Thursday, April 17, 2008

Off to the races again

Long time readers know that I'm pretty stubborn in that I hold on to my opinion unless incontrovertibly proven otherwise. Two views that I've expressed for a while are: 1) we made an interim bottom (basis the S&P) on Mar 17, and 2) we're still in phase 3 of III of the PM bull market that should see much loftier heights.

In the S&P chart below I drew a potential inverse head and shoulder pattern. The most recent low came last Friday when technically speaking the market had a good reason to drop another 20 S&P points. Naturally short covering was a part of Tuesday's rally, but the materials/energy names were too strong to be dismissed. My read here is that for now the bulls are in control as money on the sidelines rushing in. I have 1475-1500 as my first upside target.

I wish I have as specific an idea about the near term agenda of PM stocks as I gave above for the S&P. PM stocks have moved in tandem with the general market since the precipitous drop in March. As shown in the chart, the uptrend channel was broken and the HUI have just made it back into this channel. Painful as it was, this kind of volatility was fairly typical for PMs as we're once again reminded that the bull market tries to throw off as many people as possible along the way. As observed before, the HUI tends to take several tries before overcoming a significant demarcation line. Presently I expect the 500-515 region to be such a battleground.