Securities Research Services

Friday, April 21, 2006

It's a Rally Until it Isn't

We want to clarify our position on the market today. Recently we have made some bearish remarks regarding the longer term outlook of the market. We need to qualify these remarks. We have a thesis that the market is nearing levels where smart money will start to distribute shares to retail. If we are right this process could take several weeks before a real top is put in place. Right or wrong, our thesis about what is going to occur long term should have no bearing on how we play the current market. It is very important to play the market that is right in front of you. As hungry bears learned on Tuesday this week, it never pays to pick a top in a bull market. Bears lost money trying and ironically they actually helped feed the rally when they were forced to cover their shorts. A rally is a rally until it isn't. Yesterday some heavy distribution took place in the gold and silver markets yesterday. A top is probably not in place in gold, but it may be in silver. At a minimum we should see both groups pull back to their trend lines and a short may be had by those nimble enough to find a good entry in this wildly volatile group.

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