1. Administrative Comments:

I added a ton of new metal based stocks to the gold stocks section, I added a table of Aluminum, Copper, Steel, and Uranium stocks, as well as a few new gold stocks.

see for yourself: Gold Stock Section

Be sure to check out the sector picks this week!

Synopsis of stock picks from hot sectors in this weeks newsletter:

2. General Market Comments:

I hope that everyone had a good Thanksgiving!

The market drifted up last week as we expected, but of course volume was light and the index charts essentially look the same.

Nothing has changed with last weeks market analysis: The market is in a strong uptrend and pullbacks can be bought. The market should do well until at least January, with minor pullbacks along the way.

One group that did very well last week was oil stocks. In last weeks newsletter, I listed a ton of oil stocks, of which the majority of them broke out and are up substantially. If you caught some of these oil breakouts, be sure to lock in some profits, but you might also want to keep some of your shares because oil stocks could continue to runup this week. I also added a few to my newsletter watchlist as you will see below.

The US Dollar is in a sheer meltdown and is one of the main reasons why oil is going up. In fact, nearly all commodity based investments are doing well.

As you can see from the chart below, commodities are on the rise. Don't listen to the government when they say inflation is low, as reported with their biased CPI number.

I was talking to a friend this weekend, and he told me that he found a few grocery receipts from a year ago, and compared them to recent receipts. He said that prices were averaging 20% to 30% higher than a year ago for the same items! This is insane and really affects the average American.

Of course, the government doesn't include food items in it's CPI calculation, nor does it include car prices, college tuition, or health care costs - things that obviously effect us all.

3. Market Index/Sector Analysis:

The Nasdaq tested prior resistance, now support, at 2055 last week. The Nasdaq looks bullish, and will likely run up to the resistance high of 2155.

A larger time frame shows us that the Nasdaq is has broken out of a large symmetrical triangle which is very bullish. The Nasdaq could easily run up to the next resistance area after the Jan. 04 high at 2155 is taken out which is about 2330!

Likewise the DOW is in a strong uptrend and the first target is the February 04 high at 10750.

This long term chart of the DOW resembles a bullish flag that has been broken to the upside. However, the important resistance line is the 5 year downtrend line. If the downtrend resistance line can be broken on good volume, then it's off to the races for the DOW as it will likely go in to the 11,000s.

Notice that the significant downtrend line was tested last week. I think there is a very strong possibility that this downtrend line will be broken to the upside.

The S&P 500 looks good and now has support at 1160. Pullbacks will likely be bought as the S&P is in a nice uptrend.

The long term chart of the S&P shows us that a rally to the low 1300s could occur.

STOCK PICKS BASED ON STRONG MARKET SECTORS:

So far my picks based on strong sectors have performed very well. Last week my oil stocks rocked, and the week before, coal stocks rocked.

Here's what looks good this week:

Last week I posted a ton of oil stocks that subsequently broke out and have done very well. However, the oil sector continues to look good and will likely continue to make gains as long as the US Dollar continues to melt down.

Here's a few to watch that haven't already broken out:

Steel stocks broke out strongly last week (as you can see from the chart below) because of a weak US Dollar coupled with a shortage of steel. Here is a list of steel stocks that haven't yet broken out:

Uranium stocks are on the rise, though I do not have a chart of Uranium metal.

Here's a couple that look good.

Gold metal continues to make new highs as you can see from the chart below:

Here's a list of stocks to near breakpoints.

The Aluminum sector is on the verge of a breakout as you can see from the chart below.

The stock AA looks ready to breakout:

The Semiconductor index has a nice base and clean resistance just overhead.

Here is a list of stocks to consider:

4. Gold and Precious Metals Analysis:

The chart of gold metal looks fantastic as it broke through a bullish ascending triangle to the upside earlier this month. Former resistance will not act as support on a pullback.

On a long term basis, gold does not have substantial resistance until about the $500 level. I think gold will hit the $500 level in 2005, though probably not without some kind of pullback first.

Just as I stated above, commodities are now in a Secular Bull Market: This means that commodities will be the next big movers in the next 5 to 10 years. I think we will see gold well over $1000 an ounce in the future, possibly even 2 or 3 thousand. The general public is not yet interested in gold, but when they do, gold and gold stocks could one day move like internet stocks did in the late 90's. We are still in the beginning stages of a bull market in precious metals.Gold stocks have very low market caps and it won't take much to really move them up. Remember the 90's when you would go to parties and people would talk about their tech. stocks? Mark my words, the same thing will happen with gold, commodities, and precious metals. When this finally occurs, then it will time to start looking for a final top. I think there are, and will be, fantastic opportunities to become wealthy in this area. Day trading is fine, but the real wealth will be made by those who buy low into commodities and simply hold them. This is much easier said then done of course, and it's hard not to take profits when you have them.

Good news, the gold exchange traded fund (ETF) is finally trading - symbol GLD! This is great because it allows investors to trade gold without having to own the physical metal. Of course, die hard gold bugs would say that this is still fiat money and would rather own the metal. However, to me the gold ETF is welcome addition. Also, the gold ETF may spark more public interest in gold as it is now much easier to invest in the metal than before. I think the gold ETF has the potential to become at least a part of everyone's portfolio.

The gold ETF trades exactly with gold, GPD is simply the price of gold divided by 10.

Gold Stocks:

Historically, major buy signals are generated whenever a downtrend line is broken to the upside, and sell signals are generated whenever the 50 moving average is penetrated.

As you can see, in the past this has worked very well for the last two major uptrends: The first uptrend lasted from January 2002 to July 2002, and the second major uptrend lasted from about July 2003 to December 2003. The 50 M.A. would have kept an investor in gold stocks during these major runups.

Another major buy signal was generated recently in August 2004, however last week the 50 MA was broken, thus giving a major sell signal if you go by the past uptrends.

However, as I stated on the message board last week, I am giving gold stocks a little more room here: First off, the ratio was near support at 0.525 (which you can better see in the next chart below.

Also, take a close look at the slopes of the prior downtrend lines and compare them to the recent downtrend line that was broken in August: Notice that the slope of the downtrend line in August was MUCH STEEPER than the two prior downtrend lines.

Therefore, I have drawn another downtrend line (red dotted line), which connects the recent consolidation, and its slope more closely matches the prior slopes, than the previous one. A breakout from this, less steep trendline, may be more meaningful and produce a longer lasting rally similar to the previous 2 which lasted on average about 5 to 6 months. Therefore, I continue to hold my gold stocks here, even though the 50 MA was broken and the +DI gave sell signals).

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I also pointed out on the message board last week, whenever the HUI is oversold on the 60 min stochastics, it tends to rally - which is exactly what occurred last week. The HUI also has good support at the uptrend line.

The daily chart of the HUI shows us there is strong support at the uptrend line and major resistance in the high 250s to 260.

As you can see, the US Dollar is in a melt down, however major support at about 80 is fast approaching (which you can clearly see on the next chart below). Keep a close eye on the US Dollar because a substantial oversold bounce could occur at any time.

The long term picture shows us that the dollar has support at about 80 going back to 1995. Also notice that there is a slight positive divergence in the MACD, and stochastics are way oversold and are under 5. I think there is good possibility that the Dollar bounces soon, probably near this 80 support level. The Dollar could put on a nice rally off this 80 level, possibly all the way to former support at about 85. If this occurs, be ready to take profits on gold and gold stocks because a big pullback will likely occur. For example, gold metal could pullback to the recent broken resistance in the high 430s.