend it's Wednesday... The bond market seems to be searching for a tradable bottom and the Treasuries may try to rally back to the early June top we have mentioned here several times. I think the difference this time will be that housing will not respond so strongly to another drop in mortgage rates like it usually does. That would be a significant clue for us to know that the housing market and therefore the economy is ready for a correction.

The precious metals were trading opposite the dollar today, as they should. This morning the dollar started out rather strong and ended up weaker, also as it should given the tongue lashing it got from the Chinese this past week. The Chinese apparently entered the currency markets to stabalize their currency as they said they would like to keep it near its new target. Back to the precious metals, they managed to find some footing and rallied a bit into the close.

As mentioned in the past week, we are getting cautious the mining stocks even though there looks to be a pretty good rally coming in them near term. We are going to sell into this next rally if it is sharp enough. There should still be time to hold.

Dow Industrials: 10,637.09 +57.32
BGEIX: 10.96

AMZN Jumps on Higher Revenue

After the market closed, AMZN reported earnings that were basically in line with expectations but I thought one line was worth mentioning: AMZN's 2nd quarter profit fell 32% due to an income tax expense. Hey, what do you know, income tax is an expense. In reality, the stock pushed up 10% after the news, in fairly lively trading.

The market demonstrated the ability to crawl through another day today although there was a little more strength in the broad market today compared to yesterday's sleeper.

The biggest action today was right here on the blog with Erick, our prolific reader, making a comment. You all should read his comments and make sure you leave a comment of your own. Besides the fact that I had a good time reading it, I appreciate the comments on the media's spin on the unions. Indeed the media is bullish. I also have to agree about taking profits except for one thing--when the market drops this time we should see a pretty good drop and covering shorts on the way down will not make you happy either.

Both the stock market and the bond market were quiet today and we will be too. It is near the end of another month and we are trying to be patient with our next round of selling. The market should be rolling over here and looking at the trading over the past week, it seems to be. More tomorrow... We are looking at the QQQQ's around this 39 mark and are starting to get interested again--for a move down, believe it or not.

Dow Industrials: 10,579.77 -16.71
BGEIX: 10.94

Is it Yaun or Yawn?

Today's market was indeed a sleeper with light volume and a slow bleed into the close. What we can be excited about is that we are back into the 10,500's. Not. The Dow drooped to just under the 10,600 line with no particular conviction one way or the other today.

The existing home sales set another record today which begs the question "When will this housing boom be over?" The bond market did drop a little today but again with no real conviction that the Chinese might take the punch bowl away. Well, at least until they do, we should stay at the party, the bold bulls must be thinking.

We mentioned our near term angst over the precious metals market but didn't make a firm decision on what to do. We have some nice profits from this recent run up and we might want to be especially careful here. It looks as though the mining stocks are following somewhat to the stock market is doing, they are stocks after all. If you own any of them, you may want to be watching them, too. We like to say the mining stocks move before the metals and today we say a bit of a down draft in the stocks without much movement in the metals. It just makes you sit up and take note, which we are.

The big news today, other than housing, was the mass exodus from the AFL-CIO. This might mean something to the markets but as of now, I can't really know what that might be. Any thoughts out there??? Leave a comment for us.

Dow Industrials: 10596.48 -54.70
BGEIX: 11.11

The Last Week of July

Here we are again near the end of another month and the market has continued to hold that 10,500 number we have discussed so many times. The longer the market holds, the longer the complacent stay complacent. We still believe in the market being overbought and destined for a fall into the fall.

Last week's announcement by the Chinese to revalue their currency against a basket of currencies should be taken to be an uncertainty in today's markets. Not at the corner of Broad and Wall. There we decided to have one down day to take care of some selling. After all, every dip is a buying opportunity (sarcasm). We see the futures are indeed up this evening and there are a barrelful of earnings coming out this week to entice buyers.

Moving over to the precious metals, we have become a little troubled by their performance lately. The commitment of traders report showed a modest improvement (slightly more bullish) but the trading in the mining stocks has become a little labored. We don't like to see this at this point in the cycle and are becoming more and more inclined to leaning out of our positions. We haven't made up our minds as of tonight but we need to see some upside pretty soon to be fully convinced we are going up.

While we have done fairly well in BGEIX, that doesn't mean we can just sit back and watch it go down. We want to protect our principal in this market including our precious metals/mining positions. We continue to hold for now but we will let you know what we think as the next move develops.

Dow Industrials: 10651.18 +23.41
BGEIX: 11.19

China Sets the Stage

The market had a bit of a shock this morning as China announced it was finally revaluing its currency the yuan, or renminbi. The market initially thought this was a great thing until the announcement of another London bombing. Then the media picked that up as we watched the futures drop. The news out of China is something we have mentioned several times because of the hard shot it is against the US Dollar, implying all sorts of things.

Generally these things take quite a while to filter through the financial system, although not always because currency revaluations by the market can be swift; but, we think this is significant news and plays into our continuing belief that the stock market is going to be a casualty of the inevitable unwinding of the huge credit expansion.

The first thing that came to my mind on the subject when hearing the news was that we buy a lot of goods from China and, guess what, the price just went up. That is called inflation. And, the bond market kind of "got it" today as it traded down rather hard, meaning interest rates moved up. We have "pegged" (I had to) our turning point in the credit expansion to the June jobs report day when the bond market had its big reversal and tonight that date is looking better and better.

The second thing is "What does that imply for the economy?" We come back to the almighty ATM that many people live in--oh, yes, their houses--which have allowed them to spend more than they earn to buy those goods from China. You never know what is going to push the housing market over, but whenever it rolls over, the economy will follow suit.

I know you've probably heard about this news since it was out all day long today but it is something to take seriously. Even though it may not bring immediate reactions either in the stock market or the economy, this news has the potential to affect many areas of the global economy.

The Chinese have just given a little shove to push the dollar aside and give more credibility to other currencies when valuing their own. The Asians are the ones who have been supporting the US Debt binge, both private and public debt. Again I can't stress enough the importance of this news today. We'll continue to watch the bond market to see what it thinks of this development in the near term. Today, it viewed it as negative.

The other news is earnings news and the big one tonight was GOOG, one of the stocks on our watch list for shorting opportunities. GOOG has pushed above the $300 mark and the new targets have been raised to $350. Well, tonight it disappointed the market with its earnings news, which really wasn't too bad, and dropped about 6% after hours. This could have an influence on the market on Friday so that is also something to watch.

The stock market looks very tired of rallying. Be careful here.

Meanwhile, the precious metals are again mounting an unnoticed rally since we mentioned them as buying opportunities over the past week. They were some of the beneficiaries of the yuan revalution news due to the implications on the dollar. The last two days have been pretty good but there needs to be a strong up move fairly soon to confirm our bullishness in this sector. Friday we get another installment of the commitment of traders and those numbers have recently improved so we will see if they can improve again this week. Unfortunately, they are measured on Tuesday evening which was before the move of the last two days.

Have a good weekend and we'll see you back here late Sunday evening.

Dow Industrials: 10,627.77 -61.38
BGEIX: 11.15

Saw See

Today was another up day for the market even though it didn't start out that way with INTC and YHOO leading the way down. Those two stocks never did recover today but the initial decline in the stock market vanished to green by late in the day. INTC was down over 4% and YHOO was down almost 11.5%.

The headlines read "NASDAQ hits four year high". Yes, indeed it has but that six year high will be very difficult since we would need a rally of over 150% from here. At any rate, the market is finally up to its December highs as measured by the SP500 and the NASDAQ. What does that mean?

Well, to me, that means the market is at a crucial point trying to prove itself as a bull. I am a little skeptical, imagine that, when it comes to going along with this rally. I prefer to buy cheaper assets like the precious metals. And in that regard...

The dollar may have just hit the ceiling even with Greenspan's testimony today, that being that the economy is good and the Fed needs to continue raising rates. That should, and temporarily did, firm up the dollar and weaken the Euro but by day's end, that wasn't the case. Gold and silver were firm today along with the Euro. So, the tide may have turned negative on the dollar and positive on the Euro and the metals. We will stay in these assets rather than pay these enormous prices for other stocks.

So, we had IBM give good vibes to the market on Monday and popped the it on Tuesday. Then we had INTC and YHOO to bring it down this morning, as short lived as that was. And, tonight, we have EBAY up over ten percent. I don't think EBAY holds sway over the market like INTC or YHOO but we'll see tomorrow.

Like I said, the market is at a critical point here making basically a double top with the December highs. I never thought this could be possible but I guess I should be thankful for a little life in the market after the dulls over the past couple of months.

Dow Industrials: 10689.15 +42.59
BGEIX: 10.91

See Saw

What a day.

See: The techs ruled the trading day after IBM's announcement after the bell last night. The market bolted out of the gate this morning on its way to another four year high for the SP500 and a very healthy gain in the NASDAQ as well. The Dow was up but just barely recovering yesterday's losses.

Saw: After the bell tonight, the market didn't really like the news out of both INTC and YHOO, the latter being clocked for 10% after the bell with INTC only down about 4%.

HPQ (Hewlett Packard) decided it would ax 10% of its workforce, obviously in response to a strong economy--did I read that right?

Tomorrow should prove to be interesting given the response to the news after the bell tonight. With no one interested in selling stocks all day today, maybe we could see some change of heart on Wednesday. We'll see.

In our credit expansion watch, we noticed that housing starts for last month were unchanged versus an estimated consensus increase of 2.0%. All this news comes amid a monster rally on Wall Street today. Just some food for thought.

Gold has been trading in a range just above its June lows down around $416. We are fairly confident these lows will hold due to the way the mining stocks have been behaving, stronger than the metals. Nothing is guaranteed but this past week would seem to have been a good time to be buying the metals. Silver is still under $7 tonight.

Dow Industrials: 10646.56 +71.57
BGEIX: 10.85

PS Don't forget that tomorrow there will be no email version, come back here for further Updates.

IBM to the Rescue

With the new Harry Potter book out this weekend, it's no wonder that the market was having trouble today, everybody was home reading. Ok, maybe not everybody, I was at work enjoying another wonderful Monday...maybe not. But there were a few happy people there who were smiling about their Harry Potter experience over the weekend.

Today, the market traded low volume again. I guess after the lackluster option expiration volume, today was uninspired to trade much either. Today's volume was the least in a month at just around 1.2 billion shares on the NYSE. Volume like this is not the things bull markets continue to run on.

We keep a close eye on the interest rates of late due to the powerful nature of the credit expansion that has taken place locally and globally. Today the bond market fell again pushing the yields up on Treasury's to their highest level in a couple of months. We know that the bond market hasn't made a decisive move here but that move could come at any moment and we want to make sure we see it when it happens. Ideally, we would be able to recognize something long before the market would, I know, wishful thinking.

IBM announced earnings tonight and improved them from last quarter which were dismal. More importantly, the stock vaulted higher by about 3 points in the after hours market. The leadership of IBM has not been to the upside for a while but recently it has lead the charge higher. We aren't skeptical about that, of course not.

Lots more earnings coming in the next couple of weeks. Last week we heard from GE, not so good, and today we heard from another giant, Citigroup, that it wasn't too happy either with earnings. So, there are two big reasons for the softness in the market. Of course tonight we got IBM which is there to save the day.

Dow Industrials: 10574.99 -65.84 (Let's see, yes, it's in the 10500's again)
BGEIX: 10.83 (no change)

PS I apologize for not responding to one of the comments. So, here is what I say: The question was why low CPI and PPI aren't good for the market along with higher consumer confidence. My answer is that the CPI and PPI numbers are reported to be low but I don't believe them. Low inflation usually is good for the market but the actual rate of inflation has to be low, not just reported numbers. You know, we can't include anything that is actually going up in CPI, we might have to pay those senior citizens (I'm getting close-no comment, Trish) more Social Security.

GE Subdues Forecast

Friday the market enjoyed options expiration--thanks for pointing that out to me PH. The NYSE volume was the lowest for the week. The prices seems to be drifting up but the punch is definitely gone. In fact, the SP500 and the NASDAQ have been up seven days in a row and, yes, they both made new highs for the move. The SP500 broke its March high which is a four year high so everybody should be happy. The last time the SP500 was at this level was shortly before 9-11. The NASDAQ has failed to break above its December high but it is close, about a percent to go. The Dow has almost 4% to go to make a new high for the move.

This upcoming week, the market is looking at earnings news for many companies. For the most part, the market is hoping for great news on the earnings front even though GE's forecast when it announced last week was not particularly robust. I don't know that companies will disappoint on the earnings front because obviously the big credit expansion is still in force. As long as people continue to buy on credit there is always a little more room for the liquidity in the stock market. But, we don't expect the party to last forever. Quite the contrary, we know that the credit expansion will be its own demise.

This week's market should provide some ability for you to unload some of those stocks with freshly painted high prices. For what it's worth, the market has continued overbought for the past week and trading last week was very toppy. Yes, it looked strong on the surface looking at prices but the underlying strength in the numbers was not there. I would say the mere fact that the market went up last week is a good reason for a drop this week. Clearly the prices advanced in part due to options expiration.

We continue to recommend gold and silver, the metals. Their prices have dropped to buying ranges again with silver just under $7. These could be excellent purchases for the road ahead. GLD itself is down near 42.

Dow Industrials: 10640.83 +11.94
BGEIX: 10.83 (good price to buy again with a good pullback last week)

CPI Stuns

This morning's announcement of the CPI left me scratching my head as it so often has the last couple of years. Not to worry, the June CPI was 0 today and tomorrow we should get the PPI. The report said that, with the DROP in energy prices, the CPI was able to have a flat month. The stock market thought that news was great and proceeded on a quick up move taking the Dow above the 10,600 level.

Later in the day, oil managed to drop 5% but for some reason that didn't do much to the stock market. I guess it had gone up enough for one day. For the bond market's part, the CPI news popped it up a little early but even the oil drop failed to generate any excitement in the bond market today. The bond market closed down a trace today. Apparently the bond market has "known" about the inflation number for quite some time as it yawned and rolled over for a snooze after the news. We do think the bond market topped on day of the June jobs report with its key reversal that day and its failure to break above that number to date.

The gold complex couldn't get out of the way of Low inflation and falling oil prices as gold went down about $5 and the HUI was hit for over 6 points. This is not the type of ratio gold bulls like to see, remembering that the stocks move ahead of the metals. We will keep our eyes open for any further developments here.

In my favorite news of the day, in a CNN article today someone wrote that a flat to inverted yield curve doesn't mean that the economy is going to get weaker. It means that the Federal Reserve is getting weaker. In what might be considered the biggest effort to discredit the Fed's latest position on raising short term rates, this article is saying the Fed is losing its power of longer term interest rates. I believe this is in an attempt to convince people that the ongoing housing boom will keep going and that higher interest rates from the Fed will not be able to stop it. Did I read this right? I am amazed at some of the journalism out there today.

Dow Industrials: 10,628.89 +71.50
BGEIX: 10.98

First Wednesday Post

We mentioned in the Wednesday Update email version that we would write a blog out here every night including Wednesday so let's get to it.

The Dow managed another up day but the move looked a little tired relative to the performance of the last week. We are impressed with the market's ability to hold its gains of the past week but still believe they will not hold for long. We are here at 10,500 again today indicating that magnet is still operable.

The big news today and something we don't always mention here was the deep drop of the dollar index. Today it broke trendline support and dropped hard through it. This is after yesterday's drop down to the trendline. This should give temporary support to the gold complex but didn't seem like it today.

See you back here tomorrow.

Dow Industrials: 10557.39 +43.50
BGEIX: 11.29

Market Struggling To Get Higher

The broad market attempted another rally today and for the most part delivered with the retailers and the energy stocks leading the charge. This combination of leaders has a funny feel to it, that being inflation. We are buying as fast as we can at stores (credit to buy furniture) and driving energy prices up along the way(credit to buy Hummers) .

This rally seems close to over with the way the market traded today. Our indicators show vast amounts of overbought at this time but that doesn't mean it can't go up a little more. We just don't think this is a good time to be buying any non-commodity type stocks. Speaking of commodity stocks, gold stocks managed a little volatility today by making a new high for the move but closing a little lower, basis the HUI. The BGEIX did manage a small gain on the day, however.

There is not much for a bear to talk about in this market except that it seems to be a good time to sell into strength. Bulls tend to revel in the moment even though we are struggling to get back to the highs let alone bust through them. Yes, there are certainly some stocks breaking out, but does that mean market strength?

The market is attempting to get back to the June highs and in some indexes has succeeded. Since the move has gotten the media lathered up, the sell signal is growing very close indeed. Capitulation on the part of the bears is at hand and when that happens, look out below.

I realize that my October low theory is just that, a theory, and it seems to be outlandish at the moment but please "bear" in mind that the moment selling starts this time, there will be no one to sell to and prices will drop hard.

We have said in the past year that the stock market is dependent upon the credit market for excess liquidity, meaning as long as people can go to their personal ATM (yes, their house) there will be room for the stock market to hold. Once the stock market sees less liquidity out there, it will drop long before the housing market does. It's a lot easier to dump stocks than to sell your house. October is waiting for you and it's only three months away, can you believe it?

Dow Industrials: 10,513.89 -5.83 (Isn't 10,500 getting just a little dull?)
BGEIX: 11.37 (another relative high)

Dow 10,500 AGAIN!!!

Well, there you go, another chance to see 10,500. It was another glorious up day in the market today with all the major indexes up on the day. In "short", it was a good day to sell stocks again. We have tried to encourage readers to take advantage of price swings to sell into and to buy into. We have been cautious on the stock market for a long time due to the set up to a fall we have been watching for the last six months. The media is telling you to get on this bull ride. We have said that the highs for the year are behind us, at least in the indexes we follow. Today, the market has again gone into overbought mode. We suggest selling into this strength.

The Real bull market is taking place in the commodities and we have suggested to get on that parade since mid-May. Our original idea was that mining stocks had gotten way oversold and we were buying into that weakness. The HUI index closed at 205 today after trading at just over 165 in May, for those of you without a calculator, that's 40 points or almost 25%. Show me that type of gain in the stock market or the bond market in the last two months.

Our beautiful little gold mining mutual fund, BGEIX, has done very well, too, closing at a new high for the move today, albeit only a penny higher, at 11.34. If you remember, we got you in at 9.71 on May 23rd, just a week after the May low.

Dow Industrials: 10,519.72 +70.58
BGEIX: 11.34

Here We Are

The stock market put in a tremendous upside day on Friday and caused bullishness around the world to go up even more than it's been. The NASDAQ Comp managed a new relative high along with Russell 2000 which made a new all time high. The Dow and the SP500 failed to confirm. So, those of you in Russell 2000 type stocks are having a good time along with those of you in the home builders and retails. Life could be better for us if the SOX would finish this little rally phase as it has been struggling to hold up for about year. We remain short these type of stocks, QQQQ for one.

The precious metals have taken another breather but if you look carefully at the mining stocks they have managed higher lows ever since their lows around May 16th. The mining stocks are reminding you politely to buy the metals especially since they pulled back slightly the last couple days of last week.

It's a new week and a new point for the market to try to balance itself on the pinnacle. We continue to think there will be a reason to sell stocks pretty soon. The backdrop is just right for a fall with the sentiment being so very bullish. Take precautions if you are in technology type stocks for sure. With interest rates continuing to move up at the short end of the curve and the oil staying above $60, it's only a matter of time...

Dow Industrials: 10449.14 +146.85
BGEIX: 11.12

PS I've added another wedding picture, sorry you have to have a look at me. I'm the one standing next to the bride, no not my son, the big guy.

The Five Stadings

The five Stadings

London Subways Falling Down

Today was an unusual day due to the terrorist activity in London. Markets around the world initially reacted negatively, some very negatively, but here in the US the Dow managed a positive close. A day like today is one of those days when you look at the financial markets with a bit of a question mark. We abhor the violence inflicted today on innocent people but don't think it should affect trading as much as it appeared to have done. A market trader, like I have been, tends to say how can I make money today and sees an opportunity in a weak open. How many of you were thinking bullish thoughts as the markets opened this morning? We have often times talked about weak openings or strong openings as good times for a reversal due to the nature of those early morning trades, someone is obviously Reacting to news.

Our position remains that the big news of the week is tomorrow morning with the jobs reports and then we will see what the market wants to do. Tomorrow will be the official end of the bullish period we usually see around the end of the quarter or month. We do have earnings season upon us as well so there are several things out there to hold the market's attention.

We expect the market to continue its recent drop in spite of the relative strength today. The market has told us it wants to go down based on the ever lower highs it has been putting in this year. Today, don't forget that we had another new Low for the move and we are a ways from breaking the June highs. Rationalize all you want to, but make no mistake, until the market pushes above the June highs there can be no bullishness from the Wednesday Update.

To answer the blog comment, I have seen that AIG has gone up to around 60. Do you think it can go much higher than that???

Dow Industrials: 10302.29 +31.61
BGEIX: 11.15

Thanks to all of you who remembered my birthday today, much appreciated. And, yes, I have posted another picture on the blog just below. I don't know if you can see it or not, I can not see it at work but I do see it here at home so maybe you can too. Have a great weekend.

One More Wedding Picture

My favorite wedding picture

Fireworks to the Upside?

We had a comment today saying that "Prudential's chief investment strategist on Tuesday recommended that investors with the "appropriate risk tolerance" allocate 100 percent of their portfolio to equities." Well, that's just about as much as a good contrarian can take. There you have a great sell signal straight from Pru. Yes.

Indeed the stock market was up today but I think it had more to do with factory orders being up rather than Pru's statement. Then there was oil knocking at that $60 mark as well as bonds getting hit, a couple of poor backdrops for a rally. The media sure liked today's rally but the volume was a bit light again, summer volume levels.

Today gold and silver gave a little back along with the mining stocks. This should have given you all a great opportunity to act on the buying opportunity we mentioned in last night's post. We are going to continue to commit funds to this sector for those of you who want to be bullish on something.

Dow Industrials: 10,371.80 +68.36
BGEIX: 10.94

Look for the Wednesday Update email version, more thoughts on Pru's call.
[Editor's note: I didn't have time to spend on the wedding picture tonight.]

A Short Week Ahead

I trust you had a good holiday weekend. We capped ours off watching some great fireworks. The market is about to have some fireworks, too, so we better get to that. Before we do, I wanted to share one picture with you. Check the post just below this one: I finally have posted a picture of my son Jeff and his new wife Danielle from last weekend's wedding, proud father that I am. [Editor's note: I see that it's not showing up today, Tuesday 7-05-05. I'll try again tonight.] But, after that let's get back to the market...

I think the biggest news for the markets we follow was the trading in the precious metals late last week. Briefly put, on Friday gold was down over seven dollars and the HUI was up 50 cents. That reaction in the mining stocks shows strong underlying support and gives you good reason to start purchasing the metals with some confidence.

If you haven't followed our advice on buying mining stocks to this point, you may want to buy silver. Silver closed at 6.85 on Friday, down over two percent but PAAS closed about even on the day. Silver is under seven dollars and should be purchased and gold is near $425 and should be purchased under $430. The market is speaking and we should listen. (We recommend reading the True Contrarian as he has posted his beginning of the week message.)

The other stocks are trying to hold their lows but should fail miserably at that task over the coming weeks. The stock market is sitting here at the beginning of a month with a holiday weekend and struggling to hold on to lows. The market should be strong at the end of the quarter and the beginning of the month. We are expecting strength but in the other direction. a strong decline that has its roots in June.

The big news event of the upcoming short week is the all important Unemployment Report. We are looking at another Friday jobs report and we are going to be comparing it with last month's figures to see if there is some deterioration. I don't really think the news matters to much this month because of the downtrend that seems firmly in place.

Dow Industrials: 10,303.44 +28.47 (where is that 10,500?)
BGEIX: 11.19

The Happy Couple

Jeff and Danielle (Thanks CZ)

Fed Raises Rate, Traders Lower Market

While we were not entirely surprised by the Fed's lack of originality, we did think the market might put in a little better performance since everybody was expecting rates to move a quarter point higher. That and the fact that today was the last day of the quarter, normally a strong time for the market. All of this is in addition to the normal strength of long holiday weekends.

As I'm sure you know by now, the Fed raised short term rates another quarter point today, the ninth such move in the last nine FOMC meetings. Does this mean that we are now in the ninth inning, or are we going into extra innings? Not that the bond market paid much attention to the Fed's potent (yes, I know, sarcasm again) 25 bps as it managed to rally strongly sending rates Lower on the day. Pretty soon we will have a flat yield curve with rates all across the Treasury curve being 3.5%, exactly the conundrum that Greenspan sees.

We think that the inflation numbers are not showing the true picture of the economy as yesterday's final first quarter GDP number was released showing 3.8% growth. Had inflation been higher, the GDP would have been lower, and what I am trying to say is that inflation was higher than reported. The GDP got a break from this and had a good showing.

The Dow dropped nearly 100 points today after the announcement and now sits under 10,300 again, its lowest close since May 16th. Right after the announcement the market did some minor volatility but then went down the rest of the day. But, of course, the over night markets are again showing strength. They may never learn but we can thank them because we get to sell to them.

The June numbers are in and they are like this:

Dow Down 192 (-1.8%)
SP500 Flat (0%)
NASDAQ Comp Down 11 (-0.5%)
NASDAQ 100 Down 49 (-3.1%)
HUI Up 15 (+8.5%)

Where did the Wednesday Update have you invested? Short the NASDAQ 100 and long the HUI, we all had a good month. We look forward to July.

Dow Industrials: 10,274.97 -99.51
BGEIX: 11.23

PS We did notice silver traded under $7 today.

Consumer Confidence Rises, Oil Falls

The market had one of those bounce days that we so often see after a solid selloff. The Dow had been down six days in a row and today decided it might try to go up. With little resistance, the Dow managed better than a hundred points today on good consumer confidence numbers and a big drop in oil prices. I still think that $58 oil is pretty expensive but the market rallied on that drop anyway. Bonds weren't too happy and dropped a little increasing rates by a little bit today.

I received a comment today regarding GM being dropped from the Dow Industrials. The comment was that with GM going down, an investment in an inverse Dow fund would not benefit from a further drop in GM. My thought is that GM has already dropped quite a bit and will be replaced by a stock that HAS gone up allowing a larger drop in the Dow. Any comments?

Gold and silver were both down today and silver itself is looking pretty close to a buy to me. Personally, I have been very patient with a silver purchase and the time is definitely close. The True Contrarian advises buying silver under $7 an ounce and today it closed at 7.09 down about 15 cents. PAAS was down during the day but recovered to close modestly up on the day, a very strong showing. (I own PAAS in another account.)

Dow Industrials: 10405.63 +114.85 (longing for 10,500)
BGEIX: 10.95

Say Goodbye to 10,500

The Wednesday Update blog returns and sees the Dow comfortably under 10,500, about at 10,300. After over a month at that 10,500 level, the Dow has finally dropped and is now having difficulty staying up. Of course, there are plenty of bulls out there to try to hold it up but they can only do that for a while.

There are a couple of comments out on the last blog providing some fresh air in an otherwise dull, maybe I should say nonexistent, blog the last week. Dullness was not the theme of the market the last several days, however, as the Dow has now fallen 332 points in six straight sessions from its high of 10,623. After a false breakout to the upside, the true move is emerging and it seems fairly strong to the downside.

You may be asking what has caused the drop and that may be important but it probably can't be determined by reading the news. Or, it may be. I was disturbed by last week's Supreme Court ruling that expanded eminent domain. And, that could have had a significant impact on the market--or not. I just saw that it coincided with the market dropping.

There are plenty of reasons for this market to drop, such as the price of oil and gas, oil carrying a six handle for the first time ever(meaning it's over $60). I was amazed by a report showing the "inflation" adjusted price of oil and how the price of oil is less than it has been in the past on that basis. Let's try to put a bullish spin on the high price of oil, shall we. Right.

The precious metals have shown some weakness in the past week along with the market and may show some more. This drop should provide another good opportunity for you to move into the complex. The HUI may drop another five or ten points from tonight's 196 with a powerful move up to follow. We will provide tighter entry points over the next few weeks.

All eyes are on the Fed as they will be announcing something this week on interest rates. I believe the announcement comes on Thursday afternoon so get ready. We have been thinking the Fed is starting to get into trouble with raising rates and have even predicted that they will not raise rates this week but it looks like they have to raise them. We will see, more on this in the next few days.

Dow Industrials: 10,290.78 -7.06
BGEIX: 11.06

PS My son's wedding was perfect.

New Week, New Decline Coming

Just wanted to remind all of you that the market has now finished with its option expiration ritual and we did have some typical quadruple witching volume. The market is now set for a fall and hopefully you have prepared yourselves for this drop.

Oil closed at a record high on Friday and may cause some strain in the market this week. The dollar has been struggling higher during 2005 but we feel some gravity beginning to tug at it. The Fed meeting is looming large next week and traders will be nervous in front of that, too.

Please read our link to the True Contrarian. His sort of regular Sunday Update for June 19th is specific about gold and the NASDAQ. We are in complete alignment with him at the moment.

Good luck and remember...

The Wednesday Update Blog will return next week. See you back here then.

Dow Industrials: 10623.07 +44.42 (What do you know, a close away from 10,500! Enjoy it while it lasts.)
BGEIX: 11.27

Gold Rocks

Gold decided to have a great day, going up $7 today. This led to a great day for gold stocks in general. We are very pleased so far with our choice of PAAS and BGEIX which were both up nicely today. PAAS was up 60 cents to 15.42 for a 4% advance and BGEIX was up 34 to 11.20 for a nice 3% move. So far BGEIX is up 1.49 from 9.71 for a 15% gain, not too bad for a trade we put on May 23rd, less than a month ago. And, it's a long position, most of you should like that.

The stock market continues to annoy me by trying to find everything bullish. Today oil closed over $56 a barrel and that is stock bullish because oil will fall and you want to be in stocks when it does. There was an article on CNN today with a title of "Oil set for a Crash?" A Morgan Stanley economist said that "I believe it [oil] could correct in the most speculative fashion--it could collapse." And, this after Goldman Sachs comment a few months that oil was poised for a move to $105.

Meanwhile, the Dow continues to keep that 10,500 handle and we are having a hard time staying awake for this. We were pretty sure that the intermediate top would come into sharp focus this month, but the focus is blurry at best. We still maintain that the highs of the year are in place and will NOT be broken in our four indexes, Dow, SP500, NASDAQ Comp, and NASDAQ 100.

As noted in our email version last night, this will probably be the last Blog until Monday evening, June 27th. If something truly awe inspiring happens in the stock market, I may have to post another blog.

In the mean time we are fairly happy with our positions especially our gold positions. We hope you were able to take advantage of that, too. We tried to bring you through the process to buy BGEIX over a few months. We picked a pretty good point to enter, we saw a clear bottom given our signals and we pulled the trigger. We may have been a little late but it wasn't very late. BGEIX hit a low of 9.34 on May 16th and we bought at 9.71 a week later.

Have a great weekend and a nice week off next week. Please come back after my Monday evening post on June 27th. I am hoping something happens before then, like tomorrow when we get quadruple witching. Maybe tomorrow we can get some better volume just because of that, something, anything, would be good.

Dow Industrials: 10,578.65 +12.28
BGEIX: 11.20

BBY is a Winner Today

Best Buy, BBY, provided some entertainment for the street today by announcing blowout earnings and then rallying 15% to an all time high. The comment in yesterday's posting tells it all. But, I wish to remind you all that in the Wednesday Update email version, we did point out that BBY was one of the winners. I know, I didn't really recommend it.

The market was fairly quiet, other than BBY, and Dow leadership came from GM, that's comforting to all of you bulls out there. The Dow continues trading near 10,500 in very dull trading. I usually say that dull markets don't stay dull very long but here we are with a stretch of 19 days trading near 10,500.

JPM, one of our shorts, announced that it would settle some of the Enron claims and pay a $2.2 billion fine. So, of course, that would mean that all the bad news is behind JPM--I am a little sarcastic this evening, sorry. We are only slightly down on this short (stock is up from where we shorted it) and would like to see some progress along with the market in the southerly direction.

Today showed last month's PPI, Producer Price Index, to be down 0.6% just the same amount it was up last month. This number "proves" that there is no inflation and the Fed can start thinking about slowing those nasty interest rate increases. For some reason the bond market was not buying it today as it closed down slightly, still showing fatigue after its big reversal day on Unemployment Friday. And, tomorrow brings us the CPI, Consumer Price Index, with expectations (before today's PPI at least) of a slight increase in the Core of 0.2% but no change in the all inclusive, we never pay attention to this number unless it is "good", CPI. Last month showed a worrisome 0.4% increase so one might think the number tomorrow might follow the PPI's lead and be down the same amount. I am so bad.

Gold and company moved down today and is trying to make me feel like selling our position. PAAS decided not to make a run at last week's high of 15.40 and instead dropped a bit today. We need to see a solid up day with a punch through that 15.40 to feel confident in the next up move. Looking at the HUI we see a similar pattern. The HUI is well above its low of 165.71 on May 16th and closing today at 191.39 down 3.37. The bullish pattern is very much in place. We would expect to see a powerful rally from the lows that develop over the next day or two.

Dow Industrials: 10,547.57 +25.01
BGEIX: 10.70

Dow Still Attracted to 10,500

For eighteen straight trading days, the Dow Industrials have traded at 10,500. Looking at the chart, it appears that we have a flat line Dow for almost a month. That could be the most exciting thing about today's trading.

There was a big rally in the morning and then stocks drifted down the rest of the day. I call this a distribution technique, push prices up fast ensuring a good bit of chasing to get in and then some buyers under the market to sell to over the course of the day. The market is just taking more and more captives as it meanders through treacherous water. Yes, many stocks have moved up a bit into this past few weeks highs but many have not.

We are still perplexed by the overwhelming bullishness in the market place. We believe that bullishness is misguided and will be reversed over the course of the next four months. You might say, "What can push this market down?" to which I reply what ever does. Today oil was up about $2 to over $55 and the bulls are now impervious to higher oil prices, they just don't matter to anyone. Anyone, that is, except companies like Northwest Airlines, NWAC, who need to pay for fuel and can't raise prices to cover their expenses. NWAC is thought to need a possible Chapter 11 to seek protection from creditors.

The precious metals were not very strong today with gold up a little and silver down a little. The mining stocks faired ok with PAAS a little weak. PAAS needs to run up strongly here in the next few days to we can feel more confident in our bullish position in these stocks. We continue to recommend these stocks and the precious metals themselves.

Dow Industrials: 10522.56 +9.93 (Is anyone else getting bored with this 10,500?)
BGEIX: 10.80

Start of a New Week

Friday was good to our precious metals positions as well as some of our shorts with the NASDAQ being down strongly; but, here we are facing a new week and new challenges. The stock market is uneasy and overbought. The top from two weeks ago is still well in place and we had a good nonconfirmation when the SP500 pushed to a new relative high but all of our other indexes stayed below the previous week's high.

Friday's commitment of trader's report (after the close) was not too bullish for metals but I think we are now into watching the mining stocks for further clues. The pattern is very much in place for further upside and we continue to recommend buying on weakness. Tonight gold is down and so is silver which could set up a nice pull back in the early trading on Monday. We are watching PAAS, well, maybe we should say trading PAAS with the full intent of seeing it cross to a new relative high against last week's 15.40. PAAS made a perfect low near 14 last week and now should move above 15.40.

The strength of the move over 15.40 should give us a good indication of the power in further upside. If it can't do much over 15.40, then we know to get out of our position. We think a move well above that number is possible--there are never guarantees however. We just want to follow what the market is telling us. Our main index, the HUI, hit a high of 195.73 last week and closed Friday at 192.07 up 7.33. We saw a nice pullback last week from that 195.73 high to 181.67 and now 195.73 is the number that should be exceeded, and fairly soon, for us to think the gold bull market has started.

In economic news this week, we will get to see some hint on inflation as the PPI, Producer Price Index, will be released on Tuesday and the CPI, Consumer Price Index, will be released on Wednesday. These are potentially gold and silver movers and we need to be careful as these reports come out. There are bond market and stock market considerations as well because this will give good clues as to what the Fed may be forced to do later this month at their rate setting meeting. We already think that the bond market topped the day of the Employment report, June 3rd when it decided to do a key reversal, with a big outside down day.

The market is also looking at triple, or quadruple, witching with options and futures expiring on Friday. That is always an interesting day and we all know where most of the players are, bullish this month. There could be some excitement this week, this being June and all. The next two weeks could be decidedly bearish given the market is overbought and the players are all bullish.

Happy Trading, be careful.

Dow Industrials: 10512.63 +9.61 (trying to hit 10,500)
BGEIX: 10.67 ( a new high for the move, we are in at 9.71)

Dow 10,500?

After the last three weeks of trading, I have come to conclude that the market is trying to close right at 10,500. Today it almost hit it right on the nose at 10,503. All participants were waiting for Greenspan to speak before any real trading could begin and of course his words were palatable to the market.

Tonight INTC had their mid-quarter update and raised revenue guidance a little bit. INTC has had a big run for the past month or so and going into the close it was having another good day. After the announcement there was a bit of a pull back in the price. We will see what tomorrow brings.

It's Friday and soft trading, both in terms of volume and price should occur. Not much to report tonight as nothing seems to be going on, again. Our assessment is that the market continues to be overbought and we remain extremely bearish.

We mentioned trying to get into PAAS again today and we did. PAAS dropped to 13.99 during the morning trading and we managed to pay a little bit more than that for it but are happy with our trade. Silver dropped 18 cents today, about 2.5%, and gave us a great opportunity to get back into PAAS. Our target price was in the low 14's and today it traded at 13.99, so far we are doing well since PAAS closed at 14.35.

Have a great weekend, talk to you next week.

Dow Industrials: 10503.02 +26.16
BGEIX: 10.32

Turn Around Tuesday

The market got off to a big start this morning and showed about a 1% gain in the first hour of trading. After that the market hit a brick wall--could it be last week's highs were holding? Well, of our three indexes only the SP500 made a new high today compared to last week. The other two, NASDAQ COMP and DOW Industrials did not make new highs. You guessed it, that's a big nonconfirmation. Looking at the rest of the day, the markets turned down and basically closed on the lows of the day, although the DOW managed a 16 point gain.

This is the type of market action that we are expecting and it does not surprise us. As the Dow traded over 10,500, AGAIN, we have to admit a little nerves but when it was over the market managed a big turn around to the down side. This type of day gives us more confident in calling last week's high the top. Of course, we won't know that until we see some further deterioration in prices and we are watching for that.

Tonight TXN, Texas Instruments, announced some good news, at least the market liked it and we are seeing some strength in the overnight markets; but, as we've seen many times in the past, overnight markets don't always mean and up morning.

The precious metals were mixed today with the mining stocks taking another breather pulling the HUI down to 184.75 well under 190. The next rally here might be pretty strong so we want to take advantage of that move. We put an order in to buy PAAS this morning but tried to get it for too cheap so we didn't get it. We may try again tomorrow.

We want to remind you that this market is very ready to go down and it will be very tricky. We have tried to give you a good warning about what we think will be the top, last week. Be careful with your assets.

Dow Industrials: 10,483.07 +16.04 (Dow got over 10,500 today but couldn't hold it)
BGEIX: 10.35

Another Dull Monday

The Dow barely registered anything during today's low volume session. No particular movement anywhere and looking for a pulse in most places. So, not much to report this evening.

The gold and silver markets were up today but the mining stocks took a bit of a breather dropping a little less than a percent. This morning's pop was quickly sold and we ended basically on the lows of the day. This is not particularly bullish near term and we continue to wait for a good entry, or should we say, re-entry point for PAAS.

Try to stay awake long enough to pay attention to the market's next move, which we think will be down into the end of June and then into October.

Dow Industrials: 10,467.03 +6.06 (still under 10,500)
BGEIX: 10.51

Monday Again

Friday's volume was light again and without volume there usually can't be sustained upside, not to mention the down day we saw on Friday. We are more and more convinced that this market is topping and that the highs we saw late last week will probably hold for some time. We remain very bearish considering the highs set late last week.

As far as precious metals and mining stocks go, we are much more constructive and encourage you to read the new post at the True Contrarian link to the left. He is making the case to buy the metal under $420 with a possible downside of $406, so keep that in mind. And, he says that mining stocks should be picked up if the HUI dips below 190, and maybe that will be here early this week since the HUI closed just over 190 on Friday. There are opportunities in the precious metals and mining stocks for those of you who want to be bullish on stocks. We continue to watch PAAS for another entry point, hoping for the low 14's.

June could see a swift downward correction of this rally of the past month and we are going to be happy to see it for our trading accounts. Tonight the futures are not particularly motivated in either direction, must be waiting until trading opens tomorrow like we are.

Last Friday morning we said something about the bond market being happy about the low jobs number and we should have paid more attention to that statement alone. We talk about morning pops in the stock market being good selling opportunities. Well, from the looks of the way the bonds ended on Friday that they follow the same pattern. Right after the news, they were up strongly and by the end of the day they were down, a nice reversal day and quite probably very bearish for bonds. Don't forget that as bonds go UP, rates go DOWN but when bonds go down, rates go up.

All in all Friday shaped up to be a nice turn around day but only time will tell if we are correct.

Dow Industrials: 10460.97 -92.52 (back under 10,500)
BGEIX: 10.57

Weak Job Growth

Quick note this morning: The jobs came in at 78K, far below the 180K estimates, and last month's 274K stayed the same. The bond market is having a good time this morning. The stock market was soft overnight and did bounce a little on the jobs report but is not going to produce the type of pop that we would like to have seen. That is not to say that today does not represent a good top, today is our pick for that as indicated in our writings over the past two or three weeks. If the market is finally putting things together, there could be a dramatic shift in market psychology, something we like to call a sea change.

The time to act is now if you haven't already. Cash is King and gold may be the best currency for you to have. Gold is trading near $424 this morning.

Have a great trading day and a peaceful weekend. We'll be back next week.

PS Don't forget to look at last night's post below.

Cheers to Unemployment Friday

Friday we get the all important Jobs report which can lead to some volatility in the market. This time the Wednesday Update is looking for a defined market top to form. This usually resembles a nice upside pop in celebration of the number, whatever it may be. The market seems to be whistling to its own tune the last few weeks and probably will come up with a reason to jump up with any number that comes out of the jobs report. If it's too big, the economy is getting stronger, if it's too small, the Fed won't need to raise rates and of course if it's just right, Goldilocks will appear. There are many out there who think Goldilocks is already here.

This morning the weekly jobless claims number showed a bit more weakness than was expected, with claims up 25K compared to an expected increase of just 2K. The jobs number is expected to show about 180K growth compared to last month's 274K. That number will most likely be revised and the market tends to look at the revisions to see a trend. And, as we always say, it doesn't really matter what the number is, what matters is the early reaction to it.

Ideally, we will see a good up move in the morning confirming half of our conjecture. Then it will be up to the players to see if that will be the peak for the move and the summer. You can never be sure, but the moment looks like it has arrived to us. Oil has moved up (not today), gold reversed course this week, the market is well overbought and WE are SHORT. Ok, maybe that last one is a little selfish but it's true.

I have been long PAAS however and that has done very well but today PAAS popped a little at the open and gave me cause to sell my position. I am looking for an entry point again. I have traded it twice in the past two weeks, bought it once at 12.60 and took 13.10 for it and then bought it again at 12.60 and sold it today right after the opening bell at 15.25 for a nice 20% move. Can you get it to go back down to 12.60 so I can do it again? Please?

Seriously, I don't think PAAS will get back to 12.60 so now I need to decide when to get back in. It seems too soon to think that if the market pops tomorrow that this stock would drop enough to let me back in. But, such is the nature of bull runs, they tend not to let you back in. The way I will try to trade this is to buy early weakness and that may be tomorrow. Based on normal corrective retracements, the stock could drop back to around 14 but that could be wishful thinking.

At the same time, gold looks like it might have reversed its course this week. Today it gave us a strong up move, about six dollars even with a strong dollar and a weak Euro after yesterday's Dutch no vote. So, all of a sudden the precious metals are beginning to pick up some bids. Friday we get the commitment of traders report which should be revealing.

So, two ways to travel, short the market on an strong opening or buy the metals or mining stocks on a little weakness. You do have some extra cash lying around after selling all of your stocks into this rally over the past week or so, right???

I apologize for the length of this tonight but Friday is an important day.

Dow Industrials: 10553.49 +3.62 (enjoy that 10,500 while it lasts)
BGEIX: 10.43 (managed a one cent gain)