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Monday, November 23, 2009

The next phase of investing

History
If you read my blog, its no secret that 2009 was NOT a good year for my investing. (Gambling?) In March 2009, I wrote and my friend John Chinnock called "the bottom" of the near term Market, within a day or two of the actual bottom SPX 666. The lottery ticket recommendations made at that time paid off between 100% and 300% on investments across the board. Unfortunately for me, I didn't go all in, I treated it like a lottery ticket.
So while those trades where profitable, unfortunately, trying to call a market top took those winnings away. The market top picking started between 930-1000. Although the market only moved up 10-20% from that point, the market stayed high since July, wiping out all my earnings for 2009.

As Gary of the Smart Money Tracker and Karl of The Market Ticker both say, the markets can stay irrational longer than your bank account can handle. Meaning, trying to pick a top isn't a good way of investing.

Resources & Gold Miners
I point this out now because the next leg I am preparing for investing is trying to pick another trend, this time a parabolic bull market up. Since October of 2008, when the gold miner index (GDX) hit 17, I have been a resource bull. Meaning, resources directly or indirectly are a great investment overall, but I like Gold for the "extra fear" and therefore hyper-extension possibilities.

Sometime in the summer of 2009, I got cold feet and dumped my gold miners, probably not the wisest of moves. But it is what it is.

However, as a long term play, I have since October 2008 professed we will see Gold reach all time highs, possibly as high as 2,000 to 8,000 an ounce, but probably more likely between 1,400 and 2,000 an ounce.

Near term bearish resources & Gold Miners

Below is a a quote from another blog post, which sums up why I am against resources....again. Main reason? Because almost everyone thinks skies the limit.

While the fundamentals underpinning the gold price and gold mining stocks remain very positive, a growing subset of investment professionals has been arguing that the fundamentals are already priced in at $1,145 per ounce. Well-known market pundit Robert Prechter, founder of Elliott Wave International, released a bearish report on the gold price in his latest Elliott Wave Theorist publication. He noted that in the past two days, 97% of futures traders report being bullish on the gold price. According to MBH Commodities, this is the highest two-day reading since the organization began keeping this data in 1987. Moreover, the only other time there was a 97% reading was for one day - March 3, 2008 - only two weeks and $30 prior to the gold price reaching its previous all-time high of $1,033 per ounce. Prechter also pointed out that the silver price is still below its March 2008 high of $21.40 per ounce, while 95% of futures traders are bullish on silver. Mr. Prechter argues that the record bullish sentiment readings with respect to the gold price and silver price, along with the divergence of the gold price reaching new highs and the silver price lagging behind, provide strong evidence that the gold price is close to a significant top.

Recent View for next play
I have become interested in a market trend analyst named Harry Dent. Mr. Dent's rational for investing is based on population and market cycle trends. Mr. Dent called the market crash of 2008-2009 I believe 15 years ago, and in his 2009 book "The Great Depression Ahead" calls for natural resources to reach highs late 2009 or into 2010, before a nasty collapse. Unfortunately, this prediction is in a book published Jan of 2009, and his more recent refinements of his predictions are only available if you pay about $300 yearly for his newsletter. I paid for it today, so I have no comment on it yet, nor have not absorbed his latest vision. And quite a bit has happened since January 2009.

This past weekend, Gary of the Smart Money tracker reviewed his view of gold in his paid service. I will not go into detail of his market analysis, if you wish to read, pay his low fee of 80 bucks for six months. Anyone who has an interest in metals/resources should pay for his service.

In any event, in general Gary is looking for a leg down in gold/miners before the next and possibly parabolic rise of this sector higher.

The trick of course is when to get into a play, and when to get out. Gary will give his 2 cents on when to get in, and my opinion may differ than his. But Gary gives much more analysis than I do, so his 2 cents counts more. (hence pay for his services).

The gist is, I plan to ride this next wave down short the market (not short resources). I'll start looking for rolling into precious metals/resources WHEN IT LOOKS LIKE A GIFT. John Chinnock (friend) and my 2006-2008 market purchases where all spot-on for long term. John is and continues to be a sage of market timing. However I am unsure if this next play John will agree with me. This play is more of my opinion, faith in Gary, and a curiosity of Mr. Dent's predictions.

If you continue to read this blog, and plan to follow some of my market investments, I highly recommend paying for Gary of the Smart Money tracker, reading Harry Dent's book, and consider Elliot Wave International (stock charting) to get a reasonably wide view of the markets from different analysis.

One thing I learned in 2009, is don't get cocky, question everyone's 2 cents, scale into positions over time, and go with my gut. My gut says follow Gary's lead, and Mr. Dent a nice coincidence or corroboration to Gary. For now, no resources, and short the market.

See my disclaimer on the right about investing, and good luck to everyone.
And I reserve the right to change my mind completely, with new information. :)

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