10/29/06 Market Update

Stocks:

Has the Dow finally reached an exhaustion point? The wave pattern suggests a significant top on the weekly chart. This could indeed be the Wave 5 stopping point. If you remember from last week’s update, we are now within the optimal time window. A one day decline does not create a trend; but all the warning signs are here and there is a confluence of time and price at the current juncture. It would be judicious to start protecting the portfolio. We will with a further reduction of our positions.

Dow Jones Industrial -- Daily

Bonds:

Interest rates collapsed after the Federal Reserve meeting on Wednesday pushing the 30-Year U.S. Treasury price (below) off its declining tops line and now pressing up against the rising Gann grid line. This should give the bonds a position to pause to absorb some of this move before going higher. Any decline here should also be an optimal buying opportunity.

30-Year U.S. Treasury Bond Price -- Daily

30-Year U.S. Treasury Bond Price – Daily (zoom)

Gold:

Like the stocks, the XAU experienced a correction on Friday. Unlike the stocks, this market is not over-sold at this time. The Comex Gold actually picked up about a buck twenty on Friday; but as what often happens, the gold stocks react with broad market stocks in the late stages of a rally.

Friday’s decline brought the price down to rest on the declining Gann grid line. We could easily see continued volatility as the price bounces between the rising and declining grid lines. A break below the declining grid line early next week would be short term bearish. We will have to wait and see what the market brings.

XAU – Daily

We have some important news from the General Office of Accounting. David M. Walker, head of the Government Accountability Office is on a major rode tour rightly titled, “GAO Chief Warns Economic Disaster Looms” The full story is at http://biz.yahoo.com/ap/061028/america_the_bankrupt.html

Finally, some one agrees with me. I have been spouting this danger for at least three years. Forget politics for a minute. Tax cuts for anyone, rich or poor, when the country is running a annual deficit economically equally borrowing money for tax refunds that our children will have to pay back. The quickest way to lose our freedom is unmanageable debt bought by foreign governments. Tell your party leaders to fix this imbalance now. If not, it means much higher taxes, fewer benefits and more than a third of the taxes collected going to foreign governments for interest payments. It a sure bet for disaster.

There is only few ways to fix the problem. Raise taxes, cut spending or print money (higher inflation). Like all house holds and companies, eventually we have to bit the bullet and bring in more income, cut spending or go bankrupt. Bankruptcy is the current course of action and not one major candidate is talking about the problem. Thank god for GAO manager, David M. Walker.

Back to Members Area Index >>