Trade only the strongest sectors
The US market rally has
hit resistance at former highs in many indexes and is backing off some.
New Zealand and some other markets with tighter monetary conditions seem to be
moving lower here as well, and some sectors that had led this rally are taking
hits.
Crude oil appears to have bottomed, and oil
stocks are rallying sharply off of this week’s lows in oils, particularly the
natural gas sector. Commodities are sizzling, with gold breaking through the
1982 resistance level of 515 like a hot knife through butter. Palladium,
Platinum and Silver are riding high as well, as are many of the base metals. But
beware of super strong Decembers in the metals — they usually lead to peaks
soon after the New Year. For now a party is on it appears. Tighten stops and let
it ride. Gold/Yen is particularly explosive.
Bonds and the dollar are in tug of wars.
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is flirting between 50 and 200-day MA’s and a strong volume strong or weak close
below both of these averages will likely tell the tale of the next directional
move.
The dollar is also stuck in a critical range. A
move by the Euro over the highs of two weeks ago and by the dollar index below
the lows of two weeks ago, will put the first intermediate-term peak in the
dollar for some time. Conversely new lows in the Euro accompanied by new highs
in the dollar will setup a likely last leg up in the dollar. Watch carefully.
We continue to like the global leaders such as
Japan, Korea, US transports, insurance, Latin Banks, Brazil, Gold/EUR and
gold/Yen, and the platinum-palladium group of metals — though all of these are
getting overdone a bit and conservative traders should take partial profits
while others should tighten stops.
This equity market still isn’t the stuff of
long-term wonderful trading opportunities in our opinion — but particularly for
traders, the rally is playable with less than normal allocation in the globe’s
best relative strength sectors.
Mark Boucher
Mark Boucher has been ranked #1 by Nelson’s World’s Best
Money Managers for his 5-year compounded annual rate of return of 26.6%.Boucher began trading at age 16. His trading helped finance his education at the
University of California at Berkeley, where he graduated with honors in
Economics. Upon graduation, he founded Investment Research Associates to finance
research on stock, bond, and currency trading systems. Boucher joined forces
with Fortunet, Inc. in 1986, where he developed models for hedging and trading
bonds, currencies, futures, and stocks. In 1989, the results of this research
were published in the Fortunet Trading Course. While with Fortunet, Boucher also
applied this research to designing institutional products, such as a hedging
model on over $1 billion of debt exposure for the treasurer of Mead, a Fortune
500 company.