Three Takes - The S&P500, RSH & China

Albie's Take:

The S&P500 has reached support and has stopped its spiral downward. However, after having headed back up it has shown weekness again and fallen back to Daily support lines. Hour four Charts are encouraging as new support and resistance lines are now able to be drawn, but it seems that only the Daily support lines are really holding. Reflection on the odds of it going up are still questionable in my mind. I am thinking that the deal between Greece and the Euro will be more of a favorable short term indicator than anything at this point. After having just written this, I see that some progress has been made between Germany and Greece this morning. However, there is still some more work that needs to be done this week before everything is finalized. As I edit this on 2-1-12 The S&P has headed on it's way back up from Daily support.

Bryan's Take:

Buy Radioshack! (RSH)

I don't normally make short term predictions or speculate on companies within the stock market. RSH got hammered yesterday and was unduly punished, losing over 30% of its value. This company is not going out of business any time soon. Although I wouldn't consider this a long term play or a wonderful company by my standards, if I had a hankering for a short term trade to make at least a 10-15% quick pop, I would put some money down on this one. Of course this is pure speculation and I could be way off, but I think this one has found a bottom. As I write this, RSH is trading at 7.25 a share. Keep your eye on it!

Albie's Take: Thanks Bryan. I think you've given us something practical to use! On a different note: "Did you read the article on MSN about China? ("China Goes On Gold Binge; World Wonders Why" 1-31-12) China has been dramatically increasing its supply of gold. 'Why' is the question! Here is the quote: "Third, the purchase of gold would be especially risky for the central bank, which is already insolvent from a balance sheet point of view. The PBOC needs income-producing assets in order to meet its obligations on the debt incurred to buy foreign exchange, so the holding of gold only complicates its funding operations." MSN

Troy's response: "In one word: 'Propaganda'. Gold has gone up nearly $200 in the last 4 to 5 wks... In other words ain't selling... I sleep good at night knowing I have gold and silver..."

Albie: "Good to know! But the fact that China has doubled its intake of Gold lately is a fact. China's buying of gold seems fear related. This seems like something I want to keep my eye on..."

Troy: "China doubling its gold in take... For me that's called a clue..."

Albie: "Again - you have a point. I understand its fear of the world economy. But when you consider that gold does not help ITS economy right NOW and its having a hard time keeping currency flowing and jobs. Check out the article quote above. Surely that is based on some real facts!

Troy: "It does help its economy because China has an inflation problem. Gold and silver is the best remedy for this problem..."

Albie: "You are on the ball... But check this out from MSN: "A better explanation for the gold-buying binge of Chinese citizens is that they are using the shiny commodity as an inflation hedge, as the Financial Times recently suggested. Yet the buying of gold has increased while inflation has eased. And that means there must be another explanation. The best explanation is that individuals in China are using gold as a substitute for capital flight."

Troy: [Troy referring to the article from MSN, 1-31-12] "When China says no asset is safe...they are referring to the USD.

Albie: "That makes sense... (Albie's laughing). Why do they say buying gold does not produce income? They can hold and sell gold like anything else?!! Right? The question comes from the quote from MSN:'but there are real constraints on its ability to purchase assets that do not provide current income.'"

Troy: Gold does not purchase income because it's a form of insurance. It's a hedge. It's a hedge that been producing a good appreciation return.
I know it does not produce "income" but most mutual funds don't produce income either. Gold for me is a form of savings not investing

Albie: Good answer. So do u have any clue why China's doing what they're doing considering the bind they're in?

Troy: Yes inflation may be dying down a LITTLe but do you drop your health insurance just because you just got over the flu?

Troy: I think they are preparing for the day where they have the world's major currency.

Albie: True - but do you hold any thoughts on the fact that China is 100% dependant on US. And this quote from MSN: "the Chinese government rarely benefits others - and hurts itself - by telegraphing its short-term investment strategies." How to be a world dominating power when your a miser. Miser's become hated & even rejected because they only think of themselves.

Troy: China 100% dependent on the US?? How many people does China have again?? Gold is not a short term investment. China is thinking long term.. The US is thinking more short term. How is China being a miser?? If they were a miser they would have let the RMB float & the dollar would have tanked. If they were a miser they would have stopped buying our troubled bonds then we would be in deep deep trouble. They have actually been holding us up. We have actually to beg to them to keep buying our bonds to keep the % rates low.

Albie: Wow! Ok - terrific comeback! But China does have tons of people & resources but in the last century its track history of using them was grade of 'D' if you know what I mean, and I don't trust this gov much more than Mao tse Dong's. But the actual people of China are a different matter... True that about them helping USD. But on flip side - what would have happened if we stop buying all their stuff!

Troy: I know exactly how you feel. But people change. But we both have to look at the numbers and as Jim Rohn says the numbers tell the whole story. A legendary bank robber was asked why he robbed banks. His reply? Thats where the moneys at...Unfortunately the Asian countries are where the money is at...

Albie: So true! Haha! Good one!