Right, Left, Uppercut.
Wow, the Dow was down 214 points, nearly 2%...quite a move. That makes it a cool 4.2% off the high 7 days ago. Core inflation rose above expectations and that's not the worst of it in my opinion. The idea of "core inflation" to me is a joke. It's an idea created by the fed to take out the volatility of goods that everyone and every company has to pay for. People eat and people use oil. Volatility in prices creates problems for fed policy makers. Anyways, I called the knockout punch last week see my post at http://theskinnyreport.blogspot.com/2006/05/spxa-knockout-coming.html
The metals, and most of my current "watch list" stocks, continue to get crushed. PEIX is down 9.2%; it's pullback is getting it close to the 50 day MA as well as an RSI of 50 (normally possible buypoints in LT trends) but I'm sensing continued weakness there as the preceding rally was largely speculative in nature. The gold stocks have continued their slide as well. GG is off 3.8% andUSGL down 1.4%; this despite GLD be down only 0.7%. The GLD's pullback has been very small in comparison to the gold stocks. The fact that the forward price remains strong compared to the gold stocks indicates the markets belief that going forward gold and gold stocks will continue their longer term trend despite the short to intermediate pull back. My normal buy point rules may not apply here since the overall market is so very weak. I'm thinking an RSI of 30-40 will be better than my traditional entry point for the golds and oils.
I'm thinking the Dow could have another 2% to go down this week alone. Please take note of one of the popular explanations of the cause for the 1987 Market Crash per Wikipedia "Another common theory states that the crash was a result of a dispute in monetary policy between the G-7 industrialized nations, in which the United States, wanting to prop up the dollar and restrict inflation,tightened policy faster than the Europeans. The crash, in this view, was caused when the dollar-backed Hong Kong stock exchange collapsed, and this caused a crisis in confidence. Jude Wanniski stated that the crash happened because of the breakup of the Louvre Accord, a monetary pact between theUS, Japan, and Germany to keep currencies stable. Just prior to the crash, Alan Greenspan has said that the dollar would be devalued." Hmmm...this sounds oddly familiar. Do your homework before entering this market. This long bull run for the overall market is over as of last Thursday.
The metals, and most of my current "watch list" stocks, continue to get crushed. PEIX is down 9.2%; it's pullback is getting it close to the 50 day MA as well as an RSI of 50 (normally possible buypoints in LT trends) but I'm sensing continued weakness there as the preceding rally was largely speculative in nature. The gold stocks have continued their slide as well. GG is off 3.8% andUSGL down 1.4%; this despite GLD be down only 0.7%. The GLD's pullback has been very small in comparison to the gold stocks. The fact that the forward price remains strong compared to the gold stocks indicates the markets belief that going forward gold and gold stocks will continue their longer term trend despite the short to intermediate pull back. My normal buy point rules may not apply here since the overall market is so very weak. I'm thinking an RSI of 30-40 will be better than my traditional entry point for the golds and oils.
I'm thinking the Dow could have another 2% to go down this week alone. Please take note of one of the popular explanations of the cause for the 1987 Market Crash per Wikipedia "Another common theory states that the crash was a result of a dispute in monetary policy between the G-7 industrialized nations, in which the United States, wanting to prop up the dollar and restrict inflation,tightened policy faster than the Europeans. The crash, in this view, was caused when the dollar-backed Hong Kong stock exchange collapsed, and this caused a crisis in confidence. Jude Wanniski stated that the crash happened because of the breakup of the Louvre Accord, a monetary pact between theUS, Japan, and Germany to keep currencies stable. Just prior to the crash, Alan Greenspan has said that the dollar would be devalued." Hmmm...this sounds oddly familiar. Do your homework before entering this market. This long bull run for the overall market is over as of last Thursday.
posted by Brian P. Egan at 5:50 PM
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