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January 26, 2007

Marginal Victory

A difficult trading day commenced with two, wily head-fakes. First, a positive open reversed so rapidly as to give the impression that equities would go into free-fall. However, the bleeding was stanched within an hour and followed by a quick rally. The rest of the session was quite choppy, as well. The good news is that bears managed to close the NDX marginally under its moving average:

stock charts

Of course, MAs are best used to judge general areas of support/resistance. It would not be prudent to base a trade on such a miniscule crossover. What we bears would like to see next is a solid downside move away from the MA.

This morning's new home sales report gave a conflicting view of the market than the existing homes sales figure, but it seems traders are beginning to believe the CEOs more than the government figures or market cheerleaders. Home builder shares slipped about 1.6% with shares of Beazer and KB Home leading the way down. I sense an important psychological shift has occurred in these shares, though I have yet to commit any money to the idea.

Mining shares continued to consolidate recent gains and I remain confident that a big rally is upon us. As the news on the economic front continues to deteriorate, we edge closer and closer to the point where people realize the Fed has no choice but to get rates quickly. Then the "main event" of this precious metals bull market will kick off.

Disclosure: None

 

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