Ouch!
Posted by ML on January 3rd, 2007
Wow, that was quite a day. The closing numbers in no way describe the roller coaster ride: the Dow had a range of 12404.82 – 12580.35 (!) and closed at 12474. Barry Ritholtz at the Big Picture had a nice summary of the day’s news. The usual dip buyer(s) showed up around 3 and pushed the Dow and Naz back into positive territory.
After going up yesterday when the US markets were closed, gold and silver took a brutal beating. The HUI went down 4% to below its 50 and 200 dma. This sets off an alarm bell for me and I sold my EGO and HL which I picked up during the last couple of weeks. They were showing a small profit and I loath to let a gain turning into a loss. I also bought some protective puts on GDX, although only half of the order was filled. This is probably the extent of the defensive action I’ll take for my PM positions. Until HUI breaks the recent low of 312, the bull trend is still intact, and I know I’ll be quick to jump back in precisely because I’m ready to take defensive action to limit my downside when I get it wrong.
Anyway, it was almost too much action for the first trading day of the year. Now let’s see if this volatility sets the tone for the rest of 2007. Good luck and be safe!
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January 3rd, 2007 at 6:41 pm
Geesh finally someone else who talks and posts about the Gold and Silver market. I’ve been reading tons of PF blogs since at least August and you’re one of the first to actually talk about Gold and Silver. So Koodoos.
Also wanted to know what your top mining stocks are? I used to own Staccoato Resources (CAT.ca), but finally sold out of it because it went up high enough for me to take a reasonable loss. The dang thing jumpped up and down to much for my nerves. So any suggestions?
January 3rd, 2007 at 7:28 pm
Hey I’ve been blogging about PM for months now! Trading GDX via covered calls has been exceptionally good for me. Anyway….good observations frugal. I think what set PMs off was the FED’s gloomy report about housing and the economy. Looks like they may cut fed rate and that will hurt PM in the short run. Long term I’m gold bullish. GDX is looking good but I’ll wait and see.
January 3rd, 2007 at 9:13 pm
Definitely not a good day for PM. My job does not allow me to have any time to be agile in the market. I guess I should have seen this coming, especially with Britain preselling before US market in the PM market.
Looks like another substantial dip is coming.
January 4th, 2007 at 11:53 am
Mondy vs. Debt
I don’t follow the fundamentals of each company that closely to be comfortable with the juniors and exploration companies. The more sizable names with strength are AEM, AUY, GG, KGC and EGO for gold and SSRI, HL for silver.
Rich Slick
Actually the PMs rolled off before the Fed minutes came out, even the Dow started rolling off before then. It was a very strange day. I think PMs were weak due to the general weakness in commodities. FCX was a big drag for days. AEM with a lot of zinc production was hurting yesterday.
You need to explain the lower rates thing to me. I believe cutting rates will likely drop the dollar which is good for PMs.
I agree with Frugal that the weakness will continue a while longer although in my mind this could still be part of the consolidation noted here
http://www.1stmillionat33.com/2006/12/crossing-the-line/, the alternative is of course a retest of 270-280. My trading is for “emotional management” only. It’s a small portion of the overall position.
January 4th, 2007 at 2:42 pm
Some how, I think the big boys always know what that report is going to say and act accordingly
If the Fed cuts rates the dollar may drop and PMs might go up BUT it might also mean that the bull market in commodities is winding down if the economy is winding down and that will drive PMs down.
I guess there are too many ways to look at it.