Could General Electric And Manulife Financial Deliver The Next Blow To The Markets?

Death by a thousand paper cuts might be preferable to this monotonous grind lower, rallies lasting nanoseconds, and large institutional buy orders now a figment of our imagination.

Perhaps it was Bernanke’s dour outlook, or Timmy not being so terrific, but I’m beginning to wonder if something is seriously wrong with one of their five star generals, General Electric (GE) (GE - 7.76% on massive volume). This stock was trading as high as 29 last Fall and has absolutely cratered (-64.7%) the past two months. Could this financial in drag that “Neutron” Jack Welch created be poised to deliver a knock-out blow to this market? Keep GE front and center on your trading screen for the next few weeks. Canadians need to do the same for Manulife Financial (MFC), which has plunged -55.2% over the same short span.

In fact, this morning I am issuing an alert to pension funds that are invested with Manulife Financial. My talks last evening with some of Canada’s leading financial people have unnerved me to the point that Manulife will be removed from the Cara 100, which I must also do for General Electric.

While gold spent the day under pressure (GLD) (GLD -0.92%), miners overcame early morning selling, reversing to finish the session higher (GDX) (GDX +1.79%), likely signaling the recent gold bullion selling is about to abate. We became cautious as the metal peeked above 1000 dollars a week or so ago, and will now focus on adding to positions if GLD holds the 86-87 area. We added to our core holding, Goldcorp (GG) (GG +4.53%) today as it finally exhibited some relative strength and remains a favorite or ours going forward. I also met with Silver Wheaton’s (SLW) President Randy Smallwood, who I have huge respect for as a quality operating man. He agreed with me that when I was buying the stock in November and December at US$2.99 and $3.05, there was a strong possibility of a takeover attempt on his company. He dismisses that prospect now, and he didn’t appear the least concerned about banking covenants. So we will continue to add to positions there as well.

Also, since I was operating on one cylinder the past couple days, I forgot to tell you we bought a significant position in US Gold after Rob McEwen issued a news release on the drill results in Mexico. I anticipate a substantial profit from that trade. Funny, but Rob, a former broker, picked up on my private conversation and said, “So you’re going to day trade us”. I replied, “Your job is to find gold; mine is to make profit, so yes, I might be long one day and short the next.” I don’t think I’d ever go short Rob, though. Besides, I really like what I see happening for him in Mexico.

As long as the overall market remains mired in this quagmire, the defense remains on the field. Part of my defense is gold and silver. Let the so-called gurus pick the bottoms while we focus on the price action and volume patterns to tell us when to move more aggressively to the long side.

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