Alert #19, Dec-21 2000
In the Oct-31 e-mail alert and the Nov-20 Weekly Market Update we outlined
our reasons for being short-term bearish on oil and expecting a quick drop
below $30. In the Dec-06 Interim Update we suggested that oil would drop
into the $20-$25 range during the following 2 months. Our conclusions were
based on a) the price-performances of oil and transport equities, b) bond
market strength, and c) wide swings in the oil price (action that is often
indicative of a market near an intermediate-term price extreme).

The fundamental basis for a price change often only becomes apparent AFTER
the fact (news follows price). During September and October, threats by
OPEC to increase production and the release of oil from the US' Strategic
Petroleum Reserve caused only minor blips in oil's up-trend. However, the
oil price has recently collapsed in parallel with disruptions to Iraqi oil
supply and statements from OPEC that they are now considering production
cuts. In other words, the price appears to be moving in the opposite
direction to the fundamentals. In reality, the fundamental reason for the
sharp decline in the oil price will become obvious at some point over the
coming weeks or months, but by that time the market will be discounting
something else and the price could once again be rising.

We doubt that there is more than about $2-$3 of downside remaining in the
oil price and are bullish on oil taking a 12-month view. The risk for oil
is that the world enters a deep and prolonged recession, but we suspect
that the central banks will flood their economies with money at the first
sign of deflation.

A few months ago we discussed the apparent link between US Dollar strength
and oil price strength and argued that a falling oil price was potentially
bullish for gold. We will revisit this idea during the next Weekly Update.

Regarding the stock market, Wednesday's decline may have removed a lot of
the remaining downside risk, at least for the medium-term. Lower levels
will probably be reached during the first half of January, at which point
a powerful multi-month (counter-trend) rally is likely to commence. We
will begin to add a few stocks to the Portfolio in anticipation of this
rally, starting immediately with the NASDAQ100 Trust (NYSE: QQQ) and
Micron Technology (NYSE: MU).

Alert #18, Dec-16 2000
We will be back on-board on Tuesday (Dec-19) and will prepare the next
Interim Update on Dec-20. In the mean time we thought it was worth sending
out a note to briefly review the current market situation.

In the Dec-11 Weekly Market Update we said that "some consolidation [in
gold stocks] would not be surprising over the next few days" and that "an
early-week decline in the gold price and rally in the Dollar that reverses
by mid-week would be very bullish for gold and very bearish for the
Dollar". The Dollar followed the bearish script very nicely by rallying
during the first half of the week before reversing sharply lower. Gold
also attempted to follow the script although its upward reversal late in
the week lacked 'gusto'. We now have a set-up for a gold rally and a
continuing Dollar decline over the next few weeks.

The Yen fell sharply after the release of some disappointing economic news
(taking out our suggested sell-stop), but there has been little
follow-through thus far. Of note is that the Traders' Commitments for the
Yen are outrageously lopsided (bullish) with Non-Commercials long only 110
contracts compared to a short position of 41806 contracts. We remain
cautiously-bullish as far as the next few months are concerned (we are
extremely bearish on the Yen taking a 2-year view).

T-Bond yields have dropped to 5.41% meaning that T-Bonds have fulfilled
our upside price objective (downside yield objective) one month earlier
than anticipated. Bonds have been overbought for more than 3 weeks, but
continue to push higher regardless. This type of behaviour is typical of a
market that is in the process of completing a blow-off top. Bonds could
still pullback before one final surge into January (perhaps in parallel
with the stock market completing an important bottom).

On Dec-15 the S&P500 (cash) made a new closing low (at 1312) for the year.
The only other closes below 1325 occurred on Nov-30 and Dec-01, and were
immediately followed by a sharp rebound. It will be interesting to see if
there is any downside follow-through during the coming week. The market
could possibly drop another 100 S&P points (or so) over the next 4 weeks
(judging by their 90000 contract net-short position the Commercials
certainly seem to be expecting a further decline) , but there is no reason
to press the downside at this stage. There is a very good chance that the
next major (multi-month) move will be UP.

The stock and bond markets appear to be setting themselves up for huge
reversals at some point over the next month - DOWN for bonds, UP for
stocks.

Alert #17, Dec-05 2000
The Dollar Index has been declining since Oct-26 and hit new closing and
intra-day lows on Monday, thus providing further confirmation of a
down-trend. We expect that our target of 100-105 (a test of the major
up-trend) will be reached within the next 6 weeks, but a counter-trend
bounce should commence shortly (perhaps fueled by a Gore concession, or is
this just wishful thinking?).

Gold has yet to clear the first hurdle (271.60, basis December) and
provide some evidence that a bottom is in place, but it is just a matter
of time before this occurs. Gold stocks have certainly become buoyant of
late, with the XAU having now jumped 20% since Nov-17. On Monday our two
favourite gold stocks - HGMCY and GOLD - moved up by 10% and 15%
respectively.

Below are links to charts of Barrick Gold, Newmont Mining and Harmony
Gold, prepared by the specialists at www.dingdingding.com. From a purely
technical perspective Barrick is currently the strongest, but we prefer
Harmony on the basis of longer-term risk/reward considerations.
http://www.speculative-investor.com/abx_011200.jpeg
http://www.speculative-investor.com/nem_041200.jpeg
http://www.speculative-investor.com/hgmcy_041200.jpeg

The next 1-2 weeks hold the potential for counter-trend moves in many of
the markets. We should see near-term strength in stocks, weakness in bonds
and a modest recovery in the Dollar. With the XAU having just broken-out
of its down-trend a pullback in gold stocks over the next few days would
also not be surprising.

We have, since April this year, been recommending that investors
accumulate the highest-quality (profitable, lightly-hedged) gold stocks.
On Oct-31 we suggested it was time to buy shorter-term trading positions
in gold stocks to prepare for a sharp fall in the Dollar. Investors and
traders should now sit tight and watch as the story unfolds over the next
6 weeks.

Alert #16, Nov-28 2000
Monday's reversal lower in the Dollar takes on greater significance
because it occurred after the probability of a Bush presidency increased.
Prior to Monday the Dollar had been given a boost whenever the pendulum
had swung Bush's way. From a technical perspective,  it is worth noting
that the Oct 26 intra-day high and the Oct 25 closing high in the Dollar
Index (basis the December contract) have held thus far.

On Monday the gold price broke upward out of its month-long trading range,
with the advance stopping at the Oct 24-25 'gap' (basis the December
futures contract). A weekly close above 271.60 will provide the first
confirmation that we have seen the lows (Monday's close was 270.30).

Monday's action was very bearish for the Dollar and very bullish for gold,
but we need to see some follow-through (further price confirmation) over
the next few days to determine just how significant the reversals were.
The drop in the Dollar, combined with continued strength in the CRB Index,
is also a major short-term negative for bonds.

Gold stock prices have been firming for the past week, but there has been
no excitement at this stage. With gold shares near historic lows relative
to the price of gold, a slight change in perception regarding the gold
price would likely lead to a substantial rally in gold stocks. The almost
complete lack of speculation in gold stocks is evidenced by the fact that
Normandy Mining (NDY) Feb 2001 $1.00 call options traded at 3.5c today in
Australia (the stock is trading at A$0.91 as we write). Whatever the
eventual outcome, this is an extraordinary under-pricing of risk. The
market is effectively saying that there is almost zero probability of the
NDY share price increasing by more than 10% at any time during the next 3
months.

Stock market action on Monday could be described as neutral. The market
'bought the rumour' of a Bush victory on Friday, gapped-up on the news on
Monday morning, and then pulled back. Clearly, the election has not been
finalised and more oscillations are likely over the rest of this week as
various court battles take place.

In the eyes of many Asians the events of the past fortnight have
diminished the credibility of the US and every day of continued legal
wrangling results in a further loss of credibility. If Bush is finally
confirmed as president it could take many months, if not years, to repair
the damage. If Gore's legal tactics prove successful then the damage to
the image of the US could be irreparable. The US's widening credibility
gap may also be having an effect on the peace negotiations between Israel
and Palestine. It is interesting that Barak and Arafat met, last week,
with Russia's President acting as mediator.

Alert #15, Nov-24 2000
Most people who analyse the gold market with an unbiased eye probably
think gold is currently cheap, but is there any way of objectively
determining how cheap?  After all, gold looked cheap at $350 in early
1997, but that didn't stop it from falling to $250 during 1999.

One way of ascertaining whether the price of something is 'low' or 'high'
is to do comparisons between different, but related, items over a long
period of time. Kevin Klombies has just prepared a special report that
does exactly that for gold and gold stocks. Here is a link to download the
document in pdf format (you will need Adobe Acrobat Reader to open the
document):
http://www.speculative-investor.com/imragoldspecial1.pdf

Kevin's analysis goes into some 'nitty gritty' detail regarding various
inter-market relationships, but the bottom line is that gold stocks are
now very cheap compared to gold, gold is very cheap compared to
commodities in general, and commodities are very cheap compared to both
oil and the S&P500. In other words, at current prices gold stocks
represent phenomenal value. Also, the behaviour of the bond market
suggests that the time may be ripe for a gold rally.

One point we made a couple of weeks ago that bears repeating is that with
the stocks of the highest-quality gold companies selling at such dirt
cheap prices, there is no reason to take a chance with the more
speculative companies.

Alert #14, Nov-18 2000
From time to time we'll be presenting some of Kevin Klombies' excellent
chart work to our readers. This is one of those times.

A couple of interesting charts and comments from the November 17 IMRA have
been placed at:
http://www.speculative-investor.com/imra.htm

The first chart shows the S&P500/Oil ratio, or the number of barrels of
oil that can be purchased by the S&P500. Note the steady up-trend in this
ratio that was in place until early 1997, at which point the ratio broke
out of its up-channel and accelerated sharply higher (oil became very
cheap compared to stocks). Also note how the ratio eventually snapped back
into its long-term up-channel such that oil is now reasonably priced
compared to stocks.

The second chart compares the XAU/Gold ratio with the Dow Jones Futures
Index (an index of commodity prices). In the past, as commodity prices
have trended higher the XAU has out-performed the bullion price (the
XAU/Gold ratio has risen). However, over the past 12 months the XAU/Gold
ratio has plummeted as commodity prices have moved substantially higher,
thus creating a huge divergence.  This divergence will eventually be
closed.  Unless commodity prices crash, the divergence will almost
certainly be closed by a sharp move higher in the XAU.

The latest Commitments of Traders Report shows that speculators have piled
on more gold shorts and are now net-short to the tune of 45,000 contracts,
an increase of 11,000 contracts over the space of 1-week. It is
interesting that this increase in the speculative short position had no
observable effect on the gold price.

Alert #13, Nov-14 2000
At the same time as oil was breaking upwards out of its multi-week trading
range on Monday, the Dow Transports were strong and the XOI (the AMEX Oil
Stock Index) was down. In other words, the oil price action was bullish
but the equity market is still telling us that the next big move in the
oil price is DOWN. The fact that the oil stocks could not rally in the
face of both higher oil and higher bond prices is particularly strange.
All we can say at this time is that a very significant divergence is
building and this divergence will be resolved via either a sharp downward
move in the oil price or a sharp downward move in the Dow Transportation
Average.

A number of counter-balancing forces are acting on the Dollar. Potential
problems in the emerging markets (Asia, Latin America) and a firm oil
price are lending strength to the Dollar whereas the slowing US economy, a
faltering US stock market, election uncertainty and the current account
deficit are lending weakness. It looks to us like the Dollar has peaked
and is consolidating prior to the resumption of its decline. As is the
case with the stock and bond markets, the US election imbroglio is having
an effect on the currency market and it will be difficult to get any real
'feel' for the Dollar's underlying strength until a new President is
confirmed.

In Florida, a desperate grab for power proceeds under the auspice of 'the
democratic process'. On Tuesday morning a court will decide whether the
5PM Tuesday deadline for the certification of votes stipulated under
Florida law and reaffirmed by the Florida Secretary of State will remain
in place, or whether the Gore team will be successful in extending the
deadline in the interests of preserving "the integrity of our democracy".
If the legal action to extend the process is successful then uncertainty
will continue to weigh on the stock market.

Turning to the stock market, the put/call ratio has moved sharply higher
over the past few sessions and looks to be on its way to making a
secondary peak (Oct 18 having given us the primary peak). At this stage it
seems to be doing something similar to both 1996 and 1998 when a re-test
of the initial lows in the stock market resulted in a secondary flurry of
put buying before a major rally got underway. We don't see any hope of a
long-term bull market rising out of the ashes of this decline, but a very
interesting upside move will probably start as soon as the political
situation is perceived to be moving towards a resolution. In the latest
Weekly Update we mentioned that if the market dropped sharply on Monday
morning we would purchase QQQ shares and call options following a turn
from down to up. This is what we did. Buying call options into the teeth
of a plummeting oversold market is often rewarding because even a
short-lived rebound will generally provide an opportunity to exit with a
healthy profit.

It is never wise to read too much into any single day's trading, but there
were some positive divergences worth noting on Monday. First and foremost,
although the NASDAQ Comp. and NASDAQ100 made new lows for the year (on
both an intra-day and closing basis), the Semiconductor Index (SOX) did
not penetrate its Oct 18 low and finished the day with a gain of 4.3%.
This could turn out to be significant because the semiconductor stocks led
the tech sector down and might now be about to lead it back up. However,
more evidence is required to support that view. Secondly, a number of key
stocks did not penetrate their Oct 18 lows, DELL being a prime example
(DELL actually closed higher on the day despite the Hewlett Packard
earnings disappointment).

Gold looks moribund, but we suspect that this is a temporary state as the
Dollar consolidates its recent losses. Judging by the latest Commitments
of Traders Report, most speculators seem to think that the Dollar is going
to move to new highs in the near future. If price action over the next few
weeks proves them wrong then gold will begin to garner a lot more buying
interest.

For the reasons outlined in the latest Weekly Update, the outcome of
Wednesday's FOMC Meeting will be VERY interesting.

Alert #12, Nov-10 2000
In yesterday's Interim Update we half-jokingly said that, since news
follows price, if the Dollar had dropped during Wednesday's trading the
headlines would have read "Dollar Falls On US Political Uncertainty".
Well, that hypothetical headline became a reality today in the European
Wall St Journal (the actual headline in the Journal was "Dollar Slips As
Election Outcome Is Unclear").

Our assessment remains that October 25 gave us an important (perhaps
long-term, but at least medium-term) peak for the Dollar. If the December
Dollar Index closes above 117.20 then we will need to re-think our
assessment (it closed on Thursday at 115.19). On the other hand, a close
below 114.05 (the Nov 3 intra-day low) would provide further confirmation
of a top.

At this stage it looks like the election saga will drag on for at least
another week, but potentially much longer as we await the counting of the
remaining absentee votes, the outcome of various legal challenges and the
result of a request by the Democrats for a recount by hand. The
willingness of the Democrats to use every available means to get their
candidate 'over the line' is understandable, but do they really need to
insult everyone's intelligence by claiming that their major concern is
that some voters have not been, to use their word, disenfranchised? In any
case, the uncertainty and the growing perception of instability are
bearish for the Dollar and bearish for the stock market.

As per the Interim Update we purchased QQQ shares and QQQ call options on
Thursday when the NASDAQ100 (NDX) dropped to around 2950 (it actually hit
a low of 2923). We will exit (gracefully?) if the NDX drops below 2800. At
the time of writing Bush's lead in Florida has been cut to only 229 votes
with 66 out of 67 counties having reported. The closeness of this race and
the escalation of political rhetoric will probably lead to another
sell-off during Friday morning's trading.

One stock market positive to come out of all the political uncertainty is
that sentiment is once again nearing a bearish extreme. The overall
put/call ratio was 0.78 on Thursday and the VIX hit an intra-day high of
31.68 before settling at 29.64. The stage is being set for an enormous
relief rally, but any relief seems distant at this time.

After gaining 68c on Thursday oil (basis NYMEX Dec Crude) is very close to
breaking out to the upside from its multi-week trading range. A close
above $34.08 would be a breakout (Thursday's close was $33.92). An upside
breakout in oil at this time would mean that the recent rally in the Dow
Transports was a false signal and that the Transports will soon be
dropping. It would also tend to put downward pressure on the European
currencies, potentially counter-balancing the US political uncertainty.

Alert #11, Nov-07 2000
The Dollar was quite strong on Monday, despite a further ECB attempt to
bolster the euro.  The Dollar Index had fallen by 4% from its Oct 26
intra-day high to its Nov 3 intra-day low, a large move for the Index in
such a short time.  Monday's upward reaction is therefore not surprising,
although we would have preferred that the Dollar had dropped further
before bouncing.  At this stage we are working on the basis that
yesterday's action was a counter-trend bounce within a developing
down-trend for the Dollar.

Now that the ECB have shown their hand by intervening 3 times in the space
of 2 days, they cannot afford to back away.  As such, further intervention
in the days and weeks ahead is likely.  This intervention would be more
successful if the US Fed was involved, something that becomes a
possibility after the US elections.

After the close of trading on Monday Cisco reported its latest quarterly
results.  They were, as usual, extremely good.  In particular, revenue was
up an extraordinary 66% year-on-year and the company raised earnings
estimates for the next quarter.  We doubt that the Cisco results will give
the market a substantial boost on Tuesday, but they have removed a
negative influence (concern over what Cisco would say certainly weighed on
tech stocks during Monday's session).  There is a definite slowdown in
telecommunications capital-equipment spending going on at the present time
and this will eventually hurt Cisco.  However, based on Monday's report it
is clear that the best-managed company in the telecommunications industry
will be the last to feel the effects of the slowdown.

We are at 'decision time' for the stock market with the S&P500 futures
closing right at their 'breakout level' on Monday.  Technical signals are
mixed in that the market is now short-term overbought by some measures,
but short-term sentiment indicators are positive.  Further to the Weekly
Update we would consider any pre- or post-election euphoria to be a
selling opportunity.

Alert #10, Oct-31 2000
Over the past few trading days the Dow Jones Transportation Average, which
is inversely correlated with the oil price and tends to confirm changes in
the oil price trend, has broken out to the upside. After breaking its
short-term down-trend at the end of last week the Transports were up 6.2%
on Monday, suggesting that a sub-$30 oil price is likely in the weeks
ahead. As we've stated on a number of occasions, Dollar strength and oil
price strength appear to be part of the same trend. This is possibly
because a rising oil price has a greater negative impact on Europe than it
does on the US. As such, a fall in the oil price is potentially bullish
for gold (contrary to popular opinion, some of the best gold rallies of
the past 20 years have occurred in parallel with a falling oil price).

There were a number of other interesting developments on Monday.

Firstly, the XAU was up 2.9% despite another small decline in the bullion
price. This could well be just a short-lived 'oversold bounce' - there is
no way to tell at this time because oversold bounces look the same as the
early stages of rallies. However, further to the latest Weekly Update we
followed our own advice and purchased some Normandy Mining call options
(the Feb 2001 $1.25 calls) at 2.5c on Tuesday. This is a low-probability
speculation that has the potential to be a huge percentage gainer.

Secondly, the CRB Index dropped another 0.4%. We suspect that weakness in
the CRB is directly related to Dollar strength and that commodity prices
will recover (and re-establish their up-trends) IF the Dollar breaks
lower. In expectation of a reversal in the Dollar we are going to add two
commodity-oriented stocks to the Portfolio - Western Mining Corporation at
A$7.37 (ASX: WMC), an Australian-based diversified miner, and Cameco at
C$22.65 (Toronto: CCO), a Canadian-based uranium miner.

Thirdly, the USD was flat after reversing earlier losses. We therefore
still have no technical evidence that the Dollar has peaked.

Everything hinges on the Dollar - if the Dollar breaks lower then stocks,
commodities and gold will most likely rally and bond prices will drop. If
the Dollar continues upward to new highs then the opposite should occur.

Alert #9, Oct-27 2000
In the Interim Update we said we'd look to take advantage of any extreme
weakness on Thursday by re-purchasing the QQQ Jan 2001 $90 call options
sold on Monday. The NASDAQ100 (NDX) was down by more than 150 points at
one stage during Thursday's trading, certainly qualifying as extreme
weakness. The options traded as low as $2.63, but we'll use the day's
average price ($3.44) for our records.

The NDX has possibly just completed a 'triple bottom' with intra-day lows
in the 2950-3000 range occurring on 13th, 18th and 26th October. If we
have bottomed then 2950 will hold during any further selling squalls. If
2950 is breached we would expect to see a frenetic rush for the exits.

The market will be buoyed somewhat on Friday by the earnings and revenue
results reported by JDSU after the close of trading on Thursday. The
results were good, relative to expectations, but do not come close to
justifying JDSU's market cap. JDSU's stock price will need to drop by more
than 50% from current levels to restore some semblance of reality, but
that probably won't occur until well into next year. The JDSU good news
will potentially be offset by a GDP number that shows a worrisome slowdown
in US economic growth.

If the market does sell-off on Friday morning due to a worse-than-expected
GDP number, we plan to purchase QQQ (NASDAQ100 Trust) shares in the
$75-$78 range, with a sell-stop set at $73.50. We'll continue to focus on
trading the QQQ and QQQ call options until we see some evidence that at
least a multi-week up-trend has commenced. Because the QQQ effectively
represents an index, rather than an individual company's stock, it allows
us to sidestep the vagaries of individual stock action (such as when a
company reports results that do not live up to expectations and suddenly
sees its stock price 'gap-down' by 30-50%).

The biggest story at the moment is the continued strength in the USD and
corresponding weakness in the Euro. We have been (and still are) expecting
the USD to reach a peak in October, but if we are wrong and the USD goes
to new highs in early November then the world is most likely headed for a
fully-fledged currency crisis. Movements in the currency markets have a
broad-based effect and that effect has recently been particularly evident
in the commodity markets. The CRB Index has fallen sharply over the past 2
weeks, but the majority of this decline is attributable to US Dollar
strength (since commodities are priced in US Dollars). Between Oct 12 and
Oct 26 the CRB Index dropped by 5%. However, the average decline in terms
of other major currencies over the same period is only 2%. We'll spend
some time on this in the next Weekly Update.

Alert #8, Oct-24 2000
Bonds continued their rally on Monday with the December contract making a
new closing high. This means that any pullback in bond prices in the
near-term is likely to be in the context of an on-going up-trend.

The CRB index is still edging lower. The up-trend is in tact and no real
technical damage has been done at this time, but a drop of a further 2
points or so from its current level would suggest that the commodities
bull market is over. It would be very strange if the bull market in
commodities was to end with many commodities having not participated to
any significant extent, so at this stage we expect the CRB Index to
reverse back upward.

The on-going weakness in the Euro, which is also dragging both the SF and
the A$ lower, is a cause for concern for 3 reasons. Firstly, it indicates
an acceleration in the rate at which capital is moving into the US. At
this time such capital movements probably have more to do with 'security'
than with 'profit potential'. Secondly, it will rekindle fears of earnings
shortfalls for major US corporations due to reduced foreign-based income.
Thirdly, it will lead to reduced European economic growth due to reduced
investment, higher energy costs and higher interest rates. Further central
bank intervention in the currency markets is likely to occur soon.

As per the Weekly Update, any stock market strength on Monday should have
been considered as a selling opportunity for short-term traders. We sold
the QQQ calls bought last week and will look for an opportunity to
re-purchase later this week. There is a good chance that the market will
retrace some of its recent gains over the next few sessions and it will
probably keep both bulls and bears nervous for at least the next 1-2
weeks. A close below 1370 in the December S&P500 would be bearish. In
other words, the market can drop around 50 points from Monday's close
without giving us a major cause for concern.

As far as we can tell, there have been no further 'technical glitches'
with our web site over the past few days. If you do experience a problem
getting access to the site please let us know so that we can check out the
problem and (hopefully) resolve it.

Alert #7, Oct-20 2000
As we write this Market Alert our web site is operating correctly, but
after the events of the past 24 hours we are going to make a small change.
Until we are confident that our web hosting company has permanently fixed
the problems that made access to the site either impossible or extremely
slow we will e-mail the text of Weekly Market Updates and Interim Updates
to all subscribers.

As stated in the October 18 Interim Update, we were (and still are)
becoming increasingly positive about the stock market as far as the next
2-3 months are concerned. Thursday's sharp jump in the senior indices was
driven mostly by short-covering ahead of today's expiration of options,
but almost all major rallies begin with short-covering. We'd like to point
out two positives, from a technical perspective. Firstly, the ratio of
up-volume to down-volume on the NASDAQ was better than 5 to 1 during
Thursday's trading. Secondly, the NASDAQ Composite and NASDAQ100 (NDX)
have now both broken out to the upside from the downward sloping channels
in which they have been trading since the end of August. If this is the
rally we think it is then it will be led by the NDX. However, as stated in
our e-mail earlier today we expect another pullback during the first half
of next week and so would not be chasing any immediate-term strength.

Bonds rose during Thursday's trading, despite the strength in stocks. A
stock market rally is not dependent upon a bond market rally, but it IS
dependent upon bond prices NOT FALLING sharply. How bonds finish the week
will give us a clue regarding their likely path over the next few weeks.

Commodities prices, as represented by the CRB Index, have again dropped
back to their 'breakout' point. The up-trend is still in tact, but a drop
of another 2 points or so would be very bearish.

A number of cycles were nicely lined-up for a Dollar top on Wednesday
October 18. So far the action is constructive (the Dollar has edged
lower), but we will need to see a lot more evidence before getting excited
about the possibility of a trend change. Gold will begin to rally around
the time the Dollar peaks (either just before or just after).

Alert #6, Oct-18 2000
In the latest Weekly Update we suggested 4 stocks for purchase, with
sell-stops set immediately below last week's low for each stock.
Unfortunately, 3 of the stocks (ALSC, CMTN and WCOM) were stopped out
during Tuesday's trading. Having dipped 4 toes into the water and had 3 of
them quickly bitten off we'll take a step back and watch from the safety
of the riverbank for a while.

Even if last Friday's rally proved to be an important turning point rather
than just an oversold bounce (the jury is still out), there was always a
distinct possibility that the market would drop to test last week's lows.
With IBM announcing disappointing results and guidance after the close of
trading on Tuesday and with a potentially bad CPI scheduled to be reported
prior to the commencement of trading on Wednesday, a test of last week's
lows will probably happen immediately. The market looks and feels
terrible, but it is also set up for another potentially-sharp bounce. With
the daily trading volume of put options remaining at a high level over the
past 2 days and with October Options Expiration occurring on Friday, any
reversal to the upside could be violent due to massive short-covering. The
safest place to be in the short-term is on the sidelines.

Bonds moved up sharply on Tuesday, but in order to be convincing the
strength must be sustained through to the end of the week.

The XAU closed below 45 on Tuesday, a bearish technical development for
gold stocks. We would certainly not be selling into the current weakness.
We will, however, wait for a reversal higher in the XAU and/or a reversal
lower in the Dollar before purchasing short-term trading positions.

We've posted an article entitled "Gold - Popular Misconceptions" at
http://www.speculative-investor.com/new/article171000.html
The article also appears at the Gold Eagle site.

Alert #5, Oct-17 2000
The daily chart of the XAU has been updated at
http://www.speculative-investor.com/XAU.htm
The chart indicates breakout points of 48 on the upside and 45 on the
downside. Our own Gold Momentum Model will give a BUY signal if the XAU
closes above 49.6 and spot gold closes above 279.50.

We've also placed a chart of the NYSE Composite Index at
http://www.speculative-investor.com/nysecomp_131000.jpeg
A break below 625, on a closing basis, would be bearish.

Both charts are provided by the team at www.dingdingding.com

As far as this week's action in the stock and bond markets is concerned,
the second half of the week is far more important than the first half.
Strength in bonds and stocks during the latter part of the week would be
very bullish. As stated in the Weekly Update, the bond market presents a
potentially serious risk to the stock market. The stock market is holding
up surprisingly well considering the battering being taken by INTC and
MSFT, but we doubt that it would continue to hold up if additional
downward pressure, in the form of falling bond prices (rising long-term
interest rates), was applied.

Further central bank intervention will probably be necessary to stem the
Euro's decline and create an important top for the Dollar. We expect this
intervention to occur soon, notwithstanding clueless comments from the
head of the ECB.

Alert #4, Oct-13 2000
From the October 12 Interim Update:
"Too many people are still anticipating a turn from down to up so the
market will probably need to break below yesterday's lows before a
sustainable rally gets underway, but the ultimate low for this correction
is likely to occur during the next four sessions."
The escalation of problems in the Middle East resulted in a decisive break
of Wednesday's lows and there is probably more to come on the downside in
the days ahead. The probability of a crash in the overall market (the
S&P500) is extremely low, although it could be said that some parts of the
market have already crashed. We expect further attempts to press the
downside on Friday and perhaps early next week. A very strong 2-3 month
rally will likely commence from whatever low is reached over the next few
days, but we would NOT be getting brave (buying) at this moment. The
Mid-East situation is too much of an unknown and when the market does
finally reverse course it is unlikely to just explode upwards. Just as the
present decline began slowly and became more intense with the passage of
time, the next rally will probably be surreptitious at first.

If the conflict in the Middle-East continues to escalate then an explosive
up-move in the gold price will almost certainly occur. Gold stocks have
not yet reacted to the growing tensions so they can still be bought at
current levels. However, we would not chase gold stocks if they surge on
the back of a growing Mid-East conflict because any gains resulting from
the prospect of war will quickly disappear should there be a peaceful
resolution.  A prolonged rally in gold will only occur in parallel with a
prolonged decline in the Dollar.

Let's hope that common sense prevails and that the current hostilities can
be resolved without the need for further military action.

Alert #3, Oct-11 2000
Bonds were firm on Tuesday, but until we see how they perform on a day
when the stock market moves higher we won't know if they are exhibiting
genuine strength or just getting a boost from 'scared money' exiting
stocks. In the mean time the stock market continues to ignore the fact
that it is extremely 'oversold' and seems incapable of mounting any sort
of rally. Unless a rally commences soon and endures for at least a few
days (rather than just a few hours), the possibility of a crash will be
substantially reduced. However, a wash-out that takes the S&P500 down to
the low 1300s could still occur.

One of our tech stock selections - MFNX - was stopped out on Tuesday. Two
other stocks - ADI and CPTH - closed just above their sell-stops.

Lucent had appeared to be building a base and had weathered the past
fortnight's sell-off in tech stocks quite well, but that has now changed
courtesy of yet another earnings/revenue warning after the close of
trading on Tuesday. The stock quickly dropped $6 in after-hours trading.
We had originally purchased LU to gain exposure to its optical technology
business, but Lucent's management have shown that they are incapable of
generating significant growth in one of the world's fastest growing
industries. We may be selling this stock near a short-term bottom, but
will sell LU on Wednesday since any upside will be severely limited until
there are signs that the company's internal problems have been solved.
When the overall market turns upward there will be better profit potential
elsewhere.

The USD weakened on Tuesday as the effect of the stock market's decline
overrode the effect of a higher oil price. The Dollar's trend is still UP,
but we plan to 'beef up' our gold stock holdings in preparation for a
trend change. We previously sold Gold Fields (NASDAQ: GOLD) following its
merger announcement with FN because the merger terms appeared to be
unfavourable to GOLD shareholders. Now that the merger has hit a brick
wall we will return it to the Portfolio at $3.13. We will also add
Anglogold (NYSE: AU) at $16.88. There is no technical evidence at this
time that the USD has peaked, so steady accumulation of gold stocks is the
order of the day. When we do see some evidence of a trend change we will
recommend some short-term trading positions.

The CRB Index was very strong on Tuesday, suggesting that its recent
decline was just a pullback to the 'breakout' area. Rising commodity
prices are not inflation, they are the result of the inflation that has
already occurred. With recent figures revealing a surge in the money
supply growth rate, commodity prices are likely to move much higher over
the next 12 months.

Alert #2, Oct-10 2000
In the latest Weekly Update we mentioned that the stock market's fate in
the near-term would largely be determined by the bond market. Weakness in
bond prices over the next fortnight would set-up the possibility of a very
sizable fall in the stock market. If bond prices are firm during the first
part of this week and then fade at the end of the week, that would be
bearish. If bond prices are flat or slightly lower during the early part
of the week and then strengthen as the week progresses, that would be
bullish and suggest that bond prices are going to move higher (interest
rates are going to move lower) over the ensuing weeks.

With the low volume on Monday and the bond market closed due to the
Columbus Day holiday in the US, Monday's action gives us little to go on.
The NASDAQ Comp. did rebound from heavy losses during the day, but closed
down by 5 points meaning that 11 out of the past 13 days have been down. A
rally over the next couple of days is highly probable, but we'll need to
watch the performance of bonds to determine if the stock market is close
to a bottom. If the bond market is cooperative over the next few weeks
then any upside reversal in the stock market should lead to an explosive
rally into December/January.

We expect the USD to reach a peak soon, although Mid-East tensions are a
wildcard. If these tensions escalate into military conflict then capital
flows into the US would almost certainly accelerate, boosting the Dollar's
exchange value in the process. A higher oil price, whether it occurs as a
result of Mid-East concerns or for some other reason, would also tend to
support the Dollar.

Alert #1, Oct-03 2000
Whereas there were some positive aspects to Friday's stock market decline,
Monday's action was decidedly negative.  No major technical damage was
done, but the situation is becoming increasingly dicey.  The SPZ (Dec
S&P500 Futures) eked-out a small gain and remains delicately poised above
important support in the low 1450s.  Major support is at the 28 July low
of 1424.  The NDZ (Dec NASDAQ100 Futures) is also precariously poised near
important support.  The odds still favour a rally into late October, but a
reversal upward must occur very soon (Tuesday would be nice).  The CBOE
equity put/call ratio was 0.68 on Monday, a market-bottoming level, so the
market is certainly set-up for a bounce.  We are not interested in
liquidating long positions into the current weakness, but are also not
interested in adding to long positions in anticipation of a rally.  The
fundamental backdrop is not favourable and any rallies over the coming
weeks or months will be selling opportunities.

On Tuesday we get the next FOMC meeting, with an announcement on monetary
policy due at around 2.15pm.  As stated in the latest Weekly Update, we
would not be surprised to see the Fed shift from a tightening bias to a
neutral stance at this meeting.  There is a growing risk that the US
economy will fall off a cliff during the first half of next year so a
reduction in interest rates at this time would probably be prudent.
However, any changes in interest rates prior to the election are extremely
unlikely.  Therefore, rather than reducing the cost of money we expect the
Fed to continue trying to increase the supply of money.  In this regard
they need the help of the banking system and the GSEs (Fannie Mae et al).

Bonds dropped on Monday, but as is the case with the stock market no major
technical damage was done.

Oil is strengthening again and, in the process, is putting upward pressure
on the USD and downward pressure on bonds and the European currencies.
The oil price was certainly due for a bounce after dropping by around $8
in the space of one week.  An extension of the oil price recovery over the
next 2 weeks would substantially increase the potential for the Dollar to
re-test its 20 September high of around 116 by mid-October.

If we do get a final Dollar rally into mid-October then the gold price is
likely to remain depressed until that time.  However, even if gold does
come under further selling pressure in the near-term we see very limited
downside in the stocks of profitable gold producers.  The Daily XAU chart
has been updated at:  http://www.speculative-investor.com/XAU.htm
According to our friends at Dingdingding.com, October 3 could be a pivotal
day for the XAU.