When reading into and trying to understand the markets it is important to know a few things well. One cannot be an expert at everything and if you try, you will end up being good at nothing. One must find a place in the markets to park their butt, and learn.
Since I have entered the markets in late 2005, one of my first trends I identified was gold. I hopped on the gold bandwagon at the last time gold dipped below $500 and took off. That is almost 5 years ago and 150% return later, Gold is still going strong. Since that time I learned everything I could about gold, its fundamentals, its trading patterns anything and everything that has to do with gold. I learned the arguments for gold and arguments against gold. Over the last 4.5 years, basically memorizing everything to do with gold.
Now some may call me a gold bug because I believe gold is still far from peaking. But how can I be a gold bug when I have only been in the industry for 5 years? I am certainly not a gold bug and will jump off the train when the time is right, but that time is not now.
More often than not, (and after a bit of nail biting) my calls in gold are usually right. Last summer I called a breakout in gold the day Gartman claimed he sold all his gold and gold promptly went on a 4 month run from a breakout at $1000 to $1250...
This summer I called for a correction in gold, and though it wasn't as dramatic as I though it would be and it had to fail a breakout before it came down below $1200 and settle halfway in between my correction targets of $1140 - $1170 before promptly moving back to $1200. I heard so many people over the last week to get out of gold, on BNN, on Stockhouse, I even heard someone say short below $1170????
Really you can' fault these people because they don't follow gold like I do, but it proves you can't know everything and you need to defer to the experts instead of trying to know it all like most of those 'cases' on BNN. In the end they all look like fools... 3 analysts on BNN called for a major sell-off in gold. To the journalists credit, most of them gave the analysts a way out, asking about seasonal trades and timing, but all said the same thing... Sell gold. Don't buy it here.
I could not find a gold bull anywhere last week... except me. The fundamentals driving gold just won't relent and will stay in place for the time being.
I don't know much about the markets, and can often put my foot in my mouth, but one thing I know for sure is BUY GOLD!
The last 2 weeks were an excellent opportunity to buy like I said and now that we have confirmation that gold has bottomed and another breakout to all time highs is imminent, The time to buy Gold and Gold stocks is NOW!!! There is one area of resistance that needs to be broken before confirmation of this continuation pattern. This week or next, gold must beak through this last area of resistance between $1200 and $1210 to confirm the bottom that developed in gold over the last month.
I hope you took the last 2 weeks to load up on your favorite gold stocks because this fall is going to be another major run. If you haven't yet, there are still some good value for some great gold stocks.
EAS, VEN, CSI,SAS, SGR all have great growth profiles for a midcap names.
If you want more leverage and can assume more risk... CXT, PEM, DEC, and FAU are great smallcap names.
Happy Trading
Showing posts with label currencies. Show all posts
Showing posts with label currencies. Show all posts
Wednesday, August 4, 2010
Tuesday, August 3, 2010
30 year Bond Bull Coming to An End?
I was looking through the newswires tonight and I noticed in my mining feed that TECK has announced pricing of $750M worth of 7 and 30 year notes priced at 3.85% and 6.00% respectively. They are using the funds to retire 9.75% and 10.25% notes which gives them quite a bit of savings on the interest which would be in excess of $100M for sure. Not chump change by any means, but still, really quite a bit of mundane news in itself.
What I am taking from this news more than anything is that TECK's decision to issue new longterm notes and retire higher interest debt, has more to do with where the company sees future interests going. If one thinks that interest rates are going to rise in the future then companies are going to start making these types of corporate decisions and locking in while paper is as cheap as it is.
Are interest rates going up tomorrow? I doubt it, but as you see more and more companies making these types of decisions you know that general attitude in the corporate sector is that rates will rise. Once the global economy gets through this uncertain economic stretch and economies return to more normal levels of growth, rates will rise to keep the economy from being overheated. On the other hand, if the currency crisis reappears, rates will go up in order to support the currencies. It will become a choice of saving buying power versus stiffling economic growth at home.
At this point in time, countries are trying to debase their currencies and as long as this strategy stays in place, interest rates will remain artificially low, but doesn't mean they cannot rise from the absolute rock bottom prices where they are without that strategy being affected too much. Interest rates have to go up. If the economy gets used to cheap paper. Like a highly addictive drug. It will never get off, and when it does, you will see severe pain.
One trade that I am researching to take advantage of when it happens is to short the bond market. Interest rates have been on the decline since the early 80's to a point where they can't get any lower and as a result the bond market has been in a super bull which I believe is nearing an end. Don't go out and short the bond market just yet as a correction this fall will push the bond market up as a place to hide, but once economies return to normal or countries are forced to raise rates because of downward spiraling currencies, The SuperBull in Bonds will be over!
What I am taking from this news more than anything is that TECK's decision to issue new longterm notes and retire higher interest debt, has more to do with where the company sees future interests going. If one thinks that interest rates are going to rise in the future then companies are going to start making these types of corporate decisions and locking in while paper is as cheap as it is.
Are interest rates going up tomorrow? I doubt it, but as you see more and more companies making these types of decisions you know that general attitude in the corporate sector is that rates will rise. Once the global economy gets through this uncertain economic stretch and economies return to more normal levels of growth, rates will rise to keep the economy from being overheated. On the other hand, if the currency crisis reappears, rates will go up in order to support the currencies. It will become a choice of saving buying power versus stiffling economic growth at home.
At this point in time, countries are trying to debase their currencies and as long as this strategy stays in place, interest rates will remain artificially low, but doesn't mean they cannot rise from the absolute rock bottom prices where they are without that strategy being affected too much. Interest rates have to go up. If the economy gets used to cheap paper. Like a highly addictive drug. It will never get off, and when it does, you will see severe pain.
One trade that I am researching to take advantage of when it happens is to short the bond market. Interest rates have been on the decline since the early 80's to a point where they can't get any lower and as a result the bond market has been in a super bull which I believe is nearing an end. Don't go out and short the bond market just yet as a correction this fall will push the bond market up as a place to hide, but once economies return to normal or countries are forced to raise rates because of downward spiraling currencies, The SuperBull in Bonds will be over!
Thursday, July 8, 2010
Markets should continue to bounce
Last Friday after the close we correctly called an oversold situation and the markets have had 3 strong days on rally mode since Tuesday. We should see at least another 300 point follow through into next week. Not saying that tomorrow will be an up day but the negative sentiment that has been in the market for the last 2 months seems to be abating and I would expect a continued rally on light volume over the next week for sure as we enter into the summer months.
One positive sentiment factor for a continued rally is that the Euro has technically moved into rally mode of its own making a strong move and we should see the Euro test resistance at 1.300 and the breakdown point around 1.32 and change. With the drastic cuts to budgets in Euro zone nations the reaction has been positive, but we will still wait and see if the Euro zone economies can recover with these cuts.
Since it was the breakdown in the Euro and widespread fear that caused this last sell-off we could see the markets and Euro recover. At best we will be range bound for the summer when we enter into September and a new round of economic data. The TED spread is rising and we wait to see if the spread comes down which will signal stability in Europe. If it continues to go u,p that could be a warning sign although currently it is still within a normal range but on the high side.
The USD seems to be recovering as well from its recent drop off so the YEN is starting to become weaker against all currencies. If you are long the EUR, being long against the YEN may offer more upside than being long against the USD.
Gold should continue to sell-off over the next few weeks and I would expect at least $1170 and lower. If it goes under $1130 I would shy away from the trade. Gold stocks are very weak at the moment. Dogs include YRI and K... Kinross used to show so much promise and now the market treats them very poorly. Huge gap down the other day which is never a good sign. G and ABX are holding up the best but I would expect all gold stocks to continue to drag lower. There is definitely some negative divergence with the spot price and gold stocks. It seems that the strategy for the gold player would be to be long the yellow metal physically and trade the gold stocks cyclically because so far they have not broken out into a super bull market in gold stocks which we are all waiting for. I would expect this market to turn around at the end of July where one could time a good trade to the upside as Gold will soon be entering into a time of cyclical bull period into August and September.
One negative sentiment is that all risk adverse assets seem to be in sell mode and are well off highs. This is usually the first market that the money flees if we are indeed entering into another bear market this fall and none of the risk adverse assets I follow seem to be showing much bullish sentiment at all. The last buying spikes of pennies in April and into May could have been a last gasp of a bullish market the little guys.
Happy Trading :)
One positive sentiment factor for a continued rally is that the Euro has technically moved into rally mode of its own making a strong move and we should see the Euro test resistance at 1.300 and the breakdown point around 1.32 and change. With the drastic cuts to budgets in Euro zone nations the reaction has been positive, but we will still wait and see if the Euro zone economies can recover with these cuts.
Since it was the breakdown in the Euro and widespread fear that caused this last sell-off we could see the markets and Euro recover. At best we will be range bound for the summer when we enter into September and a new round of economic data. The TED spread is rising and we wait to see if the spread comes down which will signal stability in Europe. If it continues to go u,p that could be a warning sign although currently it is still within a normal range but on the high side.
The USD seems to be recovering as well from its recent drop off so the YEN is starting to become weaker against all currencies. If you are long the EUR, being long against the YEN may offer more upside than being long against the USD.
Gold should continue to sell-off over the next few weeks and I would expect at least $1170 and lower. If it goes under $1130 I would shy away from the trade. Gold stocks are very weak at the moment. Dogs include YRI and K... Kinross used to show so much promise and now the market treats them very poorly. Huge gap down the other day which is never a good sign. G and ABX are holding up the best but I would expect all gold stocks to continue to drag lower. There is definitely some negative divergence with the spot price and gold stocks. It seems that the strategy for the gold player would be to be long the yellow metal physically and trade the gold stocks cyclically because so far they have not broken out into a super bull market in gold stocks which we are all waiting for. I would expect this market to turn around at the end of July where one could time a good trade to the upside as Gold will soon be entering into a time of cyclical bull period into August and September.
One negative sentiment is that all risk adverse assets seem to be in sell mode and are well off highs. This is usually the first market that the money flees if we are indeed entering into another bear market this fall and none of the risk adverse assets I follow seem to be showing much bullish sentiment at all. The last buying spikes of pennies in April and into May could have been a last gasp of a bullish market the little guys.
Happy Trading :)
Wednesday, May 26, 2010
Euro Leading the Markets
Not sure what to do in this volatile market? With Europe on jitters and the EU being held together with a ball of yarn it seems these days everything is taking its lead off the Euro. Yes we have many other fundamentals in this market the should be driving us, but when fear and panic take over and Euro starts falling, it sets off a domino effect and investors start selling everything out of fear. So for the immediate turn until Europe gets off the front pages with the debt crisis, markets will continue to take their cue from the Euro.
Happy Trading
Happy Trading
Monday, May 24, 2010
Will Gold Move To a Bear?
Some people are calling for gold to correct with the rest of the markets in this bear as it did in 08/09. Not to sure if I agree...
Argument is inflation/deflation for the bear side with global ST deflation a possibility with EU and China bears. Problem is that is not the only component that is driving gold. The decoupling of POG from the USD this spring has major significance that some people are just plain missing. Gold will selloff on the all asset liquidation days for sure, but it will have major strength as an emerging alternative currency.
Any price movement between the 50 and 200 MA's is a major buying opportunity. With impending implosion of the Euro and sell-off of major currencies, an obvious choice has been gold. Confidence will not return to the currency markets for awhile so this trend to buy gold as a currency hedge is increasing, not decreasing.
Added to this fact is that the long term result of printing all this money today to bailout the financial crisis and now this impending debt crisis, is that there will be major inflation over the long term. Prices don't go up because of demand, but because of a falling value of a currency. Simple. Too much money added too quick will take down the currency because now value has been created. To paint a picture, it would be like preferred dividend holders getting a ridiculous common stock dividend that diluted the company enormously while the rest of the common stock shareholders got nothing. All they are doing in the long run is dilluting the currencies.
The party is long from over in the current gold bull.
Argument is inflation/deflation for the bear side with global ST deflation a possibility with EU and China bears. Problem is that is not the only component that is driving gold. The decoupling of POG from the USD this spring has major significance that some people are just plain missing. Gold will selloff on the all asset liquidation days for sure, but it will have major strength as an emerging alternative currency.
Any price movement between the 50 and 200 MA's is a major buying opportunity. With impending implosion of the Euro and sell-off of major currencies, an obvious choice has been gold. Confidence will not return to the currency markets for awhile so this trend to buy gold as a currency hedge is increasing, not decreasing.
Added to this fact is that the long term result of printing all this money today to bailout the financial crisis and now this impending debt crisis, is that there will be major inflation over the long term. Prices don't go up because of demand, but because of a falling value of a currency. Simple. Too much money added too quick will take down the currency because now value has been created. To paint a picture, it would be like preferred dividend holders getting a ridiculous common stock dividend that diluted the company enormously while the rest of the common stock shareholders got nothing. All they are doing in the long run is dilluting the currencies.
The party is long from over in the current gold bull.
Subscribe to:
Posts (Atom)