Market Wrap
Week Ending 7/04/08
Douglas V. Gnazzo
Stock Market
Summer is here and vacation starts for many with the Fourth of July weekend. The beach, the pool, and barbecues and family parties are the order of the day. This week’s report will thus be shorter than usual.
The stock market continues down mired in a bear market. Things are getting oversold, however; but at the same time it does not seem as though capitulation has yet taken place. A relief rally should be coming, but another move down may happen first.
On Thursday a sense of changes were detected, as some sectors that have been doing good have now started to give in to selling pressure, the latest victim being the basic materials. This is somewhat of a proxy for commodities, although not a pure play by any means. Oil still remains high and volatile but other commodities are seeing pressure, some more than others. The chart below shows the XLB breaking hard below its lower trend line.
As goes the euro, so goes gold, at least so far and for the time being. It is what it is until it changes. The euro has gapped below horizontal support, which puts a head wind to gold.
Gold
Gold’s daily chart looks eerily similar to the euro, first rallying above horizontal resistance and then back below.
Gold has been acting good, backing and filling and consolidating, however the question remains if it has spent enough time building a strong enough base from which to launch the next intermediate term move. More time may be necessary.
Gann was spot on when he talked of the importance of the time element, and it looks a bit too quick and easy from right here at this time.
GDX
The GDX has not fared as well as physical. It ran into overhead resistance and bounced back down. Gaps below loom large to fill.
The weekly chart shows the index may not be out of the woods. A head and shoulder top may be forming. Price must hold above the lower trend line and break above the upper trend line to invalidate the formation.
In today’s very trying markets return of one’s investment is more important than the return on investment, until the dust settles and the trends can be firmly seen and established. Several markets may be at the crossroads of trend changes.
The Central Fund of Canada holds physical silver and gold, thus it is not exposed to the same risk as are gold and silver mining stocks; nor does it have the same upside potential or leverage. But as a store of purchasing power it is hard to beat.
One tend that unfortunately seems to be in place is that food is getting more and more expensive. The DBA multi-sector agricultural fund is challenging its previous high and has been a strong performer since last year.
The weekly chart suggests that more upside is likely, as a positive MACD cross has just been made with the histograms turning positive.
Enjoy the holiday weekend and remember that the return of your investment is more important than the return on your investment in difficult times as these. Some times to play defense can be an offensive posture waiting to unfold. This might be one of those times.
Good luck. Good trading. Good health, and that’s a wrap.
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Douglas V. Gnazzo
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About the author: Douglas V. Gnazzo writes for numerous websites and his work appears both here and abroad. Just recently he was honored by being chosen as a Foundation Scholar for the Foundation for the Advancement of Monetary Education (FAME).
Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.
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