Friday, November 5, 2010

November Outlook For Action

November Outlook For Action
November 5, 2010
By:  Marco G.

Introduction

After the passage of All Saints day, and All Soul's day, early in November  where one pauses to  remember and reflect on our past heritage, we now need to look forward and seek illumination as to where the markets are headed.  The two remarkable events of the mid-term elections and the FOMC pronouncements will serve as starting blocks for this scrutiny.

US Mid-Term Election     

As quite expected, the Republicans surged into the house, and gave a rebuke to our sitting President Obama as obviously, the electorate are unhappy with the state of the economy.  

Naturally with these results, most observers are saying that the split houses will now be deadlocked and uncertainty will reign forthwith.  This uncertainty will be bad for the markets, they say, as the markets will not move on uncertainty.

The author, has an opposing interpretation, in as this deadlock is actually good for the economy, only the markets will take a while to recognize this.  The deadlock serves to ensure no surprises to be sprung on the electorate, and as such will allow the private sector to get on and do their usual good work in the business of making money.  This election result will be a boon for the economy, as it is now just poised to embark upon another financially inspired revival.

FOMC Offerings

The FOMC made a statement offering to purchase $600 billion of Treasuries over the next 8 months on November 3, 2010.  They are back stopping the Federal government's budget deficit on a monthly basis only moving in as required.

As Mr. Grannis, the Calafia Beach Pundit says:

the FOMC has not only indicated that it is willing to undertake a substantial QE2 program if the need arises, but it is also giving itself some time to make sure that nothing gets greatly out of hand.

This FOMC statement is bound to be miss-interpreted by the masses as inflationary, and sure enough, immediately in the day following, November 4, 2010, the precious metals enjoy a raucous up day. 

That is the way with the markets, it moves with perception and not hard facts.

Broad Markets

The broad markets are in a continuation of the up move since September 1, 2010.  Both the S & P 500 and the Wiltshire 5000 indices have exhibited a broad based movement upwards, with no serious pull backs since.  In fact, in mid-October, both indices displayed a "Golden Cross", where the 50 day moving average crossed over the 200 day moving average.
The leading index, the Toronto Canada based TSX composite is displaying the same exuberance only earlier.  The TSX started this up trend on August 25, 2010, and the "Golden Cross" for Toronto came one month earlier in September.
In this time of year for the markets, investors both large and small take stock of their stocks and prune and purchase for the year ahead.  The author surmises, that with the help of the FOMC and the deadlocked government, that there will be no major pullbacks this year and that there are blue skies ahead in the year following.
Santa will come early this fall, and he will keep on giving to the believers invested in the markets.

Investor Stock Action

The author is a believer in the commodities boom driven by the infrastructure builds in emerging economies and is therefore presently specialized in Commodities and Mining equities.  One only needs to examine the price charts of Copper and the Commodities Research Bureau (CRB)Index to see that both charts are showing remarkable up trends since June 2010. 

In addition to the commodities trend, the precious metals have been streaking higher since summer of this year.  As I am typing, Gold is hitting new highs of $1382 USD and Silver is at $25.98.  The author ardently follows this sector and has postulated that Silver will outperform Gold in this trend. 

The author's outlook for the general stock market is bullish.  The bullish general markets will make gains in the Commodities and Precious Metals sectors easier and higher.  The author's specific stock action is reflected in his "Six Silver Stocks" second article.

Disclosure: The author is long mining equities.
Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

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