Tuesday, September 11, 2007

Where's My Medicine?

Stocks End Higher on Hopes for Rate Cut- AP
Wall Street rose sharply Tuesday as investors grew more confident that the Federal Reserve will lower interest rates next week, even after its chairman gave no clues about the central bank's intentions.

It continues to amuse me that stocks go up when the threat of a recession looms over the economy. Won't a recession lead to falling corporate profits? And don't falling corporate profits lead to falling stock prices?

Oil Hits New Record on Supply Concerns
NEW YORK (AP) -- Oil prices rose to a new record settlement price Tuesday as traders turned their attention to a government inventory report expected to show tight supplies and shrugged off OPEC's decision to boost output.

It continues to amuse me that stocks are completely ignoring energy prices. Won't higher energy prices lead to higher expenses and falling corporate profits? And don't falling corporate profits lead to falling stock prices?

Trade Deficit Shows Slight Decline
WASHINGTON (AP) -- The U.S. trade deficit declined slightly in July, helped by record exports that offset the biggest foreign oil bill in nearly a year. But even a spate of recalls did not stop the deficit with China from climbing to the second-highest level on record.

The trade deficit edged down 0.3 percent in July to $59.2 billion, compared with $59.4 billion the month before, the Commerce Department reported Tuesday. It was the lowest monthly imbalance since April.

So far this year, the deficit -- which hit $758.5 billion last year -- is running at an annual rate of $711 billion. Many private economists believe stronger economic growth overseas, a weaker dollar that makes American exports more competitive and slower growth at home will help lower the deficit after five consecutive years of record imbalances.

This is just plain amusing. My head is spinning from all the spin. Oh my, the trade deficit shrunk by $200 million. Let's party! Yes we buy a lot of toys from China, and we will continue to despite the government propaganda to convince us to do otherwise. How long before the government tells us that it's "unpatriotic" to buy goods from China? And I don't care how low the US Dollar goes...if we don't make anything to sell to the rest of the world anymore, how are we going to sell more? Made In America? LOL! The only thing made in America and exported in the past five years has been bad debt, and monopoly money.

Did you know that Tuesday was ONLY the eighth day in the past 26 YEARS that Gold has closed above $700? I have a feeling that in the not too distant future, $700 gold is going to look like the bargain of the century. Only one thing stands in the way of Gold breaking $800 this year. If the Fed fails to cut interest rates next week.

Silver closed above it's 50 day AND 65 week moving averages today. It is imperative for Silver Bulls to maintain this high ground as we approach Thursday's "rollover day". Silver has yet to breakout of it's May 2006 consolidation as Gold did last week. Recall that on August 13th Silver's low of the day was 12.65. Over the ensuing two days Silver prices collapsed down to an intraday low of 11.07. Coincidentally, 12.65 is the 50% retracement of the October 2006 low and the February 2006 high of 2007. Silver has now spent the past three days wrestling with this significant zone of resistance. Should Silver break higher from here, expect minor resistance at 12.90. Silver's next "significant" zone of resistance should appear around 13.15. Silver [and Gold] prices should remain well supported if Oil prices continue to rise towards $80.

A move back below 705 in Gold may signal a move towards some consolidation of recent gains. Significant support for Gold begins at 694 and then 688. Silver may benefit from any profit taking in Gold as it remains undervalued still. Support in Silver begins at 12.47 and then 12.28.

With the bias in Gold firming to the upside, it may pay to be prudent in one's decisions to exit positions in both Gold and Silver to "take profits". Breaks to the downside should be minimal, unless the Fed fails to cut interest rates next week. The big money is made by "sitting tight" in a bull market.

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