The VRTrader.com VR Silver Newsletter - Monday 7/10/2006
"Tools for the High Performance Trader"
Copyright ©2006, All rights reserved.
Leibovit Files
Monday, July 10, 2006
New Lows Ahead in Nasdaq?
Economic Data/Events July 10-14:
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MONDAY, July 10:
Wholesale Sales & Inventories for May (10 am ET)
Treasury auctions 3 & 6-month bills
Consumer Credit for May (10 am ET)
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TUESDAY, July 11:
Weekly Chain Store Sales (8:55 am ET)
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WEDNESDAY, July 12:
International Trade for May (8:30 am ET)
EIA Petroleum Status Report (10:30 am ET)
Factory Orders for May (10 am ET)
Auto Sales for June
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THURSDAY, July 13:
Weekly Initial Jobless Claims (8:30 am ET)
Treasury Budget Statement for June (2 pm ET)
Weekly Money Supply (4:30 pm ET)
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FRIDAY, July 14:
Retail Sales for June (8:30 am ET)
Import/Export Prices for June (8:30 am ET)
Michigan Consumer Sentiment Index for July (9:45 am ET)
Business Inventories for May (10 am ET)
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We see gold into new highs (above $730 to $850) possibly by January, 2007. We are doing a little fishing here hoping to see Gold under $600 an ounce to satisfy upside gaps that should be filled. The risk, however, is that we surge to $650 first or that we don't pull back, as the market has substantially already corrected. Upside targets for Gold into the 'thousands' still very much exist in the decade ahead, so patience is as important as analysis.
With global tensions still high and oil prices marking fresh records, gold will continue to draw interest from investors and speculators looking for a safe-haven/anti-inflationary hedge. Mounting tensions surrounding North Korea's nuclear ambitions have been a key driver this week. South Korean media reported that North Korea might be preparing to test-launch as many as four more missiles. The battle between gold and paper money is on and there is only one likely winner. Central banks throughout the world, led by Japan, adopted a policy of limitless money creation. Gold is the sane man’s alternative. The extra-ordinary belief that the value of fiat money can be sustained irrespective of the rate of supply is quite mad.
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Stocks are vulnerable in our work in the weeks ahead and we are primarily taking short positions in the indexes. The Nasdaq and especially the Semiconductors (the supposed leaders) are moving into new lows for the year. We still have technical unfulfilled downside targets in the Dow Industrials under 10,000 to potentially 9600 and time is a plenty between now and the traditional early October weakness for this target to be fulfilled. What we have to be concerned about is whether the PPT (Plunge Protection Team) will interfere with technical projections. It is not in the best interest of the November '06 Congressional elections to have the market nosedive, or is it? It depends on who is supposed to get elected or re-relected. Also, where is the 'Four-Year Cycle Low'? We do not currently believe it it behind us, but will obviously be forced to change our minds come October if the market has not moved substantially lower. We will call 'em as we see 'em. For now, to expect weakness short-term, i.e., between now and August makes more sense to us than a substantial rally. Recalling the 1987 'Pre-Crash' pattern, the market faltered in May, but managed to recover into mid-September. By early October, it signaled something was truly 'rotten in Denmark' and the rest is history. The Plunge Protection Team wasn't officially formed until 1989, but floor traders saw very unusual buy orders hit the day after the crash and to this day are convinced it was Greenspan or his cohorts at work which, frankly, was truly needed at that moment. If not, the system may have truly collapsed.
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Comments on S&P/TSX Composite Index and the S&P/TSX Composite Venture Index for our Canadian clients:
The TSX topped out on April 19 at 12,494.72 and the TSX Venture topped out later on May 10 at 3271.57.
Since then the TSX declined to 10,860.72 and the TSX Venture declined to 2342.96. Both have recovered to 11,581.39 and 2672.88 this past Friday's highs.
At the moment, volume and price action are positive in both indexes which are ignoring for the most part the damage being inflicted in U.S. markets, especially the Nasdaq.
Our basic assumption is that these markets got away from themselves in April and have experienced their needed correction and are headed back to new highs possibly by January, 2007 (or sooner).
There should, however, be some resistance at 11,870 in the TSX and 2850 in the TSX Venture on the way back up. Stay tuned.
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This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of VRTrader.com may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. VRTrader.com staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control.
