Daily Updates

Stocks, Gold, Silver, Oil and Nat Gas

Posted by Chris Vermeulen

on Thursday, 17 December 2009 13:48

Ed Note: Chris saw the big correction in gold coming with his December 3rd article Exhaustion – a Breather is due

 

It’s been a great week so far. Stocks and commodities are moving as expected from my weekend trading report. I like to see the market unfold in a calm collected manner.

The US dollar has made a nice move in the past couple weeks. Although it has broken out of its down channel I think there is a lot of short covering going on making this bounce more powerful than others. Also it is important to note that it is near resistance which could dampen things around the $77-77.5 level. If the dollar heads back down I expect gold to start making a move back up which it started to do Wednesday.

Below are my thoughts and charts about what I think is unfolding for both stocks and commodities.

DIA – Dow Jones Index Fund
The DIA fund has performed just the way I thought it would. Push to a new high then sell down. Generally I would expect this move down to test my support level or trade near that level, but because we are heading into the holiday season and volume is light the market has a natural tendency to drift higher. I’m sure this is why it’s still trading near the high.

This new yearly high was enough to suck in breakout traders and only time will tell if they get follow through or get shaken out of this trade also. Oh, the joys of buying a breakout in an over bought market condition.

1ETF

GLD – Gold Exchange Traded Fund
Gold broke down sharply from its trend channel and has settled into a support zone. Wednesday we saw a nice bounce but the question is, is this a rally or a sucker’s bounce?
I’ve found the best setups and moves occur after an ABC retrace. The black lines on the chart show exactly that type of price action. These retraces shake out most short term traders before starting a new rally. There is a thin dotted blue line showing a possible resistance trend line which would need to be broken after the ABC retrace pattern has formed if we want a low risk setup with a sizable win/loss ratio.

2ETFS

USO – Crude Oil Fund
USO has provided some great short term gains for anyone who used my analysis from my Sunday night report. The quote and chart below covers my thoughts for USO.

Sunday night report:
“Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play.”

4OilFund

 

UNG – Natural Gas Trading Fund
Natural gas is still very much a speculative play as everyone thinks they will make huge money from this commodity.

This means two things in my opinion:
1.    It’s still headed lower
2.    After rallies the sellers jump back in.

UNG is trading near resistance and it could provide a great shorting opportunity in the coming days.

5NatGas

ETF Trading Conclusion:
Although it’s been a quite week in the market, I have really enjoyed it. Not sure if it is related to everything unfolding in a controlled manner or the holiday season nearing, or maybe both?

November and December have been quiet for our ETFs but I know we are on the verge of either a large move up or down in the coming weeks. Let’s watch the market and funds unfold and see if we can get another trade or two in before year end.

 

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Dollar Bullish and right!

Posted by Greg Weldon - Weldon's Money Monitor

on Thursday, 17 December 2009 13:28

A brief comment from the extensive analysis contained in Weldon’s Money Monitor. Michael Campbell calls Greg Weldon – “The One Analyst other Analysts can’t Wait to Read.” Visit www.Weldononline.com for a FREE Trial.

 

Ed Note: Greg Weldon was Bullish the US Dollar before the rally back on November 30th with this article “The Real next big move….” HERE.  Dollar higher yet again this morning. Gregs commentary below two Charts that I have posted showing the most recent Dollar action:

This Chart below posted by Money Talks

GW12164

This Chart below posted by Money Talks

GW121723

 

“in terms of our expectation for intensifying turbulence in global stock indexes on the back of rising interest rates and an appreciation in the greenback … we need only reference the overlay chart on display below in which we plot the path of the Bullish US Dollar ETF (UUP, black bars), against the UltraShort Eurocurrency ETF (EUO, dark blue line), and the Short Dow Industrial ETF (DOG, red line) … revealing that the DOG has, so far, failed to respond to the rally in the USD, in line with the tight positive correlation exhibited over the last year.

This Chart below from Weldon’s Money Monitor

GW1217

Subsequently, we continue to monitor the US stock market for the right, bearish, technical set-up into which we can ‘sell short’. 

A move in the DOG above last week’s high of $53.43 would be a ‘trigger’. 

In the meantime, we remain bullish on the USD … 

… with a bearish focus on the Eurocurrency, the British Pound, the Eastern European currencies, and the Australian and Canadian Dollars. 

Indeed, it may become the most wonderful time of the year, for dollar bulls, and equity market bears, on the back of any potential (likely) push by the Fed towards becoming more aggressive in terms of draining excess liquidity from the banking system … 

… in line with a continued push towards intensifying shrinkage in Fed Bank Credit, and Commercial Bank holdings of cash.

 

 

Weldon’s Money Monitor offers a FREE 30 Day Trial Subscription. For subscription information contact Eileen @Weldononline.com or Visit www.Weldononline.com for a FREE Trial.

A FREE 30 Day Trial Subscription is defined as a single Trial that is limited to a one-time Signup. Signing up for multiple trials under different names, Fraudulent contact information is illegal. Weldon’s Money Monitor takes this seriously..

 

“But very clearly, sovereign risk globally has taken over as the major potential flare-up for the coming year. Looking at the official projections for 2010, we have Japan’s government debt-to-GDP ratio hitting 227%; Italy at 120%; the U.S. and the U.K. both at 94%; Germany and France at 83%, and Canada at 79% (all levels of government). Rarely, if ever, has Canada been the one-eyed man to this extent in the land of the blind.”

Analyst Dave Rosenberg is not going to be writing for a few weeks as the holidays approach, but before doing so, he took one last moment to address two growing concerns: The growing amount of U.S. debt and sovereign risk:

 

Special Report — Year Ahead: Can You Handle the Truth?

It’s that time of the year when ‘sell-side’ research departments publish their Year-Ahead Reports (as I once did in the not-too-distant past); as do all the financial magazines.

I realized after countless emails and phone conversations (in that order) that there is a very high expectation that I publish one too.  I honestly have no intention of publishing a specific set of forecasts in my current role as the Chief Economist and Strategist for Gluskin Sheff for public consumption — the granularity of my recommendations is reserved for our Investment team and our client base.  Be that as it may, I am more than happy to comment on what I see as an emerging consensus and my general view on the direction of the economy and the markets in the coming year without gettinginto too much detail or numerical forecasts, which are the domain of the ‘sell-side’ macro teams globally.

At the outset, let it be known that when I read everyone else’s year-ahead prognostications, all I can think of is, “where do I store this stuff for a year so I can look back and say ‘That was so wrong!’.” It’s not that the reports are always bullish every year; it is that they seem so contrived.  And, as I mentioned in the December 10th edition of Breakfast with Dave, this year, probably like most years, there seems to be a remarkable level of agreement.  Based on my reading, here is what I conclude the consensus views are as we head into 2010:

Having read various Year- Ahead Reports, it sure seems like there is a remarkable level of agreement for 2010

• Muted recovery, but positive growth, for sure!  No risk of a ‘double dip’.

• Equity markets up!

• A barbell strategy of domestic multinational blue chips and emerging market
equities.

• The U.S. dollar is…neutral, but we did locate more bulls than bears (so much
for the ‘carry trade’ thesis).

• Positive on commodities for the most part.

• Concerned about government balance sheets, and therefore…

• …Bearish on long term government bonds because they are the ‘competition’
and, after all, who would tie their money up for 10 years at 3.5% when you
can lose 22% in stocks?   And, therefore…

• …Bullish on spread product (as long as it’s not long-term).  And, therefore…

• …Really comfortable with high yield (just for the coupon and the view that
default rates will come down).

• Certain that volatility will not be an impediment.

• The Fed will begin to raise rates in the second half of the year, but that this
will have no impact since they will still be low.

So here we are with a glorious opportunity to reintroduce Bob Farrell’s Rule 8: “When all forecasts and experts agree, something else is going to happen.”

….read more HERE (start at the top of page #2)

 

 

 


 

The Massively Bearish Psychology is changing

Posted by Dennis Gartman - The Gartman Letter

on Wednesday, 16 December 2009 17:22

This brief initial comment  from the Legendary Trader Dennis Gartman.  For subscription information for the 5 page plus Daily Gartman Letter L.C. contact – Tel: 757 238 9346 Fax: 757 238 9546 or E-mail:dennis@thegartmanletter.com HERE to subscribe at his website.

THE US$ IS STRONG and the massively bearish psychology that has enveloped the dollar only a week or so ago has begun to change rather swiftly as very real technical damage has been wrought upon the EUR, to Sterling and to an increasing extent upon the Yen too, ahead of today’s second and final day of the FOMC meeting in Washington D.C.

We can get this discussion of the Fed’s actions… or more properly, not action… in one swift sentence: nothing shall be done; absolutely nothing. The Fed is content at this point to punt any potential changes to its policies to the newly constituted committee that shall take its seats after the turn of the year.

COMMODITY PRICES ARE VERY MODESTLY FIRMER, but they are so even  as the dollar is stronger and it is this divergence that has our attention here this morning.  For far too long the response by the commodity markets had been rather idiotically “knee jerk”: that is a weak dollar was supposed to give way to higher commodity prices and a strong dollar was supposed to give way to weaker prices. For months that was indeed the correlation, and for months one could trade each market against the other armed only with this thesis. Now that thesis is being put to test, and we think it is not a moment too soon. 

Regarding gold, we remain… and indeed are all the more… bullish of gold, but we are bullish of it in EUR and Sterling and Yen terms.

DG1215

GOLD IN EUR TERMS:  €760 Has Been  Formidable Support: The  trend is upward, from the  lower left to the upper right, and owning gold in EUR terms has proven a far better  trade… and far less volatile…  than gold in US$ terms.

 

Mr. Gartman has been in the markets since August of 1974, upon finishing his graduate work from the North Carolina State University. He was an economist for Cotton, Inc. in the early 1970’s analyzing cotton supply/demand in the US textile industry. From there he went to NCNB in Charlotte, N. Carolina where he traded foreign exchange and money market instruments. In 1977, Mr. Gartman became the Chief Financial Futures Analyst for A.G. Becker & Company in Chicago, Illinois. Mr. Gartman was an independent member of the Chicago Board of Trade until 1985, trading in treasury bond, treasury note and GNMA futures contracts. In 1985, Mr. Gartman moved to Virginia to run the futures brokerage operation for the Virginia National Bank, and in 1987 Mr. Gartman began producing The Gartman Letter on a full time basis and continues to do so to this day.

Mr. Gartman has lectured on capital market creation to central banks and finance ministries around the world, and has taught classes for the Federal Reserve Bank’s School for Bank Examiners on derivatives since the early 1990’s. Mr. Gartman makes speeches on global economic and political concerns around the world.

 

Recently after silver had taken a beating for two or three days, I was walking out of church and a friend said to me, “Why are you recommending silver; it’s so cheap?”

I attempted to restrain myself. “I thought you were supposed to buy low and sell high.” You can’t buy low unless you buy when things are out of favor. Today gold and silver are out of favor, and that has created a great opportunity. When it was raging to the upside, I was worried that it would be a very expensive entry point.

Actually, you can pay almost any price near these levels and some day brag about how smart you were, but you get better opportunities when the market is down.

This correction is a good chance to load up. If you don’t load up at times like now, how can you possibly buy low?

I’m really talking about the psychology of the investor. When the markets are going crazy, everyone wants to jump in. That’s just an observed fact. But this time the metals have given us a real opportunity. These are the opportunities I lust after.

I recently gave a copy of my new book, How to Prosper in the Age of Obamanomics, to a doctor friend of mine. He told me he hadn’t taken my advice before because he had listened to his financial advisor when he pooh-pood gold and silver.

I told him that when he read the book, to buy quickly while the metals are depressed, and if they go lower buy some more.

Opportunity abounds in alleged bad times.

I recently did a radio interview when someone read off the titles of several of my books and said, “You’ve been wrong before, what makes you think you are right now.”

The only book I was wrong on was the one about Y2K because I under-estimated the government and industry’s ability and resolve to fix the problem. The analysis of the problem was correct, but I under-estimated their ability and resolve to fix the problem in time.

Other than that book, I was right even when I wrote about the Inflationary ‘80s. While there was less inflation (you might even call it disinflation), in the final analysis there was inflation all through the ‘80s, although it was diminished from the ‘70s. It was still an opportunity, but I found better opportunities in other places and concentrated on those.

In the final analysis, if you bought during the ‘80s, you would have bought cheap; you just needed time for it to pay off.

When will this rally be over?

I’m often asked when it will be time to sell the precious metals. In reality I’m being asked when it is time to transfer your gold and silver into greenbacks.

That time may never come. We may be seeing the total destruction of the dollar – the final collapse. The Obama Administration is determined to weaken the dollar, which is a standard procedure for governments. It means they can borrow a lot of money and pay it off with cheap dollars. They can manipulate the currency to make it possible. That is what is happening now. The Fed and the Administration are determined to drive down the dollar, so why on earth would you want to change your investments from metals into greenbacks?

The only time to sell the investments on my a la carte Investment Menu is when the liquidity of the active stock market, such as the mining stocks is diminishing. You will then switch into bullion and coins. Not yet, as there are still plenty of profits to be made, and the market is still liquid, but some day liquidity will be endangered.

If you are concentrating on the things that are going up, like my Investment Menu, you are actually gambling that you will get out before the dollar bottoms out. Any investment denominated in dollars, other than gold and silver, will be a big problem one of these days – but not yet.

Go to my website (www.rufftimes.com) and click on “Free Stuff.” You will find an article that describes how we are doing with the Investment Menu. It is up 86.9% through October of this year. Is that good enough?

In the final analysis, you will be happier that you owned some coins and bullion than some of the high flyers. Fly high for now, but be prepared when I tell you to liquidate those things and buy bullion and coins. I doubt I will ever tell you to liquidate precious metals and buy greenbacks.

I think the dollar is in its death throws. When you buy gold and silver you are not just looking for a profit, you are looking for protection against the decline of the unit of account – the dollar.

By Howard Ruff
The Ruff Times

*****

Howard J. Ruff, the legendary author and financial advisor, wrote How to Prosper During the Coming Bad Years in 1978. It is still the biggest-selling financial book in history, with 2.6 million copies in print.

His new book, How to Prosper in the Age of Obamanomics is free when you subscribe to The Ruff Times (www.rufftimes.com), or if you buy the book at your favorite bookstore, you can deduct $10 from the subscription price.

Howard is founder and editor of The Ruff Times financial newsletter. This article is from a recent issue of The Ruff Times. The newsletter deals with a broad spectrum of middle-class financial issues. (You can learn about it at www.rufftimes.com). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world.

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