The Two Scenarios Unfolding in the Stock Market Today
Wednesday, June 14th, 2006
By Michael Lombardi, MBA for Profit Confidential
The way I see it, we have two different scenarios happening in the stock market today.
Scenario 1: Contrary to what you may have read or heard from other market watchers, I do not believe the general stock market is in correction mode. In my opinion, the general stock market (which includes big cap and blue chip stocks) has been in a bear market since the year 2000.
If you look at my beginning of my year 2006 predictions, I had predicted 2006 would be another down year for stocks. In that prediction, I also stated that I expected this year to be the sixth consecutive year the popular Dow Jones Industrial Average would fail to rally above its record high set in early 2000. As of yesterday, the Dow Jones Industrial average is down 2% for 2006.
Bottom line on big cap and blue chip stocks for me: not a correction, but an ongoing bear market that started in the year 2000.
Scenario 2: Contrary to what others are saying about gold stocks and precious metals (that the bull market is over for metals), I see the current action in the precious metals market as a correction within the confines of a long-term bull market. I have written many times that no investment goes straight up in price without a correction somewhere along that upward line.
And that’s exactly what I see happening in the gold market. Gold bullion had moved from $250 U.S. per ounce to $732. I’ve recently written that I expect the correction in the precious metals market to take gold to $575 U.S. an ounce–and that’s close to where gold closed yesterday. I see gold bottoming out. If gold moves to $500 U.S. per ounce, gold will have corrected 50% of the gain it made from $250 U.S. per ounce to $732 U.S. per ounce… a very healthy correction. But, the price and volume movement of the major gold producer shares over the past few days tells me we could be very close to a gold bullion bottom right now.
Bottom line on gold stocks–not an end to the bull market but a long overdue price correction that I feel is close to complete.
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Tags: Dow Jones Industrial, gold bullion, gold stocks, stock market
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
