InvestBaboo's  Instablog

All major market charts have now registered multi-day sell signals on their daily charts. However, they have not registered a sell on their weekly charts which means we have some time for the markets to recover from their daily sells into daily buys. If they kneel over and register a weekly sell then I am affraid this bull rally is over.

Today morning I used candlestick analysis on the major market indices and specific Gold and Technology stocks. The reason I picked Gold and Techs have to do with my fundamental belief that they are the best places to be in this uncertain stage of the market. Why? Let me start with techs first. All the tech leaders such as Apple, Oracle, IBM and other have registered possibly the best earnings results when it comes to an apple for apple comparison with leaders in other sectors. Furthermore, they are now starting to register top line growth. This is important. While the likes of Fedex and UPS may not be able to deliver top line growth in this sluggish economy Techs have shown they are able to do that. It makes sense because companies have to spend money in tech for two reasons -- there is the periodic upgrade cycle and secondly the fact that they use tech as a weapon to increase top line while cutting costs. Gold ia hedge both against possible inflation but more importantly the continued devaluation of the world's currencies by their massive overprinting and irresponsible fiscal policies. China has repeatedly indicated they are losing faith in the U.S. dollar and they want a move towards an alternative global currency. Many thinkers within the Chinese government have indicated that China needs to increase their Gold holdings. Remember, in the great crash of 2008 the one place you made serious money was in Gold and Gold miners.

In techs there is also the possibility of continued consolidation as companies find that they can grow their topline and cut costs by consolidating their operation with that of a competitors. Besides the several tech stocks I have recommended in my past posts my key favorite stands out to be Brocade Communications (BRCD). This is the only viable and key competitor to Cisco Systems which has now firmly stepped into the server arena and threatening the likes of IBM, HP and to some extent Dell. BRCD forged an OEM deal with IBM and there are strong rumors that similar deals are afoot with HP and Dell. I wonder though why IBM would let HP and Dell have the same hardware they do under a different label when they could easily acquire BRCD and gain a competitive edge over all others by integrating BRCD offerings into their product portfolio. This will be one sure way to firm up their offence against Cisco. Meanwhile, Dell is rumored to be shopping for acquisitions and is looking to strengthen its position within the enterprise. If Dell wants to strengthen its position within the enterprise market one sure way is to acquire Brocade. Speaking of charts if there is one tech chart that shines it is that of Brocade Communications. There is some heavy duty accumulation going on and the option sellers would not budge their ground during Thursday's sell-off even though the roof seemed to be falling off the markets. I tried mightily to buy BRCD August 8, 9 and even 10 calls for a discount and my attempts were unsuccessful. I ended up buying the actual stock at the end of the day. I sit now quite heavy with BRCD July 8 calls and hope that something substantial may happen between now and July option expiration.

Both EGO and NG showed some very strange price movement on Thursday. This is when Gold shed more than 11 dollars in its price. EGO actually closed up for the day and NG hung in there. Again, I see an accumulation going on here. Remember, EGO is supposedly the lowest cost Gold producer and NG (Novagold Resources) is a medium cap Gold play with a lot of Gold resources.

"Net net", my advice for the short term is to look for opportunities in Gold and Techs. Good luck trading and investing to all of you and a very happy July 4th weekend!

If Gold closes above $940 the charts say the downtrend in Gold may be over and the rally begins to the $1000 and beyond mark. The Gold futures are trading at about $942 at the time that I am writing this which is 9:16 Pm PST on June 25, 2009. We need an official daily close above $940 for the current correction process to get over.

Let us hope for a close above $940 tomorrow!

For those that follow my posts -- sorry, I was away for a bit and am back.

Boy, have the markets changed! Here is where we stand:

S&P and Dow -- Sell signals on Daily charts, no Sell signal on Weekly chart.

Nasdaq -- came perilously close to a Sell signal on Monday, June 22, 2009 Daily chart but saved at the end of day. So no Sell signal on either Daily or Weekly chart.

Gold -- Sell signal on Daily chart; no Sell signal on Weekly chart.

US$ -- A week Buy signal confirmed today on the US$ chart. Still a Sell on the weekly chart.

What does this all mean?

The markets are in a somewhat uncertain state. If we get a couple of days of intense sell-offs we will most certainly have a Sell on weekly charts as well which will mean the end of this bull rally. However, the markets are holding their ground the past couple of days. The S&P managed to close above the psychologically important 900 number today. That is good. If we close this week with a reasonably decent increment from current levels then we all can breath a sigh of relief. If Gold can break through $940 and close up beyond 940 we will be in good shape with our Gold stocks.