Thoughts on Markets

Monday, July 27, 2009

Bull Rally in Bear Mkt - How long will it last?

Silver is stayed around 14 today and seems to be enjoying more strength as the dollar continues to fade.
Gold traded around the 954 level most of the day, but has dropped off a bit tonight. The miners are holding very well, too.
The following is a long term graph of gold from The-Privateer.com. I am sorry that the date and prices are not as clear as I would like. However, the movement of the price of gold is clear in the graph and the reverse head and shoulders (Red outlined Yellow filled circles) are clear. This is a strong positive technical formation.

Richard Russell (DowTheoryLetters.com) is quite optimistic about the extended bear market rally. However, he says to use caution in investing. The Dow Theory confirmed the rally just last week. He recommends Tri Continental Corp (a closed in mutual fund traded as a stock) which is selling at a 17+% discount. Here is a graph of TY. Notice the strong upward trough of trading since early June. The 50 day moving average appears to be moving to cross upward through the 200 day average (noted by the red circle) which is a strong indication of more upward momentum. The move did seem to top out in today's trading which may indicate an immediate pull back from the very rapid run up. This could mean that we will see a good buying opportunity tomorrow. The MACD in the lower section of the graph is a strong showing, as well.
The big question is how long will it last. No one knows, but one can see in the following graph of the Diamonds (which reflect the NYSE) that the upward sprint may be due for a rest. They are overbought as shown in the following off of the rise in prices (the upper black trend line) and lower volume (the upper red circle) during the last two days. However, the MACD (lower red circle) remains very strong. If you are into options, calls could be considered on the DIA.
I expect to see much exciting action this week in the markets. It will be interesting to see if some of the broad market stocks are going to take a short breather before continuing their upward move. We will have to follow the market to see what it says.

I will be strongly considering buying some of the TY tomorrow or during the rest of this week. The graph is very encouraging and should turn some good profit if I can buy at a reasonable price below 10.

I am not a seller of mining shares as the dollar seems destined to less value for the foreseeable future.

Obama Care is an abomination and each of us should urge our congressmen and senators to turn it down completely. If you have not viewed some of the information I have been sending out on it, be sure you do. It will be very costly and a means of rationing of health care which will greatly reduce your access to health care and force you into the national program with all the illegal aliens. It is interesting that the congress and the president will not have to join, but we will be forced into it.

Praise the Lord daily for His blessing and we should be seeking His guidance for a national repentance and return to His law.

Best to each, Doug

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