The Binary Circumstance

Earlier today I wrote about Motley Fool’s view that the stock market is in for a big correction.

While I do not give others advice on how to invest their money, I do make my own decisions mostly by studying charts and basing my interpretation on technical indicators.

What I see in the charts is very positive for all three major indexes over the coming months. That includes the Dow Jones Industrial Average, the S&P 500, and the NASDAQ.

The longer term technicals look weaker and so I’m guessing that all three indexes will do well into the early part of next year and then I think they will begin to drop. This is pretty much in keeping with normal seasonal trends, but I think that people may be surprised by the strength over the coming months as well as the softness that follows.

I also read in the paper today (although I can’t find the article online) that NASDAQ short interest had increased recently in spite of the recent rally. That is usually a contrary indicator. Short selling indicates that investors are bearish on the market so they sell shares short on the belief that it will decline and they can buy the shares back at a lower price, making a profit.

That level of bearishness is often the sign of a bottom, not a top. If the market moves higher, they must buy shares to cover their short positions, which only drives the market higher.

There can always be world events that cause big swings in the market, but just based on the current technical indicators I expect all the major indexes to do well at least through the end of the year and possibly into early next year at well.

Gold, silver and other precious metals were all hit very hard in recent weeks but I think they may have bottomed. Gold moved up above $600/oz. again today. Currently, I’m basing my decisions on the assumption that the bull market in precious metals is still intact and I expect them to do well, at least hold near or above current levels, in coming weeks.

Current Levels:
DJIA 11,689.24
S&P500 1336.59
NASDAQ 2263.39
GOLD 601.90
SILVER 11.64

UPDATE 9/29/06: ‘Short’ Selling Hits Record on Nasdaq

The Motley Fool is telling readers to get prepared for a recession and a U.S. stock market crash.

We’re heading into a recession. You’ve heard about it for months, even years, what with the housing bubble, the war in Iraq, overextended consumer credit — you name it. A recent Merrill Lynch (NYSE: MER - News) report says that the U.S. economy will grow by only 1.9% next year, down from 3.4% this year, and slower than the global growth rate of 5.2%. Even slowpoke Europe should pass us at 2.1%, though the U.S. is ahead of the average European GDP growth rate of 2.7%.

If these numbers are even close to reality, your next course of action should be obvious: Invest somewhere else for a while. The good folks behind that report suggest Japan, India, and Brazil as eminently suitable targets.

What’s more, they expect that interest rate differences will cause the dollar to lose value against the yen, Chinese renminbi, and Scandinavian currencies, which means that even mediocre businesses in those regions should produce decent share-price returns over here, thanks to the magic of currency conversion.

The article goes on to offer suggestions for how to invest overseas.

Another way to make money if the U.S. market is really headed for a “crash” is by shorting it before the crash.

Time will tell. Either it will happen or it won’t.

A celibate clergy is an especially good idea, because it tends to suppress any hereditary propensity toward fanaticism. — Carl Sagan

Source

The Pope has excommunicated a Catholic archbishop for advocating marriage for priests.

VATICAN CITY (AFP) - A Zambian archbishop, who stunned the Roman Catholic Church in 2001 by getting married in a mass “Moony” ceremony, has been excommunicated for ordaining four married men as bishops, the Vatican has said.

Milingo, who has a fondness for carrying out exorcisms and advocates optional celibacy for Roman Catholic priests, was excommunicated because of “his increasing split” with church regulations and for “sowing division and disarray among the faithful,” Tuesday’s statement said.

[…]

Other offences incurring such a severe penalty include heresy, apostasy, schism, violence against the pope and procuring abortion.

Milingo, 76, was archbishop of Lusaka from 1969 until 1983, when the Vatican asked him to resign because he refused to stop using rituals that were judged to be inconsistent with Catholic teaching.

In 2001, he shocked the Catholic establishment by marrying a Korean acupuncturist in a mass wedding ceremony in New York presided over by Reverend Sun Myung Moon, founder of the Unification Church.

Under threat of excommunication from the pope at the time, John Paul II, Milingo renounced the marriage two and a half months later and said he had decided to return to the church.

The Catholic Church is opposed to gay men getting married and also to clergy getting married. That’s one of the reasons why the priesthood is such a great hideout for gay men.