Wed Sept 19 2012
This analyst suggests gold will take a breather and then advance again.
Survivalist mantras have been around for a long time but now they are more mainstream, note that is not all about storing dried beans and fresh water to hunker down in a food shortage, no it is about
We take profits. Did I over react, I suppose? Okay, why?
In a bull market all news is bullish. In a bear market all news is bearish.
That is one of the oldest sayings on Wall Street. It was really a precursor to the realization of socionomics that mood determines market direction. At the moment, the predominant mood is clearly bullish.
We had a great call with our TLT puts buying at 126-128 on TLT and then holding right into Friday's TLT meltdown. I admit to being giddy. Like the kids in the Night before Christmas, sugar plums were dancing in my head. The puts had exploded in value, bonds melted in the two previous QE money printing exercises, I was on the right side of the market, what could go wrong?
Well I did say that the opportunity to profit via buying an option is quite rare. This was one of those times but, one has to be nimble. That fabulous trade on Friday became an okay trade by Monday and Tuesday. It made money but not weblog grabbing headlines. The mood changed and TLT corrected upward. And there were plenty of signs that it was quite oversold. Other analysts had commented on just that.
I started this weblog specifically so that myself and readers would not be caught in a down draft holding long positions. It is easy to exit when the mood is good, profits are across the board, and everyone is relaxed. But the reversal in TLT and the simultaneous low in the Dollar was a cold shower. As Dave Letterman has mused about his success, a little voice comes in and says, it's all over, time to go back to Indiana.
With profits in just about every position and the bonds and dollar at a daily extreme, I was holding hundreds of thousands of collars of sescurities. Would it be wise to scale in HDGE as a hedge? Would it be wise to take a partial profit? Or do nothing?
I suspect the markets will top before the election and take a dive. Since few to no one expects this, that seems logical. When that happens it will be difficult to say the least to exit easily.
Another dimension of trading is the concept of the Missed Opportunity. Did you buy Apple at $15 when Steve Jobs returned or silver at $3.50, both in 1999? Those are missed opportunities.
Will GDXJ go to $30, maybe. but you never really have a profit until you take it. The money we do not make is money that we never had. Or as Jeff Goldblum observed in the Big Chill, ever go a week without a rationalization?
At the upper right gold is up $150 in the last month. IF the spx rises from 1470 to 1570 that will be another 6%. It is already up from 666 to 1470. Is that additional rise worth the worry of where do we exit? At this point is there a lower risk way to play gold and silver without having a great deal of money in potential harm's way? I will be examining those alternatives and reporting to you.
Meanwhile there is no lack of negative news from the Chicago teacher strike (the strike has now ended but the negative is the obvious in your face what are you going to do about it tactic by the union which by the way worked, they got a 16% raise) to the obvious lack of respect for the USA in the Arab world. Foreign policy wise it is 1978 all over again. An ambassador is dead, does anyone care? (This is a tragedy and I do not mean to diminish the man's life but where is the outrage?) Well the mood has not shifted to the negative yet, if it had that would be big news as in
Crowds Riot at US Embassies, Dow Plunges 200 on Uncertain Oil Prices
But we are not seeing that yet. I don't know when the Dark side of the socionomic Forces will pull the switch and everyone will start worrying about such things. Earlier this year we exited in February and the markets held up for another month or two.
I put the graph of the DOW from 1987 up for good reason. it is easy to exit when the mood is positive but quite difficult once sentiment turns dark and stocks are not well bid.
I am certain that I have exited too early. The markets will no doubt run higher. But with a top expected between now and the election one will need to be very nimble, as Art Cashin likes to say, in picking an exit strategy.
You Tell Me Department - GDXJ
Both MACD at the bottom and RSI at top have gone full tilt from buy in May to whooppee in September, note the blue boxes. We know maximum mood occurs at the end of a run, so there may be more ahead but this is hardly a buy signal at the moment.
Put another way, staying long here is a bet that one will be wonderfully omniscient, in a market with the RSI already topped out at 72.22 and with MACD at 1.07, yes one will pick the very moment before the mood switches and all race for the exits. Sure it's easy to look at an historic chart and see the top. It's a lot tougher on a real time day to day basis. The news won't change it is already negative, but the mood will. So far we still lack an exact Welles Wilder Directional Movement indicator for when that happens. But it will, and suddenly negative events that were ignored yesterday will be of concern today.
Remember in the markets you cannot sell yesterday, only today, there is no Time Machine.
Thanks for reading The Market Perspective.