The market has had a fantastic week so far for stocks and precious metals. The financial and energy sector are underperforming which is a concern, but we continue to hold our positions and will wait until a reversal to lock in our gains.

Things seem to be lining up for stocks and precious metals to take a breather, which is in line with the Dow Jones Seasonal chart below.

Let’s take a look…

Dow Jones ETF
You can see from looking at the chart the repeated pattern of price rallies, leading to exhaustion and a test of support, followed by another repeat of the pattern. It looks as if the broad market is setup for a test of support which could happen within 2-4 days. Then as we near the holiday prices will start to drift higher. This pattern occurs more often than not as seen on the Dow Jones Seasonal chart below.

Dow Jones Seasonal Trends
This chart clearly shows weakness in the first half of December and continued strength moving forward. This has not really happened in the past two years which means we are overdue for continued strength. 

That being said, the previous two years were bear markets and we are now in a bull market. So the tendency is for buying to continue into year end.

GLD ETF Fund
Gold continues to push higher surprising many of us. It seems as though money is rushing into metals and buyers are not particularly concern about price. While this is great for short term traders and those of us in the trade, we must remember that the faster things go up, the quicker they correct.

Don’t get me wrong, I don’t think gold is going to crash, I just think we could get a 10% correction before moving much higher. Gold is also trading near the upper end of the trend channel and could have a 2-4 day consolidation with the broad market before pushing much higher.

SLV Exchange Traded Fund
Silver has been underperforming yellow gold but is still a solid investment. It is also trading near the upper end of the trend channel and could have a 2-4 day consolidation with the broad market.

USO & UNG Funds
Oil continues to flag from its breakout back in October. This is a bullish pattern. Last Friday we saw oil open much lower then rally back into the trend channel. This is called an outside day and many times this happens to stocks and commodities as it shakes out the weak traders before starting another rally higher. We will keep a close eye for any low risk entry point.

Natural Gas had a nice rally last week which I mentioned looks a lot like a short covering rally. The price action this week suggests it was and has now made a new low. Today on CNBC it was reported that a new source of natural gas has been discovered. This resource is 20 times larger than the biggest source in the US. Enough gas to last the US over 100 years. This added to the selling on both natural gas and oil today.

Trading Conclusion:
Precious metals continue to perform well and it’s important to note that PM stocks are now moving higher with gold. They have been lagging for some time but are on fire again. Great to see!

The Dow Jones index and several others look ready for a breather. The timing of these overbought charts bodes well for the seasonal December pause before the holiday rally. Time will tell.

Energy and financials are both underperforming the market and without their participation we will not see the indexes move much higher.

Continue to hold precious metals positions but be ready to lock in profits if we see the market reverse sharply. I am watching energy for a play but no setups at this time.

Trading Secrets For Gold, Silver & Oil

– FREE Weekly Trading Reports HERE.

Here’s what you’ll learn in my reports and in my website…

Buy & Sell Signals for Gold, Silver, Oil and the Broad Market
How To Pull The Trigger For Locking In Profits
Learn When To Exit Your Trades
Learn My Simple Trading Strategy
How To Trade Draw Proper Trend Lines
Learn How To Trade With Trend Channels
How To Use Support Levels To Manage Risk
Putting Momentum On Your Side For Consistent Gains
Know When Risk Is Under 3% For A Low Risk Entry Point
And Much More In My Free Weekly Reports…

Simply Enter Your Name & Email Address HERE.

STOCKS VS. GOLD:  A rather interesting  chart, courtesy of  24gold.com suggesting 
that one might well  consider “swapping”  stocks for gold even at  these levels.

THERE IS NEVER JUST ONE COCKROACH:  This is one of our favourite rules of trading, and indeed in this year’s list of Rules, which we sent out last week, it was #13. In life, the sight of one cockroach in a restaurant is an assurance that others are nearby, and in the world of trading, the first bad news is almost always… ALWAYS… followed by more such.  We came upon this rule years ago in the aftermath of the Enron Affair when the rather newly appointed President of the company at the time, Mr. Jeff Skilling, announced his retirement  so swiftly after his promotion, ostensibly to spend more time with his family.  We knew… and indeed everyone knew… that that was just a false front and that bad news was to follow.  More did… and more did… and even more did.

It is in this light that we note comments from our old friend, Mr. Marc Faber of the Gloom, Doom and Boom report regarding the situation in Dubai.  He… like we… is convinced that the problems of Dubai World are but the “tip of the iceberg,” or in our parlance, the first cockroach. Marc said yesterday in an interview with Bloomberg news that

In the context of all the default[s] that will  happen in the world, [Dubai] is not a big thing,  But it’s a reminder that governments can  default.

That is precisely what Dubai World has done. It has raised the concern that governments can and do default, and that government guarantees are all too often “writ small, not large.” Dubai World may prove a mote in the eye of the global economy when all is said and done, but it may also have been the first or second cockroach. We must always be on the watch for others that might follow as the global recession… which we are certain has ended… is still having repercussions on the periphery that may spread to the centre stage sooner rather than later.

Richard Russell has made his subscribers fortunes. One of the best values anywhere in the financial world at only a $300 subscription to get his DAILY report for a year. HERE to subscribe. Richard  has been Bullish Gold since below $300. He also loaded up on bonds in the early 80’s when US Treasuries where yielding 18%+. A 30 year bonds through compound interest would turn $1,000 into $300,000 at maturity. (include reinvestment of interest income, which Richard does as his view is compounding interest is the ROYAL ROAD to RICHES)

“By now, I believe most of my subscribers have some sort of a position in gold or gold shares. Below is an up-dated P&F chart of gold. We see that the latest action is a “high pole” rise to the 1190 box. Then a correction down to the 1130 box. The correction halted well above the halfway level of the high pole. Then most recently, we see a rally and a breakout to the 1200 box. This breakout to new highs is very bullish. There is no technical resistance above gold now. My guess is that gold will now work its way up to the 1500 area.”

Central Gold Trust is a Canadian outfit that must hold 90% of its assets in gold bullion. The P&F chart is interesting. Yesterday GTU broke out of its left shoulder formation. This could easily take GTU to its former high box at 50. Anything above 50 would be very bullish. For more on GTU, check it out on Google — Central Gold Trust.

The 84 yr. old writes a market comment daily since the internet age began. In recent years, he began strongly advocated buying gold coins in the late 1990’s below $300. His position before the recent crash was cash and gold. There is little in markets he has not seen. Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron’s during the late-’50s through the ’90s. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-’66 bull market. And almost to the day he called the bottom of the great 1972-’74 bear market, and the beginning of the great bull market which started in December 1974.