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Stocks & Equities

Short Term Very Oversold - Sharp Rally Due


Posted by Stephen Todd via The Todd Market Forecast

on Thursday, 17 May 2012 08:30

DOW                                                      - 33 on 1000 net declines
 
NASDAQ COMP                            - 20 on 650 net declines
 
SHORT TERM TREND                       Bearish
 
INTERMEDIATE TERM TREND       Bearish
 
Today was a surprise. I felt that we would get a bounce today and we did for a while, but it couldn't hold on.
    
The usual suspects were again present. Concerns about Greece and concerns about its affect on the world economy. Regarding Greece, a lot of people are starting to discount its exit from the euro-zone, but 80% of the Greek people want to stay in. Also, after all of the effort already expended, it's unlikely that they will simply give up.
  
The short term is oversold almost to the breaking point so a very sharp rally should be close by, but the intermediate term is another story. We've circled the big declines since 2010 and compared to the previous two, this one is still a baby.
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TORONTO EXCHANGE:  Toronto had a decent day by recent standards, "only" dropping 17 points.
GOLD: Gold had yet another solid down session.
BONDS: Bonds surged to still another multi decade high.
THE REST: The dollar was up again and this helped push down gold, silver, copper and crude oil.
 
BOTTOM LINE:  
   Our intermediate term systems are on a sell signal.
   System 2 traders We sold the E-mini at 1322.50 for a loss of 12.25. We sold the SSO at 51.78 for a loss of .92.
     We bought another E-mini S&P 500 at 1334.00 and the SSO at 52.64. Sell at the close on Thursday.
   System 7 traders are in cash. Stay there on Thursday.
  
NEWS AND FUNDAMENTALS:
     Housing starts were 717,000, more than the expected 690,000. Industrial production rose 1.1%, better than the anticipated 0.5%. Oil inventories rose 2.1 million barrels. Last week they rose 3.7 million. On Thursday we get initial claims, leading indicators and the Philadelphia Fed survey.
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We're on a buy for bonds as of April 19.
 
We're on a buy for the dollar and a sell for the euro as of May 11.                
 
We're on a sell for gold as of April 4.              
 
We're on a sell for silver as of April 4.        
 
We're on a sell for crude oil as of May 4.        
 
We're on a sell for copper as of May 14.    
 
We're on a sell for the Toronto Stock Exchange TSX as of March 22.
 
We are long term bullish for all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.
Ed Note: To register for this Daily Letter go to www.toddmarketforecast.com



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Currency

What Buffet's Buying + US Dollar & Gold Long Term


Posted by Porter Stansberry

on Thursday, 17 May 2012 07:41

Crude oil is falling… copper is falling… stocks are falling. Because of the European debt crisis, people are fleeing assets that are sensitive to economic growth… and flocking to "safe havens" like bonds and the U.S. dollar (cash). As you can see in the chart, the dollar is currently winning the world's "least ugly" paper currency contest. It's gained around 9% from its August lows. This doesn't sound like much to most people, but it's actually a huge gain for a major currency.

20120516 DIG_USD

Of course, as the dollar rises, gold falls. The yellow metal traded for $1,750 an ounce in February. It's now trading for $1,530. That's a decline of 12.5% in three months.

On the surface, gold is falling because people are dumping assets to raise cash. Gold is a liquid asset, just like stocks and crude oil. So it gets thrown overboard when people are desperate for liquidity. But the "big picture" reason gold is experiencing a decline is that it's simply "due" for a substantial period of sideways (or lower) prices. Gold has risen in price every single year for the past 11 years. No other widely traded asset or index can match that record of consistent gains. Gold is up more than six-fold during this relentless, relatively calm bull market.

With this amazing, once-in-a-century bull market in mind, we remind you that markets are like runners. They can't run flat-out for miles without a break. The long-term picture for gold hasn't changed. Western governments still have massive, unfunded debts and obligations that cannot be paid with sound, honest money. The people of Asia (especially China and India) are getting a little richer every year. These people have a centuries-old affinity for precious metals, like gold and silver… and they are still buying. Again, gold is simply due for a break.

To put its recent decline into perspective, let's look at the "long view." Below is a 12-year chart of gold. As you can see, gold could fall all the way down to $1,300 an ounce and remain in a bull market. That's where it was in late 2010. In the context of gold's massive bull market, even the latest decline isn't severe…

20120516 DIG_GOLD

Another bit of perspective: Rich, sophisticated investors don't view gold as a conventional investment. It's not like owning an income-producing rental property. It's not like owning shares in a dividend-paying, blue-chip company like Coca-Cola. Gold is real money. It's a form of "crisis insurance." Rich people buy gold and hope they never have to use it. They don't buy it with the hope that they'll make hundreds of percent on their holdings. You can read more about the "rich guy" way to view gold in this short interview.

Speaking of rich people and what they buy…

This morning, the news services are reporting on the latest moves by billionaire investor Warren Buffett. His company, Berkshire Hathaway, has just filed reports with the Securities and Exchange Commission showing it has new stakes in automaker General Motors and media company Viacom. Buffett also increased his stake in global discount retailer Wal-Mart – one of Dan Ferris' favorite World Dominating Dividend Growers. Buffett recently said he doesn't think the Mexico bribery scandal will harm the company's long-term earnings power. Dan agrees. He sees the recent selloff as a good buying opportunity.

 Following the investments of legends like Buffett is a great way to find potential low-risk, high-reward ideas. The world's best investors and traders have massive research budgets. They have the best contacts. They have the best computers and the most extensive databases. They're able to achieve a tremendous "information edge" in the market. That's why looking over their shoulders makes sense.

Over the past few days, we've told you a few details about our newest service, DailyWealth Trader. We have several goals with DailyWealth Trader. The main goal is to educate readers on the best ways to make low-risk, high-reward trades. The service also acts as a "digest" of ideas from the world's best investors and traders.

For example, in the May 1 issue (which was made available only to Alliance memebers), we discussed one of the top ideas from legendary trader Jim Chanos. As one of the world's best short sellers, Chanos makes money by betting on a company's stock price falling. We highlighted his short position in Brazilian oil producer Petrobras. Chanos says the company is the picture of how government mismanagement wrecks companies. It's also spending hundreds of billions of dollars to develop high-cost offshore oilfields. Chanos is bearish…

As you can see from the chart below, shorting Petrobras was a heck of an idea. The stock has collapsed from $30 per share to less than $20 per share in just a few months. As of yesterday's close, that trade is up 17.5% in just two weeks.

20120516 DIG_PBR-1

Again, with a subscription to DailyWealth Trader, you'll receive ideas from the world's best investors and traders. You'll also receive a priceless education on how to act on those ideas. If you're new to trading… or interested in furthering your market education, you'll get tremendous insights from DailyWealth Trader… at a very low price. You can sign up for our upcoming educational video and receive information on a trading technique we normally charge at least $1,000 to teach here.



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Gold & Precious Metals

Gartman: Don’t Buy Gold – But Others Disagree


Posted by Dennis Gartman via Resource Investor

on Thursday, 17 May 2012 00:00

Trader, economist and Gartman Letter publisher Dennis Gartman knows when he is wading into a hostile crowd. He brought up gold in his keynote address to the New York Hard Assets Investment Conference this week and immediately acknowledged his contrarian views:

“What should money be doing?” he asked.“You’ll not like me for this. Don’t put it in gold. It’s not going up any more. It was a great trade for three years. It was a wonderful, ebullient, beautiful, marvelous trade for three years. Ain’t been so good now for the last year and a half. It sucks. There’s a really insightful economic perspective. It’s making new lows, doesn’t make new highs, keeps falling, everybody you know wants to buy some. It’s not a safe harbor. And I object when I hear people – they actually interviewed me on TV today and said, 'Mr. Gartman, what do you think about gold? Is it a safe harbor?' I said, 'It never was.' Safe harbors don’t move three and four and five and eight and 12 and 15 percent a year up and down. Safe harbors are safe. Gold ain’t safe. It’s a currency. It’s something you trade. Sometimes it goes up, sometimes it goes down. But to get married to it is ludicrous and is wrong. Don’t fall for that. Right now if you look at a chart of gold each low is lower. Each high is lower. It will continue – mark this down – until it stops. But right now anybody who‘s bought gold in the past 15 months feels horrid about it. Don’t buy gold.

Where should you go? Who are the beneficiaries in the modern world. It’s simple: English speaking currencies ... Whether you like it or not, people are going to still tell you the United States dollar will cease to be the reserve currency of the world sometime in the future. Yes, it will – 150 years from now. I’ll be long dead. I don’t care, at that point. But who does the reserve currency status always inure to? Who is the reserve currency country through history? No question, always is the same thing: the dominant military power. Period. End of discussion. And we are, we are now, we shall be, and as far as the eye can see we will continue to be the dominant military power.”

Gartman departed after his keynote address to the conference without taking questions while wishing his audience “good luck” with their trading.

But his view came back later when analysts gathered for a “Bulls and Bears Debate” keynote panel.

“It was wonderful to see the anger, angst and depression through the room,” said panel moderator Rick Rule, founder of Global Resource Investments Inc, a unit of the Sprott Group. “I always enjoy a speaker who makes an impact on the audience, irrespective really of the nature that impact. So who of you wants to be the anti-Gartman. I know for sure who’s going to take the Gartman case, so I’ll ask him later but who would like to be the ant-Gartman, any of you?   

Ian McAvity, editor of Deliberations on World Markets: … I’m as bullish as can be, in large part because I’m seeing such extraordinary negativity and I’m also seeing the speculation as having been wrung out of not only gold but also silver and the mining stocks …The only missing ingredient that we've had is what I call a diaper change moment in the S&P that lets the margin clerks butcher the stocks down to what I think will be the buying opportunity the likes of which we haven't seen since the fourth quarter of 2008, 

Rule: I have two questions for you. We’ve just been through our own mini diaper change moment. What would you say about the fact that we've experienced ours and they haven't experienced theirs yet;  

McAvity: By a diaper change moment I'm talking something on the order of a thousand point down day in the Dow. We haven’t seen anything like that volatility yet.and the only question in my mind is whether it's originating from the potential evaporation of the euro or from somebody dropping some nasty stuff in Iran.

Rule: I take it then – before I turn Paul loose on you – that the part of the thesis that Mr. Gartman propounded which was in some fashion recovery is nigh is not something you have any particular truck with.

McAvity: Well the economic recovery only shows up in two data series I track. That’s the issuance of food stamps and the growth of the national debt. If you look at housing starts and unemployment there is no evidence that Joe Sixpack is experiencing a recovery.

....read page 2 HERE

sc


 


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Timing & trends

The Markets


Posted by Mark Leibovit via VRTrade Platinum Newsletter

on Wednesday, 16 May 2012 13:39

A clip from Mark's premium service:

The stock market is rallying today on good US economic news and hopes Greece won't leave the euro after comments from German Chancellor Angela Merkel. Nevertheless, traders are playing it safe and the market has given up most of its gains. The Dow was up as much as 90 points but is now up 47 or 0.4%. The S&P 500 is up 5 or 0.4% and the NASDAQ is up 5 or 0.2%.

Industrials are the biggest winners (XLI +0.5%) after GE (GE +4.1%) said its finance unit will pay a special dividend of $4.5 billion to the parent company this year.

Retailers are trading little changed (XRT +0.5% and RTH +0.1%) after Target (TGT +0.4%) reported better than expected earnings but JC Penney (JCP -17.0%) and Abercrombie & Fitch (ANF -12.9%) reported disappointing results.

Treasuries are down slightly after this morning's good economic news and as traders shift into equities. Yet, Treasuries are holding up well considering the "good" news, showing that traders are still cautious about the economy and sovereign debt crisis in Europe. The long bond future is down 3/32 to 146 10/32.

The US Dollar Index hit is up for the thirteenth straight session, its longest run since 1985, after the US reported good economic news, in contrast to the troubles being suffered in Europe. The US Dollar Index is up 0.174 to 81.395 and hit a four month high of 81.573 this morning.

The European Central Bank said it will support Greek banks amid rumors that it was considering a freeze in funding.

Greece's 10-year interest rate slipped 0.48% to 28.92%. Spain's 10-year rate fell 0.05% to 6.30% and Italy's by 0.3% to 5.83%.

The Euro is down 0.05% against the Dollar.

Precious metals are trading mostly lower as the Dollar rallies again. Gold is down 2.00 to 1542.30 after hitting a new 4 ½ month low of 1526.20 this morning. Gold is now testing support from the 1521.80 low set on December 29. Silver is down 0.10 to 27.62 after hitting a low of 27.13. Platinum is up 3 to 1430 after dropping to 1418. Palladium hit a 5 ½ month low of 586 this morning and is now down 3 to 588. Copper is down 0.0400 to 3.4775.

Oil is currently down 0.98 to 93.00 after hitting a new six-month low of 91.81 this morning.

The Energy Information Administration said crude inventories rose by 2.1 million barrels in the latest week, above expectations for a 1.5 million barrel increase. Gasoline inventories declined by 2.8 million barrels versus forecasts for a smaller 480,000 decrease. Distillate supplies fell by 1 million barrels versus forecasts for a 120,000 increase. In total, petroleum supplies fell by 1.7 million barrels while analysts expected an increase of 1.1 million barrels.

Housing starts rose 2.6% to a seasonally adjusted 717,000 in April. Economists expected starts of just 690,000.

Industrial production rose 1.1 percent in April, its biggest increase since December 2010 and well above forecasts of a 0.7% gain.

------------------------------------------- 
CANADIAN NEWS:

The Canadian market is trading mixed as equities rise but mining stocks remain under pressure. The TSX is up 35 or 0.3% but the TSX Venture is down 7 or 0.6%.

The Canadian Dollar is falling as traders buy US Dollar. FXC is down 0.36 to 98.39.

Manufacturing sales rose 1.9% in March, the biggest increase in six months.

------------------------------------------- 
From Yale Hirsch:

My 1987 Stock Trader's Almanac was dedicated to THE NEW PROGNOSTICATORS.

Mark Leibovit was one of them. I evidently had insight as Timer Digest named Mark the

"Number One Market Timer for the 10-year period ending in 2007."

For the 10 years ending 2009, he was #2 intermediate Market Timer.

He is also their #1 Gold Market timer for 2011.

This book should be REQUIRED READING for anyone who trades.

--------------------------------------------

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Here is the link to Traders Press:

http://www.invest-store.com/vrtrader/

Here is the link to Amazon.com:

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--------------------------------------------

Mark Leibovit, From Timer Digest August 8, 2011 issue:"TIMER OF THE YEAR RACE AT JUNE 30 "We congratulate Mark Leibovit of VRTrader.com, the 2011 Mid-Year leader.

Mark Leibovit is also currently ranked #2 Gold Timer and was ranked #1 for the second-half of 2011.

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Currency

The Mistake You Are Dying To Make...


Posted by Victor Adair via Union Securities

on Wednesday, 16 May 2012 09:07

Back in mid-March when we first talked about The Mistake You Are Dying To Make...specifically the temptation to buy gold shares because they were "cheap" relative to where they had been and "cheap" relative to gold...which somehow meant that buying them was sort of "value investing" for the long term...my advice was, " Don't buy a falling market...as Gartman says, when a market is going down you have no idea how far down...down is." Well the index of gold shares is down ~20% since then, and gold just closed at a new low for the year.

People will have opinions about what a market SHOULD be doing and they will act on those opinions. For instance, they may think that gold SHOULD be going up because the central banks are printing mountains of currency. They think that gold shares are a "steal" because they are "cheap" relative to gold, therefore it makes sense to buy into a market that is falling like a stone. I've been short gold since Feb 8 because it seemed to me that the market was going down, not up.

It reminds me of my description of a market strategist: he is a guy who forms an opinion about a market, gives you several reasons why he is right, and will stick with his opinion through hell and high water. When the market goes against him he digs in his heels instead of cutting the trade and says something like, "It's taking longer than I thought for my view of the market to manifest, but I'm more convinced than ever that I'm right and the market is wrong."

I look at a market and see where it has been and where it is now. I form opinions about where it might go next, and why...I call that anticipating. But instead of selling a market because I have a bearish opinion I wait for some confirmation that the market is doing what I think it SHOULD be doing before I put on a trade.

I realize that markets often behave differently than I think they SHOULD. That tells me that I didn't (and couldn't) know everything about that market when I formed an opinion about where it SHOULD go...something that I hadn't thought of or wasn't expecting came along and had a big influence on the price.

As a trader I have market opinions all the time....I'm always looking for an opportunity. But since I've seen so many of my opinions (and the opinions of others) turn out to be wrong I don't want to "bet my life" on any of my market opinions. I'll wait for a confirmation to put on a trade but if the trade isn't working I'll close it out rather than deny the fact that I'm wrong on the trade. I want to clear my mind...be open to seeing what is happening in the market...and find an opportunity to get into a trade that works...rather than wasting time and money on a trade that is not working.

I can't imagine how much money has been lost by people buying into a falling market thinking that they were getting a bargain because it was cheaper than it used to be...only to watch it fall lower and lower...as they move more and more into denial over their losses. Maybe that's human nature, but its not a successful trading strategy!

I continue to trade on the expectation that stocks and commodities are headed lower and the USD is headed higher.

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