Tuesday, February 17, 2009

Dow Testing Low, Gold Testing High

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

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So far today the Dow has fallen as low as 7553 and is closing in on its November low just under 7400. It is inevitable that it will test it and possibly the slightly lower 7200 area, which was the bottom in 2002/2003. Financial stocks are the culprits that are tanking the market today, with the sell off starting in Europe because of weakness in Eastern European banks. The tech heavy Nasdaq is still well above its November bottom. Gold has hit a 7-month high and oil looks like it has made a double bottom.

The U.S. stock market was actually in very good shape technically and breakouts were taking place until Treasury Secretary Geithner gave his talk on how he plans to deal with the ailing American banking system. The talk came across as Geithner fiddling around while the U.S financial system burned. Wall Street reacted with a sharp sell off and the incipient rally turned into a route for stocks. With friends like Geithner, the American investor doesn't need enemies.

While stocks are falling apart, gold and silver are breaking out through one point of resistance after another. Gold so far today has reached as high as 970 in futures trading and is closing in on its all time high in the 1000 area. Silver has broken above its 200-day moving average, but still needs to do some more work before it establishes a solid bullish pattern. Meanwhile, oil looks like it made a double bottom last Thursday when in fell into the 33's, just as it did on December 19th. Press stories about excessive supplies of oil are greatly exaggerated and are being generated by the big money interests that are short the market - don't believe them.

Problems with the global banking system are serious and are not likely to be solved for years to come. The market shouldn't be surprised by this anymore, but it is and will continue to be. The solution for all the major players will be money printing, more money printing and more money printing. Commodities will be the beneficiaries, while stocks decline or languish.

NEXT: SEC Discovers Fraud Exists/Smart Money Buys Gold

Daryl Montgomery
Organizer,New York Investing meetup

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

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