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Manic Investors About to Get What They Hoped For - Mike Swanson (9/01/06)

Submitted by Mike Swanson on Fri, 2006-09-01 08:28.

Gold stocks inched up yesterday while the DOW and Nasdaq finished slightly in the red. Today the market is a little nervous ahead of the August employment report due out at 8:30. For the past year Wall Street has been excited to get weak employment reports, because they would take it as news that the Fed would stop raising interest rates soon. That meant the possibility of more easy money going into the market to make it go up.

Now with a Fed pause all but assured for September we will start to enter an enviroment in which weak economic data will discourage market bulls. We may still get one last rally between now and the September FOMC pause, but after that we could very well be in trouble. No matter how weak the economic data will be the Fed is unlikely to start to lower interest rates until well into next year. That will cause a lot of angst in the stock market if the economy slows down.

Remember US stock market investors are some of the most manic and fickle investors on the planet. These are the people who bought into the tech bubble, sold out at the bottom, and then rotated their money into condos doubling in price every two years. Usually when they get their cake they turn it away - and that's exactly what is going to happen when their cake of a Fed pause is given to them with the topping of weak economic data. But they shouldn't have known that shouldn't they?


To access today's WSW Power Investor comments with an in depth analysis of individual gold stocks with excellent low/risk and high/reward entry points click here: WSW Power Investor for 09/01/06

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Hello. My name is Mike Swanson. I’m the best-selling author of the book Strategic Stock Trading. In a former life I used to run a hedge fund from 2003 to 2006 that generated a return of over 78% during that time frame. In fact it was ranked in the top 35 out of 5,000 hedge funds in 2005.

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