Friends
The markets were a little calmer today, other than the precious metals which were pummeled for the second day in a row. Gold was down $90 for the day and was trading around $1651 at the close. Silver was even more damaged, down $5.68 for the day, and over 26% for the week.
Stocks were a bit calmer today (down about 7% for the week after being up 5.6% last week) as the Dow Jones Industrial Average finished the day up 37 points and the S&P 500 was up 6.85 points to close at 1136. It seemed the shorts wanted to pocket some of their gains for the week, and other traders just wanted the week to end and were content to sit this one out before the weekend. The S&P 500 held the 1120 area for now, but we’ll see if the bulls can build on that next week, or are we going to test the 1101 level that we have been suspecting.
If we can get some clarity out of Europe, and U.S. corporations continue to deliver surprisingly good earnings, we might be able to start building for a yearend rally despite all the negative feedback and calls for recession. We need the technical levels to be tested and to hold in the next few weeks. If that can happen, we might be able to start to rebuild the technical damage that has been done this summer.
We were concerned as summer approached that there were going to be many challenges for stocks to deal with, not the least of which was QE2 ending and continuous problems in Europe. Now that summer is ending, stocks, after having been challenged all summer, need to begin the rebuilding process. The negativity has grown all summer and is now at a high point among investors that we have not seen for a while. The negativity and enormous flows of money out of stocks in recent months can provide nice fuel for what could be the next bull market.
We have to get through these problems in Europe, and it will take some time to determine if we are going to be in recession or just a slow growth for a period of time, but stocks have been going through a re-pricing all summer so investors will be attempting to determine if we have already priced in all the bad news.
We’ll keep you updated next week as things develop.
Have a great weekend everyone.
