With the multi-month blood letting on gold miners, and gold, I think we are close to a bottom if not already passed.
Even if gold and miners reverse from here, how much farther can it fall?
In the 2008 crash GDX hit around 15 for a day or two, and traded around 17-20 for a bit before moving much higher.
Below are the charts for gold and GDX. If you can stomach it, now is the time to get in.
Actually last two weeks was, and I went in early myself.
I think with Gold gaping above the trend, and GDX and GDXJ heading for the trend reversal, it is looking like a good time. (GDXJ is gold miners/silver miners, smaller cap)
Don't expect a straight line up, both could get a nice punch down after such a good rally.
And to boot, my friend Happy John who hasn't traded in gold miners for years, went in for a decent chunk.
As for overall stock market health, the last two bubbles lasted about 6 in 2000 the .dotcom bubble, then 5 years for housing, now its sovereign debt. If history repeats the market is reaching the end of this bull run. Even if the market fell apart tomorrow, again, how much lower can gold and gold miners go?
If you like Apple, today is a very good day to buy their stock, chart wise. It should open at 459 a share. This will place the stock just on the very long trend line I showed a week ago.
If the stock closes on or below 450 today or in the future, sell. Otherwise the long trend support may hold, and what does not go down will go up.
Smartphones are now mainstream, and so are tablets. The competition for consumers are now from many manufacturers. I expect this market to continue to be fractional-ized, akin to the car manufacturing market. In the phone & Tablet markets it will settle into bands like the car market, BMW (Apple?) and Toyota (Samsung?), etc.
So while investing in this market can still be very profitable, the form factor is defined. Sure Android has the cool feature to touch phones shoot over data to another phone, unlike iphone, but all of this is incremental. A new design like Google Glass will eventually take those form factors on.
Quite amazing when you think about it, the iphone was introduced in June 2007, and here we are in 2012 and the form factor is reasonably defined with tons of competitors.
I can't but help compare this to the Ford Model T, released in 1908, and mass produced in force by 1914. Competitors took years to take on Ford en mass. The model T was so successful, the first model car to surpass Model T production run was the Volkswagen beetle in 1972! Samsung has already outsold the iphone in recent quarters, although not nearly as profitable as Apple.
We have witnessed the smart phone market to be born in it's full glory and in 5 short years highly competitive sales.
For investing, the future holds the greatest gains. Biotech, nanotech, alternative energy, and the maker community all offer opportunities for companies to be born to mirror Apple's success. I think the nature of cell phones, tablets, and PC's cannot easily duplicate the same level of success of Apple in other fields. But even 1/10th the success of Apple is huge for any company.
I continue to be fascinated by the Maker community, and one of the forces 3d printing. I am watching carefully which company first makes a break to advertise end consumer 3d printer, which I fully expect in the next 5 years to be announced. Once Pandora's box is open expect innovation in 3d printers to accelerate and consumer pricing to improve dramatically.
On kickstarter today, I ran across a 3d printer that you can buy, today, for 580 bucks. It requires your own assembly and paint. I am amazed that for the price of a hotel stay in NYC, you can print almost any plastic object you desire. Granted, the resolution isn't what I'd like to see, for that you need MakerBot for 2K dollars. I can't wait to see the mass production for general public entrant to this market.
Consider selling stock in any company that makes it's living on cheap plastic parts. ;)
First two videos are summary of advantages of 3d printers, and below that, 3d metal printing, below that 3d printing of human organs! (maybe someday food?)
2008 I still contend was an opening act, for a 5 to 20 year bout of economic turmoil facing the world, particular the western economies.
If the accounting rules in place since the Great Depression weren't suspended back in 2009, by now the markets would have bottomed, and we could start rebuilding.
Instead the markets are manipulated by changing the gauge used to measure health of companies. Further, the Central Banks have changed every conceivable rule to benefit the insolvent banks, to the point of purchasing directly the worst debt instruments to the tune of 1.4 trillion dollars, all someday to fall onto the US taxpayer to pay off.
The only wildcard now is, how does the problems play out? Another market collapse worse than 2008? Or maybe a collapse of the dollar, with resources flying high? Or something else?
I reflected today on the "momo" stocks. These are stocks that have flown high the last 2-3 years.
Maybe its time for the reversion to the mean. By no means am I suggesting shorting these stocks. If you do, put in an order HIGHER than the current price, and short only "gifts". I'd buy puts but of course, for this ride down, there will be no free lunches. the VIX is doubled in the last couple of months, so options are expensive.
For now, I am still long natural resources.....nervously watching the momos for a sign that the dam may break. I do have shorts in DECK, but thats it.
If you are long any stock that has superb gains, recommend putting in stop-loss orders in to protect gains NOW. Make sure to give "room" for wiggling, pick a level that you think today it won't get to.....so if it does your out.
I listened to a pod cast last month that got me into Rare Earth mineral. For some reason, I didn't blog it. Kept slipping my mind, I thought I had posted on this.
At the time, I bought AVARF and LYSCF, both pink sheet stocks, priced 3.11 and 1.70 respectively at the time.
Unfortunately, I missed the announcement that AVARF was going off pink sheets with new symbol AVL and being placed into the S&P 500 ETF named TSX, announced December 20th.
The stock has started a significant rise, one I expect to be a long one for AVL.
Today it hit a high of $7.18, but beware (130% gain), this week stocks are trading with odd volumes being a holiday week. This could be a pop that goes back down. But I doubt this stock will see sub-4 bucks again.
The volume has been huge, over 8 million shares traded today. When I bought this stock it traded at about 100,00 shares a day.
So jump in now at your own risk. At this price we could see a pop just below 5 bucks to get people shaken out, but it could also make a blazing run much higher.
China mines 95% of the worlds rare earth minerals, many of which are key to high tech electronics, military weapons, and new energy technology. (solar, wind, etc).
China has also announced they plan to limit the rare earth exports in raw form, basically blackmailing the world to manufacture products in China, since they own the raw materials.
Since rare earths are in the category of resources, I like the play.
I added to my position, but I am late to the party, if I wasn't sleeping at the wheel, I would have bought more when it broke through 5 bucks.
I may continually add to this position if it continues to rise. A stock fresh out of pink sheets may have quite a bit of room to run.
If you are looking for ideas on where to enter into a stock trade, a good method is to setup criteria you are looking for, then scan across a large number of stocks to see which fits your description.
This is typically called a "stock screener".
I ran across a web site that offers stock screening called FinViz.com , check it out. (click on link).
Say you like the idea of purchasing stock when there is insider stock purchasing happening.
I reviewed that screener (click), and out of all of the insider stock purchases, the one that looks most interesting is PCX. From a chart perspective, looks OK to buy a little here. I wouldn't load the boat. After all, insiders at bear sterns probably lost their shirt in stock options. So insiders may not be any smarter than you.
I made quite a few very specific predictions last year. This year I want to try something different. That is, to make a few general broad statements of where I think the markets will be 1 year from today.
This serves two purposes. One to provide a clear, concise view with less confusion in the predictions. Two to mimic what most people are trying to do, and that is pick a place to put some savings into.
2010 will reach a crisis in the US bond market. Interest rates will (if not already) become a concern and will need to be put in check. Rates will over all drift higher, squeezing the life out of the US government and economy. Rising rates will apply downward pressure on housing. a) Disclaimer: US rates will NOT be a concern if the US stock markets collapses in 2010. We are talking down for the count collapse.
US stock market will be lower on 12/31/2010 than 12/31/2009. Guesstimate is a wide range, SPX 1,000 to as low as 500. Since that is pretty ridiculous range, I'll choose 750
Inflation, despite everyone's concerns will NOT manifest. However, Currency devaluation is possible, and that would be reflected in higher commodity prices. US Dollar gains strength first half of 2010 in general, and loses strength, in general towards end of 2010. US Dollar remains above the lower trend line, as depicted here (click) for 2010.
Precious metals (gold) will have major valuation issues between Q1 and as late as Q3, but should firm up between Q2 and Q4. I am very sketchy on time line, since precious metals valuation turn around will depend on US dollar, interest rates, and stock market fear.
With that said, Gold will end higher at the end of 2010 than current levels or at the very least rising rapidly to surpass current levels. (from it's low)
US economy will NOT rebound, and will be in a quagmire of problems straight through 2012 and beyond.
There will be major crisis in 2010, including, but not limited to: State(s) faulting on debt, counties failing (avoided in 2009), more countries failing, and in general, increasing unrest in the world (wars, terrorism, etc)
Protectionism will continue to rise (tariffs, refuse to trade, etc) NOTE: This is one potential event to destroy stock market valuations.
this list is pretty broad. But it covers 8 specific points that can be judged on. Items 7/8 are a little squishy, but I should be able to look back to judge.
Feel free to put in the comments your own 2 cents, and I'll try to add them to my end of 2010 summary.
It helps to take a step back and put a little perspective on things. Today's post is 2009, with various charts showing 2009 in context of the last 2 to 14 years (depending on stock)
In general, pay special attention to the US 30 year treasury rates, this is a hint of what is to come.
There are tons of 2 bit (like here) blogs where plenty of BS for stock trading is available.
But there is a bottom line, and that is, what is the RECORD of the trader. My record for 2007-2009 spring was pretty darn good. Not so good since July. But I'm not going to go into detail.
There is a site called KaChing where traders can tie their trading to the web site to have verified positions and results. Basically put up or shut up. The site is pretty interesting.
One trader I have been half watching for a year now is Atilla Demiray of blog xTrends. He is a "bear" on the market, but to his credit will flip sides as he see's fit. But definitely leans towards shorting.
Atilla is up 60% since September, not too shabby. As of this blog entry, he is down about 3 million on his most recent positions (wow), but I guess when up 60% and trading capital of 40 million, all in a days work.
I find today to be an extremely over-extended up day. I am adding shorts, holding what I have, and waiting for the hyper-extension up to end with a snap.
But then again, I have thought that for a bit, good luck.
High Risk, High reward plays that I am involved with. DECK at short 100, FAZ buy at 20.40, SRS buy at 8.30, TZA at 11.30, DXD at 29.55, short BAP at 74.50, short AMZN at 135, Look at anything that went parabolic up since March without fundamentals for opportunity.
The topic comes up frequently of where for retirees, long term savers, or just extra savings regardless of time horizon, put cash for safe storage and growth?
The number one real answer is, seek a certified financial adviser, I am not qualified. With that out of the way, here is my opinion :)
The vast majority of savings should be in short-term low-yield US Treasury backed funds. Not state, not 30 year bonds, basically keep liquid.
The goal is to roll the cash into a longer term savings. But not now. US stock market is super-extended due for a correction. The US has done minimal reform, it has papered over its problems. The good news is, so has most of the world, making the US "not that bad" as being judged by it's peers.
Gold/Oil/Food/Resources? The time to load up was November of 2008. If equities pullback, as I expect it, they should deflate too.
The real question is, what is the next BUBBLE? 2000 was tech, 2008, was real estate, next up is resources (either just peaked or about to peak), the final end all bubble is US treasuries.
There is really 4 places to look to move from cash to investments. All of them require PATIENCE.
1) US international corporations - If/when the markets fall significantly, when prices look cheap again, us companies with international exposure should fare better in the next 10 years. 2) Natural resource companies - Right now, my opinion is with the market they pull back, but buying some natural resource based companies "on the cheap" to help hedge against a dollar fall . Alternately could put money into a currency you have more faith in, like Chinese yaun. (not sure if wise) 3) US Treasuries - if the day comes where US treasury interest rates go higher and higher, then one day, the treasuries change direction, perhaps after the Fed raises rates it starts to lower, 30 year treasuries to "lock in" the higher interest rates. Right now the rates are at lows compared to the last 20 years. 4) Emerging countries - once again, emerging countries are not valued cheaply. All the world markets have risen due to loose monetary standards. One day when it looks like the worst time ever to buy stocks, buy a little of emerging country index funds. India, China, are decent starts.
By investing when the next collapse occurs, or when one pops, your buing on the cheap. Right now, nothing is cheap. Make a plan and stick to it. Diversify when the sector is depressed.
Good luck, and don't put all investments in US cash and/or US stocks. Diversify into resource based funds, international corporations, and emerging markets. Thats a plan for the next 10 years.
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.
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. :)
Unfortunately for me, my job will prevent me from checking stocks all Tuesday, which is very very unfortunate. Tuesday the 17th marks what from a charters perspective is the turning point for this ridiculously high move we have seen.
So let me share my plan of losing tons of money with you.
I'll wake up Tuesday AM, check the markets, if down substantially, I'll put some orders in to get into the short side. If the market is flat-ish or up, my orders will trigger on S&P 500 hitting 1120 (1121 is target) to hit the bids on some shorts, and inverse funds. I can do this though Interactive Brokers, which allows trigger orders based on any fund or index.
So if the markets blow right through S&P500 1120 tomorrow, you can just imagine how bad of a day my account had. However, if you are able to watch the screen and you see the markets turn, jump on board.
Target is for S&P500 to resist falling below 1,000, we'll see. The market still goes higher with a lower dollar, god help us all when a weak dollar brings the market down, and a strong market brings the dollar down, then, there is nothing left to counter the stock market slide.
Good luck, and I went flat the gold miners today, GDX at 51.25.
All of this is subject to change, without notice. :)
This market is prime for a major correction, but then again, I believe I said that back in July. So that makes the market even MORE prime for a correction, right? :)
In any event, enough with the ping-pong range games. Here are some lines in the sand to take notice.
If the SPX breaks above 1080, on a closing basis, that makes me take notice. Today we hit 1079.xx multiple times, but could not hit 1080. Above 1100 makes me question if I need to reconsider my whole view. SPX below the bull trend line means to me "The Bear Market is back", and watch out for the bite.
USD breaking below 72 is extremely alarming, and below 70, well, bunker down for some life changing events. USD goes on/above 78 makes me thing the USD bottom is in, and the market is ready to collapse.
The 10 year (TNX) interest rates broke below previous bull trend line (which is good for America's debt machine). Looking for rates to break back above bull trend or below green line in graph below.
Gold is kinda a wild card, the events above in either direction may support Gold. Monday I bought a LITTLE of the gold miners I once sold. Not too much since I think gold miners will pull back hard, but so far I have been so wrong, best to have a hedge.
Fundamentals are definitely not driving the market, there are other factors.
Emotion: First there is human emotion. Obama brought new hope, and new reason for the "average person" to hold their stock positions to give him a chance.
Snap Back: When SPX was at 666, it was over-extended down, this is a snap back rally.
Hot China Money: China is hell bent to prove to the world it's economy is hot, and America is not. So China has been pushing loose credit, government spending, and high speculation. Some of this hot-money in asia ran into resources, Asian stocks, and there is bound to be some spill-over to US.
US & Western countries Economic Parlor Tricks: The US government changes accounting rules to allow for better profits, helping drive perception. (but not reality). Giving away 4.5K to consumers to "bribe" them to take on MORE debt and buy a car creates a momentary surge in spending.....but it can't last. The US cannot (well without consequences) bribe people to spend more money. It just can't last. Same with stimulus money.
Companies beating or OK earnings: Many companies revised their targets down significantly in Q4 of 2008, so much so that the challenge to meet or beat earnings was in the cards by the revisions taken. The "short bus" investors don't look at the companies expanding (or more likely decreasing) sales. They look at revised down target, and say "beat". Many beats where by selling inventory or laying off people. These are NOT long term gains, just quarter tricks.
But the one to really focus on is: USD Devaluation: As the US devalues, the US market looks "Cheaper" and when US international companies bring back profits from abroad, the money "comes back into the US" larger than what it was 6 months ago. This allows large corporations from "gaining" more than they would have if the USD remained flat or gained.
The USD is about to enter "Freefall territory". The US has to eithe defend the USD or throw it under the bus. If the USD goes too low, (74-70?) panic will set in and instead of the market rising, it will fall. If the USD is defended and rises, the previous good looking international earnings will evaporate.
I'll tie back this USD move in a week or two to show the correlation for the next few weeks. USD breaking higher will not likely be good for gold/resources.
On Friday, I closed almost all lottery ticket/high risk positions, and I'm gathering thoughts. There are several reasons to "give up" on shorting the market. The most important one is the world banks are printing money, banks are NOT increasing lending, so the extra money is going into financial stocks, creating yet another artificial bubble. Many of these financial companies stocks are not worth ANYWHERE close to what they are trading at. BUT you have to know when to walk away, and Friday blew through many stops as well as signals.
If you want to go long here, I have a hard time creating an argument on not going long. The only advice I have is look at the chart of the stock you want to buy, and pick a place where if it "falls to" you will sell. Basically put a stop-loss on.
Keep in mind that stocks could one day open over-night down significantly, not giving you a a good price/exit point.
This blog has highlighted the reality of the economy and this bull will die. A day? A week? A month? A year? who knows, but it doesn't pay to get infront of this bull. So lets cover the reasons why the market bull is on.
Also, I am swearing off buying the leveraged ETF's, they are the devil incarnate. That is FAZ, FAS, SRS, etc. I still have some smaller positions, likely to close them out by Tuesday. If I play them, they will be long out-of-the-money puts/calls on the cheap.
Back to basics, straight stocks long/short.
In any event, a case for the Bull market, using charts
August 21st is options expiration, where the hardest games are played. Frankly, this market refuses to die, and I can't hold my positions much longer. I already lightened up as previously blogged a week ago.
But I am holding out hope, just a little bit longer until Tuesday, to see if the options expiration games surprise to the downside.
In any event, aside from "vodoo" of options expiration, that is going on here is a battle of many stock market indicators, but the primary three that seem to be a focus. (John Chinnock & bloggers)
1) BKX - The Banking Index, it seems as long as this index levitates defying reality, so will the market 2) TNX - As long as interest rates are kept under control, the US government can continue to print debt to subsidize the private sector 3) USD - As long as the USD currency weakens, the market rallies as "cheap money" enters into the market. Long term, if USD weakens substantially, it is HORRIBLE for the US citizens and the economy. Commodities will start to rise, companies expenses rise, and people's daily expenses rise (as discussed in china vs usa post)
The SPX and overallmarket trends seem to be focused on these three basic factors. If the market focused on reality of business, it would be much, much lower. But as long as paper shuffling by US Gov makes it clear it will spend unlimited cash to hold up the banks, and the world continues to supply the US with unlimited credit, the market will remain afloat.
At this point, god help us all if the world say "enough" of debt spending and interest rates rise OR a major bank fails (like citibank) then BKX will tank quickly.
Also, for everyone who reads this blog who is starting to think I am completely wrong, that the market rally proves we are in a new bull market, think back to October 2007 when DOW was over 14,000, was the market right?
Two charts I am focused on, the SPX and the USD, see below.
The market is of course, having issues choosing a direction with conviction. I am still hanging on by a thread to my shorts. A break of SPX above 995 indicates up, and break of SPX 979 indicates down, according to "Karl of the market ticker". (pay for his service to hear why)
At the heart of the current direction is the USD. If it falls significantly lower, the USD will be in crash territory, and oil, gold, food will go up. The USD if it gains strength, will make Oil, Gold, food, etc cheaper, and also bring the US stock market to a lower value.
Many points of decision right now, the graphs for your viewing pleasure.
Short are back on....actually, I never left my shorts, but came seriously close on Friday. Well, the stock DIN was hit out through my stop-loss level, but I will be looking to put it back on on a market rally. And as for John Chinnock, the friend I mentioned last Thursday/Friday, as a professional trader he is, he ADDED at the close Friday. In this market to win as a bear trader, you must take risks to win, and he did.
This market is teetering on a very nasty fall, well, at this point I am the little boy that says "the sky is falling". :) But to be fair, the initial end of my "Bull" mode from 666 was at SPX 930, we are now at 979, and the high was 1018. If the 1018 high stays, and the market heads lower as anticipated, then the switch to bull to bear was off by about 9.5%. Considering the market is anticipated to hit SPX 800, and potentially 666 or lower, the % off in the up isn't bad.
In any event, enough pontificating, lets get to the nuts and bolts on where things stand. First, my positions where never off, but this past Friday as blogged, I was on the brink of getting out. Talk about timing! That is called CAPITULATION. I did, in fact, cover some of my shorts "at the very top". See what a great trader I am?
Well, as you probably saw and felt like I did, the shorting was getting brutal. And unfortunately, 2 days hardly marks a trend change. This market could be about to blow above SPX 1018 this week.
So I will be trying to not add to shorts too quickly, for many reasons. First, this week is options expiration this Saturday. And that ALWAYS brings games. The games could be every day the market tanks right into Saturday. Or there is some rally/tank action between now and Saturday.
The game plan is for me to add SLOWLY back some of the sort, but in general sit on my hands and add to the positions if we rally into Friday. The key line for me to watch is does the market stay below the long term trend bear line as depicted?
As for precious metals/gold miners, LOOK OUT, I have said don't go long and I maintain that position. I have most of my positions countered by selling calls.
For people in long, for years, today and every day since SPX hit 930+ has been and will be a great day to sell your positions. +50% from the low in 5 months or less is EXCELLENT. Chart below:
