Friday, May 22, 2009

Stocks Stall, Silver and Gold Gain

Friday's session was one of the slowest of the year, as investors and traders mostly went through the motions of squaring positions and getting out of town ahead of the long Memorial Day holiday weekend.

Only the NYSE Composite was higher on the final day of the week, with the other major indices falling apart late in the day. Stocks traded on the positive side of the ledger for most of the day, but only with marginal gains. Volume was the lowest in at least five months.

Dow 8,277.32, -14.81 (0.18%)
NASDAQ 1,692.01, -3.24 (0.19%)
S&P 500 887.00, -1.33 (0.15%)
NYSE Composite 5,789.62, +9.08 (0.16%)

It was a near-dead heat in the A-D line, with advancing issues edging decliners, 3195-3159. New lows again held sway over new lows, 55-42. While the relatively strong number of new highs is encouraging to the bulls, the bears can rest well in the knowledge that the bear market is still firmly in place, as the high-low indicator has yet to roll over and probably won't. The question remains: how long will it take stocks to retest the March 9 lows? Bets are down that it could be as long as six months as the market struggles to find any good news on which to rebuild a rally. The chances for further upside through the summer are nil.

NYSE Volume 1,058,107,000
NASDAQ Volume 1,628,006,000

The volume recorded today indicates just how controlled and manipulated the markets are currently. Many of the big players went to the sidelines, plotting their exit strategies as we head into the long, sluggish summer months.

Meanwhile, commodities were hopping. Oil, still overpriced, rose 62 cents to $61.67. The price of crude has risen only because the major oil companies need to stick it to unsuspecting consumers. Obviously, the Obama administration and the clueless congress has no interest in making life easier for the average consumer of gasoline, or they would be railing against the world's greatest cartel, led by Royal Dutch Shell, ExxonMobil, Chevron, British Petroleum and Conoco-Phillips. The so-called "five sisters" have a stranglehold on world supply and can manipulate the price, via futures, any time they please. The annual excuse that "Americans drive more in the summer" is their rationale for the current boost.

As for real investors, concerned with protecting wealth, the precious metals have been on a tear of late. On Friday, gold shot up another $7.70, to $958.90, within hailing distance of the magic $1000 mark. Once that level is breached, it's off to the races. Gold could find itself above $1200 by year's end. Silver is also gaining on a nearly daily basis. It was up another 25 cents on Friday, reaching $14.70 per ounce. Silver's gains have actually outpaced - on a percentage basis - those of gold over the past few weeks as the correction in the gold-silver ratio ensues. When gold reaches $1200, silver will be at or above $22 per ounce.

As mentioned here on numerous occasions, silver may prove to be the trade of 2009-2012. Some are already predicting its price at upwards of $60 before the bull run is over. That's basically a four-bagger from here, so it's not too late to get in on the bonanza. It is recommended to buy physical silver, in coins or bars, as it may become useful as a medium of exchange for those of us not able to afford the pricier yellow stuff. The lid has come off the precious metals trade and there's much more demand than supply right now. As conditions worsen, that demand will only increase.

Buy gold or silver and put it away in a safe place. The metals are investments which will not easily decline in value and have intrinsic worth, unlike stocks and bonds. There's no risk of default on actual, physical metal, as opposed to paper, and that includes currency. In the final crushing defeat of the fiat currencies, holders of gold and silver will be winners and holders of the greatest wealth.

Ponder that, and remember our veterans this Memorial Day weekend.

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