Tuesday, January 4, 2011

Market Correction Begins, Stalls as Gold and Silver are Unloaded

Stocks sold off in the morning and recovered somewhat in the afternoon, with the Dow the only index to post a gain at the close. The volume was quite a bit better than recently, which, if you're in the bullish camp, is not a good sign, as this was controlled selling followed by short covering, in earnest.

As was stated yesterday, stocks are wickedly overpriced and due for a retracement or at least a pullback of 7-10% from yesterday's close. However, considering the forces at work behind the market, nothing would come as a surprise these days as these markets are anything but orderly.

The real story of the day was in commodities, as everything - from wheat to oil - sold off viciously. More on that later.

Dow 11,691.18, +20.43 (0.18%)
NASDAQ 2,681.25, -10.27 (0.38%)
S&P 500 1,270.20, -1.69 (0.13%)
NYSE Composite 8,022.18, -21.79 (0.27%)

Declining issues beat advancing issues by a wide margin, 4262-2248. There were 146 new highs on the NASDAQ, and just 3 new lows. On the NYSE, new highs buried new lows, 200-9. As mentioned yesterday, these numbers are at extremes, cannot be maintained and the fallout is likely to be severe, unless we're entering some new Twilight Zone of prosperity, complete with flying unicorns, fairy princesses and mushrooms made of gold.

NASDAQ Volume 2,034,894,250
NYSE Volume 5,395,944,500

In the commodity space, it was sell or be damned. Crude oil for February delivery - the front end NYMEX contract - lost $2.17, closing at $89.38, though it traded lower during the day. It would not be a shock to see oil head back into the low $80 range, being that the busy holiday season is over and the oil barons have skewered the driving public once again.

Gold was unmercifully slaughtered, losing $44.10 (-3%), to finish at $1,378.80. Silver was even more battered, losing over 5%, down $1.62, to $29.51. The precious metals r being routinely pumped and dumped by large hedge players, most notorious of the bunch, JP Morgan and HSBC, who are being sued for manipulation of the silver market. This move in the PMs is nothing to get excited about, for now. A reversal was due, but not to the extent of today's move. Given time, both gold and silver will attain new heights as the kleptocracy running Wall Street and the US government becomes more desperate every day.

One should not be persuaded to sell any gold or silver in this environment, as the metals have proven to be quite volatile and able to replace huge losses in a matter of weeks, or even days.

Please note: Part 2 of 2011 Predictions will appear tomorrow, with Part 3 on Friday

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