The Apocalypse is not scheduled for Tuesday
10 days ago, I warned of a pending waterfall decline in the stock market and how it might affect gold and gold shares.
It's here and it's now.
If you look at a chart of Nortel it looks as if the stock fell off a cliff. This isn't the action of people shorting the stock, you can't short a stock at $.50, it's the action of people dumping the stock regardless of everything positive about the stock and concentrating on the negative. Certainly Nortel has problems, but is the company really worth less than half what it was worth 18 days ago?
Apple is selling for $14 and change. The company has $12 per share in cash. This is the lowest price for the stock in real terms since they went public and they are making a profit. Isn't Apple worth a little more than $2.75 in real terms?
And Lightpath is a wonderful example of the sheeple in action. The company has $13 million in cash and a market cap of $8 million. Shareholders could show a profit if the company closed the doors on Monday.
The airlines plummeted on Friday with some of the stocks down 20% on the day. Regardless of how overvalued the market is and how low we believe it will go eventually, nothing on earth can rationally change the value of a company by 20% on one day, only the price.
Baby Bush and his flock of lawless Chickenhawks are certainly doing their very best to speed up the date of the Apocalypse but take my word, it isn't coming Tuesday. But to those few brave individuals who held on to their tech stocks all the way down, the end is at hand and the sheeple are dumping stocks to beat the band. It's capitulation time and if you want to see how it will play out, go back and find a chart of the Dow for May of 1970.
This isn't THE BOTTOM, it's just a bottom. The Bear has years more to run. But remember that the greatest market advance in history was from July of 1932 until June of 1933. I believe that's exactly where we are.
What should gold investors do?
I'm glad you asked that question, I was about to suggest you proceed with great caution. Many gold stocks have dropped 10-20% just as I predicted 10 days ago. They easily could go lower but overall, the gold shares have been correcting since July. I personally would look to buy some favorites as the price gets any more attractive. I am not saying sell but if you fear a major break, you might at least want to lighten up.
Physical gold on the other hand and silver are way overbought and the COTs are giving a great danger signal. The open interest on gold increased by over 23,000 contracts last week. Gold is at extremes of emotion only found at major tops. I would be a lot happier if gold and silver prices dropped by 10% over the next 2-6 weeks in anticipation of much higher prices down the road. But for now, be warned. Gold and silver are at an extreme of emotion.
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