Stock Preacher

Wall Street’s fears about a government takeover of major US banks eased some last Friday afternoon after the White House reaffirmed its belief in a privately owned banking system. The DJIA climbed back from a 200 pt loss, and the technology heavy NASDAQ closed flat after the Obama administration tried to reassure nervous investors that it wanted to avoid nationalizing troubled banks.”This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government,” said Robert Gibbs, a spokesman for President Barack Obama. “That’s been our belief for quite some time, and we continue to have that.”

The Dow Jones industrial average fell 100.28 pts, or 1.34%, to 7,365.67, while the broader Standard & Poor’s 500-stock index was off 8.89 pts, or 1.14%, at 770.05.
The NASDAQ closed off 1.59 pts to 1,441.23.

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For the first time since last March due to safe haven buying. Silver and platinum also rallied. Gold price for April delivery went up US$25.70oz or 2.6%, to settle at US$1,002.20 oz. hitting US$1,007.70 on the day. March Silver closed at US$14.49 oz +. 555 pennies. April platinum rose US$19.20 to 1,095.70 oz. Gold’s hedge appeal was strengthened as US stock market tanked.

The DJIA continued to decline sharply on Friday after closing Thursday at its lowest level since 2002. Markets in Germany, France, the U.K. and Japan also dropped, and investors flocked to precious metals as a safe haven amid tumbling stock markets. US$ vs. the Euro went down sharply on Friday after trading up for several trading days, erasing most of this week’s gains helping Gold to top US$1,000 oz.

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Last Friday Gold surged US$37.50, crossing the US$857 oz. resistance, touching US$903.50 oz., and settled back to US$895.30 oz. on the close. That move suggests that there is huge buying power in the Gold market, and shorts are covering. Frequently after a breakout a market will back and fill, but the Gold players now are calling last week’s action with the breakout they have been expecting since last November/December. If that be the case, the price of Gold should rise to challenge the next resistance level at US$ 920, confirming a firm up-trend.

The Gold Bugs say this: Always invest with the primary trend. Gold’s primary trend is up, targeting at least $3,130.00; silver’s primary is up, targeting 16:1 gold/silver ratio or $195 .66; stocks’ primary trend is down, targeting the DJIA at under 2,900 and worth only one ounce of Gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.

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This is what happened last week…

Last Tuesday began what the world community views as a major event in US history, the inauguration of Barack H. Obama as its 44th President and its 1st Black American President.
Some of President Obama’s executive orders on his 1st day in office:

1. A freeze on salaries for White House staff earning $100,000 or more, about 100 people in all.

2. New Freedom of Information Act rules, making it harder to keep the workings of government secret.

3. Tighter ethics rules governing when administration officials can work on issues on which they previously lobbied governmental agencies, and banning them from lobbying the Obama administration after leaving government service.

The week in the markets, however, continued to be bathed in the glow of uncertainty within the financial sector and coupled with Qs about the timing of the economic recovery.
Couple that with headlines announcing that China’s Y 2008 Q 4 GDP contracted from 9% to 6.8%, the UK reporting a GDP decline of 1.5%, the largest since 1980, US housing starts fell to their lowest level on record, and initial jobless claims returned to Christmas levels, matching the 26 yr. high of 589,000 set in December 2008.
Though Microsoft disappointed, IBM and AAPL rang the bell with GOOG beating too, and coming in better than expected.
Read more

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This is what happened last week…

Last Friday’s gave us a Jobs Report that is somewhat flawed and a number of other stories, like the beginning of the lame earnings reports that most of us have come to expect.
Crude Oil ended the week at 40.45 bbl -1.25, the US$ rallied some, and a Fed rep noted that the recession would likely extend past Q-2. People started to put some money back to work in mutual funds and corporate bonds

I had a discussion with some of my pals last week about the how things were in the US back in 1980, and although this is bad, it was bad then too. But opportunities abounded then and do once again now in our collective opinions. So if we are back to the early 1980’s then we are back in the land of huge investment opportunity.

On page 2, there is a Q & A between Mike (he asked the Q’s) and me. It bought the “glass is half full” POV once again to a clear prospective. 20-odd years ago we had come out of a decade of being in “irons” and had big hopes for a new era, the Reagan Era; now we are in a similar boat but not alone on the sea; interest rates are at record lows in the West and we have big hopes for another new era, the Obama Era.

Friend, major advancements and fortunes came out of the Reagan Era and expect that to happen again, the odds favor it.

The collective thinking of the central bankers has turned to stimulus, and stimulus it will be like never before in history. No one knows what will be the result, but hopes are running high that the bleeding will stop, the wounds will heal, scar tissue will form and we and the rest of the world will forge ahead into economic bliss.

We all know that the Chinese word for crisis is weiji and that means danger/opportunity. You do not need to be Chinese to understand what that means in the investment world.

The market indices are in good shape on last week’s pullback; the financials got hammered some but the leaders held support levels on the test lower during the day on low volume as they made higher lows as the Bears weaken. However, today whoever is left will be back to work in Wall Street, Bulls and Bears alike, and this is a week of high anticipation as we run up to the Inauguration on January 20.

There is a Wall Street adage that I learned from Gene Morgan, “Stocks climb a Wall of Worry”. And we all know that most folks are worried.

Stay tuned…

Below is the short Interview that my pal Mike did with me last week on investing in the Stock Market as I reminisced, good thing he recorded it and transcribed it for us… Read more

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After getting crushed since September the US indices were up with good and respectable gains last week, bringing up the question if the recent upturn marks the early signs of a market recovery or on the other hand, represents a consolidation before the next leg lower. Time will tell us. You must remember that when measuring the upturn’s credibility, the following is a checklist (the technical wish list) for the signals.

Several, if not all, of the following events must occur:

1. A strong-volume rally that is not driven by government intervention.

2. The emergence of sector leadership.

3. Breadth: One, preferably two, 20-to-1 up days to neutralize last October’s breakdown.

4. A slowing in the volatility to digest the market extreme activities of 2008.

5. From the Sentiment POV we need for analysts, pundits, and talking heads to stop telling the audience how great this buying opportunity is.

6. A strong volume break above intermediate overhead resistance.

Until all of the above are in place another sharp move South is a risk, and therefore capital preservation is your principal objective when it comes to the DJIA, S&P 500, and the NAS. Now the Small Caps, Mini’s and Micros are a different picture, as they are traditionally the leaders.

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