The Week That Was: May 26 – 29, 2009

The action in this shortened week started on a strong note, and finished on a strong note.  After popping above 90 on the SPY in the opening minutes of trading on Tuesday, the bulls seemed to be in control for the most part, never dropping 89, even when it appeared on Thursday that we would be trading down to the lower end of the range at 88.  The one thing I really liked about that selloff was that for the most part financials remained firm, not making new lows, even as the market was.  On Friday we closed right near resistance, in the upper half of the range.

We’re still waiting for the catalyst for a move in either direction.  Until then, as J-toma said on CNBC this week, we’re in a range bound market on the SPY between 88 and 93.

Silver is trumping gold as an inflation hedge.  Personally, I love the fundamentals of precious metals in general, and silver in particular.  Gold finally began to hold above 960 this week, as concern is beginning to grow about the weakness of the dollar and the growing deficits the US is running.  This is definitely a sector to keep an eye on as the inflation trade begins to creep up onto people’s radars.

A little comparison between today and 1938.  The market rallied 50% off it’s lows before pulling back 14% and then continuing higher.  Currently we’ve rallied about 38% off the lows.  Maybe we have one last upleg before the pullback that everyone on Wall Street is waiting for?

The 30 over 30.  A look at the 30 year over the last 30 years.  Looks like maybe it was just cheapers rates that was driving markets higher.

Apparently Congress is considering a National Sales Tax.  I don’t like the sound of it at all.

A little return to the inflation debate: Faber thinks we will definitely be entering into a period of hyperinflation.  Krugman thinks the idea of inflation is absurd.  Although I agree a little more with Faber’s view, the reason I like the long term fundamentals of precious metals is that they have historically performed well in both deflationary and inflationary periods.

Zerohedge claims that the parabolic spike on Friday may be due to less activity from the SLP this week.  Whatever it was, it created some good opportunity for alert traders who were able to short above 93 and cover at 92.50 a couple of seconds later.

A woman set the record for the world’s longest craps roll.  The sad thing is I was considering going down to the Borgata on that evening!  But seriously, as traders, we must focus on the process more so than the outcome, but every once in a while, you just get lucky.  But regardless of getting lucky, you just have to focus on making statistically proven trades.

The market is doing better, but risk still remains.  I agree with the author that there still is downside risk out there.  How much downside is the real question.  You must be employing tight stops if you are getting long at these levels.

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