Monday, November 16, 2009

4046.5

At the close today both the Dow Industrials (up 1.33%) and the Transports (up 2.17%) managed new highs for the rally, the Transports barely surpassing their October 20 high by little more than one point closing at 4046.50. The consensus among analysts is that cautionary remarks by Fed Chairman Ben Bernanke which emphasized a continued commitment to low interest rates helped drive today's momentum.

Still, there is no stronger signal in Dow Theory that "all is clear" for the markets than for both averages to close at new highs simultaneously. The markets should go even higher in the near term.


Gold is now at an all-time record high. Most of my gold stocks were up 3%-4% today. This steep rise can't go on forever. Gold is severely overbought and due for a correction. Still, it doesn't seem unreasonable to look at $1500 gold in the weeks ahead. I'm watching GLD and GDX for signs of new entry points in order to broaden my position in the only "real" currency in the world today.

While there is still a possibility that the markets are experiencing the top of a bear-market rally, there is little doubt that Gold is in a bull market.

Late in the day bank analyst Meredith Whitney warned against getting too excited. She said this rally has nothing to do with "fundamentals." I couldn't agree with her more. This could all still be part of a bear-market rally. Despite the new highs overall volume has been low indicating caution on the part of most investors. Indeed, some see this as a "disintegrating rally."

But, as far as Dow Theory is concerned the immediate trend is clearly bullish for the near-term. The rally just keeps going and will probably continue upward to test the 50% Principle at about 10,725 (see Nov. 11 post) in the coming weeks. I personally do not expect that level to hold. I continue to formulate a strategy for getting out of equities completely and transferring my gains over into the Gold Bull Market where returns hold greater promise in the face of what everyone agrees is a weak recovery.

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