This is a good time to review the markets.
1. CRB Index - Hits 20 year high. It is moving in the middle of the power-up-trend channel..and still rising. All of the commodity stocks are rising rapidly, including base metals, oil, food and chemicals.
2. 30-year bond - The yield still dropping which means that Fed has no intention to stop inflation. Only rapid inflation can wipe out the US debts. This is the signal from Fed. The recent speech of AG, regarding high premium of 30-year mortgage sending strong message that Fed will inflate further with low interest rates and hope new home owners to take advantages of it by using adjustable mortgages to save some money to pay for inflated living expenses, while letting Fed to wipe out their debts with inflation. The mortgage derivatives will implode and lending institute will suffer huge loses if this trend suddenly reverses. Tax payers have to bail them out again. What a risky position AG is taking at here. CRB index will continue to rise rapidly. AG hopes to use low interest rate to stimulate the stock market again. Will this work?
3. SP-500/NASDAQ/DJ-30 - SP-500 hit 2-year resistance at this area. SPY indicated that money stream in general is till positive. But, there are signs of declining participation to the upside. We may see it stuck within a trading zone. The down side risk is increasing daily. NASDAQ - Especially QQQ showed signs of weakness. DJ-30 looks similar to SP-500. Richard Russell pointed out that DJ-20 transport index didn't follow the same trend of DJ-30, which means that there is no confirmation of a bull market. The recent high price of oil has a major impact to this industry and will affect all of the stock markets soon. I still own only one general stock, WTCO.OB 90% owned by insiders, which is still very under valued, imho.
4. US Dollar - The declining of USD stalled at here momentarily. The major down trend is till intact. Breaking out 88 has probability hitting 90-92. Personally, I believe USD will stay below 88, and 89 is the worst case scenario. However, falling through 85 signals another downward leg. The recent non-monetary interventions from European countries and Japan tells us that the recent G7 meeting had agreed to include this types of tactics to slow down the slide of USD, as I indicated recently. The general direction of USD is still heading downward at the direction of 500-day linear regression line. I will increase the # of days to the regression line every month, in order to reflect all of the old data I have been using for this analysis.
5. Precious metals - Gold stalled at here due to recent strength of USD. Silver showed great strength to the upside. This is a good time to re-adjust our PM stock position with under valued selections if we still believe USD is moving downward. I own some PDG and a core position of BGEIX, which is a gold mutual fund mainly invest in the senior golds. I also own about equal size of a group of smaller PM stocks which are my trading positions. I will gradually shift my PM stock positions into another mutual fund mainly in junior golds, before the size of them grows out of control.
Good luck.
Wade |
