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June 30, 2006

There and Back Again

Due to a long-awaited journey to Greece, this June 30 post will be the last until Monday, July 17.

Equities took a breather after yesterday's romp, pulling back mildly on net. Two movements really stood out. First, metals exploded. Both silver and gold were up in the vicinity of 3%, and silver was better by more than 5% midday, depending on which delivery month you observe. A lot of pent up demand is being infused into the markets now that the June FOMC meeting is history. I remain skeptical, though, that metals will simply inflect and shoot to new highs. My current play book calls for awaiting another attractive buying opportunity sometime in late summer or early fall before getting more aggressive.

Miners celebrated the rise in metals prices with roughly 2% rallies across the board. Pan American Silver stood out with a 3.4% gain, while Newmont fell in with the crowd. These stocks are rebounding from extremely oversold conditions, so while I am enjoying the gains, I am also remaining reserved in my near-term expectations. We could be simply witnessing a bounce rather than the beginning of a powerful uptrend.

The second notable movement was the 6% gain in the shares of Research in Motion. RIMM reported results last night which came in above expectations for earnings and subscriber count. RIMM shares are prone to volatility, so a 6% move in the wake of an earnings report is nothing special. What makes today's action notable is the fact that guidance was a bit on the timid side. In recent quarters, traders have put much more emphasis on guidance than current earnings, so to see these shares pop on weak guidance leaves me scratching my head. I'll have to do some reading during my trip and figure out whether it is a good time to get aggressive with shorting this stock.

Next week brings a new quarter, and we are bound to learn how much commitment fund managers have to this week's rally. Monday is not likely to be meaningful due to the July 4th holiday, but I will be watching the results of late-week trading with intense interest, despite being on a remote island. Well, with the Internet, almost nothing is remote anymore. Until next time...

Disclosure: Long PAAS; Short PAAS, NEM Puts; Long RIMM Puts


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