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Wednesday, December 01, 2004
Market Recap
The beginning of the Santa Clause rally hit Wall Street with vengeance today as buyers wasted no time starting December trading like a house on fire. The Dow gained +162 points on this new month of trading. The NASDAQ forged ahead to start December with a +41 point gain and the S&P climbed 17 points. The street wants to show a profit this year so they are pushing the market up in an attempt to put mutual fund managers in the green at the end of the year. This rally today was very predictable considering the market had been down the last two days and heading into the new month of trading. Our chart of the Dow last night showed the flag pattern and the rally that was coming. I believe we will see 10750 on the Dow very soon, and the possibility of 11000 on the Dow before the end of the year is not out of the question. Strap on your seatbelts and get ready for the ride. Long is the position to be in, and even though small caps lagged today, they are still the place to be at the beginning of bull markets. I have a chart of the small cap index (RUT) tonight.
Gold, Steal, and Energy
Gold continues to run-up and make new highs daily. It is at a 16 year high and shows no signs of slowing down. It has been on an amazing run in recent weeks, topping $450 an ounce. This gold rush has many people rushing in to their brokers and asking to be put into gold and/or gold stocks. The analysts are fueling the rush by projecting and predicting that gold will get as high as $500 in 2005. If it gets that high, it would only be a 10% gain from here. That is okay for a conservative investor but 10% is nothing compared to the gains we can make buying the market leading stocks in a bull market. Gold stocks move too slowly for me. Some of our long time members may remember last year when we had a few of these stocks on the bulletin. We knew gold was in an uptrend and tried to play a few but they moved way to slow to trade. They were very good plays though if you just wanted to buy them, lock them up in your portfolio and throw away the key.
Money traditionally flows into gold to offset the weakening US dollar. I believe some of what is happening now with gold can be traced back to a record low dollar. Gold was a hedge against rising oil prices, lower dollar values, and general uncertainty in the stock markets. In any case, no matter what caused the gold rush, you have to question anyone who is just now buying gold stocks at this point given how far it has run already. Its like buying energy stocks now after they have been running for the last 18 months. In case you are wondering why we have not traded energy stocks either, it is for the same reason. They move too slowly to trade but we did recommend buying energy for the long term well over a year ago and members who have been here with us for that time can attest to that.
Steel stocks have also been steadily rising for months. We had a few of those also but they were slower movers as well. For the buy and hold investor, steel stocks have been a big winner this year along with gold, oil, and energy stocks.
Gold will continue to shine in the short term, but as the stock markets heat up, precious metals will begin to lose their luster. People will begin selling and moving their money into the stock market. We are gearing up for a pretty solid bull in 2005, if that happens, gold should start to decline. Gold normally does not do well if the stock market is going parabolic. I think it is amazing how people will flock to whatever the analysts are touting at a particular time. Now it is gold, after it has reached a 16 year high. How come we did not hear the analyst talk about gold, silver, oil or steel 18 months ago when their runs were just starting? In my opinion, now is surely not the time to buy gold for the long term and that is the only reason to ever buy gold (long term). Gold is not something to buy if you are a swing trader. If you really want gold this time of year, put a watch on your Christmas wish list. At least then, you'll be able to tell that it is “time” to sell your gold stocks.
OTC BB Stocks
- UGNE
- VSNI
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