Sharon is asking me to help clean up after Ernesto, which struck here yesterday.
But I want to give you this important update before the Labor Day weekend! When you return and the markets reopen on Tuesday of next week, I think you could see the most profitable season of the year — new trends emerging … old trends restrengthening … and tremendous volatility.
Rest assured, I will be there every step of the way to help you. In fact, I plan on spending most of the holiday weekend looking for new opportunities for you. I think many are coming down the pike.
But right now, I want to do a quick review of the roadmap I published in my June 22 issue of Money and Markets. It’s been nine weeks since I gave you my signals for the Dow Industrials, gold, and oil. Let’s see how they’re faring.
First, the Dow …
On the left is the chart of the Dow Industrials that I published on June 22, and to the right of it, the Dow since then.
Here’s what I said then:
“Watch the following two numbers on the Dow Jones Industrials: 10,519 on the downside. 11,410 on the upside.
“In between 10,519 and 11,410, the stock market is effectively in neutral territory. That doesn’t mean you can’t get hurt or make a bunch of money. There are going to be some very big winners and losers no matter what the broad market is doing.â€
And here’s what’s happened since …
As expected, the Dow has been bouncing back and forth between those two levels. There have been loads of individual winners and losers. But the market has essentially gone nowhere.
What about the fact that the Dow is now pressing against the upper band and signal, 11,410? Is that a bullish sign?
My answer: Yes, it could be. It is possible that this market will stage one more strong rally. But I don’t expect it will be sustained for long.
Why? Because it would likely be a “celebration†rally, with investors cheering some temporary event — maybe positive news from the Middle East or that the Federal Reserve is going to stand pat on interest rates again.
Either scenario might be enough to set off a short-term rally, but once reality sets in, I would expect the Dow to fall back into its current trading range.
So, what to do now in the stock market? No change in my view. I still like natural resource stocks, gold shares, and energy companies. But I think investing in the broad market could be a trap.
Next Up, Gold …
On the left is the gold chart I published in June. To the right, is a chart reflecting gold’s actions since then:
Back in June, I wrote: “I expect [gold] to close above $618 … start moving back to the $700 level … then higher.â€
Gold did close above $618 on July 5, and it reached as high as $668.70 on July 14. And now, the yellow metal has drifted back down to the $618 level.
My view: Gold is retesting support at $618, and preparing for its next leg up to $700 and higher. The summer doldrums have slowed gold down a bit, but don’t let that fool you. Three conditions are now very ripe for another strong rally …
- For the first half of the year, gold demand reached record levels from investors (including exchange-traded funds) and jewelers.
- The dollar is sitting on a precipice, near record lows. Once it gives way and starts falling again — which I fully expect it will — gold should take off to the upside like a bat out of hell.
- None of the world’s conflicts have been solved. Far from it! I hate to say it, but they’re going to be problems for years to come. And that will be another force that helps to propel gold higher.
So, when it comes to gold, I still like all of the gold investments I’ve mentioned before, including the streetTRACKS Gold Trust, the Tocqueville Gold Fund (TGLDX), and the DWS Gold and Precious Metals Fund (SGLDX).
Plus, if you subscribe to my Real Wealth Report, hold all of the specific gold share recommendations I gave you. That will help you catch this next wave up. Be patient … it’s coming.
Last, an Update on Oil and Energy ….
In June, I wrote: “If oil closes above $72.32 — which I fully expect it will — oil’s next move will be to new record highs, well above $80 a barrel, and probably near $100 a barrel. Oil and gas shares will follow right along with it.â€
Sure enough, on June 29, oil traded above $72.32, then shot up to $76.98 on August 7. Since then, it’s been drifting downward, retesting support at the $68 to $69 level.
Part of the reason is the seeming calm in the Middle East; part of it is merely the fact that Tropical Storm Ernesto missed the Gulf (and visited us in South Florida instead). Add in the pre-Labor Day lull in trading, and you have the oil market taking a breather.
No problem! I’m as bullish as ever on oil. In fact, China’s oil imports for the first half of this year are nearly 16% ahead of the same period last year. Combined with all the other forces I’ve told you about, I’m as confident as ever that we will see another large rally in the energy sector … soon!
Bottom line: No mid-course corrections. Sit tight and ride the next wave.
Best wishes,
Larry
About MONEY AND MARKETS
MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Monica Lewman-Garcia, Wendy Montes de Oca, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.
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