Perhaps they saw a need to distribute - just a guess, lol
In any case...
Will This Rally Continue?
By Ron Taylor
2/18/2003 5:27 PM ET
There were a number of cross currents again today including dollar strength, gold weakness, and a rally for U.S. equities. Of course, the big question that seems to come with every broad market up-tick is whether this is the start of a much longer-term rally? My initial inclination is that this is just a bounce from an oversold condition. The apparent delay to the impending war with Iraq, in combination with the fact that it's expiration week provides a convenient catalyst for the rally. What's more, Dell Computer's earnings may have served to stoke the fire of technology bulls.
The S&P 500 Index (SPX - 851.17) has rallied into overhead resistance at its 20-day moving average, and the next area of potential resistance is the 875 level, which is the bottom of the index's prior three-month trading range. Despite the recent two-day bounce, some of the sentiment indicators we follow haven't significantly pulled back (which would be indicative of complacency). For example, the CBOE Market Volatility Index (VIX – 35.56) still remains comfortably above 35 and the 21-day moving average of the equity put/call ratio sits at 0.77. The equity put/call ratio is still being influenced by some heavy Nasdaq-100 Trust LEAPS put spreads that traded recently. That being said, I'm still inclined to take the data at face value. Maybe a continuation of this recent bounce is possible, but unless we break above through 10-month trendline, I will continue to focus on the longer-term downtrend.
This recent rally is throwing a glitch in the scenario of buying on the initiation of conflict with Iraq. If the market rallies sharply in front of a war with Iraq, what sideline cash will be left to buy the first strike? Are we potentially setting ourselves up for a decline as conflict ensues? It's anyone's guess and here is one vote for a return to the relatively easier task of gauging the outcome of key earnings reports, and economic numbers as opposed to military conflict and terrorism.
I am excited to see gold correct from its recent highs in the $390 range. This pullback to the lows of the December consolidation should prove to be the first significant test of the gold bull market. As stock traders and investors learned during the 90s bull market, a good strategy for profit is "buy the dips." Well, this is the first substantial dip for what we feel at Schaeffer's is a new gold bull market. As such, I personally believe that adding to your position at current prices may prove to be a decent entry. Should gold pull back to the $330-$335 range over the next several days, I would be extremely interested. |
