Inflation continues to creep in – P. Kurata (AMZN, PG, SLV)


Author: Peter Kurata

Covestor model: CANSLIM

Disclosure: None

 

In a first ever post-Fed meeting press conference, Fed Chairman Ben Bernanke said QE II will continue to be supported after June.

This news helped sparked the NASDAQ to move to a new new 10-year high, giving the March 29th rally new life.  As one indicator of that, Amazon.com Inc (NASDAQ: AMZN) broke out to a new all time high at the end of April.

Inflation continues to creep in, and the Fed’s position that high energy and food prices are “transitory” will be tested.

Some indicators of rising inflation in the retail sector: McDonald’s (NYSE: MCD) is set to raise prices for the second time this year. Procter & Gamble Co (NYSE: PG) and Kimberly-Clark Corp (NYSE: KMB) will charge more for diapers, toilet paper and detergent; Colgate-Palmolive Co is raising toothpaste prices.

The real story for April was iShares Silver Trust (NYSE: SLV), which continued to rise throughout the month. At this point, it is exhibiting technical topping signs and looks to be at in a climax stage of its run. Trading has advanced silver to its biggest daily gains of the year on 2 and 3 times normal volume. When a stock, or ETF in this case, becomes too crowded after a big run up, it’s usually time to exit.

Historically, Gold and Silver have traded in tandem. Since March, the trade of these two precious metals have decoupled. While Silver shot through the roof, Gold continued on a slow upward trajectory. So, while Silver looks toppy, I believe Gold is still attractive.

 

 

Sources:

“US markets up as Fed pledges support after quantitative easing ends” Independent.ie, 4/28/11. http://www.independent.ie/business/world/us-markets-up-as-fed-pledges-support-after-quantitative-easing-ends-2631886.html

“Fed’s relaxed inflation view to face test” Ann Saphir, Reuters, 4/28/11. http://www.reuters.com/article/2011/04/28/us-usa-fed-inflation-idUSTRE73R6U420110428

“Worries about rising costs cast pall on McDonald’s” Christina Rexrode, AP, 4/21/11. http://finance.yahoo.com/news/Worries-about-rising-costs-apf-2520210645.html?x=0