Saturday, August 26, 2006

Much ado about nothing

Ben Bernanke disappointed traders yet again on Friday. For a week where the exchanges were making record LOWs in the trading volume, much hope was placed on Big Ben’s speech at the meeting of central bankers at Jackson Hole to provide some near term direction. Instead, he talked about tariffs and trade policy. Appropriate topics for sure, but those looking for clues of interest rate policy were sorely disappointed. Thus the summer doldrums continue and we wait for the big boys to return from there summer hideout in the Hamptons.

Much the same is happening to PM and PM stocks. I noted a week ago, the HUI had converged all the way to the apex of a symmetric triangle – itself a pretty rare phenomenon – and “the best scenario I envision is a brief spike down that finally flushes out the weak hands before retesting the May highs”. I was very enthusiastic on Monday when the HUI went up straight out of the gate, finishing up over 5%. I was quite hopeful yet also noted “it’s critical for the HUI to get above 353.5, its previous high in July”. An attempt was made on Wednesday (8/23) when it reached a high of 354.16 but ultimately reversed lower, painting a (short term) bearish candlestick. So far, the weekly picture is still looking alright. I maintain that a quick spike down to flush out the weak hands will be positive for the PM complex, but perhaps the shear boredom will wear some of them out.

Not investment advice, please do your own due diligence. Good luck and be safe.