The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

12 June 2006

The budding setup...

... of the charts of the market's averages and indices refects the possibility for a more stable market during the coming days and weeks (short to intermediate term), as a means to "fill the chart" (pattern). However, unless the price levels rebound to levels sufficiently high to break their more ominous pall (intermediate to long term; say, to September/October), then short term strength would likely prove a good opportunity to sell. Hmm, a trader's market.

I note the reflexive strength in the US$, which now butts its head against critical resistance (~87). This is a crucial change for the better in the intermarket backdrop, but how it fends from here (near resistance) likely will tell the tale of the tape. Because gold and the mining stocks trade largely contra to the primary trend of the US$, watch for a petering out of the strength of the $ before committing new funds to that sector. This means that a successful upside breach of the 87 resistance area would hurt grievously the chances for the gold stocks to break out of their recent doldrums (one way ticket down down down).

If you want to trade the possible and potential upside the markets might execute in the short term, look among those stocks that have been:

1) Battered the most, and
2) Held up the best (relative strength)
over the course of the past 5-6 weeks. Please share your candidates as a reply to this post. I would like to know those opportunities that look good to you.

Trade well,

-- David M Gordon / The Deipnosophist

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