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December 19, 2006

Another Sell-Off, Another Recovery

Stocks sank on today's open, presumably spurred by a stronger-than-expected PPI figure. (Last week there was no inflation, but with time horizons on an hourly scale, who cares about last week?) For the first 10 minutes of the session, stocks appeared ready to slip into a landslide... to tumble like it was 2001... to surprise everyone by slipping into a stealth decline in the last two weeks of the year.

Yeah, right.

The low point of the day was market in minute nine, and from there we put on a healthy rally to close near the session's highs. Once again, tech was weaker than the broader market, with the NDX closing down a third of a percent and the semiconductors losing 1.5%. Interestingly, it was tech that lead the market lower in the spring. The NDX had made a high in January and failed to set a new high going into May, even though the SPX was still trekking into new ground. Currently, the NDX high is over a month old, while the SPX is 2% higher since then.

I have mentioned in the last two posts that I am planning to increase my silver holdings, and a couple readers wrote to ask what I am waiting for. It's a bit complicated, but I'll try to explain. Are you ready? Here goes...

I am waiting for silver to test this trend line again:

stock chart

Follow that? Boring, hey? Well, sometimes boring is quite profitable. Besides, I tend to be more of an instinct trader than a technical one. I will draw my charts and indicators, but ultimately my best plays have come from following the unexplainable little bell that goes of in my head. In other words, if something clicks, I will buy silver before it hits the trend line... and I will note it here.

I anticipate the action becoming a bit more drab as we head into Christmas and New Year. Therefore, do not be surprised if I skip a day or two between now and the end of the year. I plan to spend some time away from the trading screens to formulate some new articles for the Macro Center and give some thought to the major tradable themes of 2007.

Disclosure: None


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