The Chart du Jour
A week or so ago, we pointed to a rather clear A-B-C corrective rally in the stock of International Rectifier. Since that time, we have had yet another Fed 50-basis point interest rate cut, and further froth and happiness on Wall Street.
Perusing the charts of the major indices this weekend, we can make a case that recent equity strength will end right here and now. But cyclically, we also can envision strength lasting through the Memorial Day period, with the week of June 1 finally bringing our reversal lower. Our bottom line belief is that we are likely setting ourselves up for a failure either way. For the moment, though, we remain sidelined, looking for the right opportunity to pounce short once again.
In terms of IRF, however, strength has carried a bit further than we previously expected. But regardless of any further short term run in the major equity indices, we are truly doubtful whether IRF can take out its Sep 11, 2000 high at 67 7/16. Shorts set around current levels near $64 with a 68 5/8 stop are clearly a good risk-reward proposition. If our read is right, an eventual target on IRF near 23 1/2 is possible.
Also, as a follow-up to our May 17th Chart du Jour on Homestake and gold stocks last week, we strongly advise not chasing Friday's strength in gold. If this rally is real, let the market prove itself from here by first taking out the 200-week moving average in many gold stocks. If it can do so, then we will likely buy the pullback in many of these stocks back to their 200-week moving averages later on. But for now, the right position is to be out of longs and say "Thank you." There is still a high risk of complete failure near $8 on Homestake and $21 on Anglogold.
It may also be of interest to some that because so much time (and thus timeliness) has now transpired, we recently released three of our 2000 subscriber-only articles. These now appear under the public Earlier Articles section of the website. Perusing through them may give one a sense of the added premium level of analysis we provide to subscribers.
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