Updates
Due to various factors we have been a little quiet lately, not participating in the current sub-rally since the end of July and missed the gold/silver rally which talk all of 2 days to shot the metals and related stocks higher.
Natural gas has popped, and we were prematurely stopped out a few weeks ago when gas made a 7 year low. However we will still keep our UNG gas position lower in anticipation of higher prices ahead.
Since we are mostly cash – there is the subject of how to deploy. What major move, or major trend can we latch on to.
After careful analysis we will be setting up a short strategy to cope with what we believe will be a large move DOWN by the stock indexes, commodities, and metals.
While we are still bullish long term on metals, and hold sizable PHYSICAL possession, at this point we are gearing up for at least a correction, if not a sizeable one.
The markets may prove to hold out longer, but more and more data convinces us that a turn is at hand. When financial magazines post how people are ‘recovering’ their portfolio in this rally – we know that they are about to get sideswiped in the next decline.
The reason also, from a purely social standpoint is the 2nd decline, once it becomes ominously clear that it is more than a correction, will create a vicious spiral of selling by folks that are looking to keep some of the profits they made during the rally. In other words, the psychological fortitude to hold will not be there like it was last year.
We are assembling forces for possible employment in the following sectors:
SH – Short S&P
RSW – Double short S&P
ZSL – Double Short Silver
UUP – Long Dollar
RFN – Double Short Financials (to supplement FAZ)
With respect to the above, we will gradually add to positions and use our candlestick engine for part of the trades. ZSL is not trackable, so we will use SLV as our buy sell signal (i.e. when told to sell, we will buy ZSL)
In any event – we may move quickly and boldly as events unwind.
Weekend update
Here are the latest Blees COT ratings released on 9/11/09 for some key markets. Remember “100? is the most extreme bullish position on the part of commercial traders (aka the “smart money”) for the last eighteen months. “0? is the most extreme bearish position:
S&P 500 Index: 52
S&P E-mini: 61
Dow Industrials: 46
Nasdaq 100: 62
Nasdaq 100 Mini: 32
Gold: 0
Silver: 30
Crude Oil: 27
Copper: 26
Corn: 100
Soybeans: 76
Sugar: 31
Wheat: 99
Cattle: 73
Hogs: 100
U.S. Dollar: 89
Cocoa: 34
Natural Gas: 89
An important note is that the COT is not confirming this move up in gold. While gold can still go higher than here, the big thrust many are calling for may not materialize. However if gold can advance, pull back and stay over $1,000 – and better COT readings can be had – it may set the stage for a bigger advance in the future.
Weekend update
Gold broke out of it’s trading range last week in a quick fashion. We are going to wait until a pullback and enter some positions in anticipation of a possible run at $1300. We might even purchase some puts as an insurance policy. We will review the COT data once it comes in, however if it is bearish we must anticipate this surge in gold not to be the big one, but it might be a good short term trade nontheless.
Silver is the same story. We will put in a partial position on pullbacks with close stops once we see a sizable rally.
Alert
Keep an eye out :
9558 for the DOW, S&P 1030 – these levels, if exceeded probably mean the rally will continue
A break below 9116, 978 in the S&P means that the current peak has already been met and the probability of Wave (3) down – which is in it’s early stages.
We recommend putting stops on all long positions and phasing out to cash. If the above break lows are realized, some short positions would be prudent. More to come as we follow this.
