Thoughts on Markets

Tuesday, July 15, 2008

Dangerous Market - A Slow Meltdown??

I do not believe I have ever seen a more dangerous market than the general market we face today. The broad Wilshire 5000 stock index looks like a free fall. The only thing which might be seen as positive is that the volume is not at extreme levels. Were the volume to increase and the prices still go down, there would be very serious trouble.

The fate of the U.S. is based upon the reserve status of the U.S. Dollar. We must face the fact that the dollar reserve status is teetering on a narrow precipice now. Many countries are bailing out of the dollar using the recently created Sovereign Wealth Funds. Will we go to war to protect the dollar? That is a potential which I pray will never happen, but it is not out of the realm of possibility with the government we now have. Pray to the God of all through His only begotten Son, Jesus Christ, that Iran will not be attacked in spite of the planning which has been done here and in Israel.

Gold remains on an upward run. I am keeping an open mind and watching the price of gold and mining stocks in an attempt to recognize whether this is the beginning of the third wave or not. I would suggest that you cautiously, slowly move more available cash into physical silver and gold, precious metals ETFs (CEF, GLD, and SLV), World Markets Select Metals Funds, grams of silver and gold, mining stocks, and mining mutual funds.

When gold reaches $1,000, it will attract more interest and the late comers may begin to jump on board the train for the last ride available. I believe that will be the "sell the farm" time to get all available cash into the precious metals arena. Remember that gold should be above $2,500 an ounce before the third waves ends this time around.

Gold is down slightly to $971 in overnight trading just as it was last night. However, it remains above $970 and seems very strong. Could there be a correction? Sure, but is it certain? No! If you moved out of gold on the last run up, you likely realized some profit. If you did, I warned you in the past not to ever get completely out until the big upward bang of the third wave. Even then, I would use only mining stocks to take advantage of the sky high prices of the precious metals.

Just don't get locked out by selling too early. When I was trading in and out of mining stocks in the past, I often felt that the prices were too high to buy back in. In those cases, I often missed the big run ups that followed. Now, I always hold on to some of my mining stocks.

I notice that both DROOY and HMY hung tough during the fall off from the high prices today. Both were holding very well while many other miners suffered some from the settling of prices the second half of today's trading.

We are given only the ability to observe and learn from what has happened in the past. We must study this data, carefully analyse it, and make our decisions. King Jesus knows what the future holds, because He causes all things to happen. And He works all things for the eventual good of His people. We cannot know the future. In fact, we are clearly told that the events of each day we are given are sufficient for our actions. But we are a future oriented people resting the promises of our Covenantal God from Whose love, we can never be separated. Praise Him daily for this fact.

Best to each, Doug


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