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April 2, 2009

Rally On

Today's market wrap will be the last post before my vacation. While I really enjoy writing this blog, the last couple of weeks of posting have seemed more like a duty than a hobby, likely because of all the other projects I've had to finish by EOQ. So the break is coming at just the right time. Since I'm an addict, though, you will find me lurking in the comment sections of The DOCument and other blogs.

Despite the floored overbought readings in various market indicators, it wasn't terribly surprising to see equities shooting higher this morning. After all, such action is bull market behavior, and I can't stress enough that this counter-trend rally has to turn traders into bottom believers before it fails.

stock index chart

Over the last week the SPX performed a very quick back-test of the downtrend and then went off to the races again. I have a feeling we are above the 65DMA to stay for the length of this rally. One should also expect the advance to be quite choppy until some of the indicators work off their extreme readings. In this regard, it is also a good time for a vacation because there is not much to do but sit on my energy and metals positions.

Speaking of energy, I've mentioned before that the rally would not progress without the participation of the largest sector of the S&P 500. Indeed, oil was up nearly 10% and my Canroys performed quite well, including the one purchased yesterday:

stock chart

Another holding, Penn West (PWE), faked traders out with a 30% plunge after hours following a poor earnings report and a dividend cut, neither of which were really surprising if you ask me. The market caught me napping, literally, and I didn't notice the damage until I woke up after 8:00... too late to grab extra shares. I entered an order to double my position in the morning if the shares remained under $7, but they opened above $10. I supposed people figured out overnight that the reduced dividend of $1.44 annually (in USD) was still pretty juicy. Oh, well.

As for precious metals, they were down a bit today, but both held important support levels.

silver chart

gold chart

In my opinion we are now at a point where PMs need to resume their rally. Losing the support levels would not be a complete deal-killer, but it would certainly reduce the odds of seeing big gains presently. For those looking to increase exposure, I would think this point would provide a close stop for the extra weight.

Okay, folks. Have a Happy Easter, Passover or whatever else you care to celebrate in April. See you after the 21st...


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