Wednesday, September 1, 2010

Spring surprise. Wed Sep 1

It's just past 11 am and the market is still pushing higher, up 59 points or 1.3%. The overnight lead was flat with a rise in gold and a fall in oil and base metals but the bullishness we displayed on Monday has been reinforced with another surprise outperformance today.
I was looking for this move but I didn't necessarily expect it today after another mediocre night in the US. The index has now actually got to the new high that was my basic target, although I think there could be more to come based on shorter term charts. Here's the Xjo on a 10 minute chart. Looking at the momentum from last night's close, there's no sign of fatigue yet. The index leapt out of the blocks and hasn't done any corrective work yet.













Although the rise in the gold price was around 1%, gold stocks have risen more than that. That's partly because a 1% rise in the price might have a multiplier effect on profitability and reserves for high cost producers. Some of the stocks are pretty cheap actually. For example, I saw two analyst upgrades summarised this morning for Avoca resources. The bearish one has them on a prospective price earnings ratio of 13 and the bullish one, 5. North American stocks often trade on much higher p/e ratios, around 20 or so, I think, so although this is a mid cap stock even the bearish take has some value.
Avo has risen 15 today to 313 and I sold out half at 310. I've also sold very small amounts in Cgf, Ost and Tol.
I've chased a breakout in another gold miner, Medusa, with a purchase at 417. This is going ok in the short term but I'll have to be on my toes.
I've been in gold miner Intrepid for a week but the chart actually looks as good as at any time since I bought and I'm thinking of adding to my position. Stop is at 72 and the momentum is such that this could start to accelerate.
1.09 Better than expected GDP figures of 1.2% for the quarter helped things along but the market is looking stretched now, up 1.9%, so maybe that's it for the day. I bought extra Iau at 81 and they've firmed slightly more to be trading at 82.

2.34 The index is still up near the highs for the day. I've sold out of Tol at 615 today. I added this to my watchlist because I thought there was a chance of a strong rally after the result. It hasn't eventuated and the stock has traded in line with the market.
I generally prefer to trade the lower dollar stocks as they're often more volatile so I've taken this off my watchlist.
I also sold out of Mml at 426 as it was just a quick trade. I'd like to get long this on a pullback though.
3.45 This is a chart of the Xjo now.
So even after another very strong day, I'm still pretty bullish. It might be hard to kick on tomorrow but US futures are firm which is a start. I quite like the odds of a good rally tonight in the States. Here's a 60 minute chart of the Dow. Monday's rally overlapped the previous week's low after having made a double bottom (fractional new low, perhaps) and after a higher low, there's the possibility of some strength.
4.13 The close was up 91 or 2.1% so none of your namby pampy sensible pullbacks here thank you.
I believe the Chinese PMI number, showing a goldilocks economy, was partly responsible for us holding our gains.

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