We’ve finally exited the last of our China Automotive holdings at $14.80 yesterday, no doubt it will now run to $30. The stock is so extended with the 60 day moving average at $10 that the risk of holding on to it during this parabolic move seems to great to me. It had become such a large holding after tripling in value in many accounts, that it felt like a suckers bet to hang on for more.
Meanwhile the Russell 2000 index which is a proxy for Small Cap stocks continues to labor and appears to be rolling over, not a good sign. While I don’t think the market as a whole is ready for a collapse, strength is narrowing which is a likely sign of a maturing market rally.
Of the top performing groups of 2009 only Information Technology remains a group with leadership strength. Right now I’m compiling a list of stocks that rank high in our proprietary model and show positive chart patterns. But its too early to name names just yet.
In addition to equities, I’d love to get an entry point to add Gold to portfolios. Recent action in long term bonds implies that inflation may be around the corner which will put the Fed in the impossible position of trying to create jobs and fight inflation ie Stagflation could rear its head. But Gold’s climb is unrelenting. Ideally I’d love to see the UGL come back to around $43 a share as that could be a good entry point in what could likely be a bull market in Gold.
Long UGL