I had heard several Market gurusÂ’ claim that last Thursday's intra-day reversal was the big "capitulation" day, and I grew very skeptical. Particularly since the reversal did not end with a big rally on the upside.
Now that most guru's are confused, we are probably closer to a bottom after today's successful re-test of the 1225 (+/- 5 points) area on the S&P. Any convincing break below the 1220 mark could result in a much steeper decline of 1200 or lower on the S&P. A convincing break below the 10,700 area on the Dow could lead to a further decline around the 10,300 level. Let's see if the market can hold in here.
If you have been wondering why we own the Rydex Tempest 500 (RYTPX), you don't have to wonder any longer.
I must warn you that a rally up to the 1300 level on the S&P, and a rally back to the 11,300 level must be watched closely. I do want to be heavily in cash by the end of July.
We received some mixed economic news today. In particular, the PPI report showed that wholesale prices rose 0.2%, while the core rate rose 0.3%, slightly above the expectations. May retail sales were up only 0.1%.
The Havoc in the metals markets looks like an unwinding of positions by hedge funds that are probably getting battered by margin calls. I hate to use the term "throwing the baby out with the bath water", but that's what it looks like is happen with several energy stocks. When the hedge funds begin to run out of assets to sell after selling the metals, they turn to the energy stocks for liquidity. Well, too bad, so sad.
From here, I like the energy stocks, and believe it or not, gold.
Yes, gold! As long as the U.S. currency remains in decline, and is as worthless as it is, I fell a lot more comfortable owning some hard assets.
The Fed will probably pause after the next rate hike in June. This should be the springboard for the next rally.
As the U.S. economy cools and eventually teeters on a recession, investors will be screaming for the Fed to reverse course and lower rates.
I am confident we will see an impressive summer rally. Don't let the media types convince you that a new bull market has been born. What we are seeing right now is "Baby Bear", and I'm sure "Mama and Papa Bear" will show up in a few months.
Comments (1)
John,
Do you feel today is a good day for a reversal?
Posted by jragusa | June 14, 2006 11:15 AM
Posted on June 14, 2006 11:15