Grandich on P.M.''s
Grandich Letter Special Alert: One More Shoe to Drop
By Peter Grandich
May 29 2007 2:41PM
www.grandich.com
For quite some time now, I’ve spoken about my belief that the U.S. stock market could not top out until such time that the mood on Wall Street is convinced the Federal Reserve will move, or already has moved, to an easing position. It’s at that point where I believe the last blow-off rally should take place and where I would personally like to short the market. Despite an ever-increasing number of bearish economic, social and political factors, I continue to believe this easing is the needed “last shoe to drop” before we enter a long-term grinding bear market. While I haven’t gone short yet, I do believe investors should use further strength strictly as an opportunity to lighten their load (except for precious metals issues).
Gold – I haven’t witnessed a more pronounced bearish mood in the gold market given the least amount of price decline since this secular bull market began five years ago. Not a day goes by where I don’t read yet another formerly bullish forecaster painting a gloomy outlook for gold for the foreseeable future. The mood among retail speculators is so thick with pessimism you can cut it with a knife. Yet, here we sit this morning with gold still north of $650 and above key support of $640.
One shouldn’t simply discard this marked increased in bearishness. For starters, gold is now in the historically weakest seasonal period of May through August. It’s also been absolutely hammered – not only by aggressive central bank selling, but by a continuing pattern of strange selling on the Comex that almost always is concentrated around the 11 a.m. time frame. The fact that this is when most of the physical buying worldwide shuts down until later in the evening in Asia is no coincidence.
It’s easy to see why gold bulls like me may be scratching their heads wondering why the bullish boat has thinned out, especially when you read so much double-talk like we are currently hearing from a so-called gold expert on one of the most read gold bullion websites. This gentleman can not only talk well from both sides of his mouth, but I often wonder if he and I are looking at the same market?
Make no mistake about it; we remaining gold bulls are on the defensive until such time that gold breaks above the all-important $700 level. Gold must hold above $640 or we are all but certain to see a test of $600 or even $575. (Please put down the gun). But even if that was to occur (though extremely unlikely), the fundamentals remain solid for gold and by sometime in 2008 (if not sooner), we should be testing the old highs of around $875.
I continue to like the bullish side of silver, platinum, palladium, uranium and cobalt. I’m now firmly on the bearish side of most base metals.
Oil – With hurricane season upon us and a continuing thirst for gasoline, there’s little reason to think oil can see much downside below $60 and it wouldn’t surprise me to see a spike back to and beyond last year’s highs.
U.S. Dollar – Despite all the propaganda the “Don’t Worry, Be Happy” crowd on Wall Street gives to the financial media, rest assured the Fat Lady is not only in the building, but Last Rites have been administered to Uncle Sam’s currency. Put a fork in it.
Mining and Exploration Shares – What began as a serious correction in the uranium stocks became a serious correction (or even a mini-bear market) among producers and juniors. Very few issues have escaped this and our list of companies is no exception. Because I don’t believe the gold market is going to get much worse before it gets better, I’m personally going to ride this sluggish time frame out. I believe most of the surprises in precious metals and related equities should be to the upside for the foreseeable future.
GRANDICH PUBLICATIONS, LLC.
P.O. Box 243 o Perrineville, NJ 08535
www.Grandich.com
phone: 732-642-3992
email: Peter@Grandich.com
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