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The Dow is holding tenaciously to yesterday’s gains as bulls try to fend off the bears. So far, though, Wall Street is generally heartened by the renewed pledges from G20 leaders to continue to provide economic support in their respective countries. The Nasdaq is not doing as well, as it has slipped into the red, but the S&P is managing to hang on to its gains as well, remaining just in the black. There are hopes that governments, including the U.S. government will continue to support the financial sector until things improve. Investors are a little wary, though, of the upcoming overhauls to financial regulations.

Gold continues to gain

Gold prices remain above $1,100 an ounce, gaining along with the Dow. MarketWatch reports on the possibilities moving forward for gold:

But Fed officials are not expected to say much that would curb expectations that monetary policy will remain loose for the foreseeable future. Gold rallied along with stocks on Monday after global leaders signaled continued support for the global economy.

Gold for December delivery recently gained 40 cents to $1,101.80 an ounce. On Monday, the contract finished above $1,100 for the first time, after hitting an intraday record high of $1,111.70 in electronic trading.

Oddly enough, the U.S. dollar is managing to also hold its gains. Normally, the greenback moves inversely to gold prices, as well as dropping when stocks are gaining. However, the gains are not terribly promising, and the risk trade in forex trading has slowed as news out of the euro zone and Britain continues to disappoint. There are very real possibilities that overall dollar weakness is likely to continue.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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One of main features of day trading is profit taking. Today, profit taking is a major reason that the Dow is slumping in a direction that could very well take it back below the 10,000 mark. In profit taking, the goal is to get out when you have profits. In most cases, these profits are not necessarily large. They are often small, as investors take what they make to avoid the chance of loss later on. (The opposite of this is running profits, in which you try to keep going in the hopes that your profits will get bigger and bigger, attempting to sell just before the investment turns around.)

Profit taking is a strategy that can be used with most investments. Day traders use it with stocks, and it is a very popular technique for active forex traders. Some commodities and futures traders use profit taking as well. Profit taking is a way to ensure that your losses are limited, since you get out as soon as a position is profitable for you, whether than waiting to see whether things get better. You end up with a lot of small profits, rather than one huge payoff. On the other hand, you are less likely to sustain large losses, which is a very definite risk of running profits.

It is important to be careful when you use profit taking as an integral part of your investment strategy. Every time you place a trade, you end up having to pay some sort of a transaction fee. And, of course, the taxes on short term capital gains is larger than the taxes you pay on long term capital gains. So if you are not careful, your profits can be eaten away by taxes and fees.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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Today’s housing market data has done little to help the stock market. After yesterday’s rally on optimism due to earnings, things are cooling off as investors look at the housing situation. It is clear that confidence in an already shaky housing market is deteriorating as the end of the first time home buyer tax credit approaches. This news is putting a damper on a rally based on economic recovery. At least, the damper is on the stock market. The U.S. dollar, on the other hand, is getting a bit of a bounce.

U.S. dollar gains as a safe haven investment

Many dollar bulls have been bemoaning dollar weakness recently. With investors in a riskier mood, not to mention focusing on U.S. debt (which undermines the dollar on a fundamental level), the U.S. dollar has fallen out of favor recently. However, with concerns about the economy back in focus, the dollar is being preferred as a safe haven currency. As an investment backed by the largest economy in the world, and by the most stable taxpayer base in the world, it takes little imagination to see why the dollar has safe haven status right now.

Could the U.S. dollar really crash?

Another issue with the recent weakness is that there might be a dollar crash. This, however, is somewhat unlikely. The dollar has mainly been returning to pre-financial crisis levels. It just seems like a dramatic drop because of how much the greenback gained during the recession. The return to normalcy feels more dire than the situation is. Besides, The Forex Blog points out, it’s not like any other currency is in a much better position:

While forex investors in recent years have enjoyed ganging up on the Dollar, the fact remains the fundamentals for the other major currencies remain just as weak. For example, a model of purchasing power parity developed by “the Organization for Economic Cooperation and Development finds the dollar is worth roughly 0.85 euro, compared with its market valuation of 0.67 euro, suggesting that the euro is 21% overvalued.”

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.