Dow Jones Industrial Average 11,280
Value Line Arithmetic Index 2,121
30-Year Treasury Yield (TYX) 5.15%
20+ Year Treasury Bond Price (TLT) 84.15
Gold 1/10 Ounce (GLD) $62.46
The Big Picture for Stocks
The 4-year cycle calls for a bear market bottom in 2006.
Technical Trendicator (1-4 month trend):
Stock Prices Down
Bond Prices Down
Gold Price Up
China Life Insurance Co (LFC, 54.15) hit our sell target of 53.50 on April 17. We have been holding the stock for over two years and managed an 89% profit. The company still ought to be a good long term holding as the life insurance market in China is small but growing handsomely. But the p/e ratio at over 20 seems a bit rich for Chinese companies at this point. Maybe we can buy the stock back cheaper in the future.
We now have liquidated 34 positions from our Special Situations list. Our average annualized rate of return on all stocks sold is in excess of 200%. Of course we have especially benefited from the huge bull market in small and microcap stocks. Let's not confuse brains with a bull market. As this bull market rolls over, we do not expect to achieve anywhere near that rate of return. But we will keep looking for good opportunities for long and short positions.
We are adding two new buys to our list. One is an emerging growth stock in the promising "trusted computer" arena. Revenues for this company may be on the verge of huge explosion. The other is a small oil and gas company trading near the bottom of its range. We have not done much lately with energy stocks, focusing instead on metals and mining. But with oil breaking to new highs, and natural gas looking like a trading bottom, it looks to me like it is time to seek out opportunities in this area. See the attached chart on natural gas. (To our SafeHaven readers: Yes this is a bit of a teaser. Thanks for considering our service.)
Is the fed about to stop raising rates? Many people think so. While I am skeptical myself because of the relentless rise in commodity prices, if they do stop raising rates the dollar will fall and gold will move higher. Our mining stocks should benefit.
According to Jason Goepfert at http://www.sentimentrader.com, there have only been a few times in the last 40 years when we have seen a big up day (like yesterday, April 18) within 10 days of an opposite big down day while the S&P was near a yearly high. The typical pattern after this occurrence is a day or two of further modest advance and then a 4% decline over the next few weeks. So I would not put much hope that yesterday was the start of new upleg for the stock market.
Meanwhile, the bond market did not participate in the stock market's upward move. In fact, it is near a new cycle low. This is not healthy.
With stocks due for a cyclical bear market, bond prices in a freefall, and gold getting frothy -- I continue to recommend cash as the best risk/reward opportunity for most of your portfolio.