Dear Wealth Daily Reader:
Here it is. The last day of August.
Even though summer doesn’t officially end until September 22, for many of us August 31st represents the end of sun, fun and surf, at least psychologically.
I will always love the end of August. It’s my favorite time of year.
It was on August 26, 1994, that I took a lowly position working for an up-and-coming financial newsletter publisher. That publisher was Agora. To quote Archibald "Moonlight" Graham, I didn’t realize that that day would become one of the most important days of my life.
Almost exactly a year later on August 23, my first child Connor Jeffrey was born.
But I like the last two weeks of August for more than just past personal experiences. These are the days you can feel the annual struggle between summer and autumn.
Take last week, for example. It was brutally hot… five days of above-97 degree heat with humidity so thick, it felt like a sauna.
But smack-dabbed in the middle of last week – during the meltdown – were two days of pure heaven. On Wednesday and Thursday the temperature never broke above 80. The humidity was nil, so my wife wore a jacket because she said it felt chilly. And this was on the beach!
But this August seems exceptionally emotional with the seasonal struggle.
Maybe it’s because we’ve witnessed the first bona-fide market correction since 2005, when the Dow corrected from a high of 11,027 on March 7 to a low of 9,978 on April 18. Sure the Dow sold off 1,200 points, but it wasn’t a strict, textbook correction because the market failed to decline 10%.
According to the online investment encyclopedia, Investopedia:
Correction:
A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index. Corrections are generally temporary price declines, interrupting an uptrend in the market or asset.
A healthy market will correct from time to time.
For that we have to go back to the days after 9/11, which saw the Dow drop 23% in 3 weeks. And many argue that that correction wasn’t valid because it wasn’t spawned by purely market or economic fundamentals, i.e, stocks becoming expensive and speculative.
So it’s very possible that the last true market correction (a correction during a bull market) occurred in the summer of 1998, when the Dow went from a record high of 9,412 on July 17 to a low of 7,379 on September 1.
During that correction, the Dow lost nearly 2,000 points and corrected 22%!
So far, this Dow has corrected 12%. The bottom (so far) occurred on August 16, when the Dow reached 12,445 from a high of 14,121 on July 19. Since the bottom on 8/16, the Dow has rallied nearly 900 points… sold off again nearly 500 points… and has rallied yet again about 200 points.
Was that a sucker’s rally? Maybe. Maybe not.
By the looks of the chart, this is a critical period for the markets. The trend is obviously down as exhibited by the lower highs. But we did test 13,000 again and successfully bounced off of it.
But even though the market technicals aren’t giving a clear direction, I’m maintaining my bullish prediction because I continue to see risk capital flowing into natural resource stocks as well as technology and biotechnology.
You see, the market was looking for an excuse to correct. It needed to wipeout housing once-and-for-all. It did it when the full extent of the housing bust came to light. The market is now looking for an excuse to rally. And I have been and will continue to play this rally on each side.
When the Dow declined 300 points on August 16, I immediately put money to work on the long side. I bought 500 shares of hot tech IPO VMWare (VMW:NYSE) for $57 a share.
I sold it four days later for $69.93 . . . a 22.6% profit in less than a week.
Yesterday I sold Internet video player Sigma Designs (SIGM – NASDAQ) when it rallied over $44 a share (more than $5 intraday) on booming 2nd quarter revenues. I bought it last month for just $31 a share. I – as well as my Quantum Confidential members – locked in a profit in excess of 45%.
I also purchased Garmin (GRMN:NASDAQ) for $89 a share. Today it trades just shy of $104 a share.
I’ve also been picking up shares of junior resource stocks, because I’m still a believer in the commodity bull market, particularly metals and energy, and specifically natural gas and gold.
As an aside, I consider natural gas the "forgotten crisis." And many investors are asleep at the wheel to its opportunity. Natural gas is insanely cheap at the moment.
In fact, I see the exact same market fundamentals as I did this time last year. I was on CNBC in October ’06 and made a bullish call on natural gas when it was trading for less than $5 per mcf. (You can see my CNBC interview here: http://www.wealthdaily.net/interviews/bhicks_naturalgasCNBC.mov )
Here’s how natural gas performed:
I think we’re headed for a similar rally in natural gas. And at the Profit at the Peak Conference, I’ll reveal three ways to triple your money by this winter in the natural gas market.
In addition, Greg McCoach will reveal–for the first time ever–the five junior resource stocks he owns in his personal portfolio. And you can hear about those five stocks, as well as other stocks Greg is looking at for recommendation right now, at the Profit at the Peak conference in Philadelphia on September 14–16.
There are still spots available for this conference, and if you wish to attend, you can do so by calling Barb Perriello, Telephone: +561-243-6276, X104 or +800-926-6575 x 104
Facsimile: +561-278-8765
E-mail: barb@agoratravel.com
However, I understand that this correction could accelerate with an off-the-cuff remark by Bernanke . That’s why I’ve also hedged my long positions with the UltraShort Dow30 ProShares (DXD:NYSE).
So as you can see, my portfolio is pretty diverse with tech, energy, metals and a short fund. Because quite frankly there’s always a bull market somewhere. And sometimes there are concurrent bull markets occurring in several sectors.
But there’s another reason why I’m telling you all this. I’m telling you what I’m doing personally with my portfolio because starting next week, Wealth Daily will release its Subscriber Bill of Rights.
The heart of Wealth Daily’s Bill of Rights is full disclosure and full transparency. You’ll know exactly what I’m buying and selling as I’m doing it. You’ll also know what all of your Wealth Daily editors are doing with their money as well.
The Subscriber Bill of Rights contains 5 rules that all of our editors must abide by. In the future if we feel we need to add more rules, we’ll amend it. This will be a living document with the ability to change accordingly to market conditions.
Hopefully those changes – if any – will come when the Dow hits 25,000!
Enjoy, and get ready to make some money,
Brian Hicks
Publisher, Wealth Daily
