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Last of 2003
Administrative Comments:
Okay, a few things to note:
1. Per last week, for website problems exclusively, such as login problems, link problems, billing questions, etc, please send your emails to:
members@breakpointtrades.net
2. I've set up a test message board for us to try out. For now I've placed a link on the standard message board, however here's a link:
http://www.breakpointtrades.net/membersonly/forum/wwwboard/index.html
You will notice that this message board is very very simple, however that can also be a good thing: For example, links from stockcharts work without having to incase the links inside brackets, etc. Also, because there is only one forum to follow, it kind of reminds me of a slow motion chat room. The message board is very simple and if I decide to keep it, I can spruce it up a bit with some graphics, etc.
Anyway, I would like you to send feedback on which message board you like best.
Please send your feedback emails to:
feedback@breakpointtrades.net
thanks
3. And lastly, I've totally revamped the 'gold stock section'. The new section is sorted by company name and includes multiple time frames to give you a good short, medium, and long term perspective for gold/silver stocks. Gold and Silver are in a strong Bull Market that will likely last for several more years:
Also note, throughout the week and possible next week, I will be revamping/improving various sections on the website such as the market analysis, long term, and foreign sections: thanks for your patience
This is what the new gold stock section looks like: I think it is now much more useful:
If you don't believe that gold is in a strong bull market, take a look at the gold stocks in the 'Big Picture' column. You will see that many have broken out of multi-year basis and have a long way to run over the next few years.
The end of the year is here and this is the last newsletter for 2003, can you believe it??? We're all a little older, but hopefully a little wiser, especially when it comes to trading and the stock market. We also must not get too cocky and realize that we are always students of the market as there is always something new to learn and our own emotions to master - never think of yourself as a master, think of yourself as a perpetual student.
The markets have had one hell of a year: The Major indicies have been rallying since March without any real pullback as the market is in a Cyclical Bull Market in the long term Secular Bear Market. The US Dollar has had a terrible year, falling over 13% and over 30% since early 2002! Gold /Silver and their respective stocks have also has a great year as well as most commodities and raw materials.
So now we are close to entering 2004, what next year bring? For the general market itself (Nasdaq, S&P, DOW), I expect a rather large pullback, sometime early in the year, most likely 1st quarter. Then I think the market could possible muster one more rally and hold up until near election time. After the elections are over, I expect the market to be toast, but who knows. It is important to trade what the charts tell you, not be a psychic.
Commodities and raw materials have broken a 21 year downtrend line and have likely entered a bull market,
thus commodities should have a good year. Stocks that deal in metals, oil, natural gas, electric, etc should continue to be strong performers next year.
Interest rates: Personally, I also expect interest rates to go up and break their multi-year downtrend lines next year, thus cooling off the housing market.
The commodity sector is very hot, as the CRB indicates below. Natural Gas, Oil, Metals, and other raw materials are on the rise and any pullback will probably be temporary.
The long term chart of the CRB index is very important and shows us that commodities are in more then a simple uptrend: Commodities have decisively broken a 21 year downtrend and entered a Secular Bull Market. Secular Bull Markets last 10 years or more on average, therefore this chart tells me that the big money will be made in commodity based investments in the long term such as precious metals and other metals like steel, copper, aluminum, natural gas, oil, etc.
All goods are made up of raw materials, therefore if raw materials are on the rise, then the price of goods has to go up eventually, right?. This is called inflation, don't believe the FED or the mainstream press when they say inflation is not a concern....
Crude oil is on a nice uptrend. So far, resistance at $34 has proved to be strong resistance, however I think OIL has a good chance of breaking this resistance area soon. Many oil stocks look good look great, and will likely take off if this resistance zone can be taken out.
As you can see, OIL companies are doing very well, however the chart looks a little vertical to me and suggests that oil stocks may have gotten a little ahead of oil. A pullback could occur anytime, but such a pullback will probably produce nice entries on many oil stocks.
Stocks in this index include:
AHC, BP, COP, CVX, KMG, MRO, OXY, RD, REP, SUN, TOT, UCL, XOM,
OIL could see the $70's some time early next year. In the short term, OIH is consolidating and may be setting up for another runup.
Likewise, the energy sector is doing quite well, as represented by XLE. XLE could also pullback here, though any pullback would likely be short term.
Natural Gas stocks look great as this index takes out resistance. Many stocks in this sector could be bought and held for nice easy gains, or traded via buying the dips and selling the rallies.
stocks in this sector include: Components
Check out the long term chart of Gas Utilities: A very long base, gas stocks have the potential to rally 50% - 100% in the long term if this base is broken decisively.
stocks in this sector include: Components
Electric Utility stocks are also doing very well after breaking resistance. This sector could for a long time as indicated by the chart. Many stocks in this sector could be bought and held for nice easy gains, or traded via buying the dips and selling the rallies.
Stocks in this index: Components
Banks look strong and are on the verge of breaking out:
stocks in this sector: Components
First, the Nasdaq:
The Nasdaq is trying to rally and is forming a bullish Ascending Triangle with resistance at 2000 and support at the uptrend line.
The Nasdaq needs to muster some strength here, if it can break 2000, then the technical outlook could turn bullish again with the next target at 2100. However, if the triangle breaks to the downside, then a strong pullback will likely occur.
The Semiconductor index strongly affects the Nasdaq and the general market. The Semis have been weak lately and the Semis hold the key to the Nasdaq: If this sector can rally, then the Nasdaq will likely break 2000.
However, if it weakens and turns down, then the Nasdaq will likely enter a strong downtrend.
On a long term basis, you can see the resistance level at 2000. If this can be cleared, the next target is 2100
DOW daily chart:
Once the DOW broke 10,000, the masses got excited and it rallied nicely. The DOW looks strong here with nice support near the 50 MA. However, a pullback has got to occur sometime and this latest rally has been on weak volume.
Yes, the DOW has broken the 10,000 barrier. However, 10,000 level is more psychological then technical. The next resistance levels are 10,660 and the downtrend line.
The S&P 500 daily chart:
The S&P looks similar to the DOW with a strong uptrend and is making new highs. One could also argue that the S&P is at the top of a channel and could pullback.
On a long term basis, the S&P could run to 1175 which is the next multi-year resistance level. However, I would like to see a nice pullback first before it attempts to rally that far.
Part 2: Gold Analysis
Gold has been holding up well as the US Dollar has been in an absolute melt down. Gold metal still looks strong, however I don't see allot of upside in the short term. Major resistance is in the $420's and also the US Dollar is getting short term oversold and could rally hard anyday.
Gold stocks themselves have not held up so well and have been really hammered this earlier this month. However, gold stocks rallied nicely last week, most of them off their 50 MA's, I'm not sure yet if they will make new highs, more below.
Below is a plot of the gold metal on a longer term basis. Basically you see the same technical picture as above, but on a multi-year expanded view.
Below is an long term view of Gold metal. Notice the multi-year resistance line. Again, not a lot of upside before Gold encounters resistance.
The US Dollar:
The US Dollar has been in a melt down but looks like it wants to bounce. Watch the Dollar closely, especially if you hold substantial amounts of gold stocks.
Silver is also doing great, and many analysts feel that Silver has more upside potential then gold. Silver has strong resistance at $5.43, and if broken, Silver could probably see $6 +
The HUT has pulled back hard this month all the way to the 50 MA and bounced nicely off it last week. The HUI also appears to be forming a Bullish Flag, though I'm not entirely sure of the pattern. Anyway, if you are aggressive, you could long gold stocks in the HUI index if this flag is broken to the upside.
Also, some of you went long gold stocks near the 50 MA which, so far, appears to have been a smart move. Personally I would love to see a pullback to the 200 MA around $180 - 190, as it would produce fantastic buying opportunities. Though this may not happen.
On the 60 minute chart, the Descending Triangle that I showed you last week was broken to the upside. This is bullish in the short term, though it the Dollar strengthens, this uptrend could be stopped dead in its tracks.
The daily and 60 minute patterns on the XAU are almost identical to the HUI:
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