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March 3, 2006

Intel in Slide

Intel's curious end-of-day behavior over the last week culminated today with an early-morning break of about 3% after the company lowered its revenue forecasts. I had perceived something awry and noted so in yesterday's post. Being heavily short INTC, I had hoped that the next break would take out the 2004 lows around $19.70, thereby opening the path to the mid-teens. However, some heavy bidding came in under Intel as it tested those lows, and not only did the lows hold, but the shares nearly erased the early-morning loss by the end of trading.

Today's action in Intel shares must be respected, especially since RSI is showing a bullish divergence. I may consider paring back my position a bit simply to control risk, but I'm glad I have the weekend to ponder the decision.

stock chart

Silver took a breather after yesterday's show-stopper, but the good news is the metal didn't give back any of yesterday's gains. Gold has not yet made any indication it will follow its counterpart's example. Gold stocks pulled back a bit today, including NEM, which gave back almost a buck. Newmont's intraday chart looks to be basing, so I took advantage of the decline to add to my calls. There are many people who perversely think that the interest rate picture will kill the bull market in metals this year. I say "perversely" because, despite more than a dozen interest rate hikes, the Fed is nowhere near tightening mode. Money supply growth is still running rampant. I believe the way metals will surprise the most number of people this year is by being more explosive than last year. I suspect the explosive moves will occur right around the time the bond market breaks down, and with Treasury bonds testing support, that moment could happen at any moment.

stock chart

On a final curious note, major indices tried to break out of contained patterns to the upside at about mid-day, and when the runs failed, so did the indices. They all put in bearish hammers and went out near the day's lows. Monday's action may turn out to be very important.

Disclosure: Short INTC; Long INTC, NEM Calls


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