Charts or sentiment 10/30/2011

By now you realize the markets have a mind of their own.  They climb walls of worry, and tank on positive news.  There has been much negative news lately, both at home and abroad, and yet the market has had one of its best months in recent memory.  Here at EconIntersect we follow the charts, read all the economy data, follow government reports, and try to figure out where the markets will be in 6 months.  If the future looks bright we are willing to take more aggressive moves short term.  We may even take aggressive short moves if data shows a down side.  Right now the data is showing a sideways trend for the economy, not necessarily for the market.  You would think they go hand in hand but many times they diverge.
Some people even say there is manipulation.  Consider the silver market. Recently, the metal was very hot until the margin requirement was raised a few times in a weeks time.  And then there is sentiment.  No matter what the fundamentals, people do strange things when they are scared and there are many reasons to be worried now.  We believe sentiment pretty much trumps everything.
At the moment we are in cash, waiting to start buying the metals and our other favorite stocks.  This should happen very soon.  It seems the markets want to go higher heading towards the New Year.
Here is the recent chart for the Dow.

Another week of Euro Nation

Wednesday is supposed to be the day that Greece is saved.  We'll see.  So far lots of posturing and not much substance.  Last week the DJIA and the S&P 100 moved higher while the NASDAQ slid lower.  If there is any direction in the market it seems to be slightly lower.
There are times to be mostly in cash, and this is probably one of them, but that could change soon.  One could make the point that equities and commodities are much cheaper than a few weeks ago and this may be the time to start leveraging in.  We agree if you can do it with money you can afford to lose.  We would much rather the market have a trend.  If the market likes what comes out of the Europe meetings this week we could see a new trend start.  So do you jump in, or wait!  Unless you have inside information we recommend treading lightly.  Below is the chart for the DOW.

And Now Ladies & Gentlemen-What's Next?

The stock market finally got back to where it started at the beginning of the year.  Gold is down recently but still up over $300 for the year.  Interest rates are at historical lows.  What do you do?  Most safe havens aren't safe any more and if they are they give very little return.  Protests and down graded governments all over the world don't make you feel any better about investing.  Markets up-down and all over the place.  New mattress to hide my cash please!
At EconIntersect we love trading trends.  That can be a difficult task at the moment.  We still think gold, silver and their equities offer a good chance of appreciation.  This may be a good chance to acquire stocks and physical metals on the recent softness.  We believe they are going higher in the future, so even if the metals didn't hit bottom yet you should not get hurt acquiring them if you hold for the longer term. Our favorite gold stocks are NGD, EGO, IAG and NG.  For silver AG, EXK, SVM, and SLW.   Two juniors we like are BAJ and NAK.  NAK traded above $21 earlier this year and is around $7.50 now.  Below is the chart for gold.

Sell GDX calls

We just sold our Nov. 22 GDX 57 calls that we bought on Oct. 6th for 1.82.  This is the exact price we bought them for even though gold was up in that time.

What do we see?

Last week December gold was up around 1% and silver close to 3%.  The sovereign debt crisis in Europe will most likely be the market driver this week.  Chancellor Merkel of Germany and President Sarkozy say they will have a plan by the November 3-4 G20 summit in Cannes.
Our feeling is that although the crisis is mostly good for gold and silver, if the market tanks it usually initially takes everything down with it.  There are no really good places to be at the moment which makes the dollar look good as a safe haven despite the economy.
We see gold going up this week on safe haven buying but longer term depends on the debt crisis medicine dished out.  If the market isn't satisfied we could see a wild ride to the down side.  Below is the Yahoo chart for GLD in blue, SLV in red, and Dow for last week in green.  You can see silver was the winner.  We currently hold GDX calls for October.

Gold

We bought some call options on GDX yesterday because the momentum seems to be going up for the moment.  This is also a good time to layer in some gold and silver stocks.  Some of our favorites are EXK, AG, NGD, SLW, SVM, EGO, AUY, and IAG. We will try to add in the next few days.  We must remember that in this climate the momentum can change very fast so even though we like to hold stocks for the long term, it is best to keep an eye on all our holdings.

GDX calls

We just bought 10 GDX Oct. 22 calls, strike price 57, at 1.82.

Gold 10/4

Gold's free fall may have ended Monday.  However the stocks may not follow as the market still looks weak.  For the last few months gold has out performed the equities.  You can see from the 2 charts below.  The chart on the left is Gold, the one on the right is Gold Stocks.  Notice on the bottom MACD shows a very over sold condition.
                                                                                                           

Monday 10/3/11

This week Econintersect will launch a new investment vehicle.  This service will be free for a while.  You will be able to follow in real time every trade made.  These will be actual trades made.

Econintersect investing

Our goal is portfolio appreciation through the purchase of equities and the use of options.  See our overview below.

This chart shows gold's history for the last 5 months.  Econintersect has paid special attention to gold and silver as they have been the best performers for the last few years.  We expect to buy gold and silver through ETF's and stocks,  and buy and sell options on the metals and their equities.  From time to time we hope to trade some of the junior miners as well.

From Bloomberg:

In October 2008, [gold] prices tumbled 18 percent as the worst financial crisis since the Great Depression spurred losses in global equity and commodity markets. The metal then rebounded and gained 23 percent in the next two months.

Gold is down around 20% in this correction!  

These are not our only focus.  We will follow the major indexes and some stocks that we like.  Most of our trades will be on equities and options that have high volume and are very liquid.