Saturday, June 07, 2008

Safe to dip in the gold pool again?

What transpired in the past two days was simply stunning, up 200 Dow points then down 400, while crude gaining $17 in the same time span. The S&P has now broken decisively to the downside. I can easily see the 1325 level gets tested. 1310 would be the next resistance level. After that, it's straight to the March low. For me to continue holding my sanguine view on the market for the balance of 2008, the March low absolutely must hold.

Of course I don't structure my portfolio based on a "second half recovery". My commodity heavy portfolio only experienced a minor set back this week and I expect it to outdistance the general market further. I have not touched my core precious metal holdings which I think are on the verge of breaking out to the upside. One thing that the exploding unemployment number did was to call the bluff on the newfound hawkish stance of the "Bearded One". Although gold was among the few red spots in a sea of green on Thursday, it jumped over $24 on Friday to end the week above $900 once again. The chart on HUI shows an impending break out. The MACD is very slightly negative and the stochastics have already crossed over to the upside.

Ironically, judging by Friday's closing price relative to trend line, and MACD, the best looking stock is one that many gold bugs loved to hate for its erstwhile hedging program: ABX. Further encouraging signs include positive volume action for the past two sessions that is likely footprints of institutional money. It remains to be seen whether large cap miners will continue to be favored or whether the values in juniors will be realized if not by investors then at least by their acquirers.