This Week’s Commentary – December 8, 2007 – Year End Rally?

by JDH on December 8, 2007

Has the year end rally started? Obviously this was a relatively good week (compared to the last 30 weeks or so); my portfolio increased by around 2%, although that can mostly be attributed to a great performance on Thursday.

Gold appears to be in an obvious consolidation phase:

Gold Chart Three Months

A short term uptrend resumed around November 19, to compete with the downtrend that began with the top reached earlier in November. Since we know something can’t go up and down at the same time forever, gold must break one way or the other, so my guess is that the longer term trend will re-assert itself and gold will move higher.

Presumably the Fed will announce a rate cut, probably 50 points, and the lemmings will interpret this as good news, because now everyone with variable rate mortgages can borrow at a cheaper rate. A brief year end rally in the general markets will ensue. The American dollar will resume it’s downward slide, and gold will prosper.

Since a rising tide lifts all boats, this should be good for most stocks.

However, we have the competing factor of year end tax loss selling, where we sell our losers to lock in losses to reduce the tax hit on the winners we have sold in 2007. For example:

Cash Minerals

Obviously everyone who has bought CHX.V – Cash Minerals Limited in the last two years is holding it at a loss. We have all been wrong on this one. (I believe this is one of the few stocks that is recommended by both Dines and Casey, and they both still continue to recommend it, so even the gurus are wrong every now and then………). The good drilling results from the summer of 2006 were not repeated in 2007, so either you hold and hope for a recovery, or you cut your losses and run. For me, this will probably be a “cut your losses and run” stock over the next week or so.

Here’s another one:

Pitchstone Exploration Chart

PXP.V – Pitchstone Exploration Limited has also not performed as expected, but at least there is a semblance of an uptrend, and it appears that the RSI and MACD levels are positioned well for an upturn. I’ll be holding this one for the time being.

Here’s another Casey/Dines “winner” (first recommended by Casey, then a few months later by Dines, if I remember the chronology correctly):

Uracan Resources

URC.V – Uracan Resources Ltd. appears to have broken it’s long term uptrend, and is in an obvious down trend; I see no point in holding; I’ll be selling next week.

I could go on and on, but you get the idea. Some stocks have broken down, so even if the Santa Claus rally does appear, that cash is probably better deployed in other areas.

The Buy High Sell Higher Forum

We had an interesting discussion on the Buy High Sell Higher Forum this week about the purpose of the Forum. At the suggestion of a few of you one member was banned for posting what appeared to be articles written by others that “pumped” stocks. If the articles are available elsewhere, they don’t need to be reprinted here.

I started this blog, and the Forum, to share ideas and thoughts. In a way, it’s an exercise in mass psychology, on a small scale. If we are all pessimistic that’s a buy signal, and vice versa. Also, we can share our thoughts on the wisdom of Dines, Casey, Grandich and others. The more perspectives we have, the more information we have to make our own decisions.

But when does an opinion become a blatant attempt to “pump” a stock? And when does an honest critique of one member’s comments become “bashing” that needs to be stopped?

One member, sunseeker, suggested that policies be posted for the Forum. That makes sense to me, so I have created a new board called Forum Posting Policies. Here are my initial thoughts; since I don’t read or contribute to any other discussion group, I have no idea what is standard; I’m sure some of you can enlighten me:

First, profanity or insults are prohibited. I encourage disagreement; personal attacks and insults are prohibited.

Second, spam or advertising is prohibited.

Third, you may place links in your posts to other articles that would be of interest to other readers, but links that are obviously spam are prohibited.

What else do we need? Please provide your thoughts on the Forum Posting Policies board.

Also, the software that I use to generate the Forum (since I’m not a computer guy, I chose the platform that was free and simple) automatically assigns member categories like “Newbie” and “Senior Member” based solely on the number of posts you have made. Other than that, the categories mean nothing; all intelligent, well reasoned contributions are valued.

Those are my thoughts up to this point in time, subject to change, or course.

As always, thanks for reading, and please continue to share your thoughts on the Buy High Sell Higher Forum.

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