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Three Charts - for the HIG Meeting

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Three Charts - for the HIG Meeting

 

"Waiting for the dollar uptrend, to trigger a slide in stocks and commodities."

 

Following are the three charts that I mentioned at today's Investor's Group Meeting.

 

1)

US Dollar / DXY ... update

zzzzrd.gif

 

Bouncing off a long term trendline - as first drawn last week. It has held so far.

(Note that sentiment is the most negative yet - 3% Bulls - despite a higher high on trendline.)

 

2)

SPY / etf for S&P500 ... update : Latest 6mos

zzzz.gif

 

Being repelled by the long term moving averages (Fibonacci numbers: 377, 987 days).

Note that they have worked like "force fields" repelling the price move when it gets within 0.5%.

Will the approach this week (within 1.0%), be enough to turn the market this time?

Note the weak volume going into this test.

 

3)

12 months change in Gold versus Growth in GDP ... update

002xuz.png

 

Another drop in the economy (a "double dip") could bring a larger slide in Gold prices.

== == ==

 

A must listen podcast, is this fine interview with Felix Zulauf, of Barron's Round table fame:

 

FELIX ZULAUF

zulauf.jpg

 

Felix is on a similar wavelength with his thoughts, in this excellent interview on KingWorldNews:

http://kingworldnews.com/kingworldnews/Bro...lix_Zulauf.html

 

He spoke about a possible bottom in the "oversold" dollar, and a potential rally "into early next year."

He has some excellent comments regarding capital controls, and how they may come into the markets,

to restrict QE policies from endangering the stability of the surplus countries.

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Bubb,

Why did you chose a 978 SMA, out of interest? I've not seen that one before.

Actually, it should be: 987 days (BTW, a 1,000 d MA would be almost identical)

 

Fibonacci sequence:

1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987 ...

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COMPANIES MENTIONED at prior meetings

 

Last time (2 wks ago):

 

LAM.t / Laramide Resources ... update

lam.gif

"Buy the dips. This will be a billion dollar company someday. Uranium could be set for a run."

 

4 Weeks ago:

 

GROW / US Global Investors ... update

grow.gif

 

"Decent yield (4%+) , manages big Gold Fund. Should be rising with Gold price."

 

6 Weeks ago:

 

STO / Statoil ... update

sto.gif

 

"A good way to play Oil and the Norwegian Kroner." (I BOT $17.5 Oct. and Jan. Calls)

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Mentioned this week (in passing, but with further comments below):

 

RAB.L / RAB Capital ... update

rab.gif

 

("This is a interesting & volatile situation, and RAB could be undervalued if they can sort themselves out.

Wait and see if they get dragged down in a general selloff in global stocks, including commodity stocks, a forte of theirs.

I need to do more work on fundamental value, before adding it to my portfolio.")

 

... a related company that I also watch is:

 

RSS.L / RAB Special Situations ... update

rssj.gif

 

(NAV was about 40p, so is cheap at 27/28p. : NAV = 40.03 pence as at 14 October 2010.

But holds illiquid positions which could get dragged lower as the related fund heads towards liquidation in later 2011.

Maybe a Buy in the low 20's, in commodity pullback.)

 

For the latest NAV : http://www.digitallook.com/cgi-bin/digital...ername=&ac=

== == ==

 

RAB is losing top people, and key traders

 

Barings hires ex-RAB manager to run EMD currency fund

by Matthew Goodburn on Oct 04, 2010 at 10:37

 

Barings has appointed former RAB Capital fund manager Thanasis Petronikolos as a director in the fixed income and currency team as it looks to grow its emerging market debt investment proposition.

 

Petronikolos will be responsible for managing exposure across the firm to emerging market debt and currencies and will be lead manager on the its £169 million Baring Emerging Markets Debt Local Currency fund.

 

The fund was converted from what was the Baring Emerging Income Fund on 17 June, following demand from the firm’s institutional investors. It will have at least 70% of its total assets at any one time invested in local currency-denominated emerging market debt securities issued by governments, supranationals, agencies and companies domiciled in, or who have the majority of their business activities in emerging markets.

 

Petronikolos is based in London and will report to head of fixed income and currency Alan Wilde.

 

He has over 15 years’ investment management experience in emerging market fixed income and currencies and most recently had been responsible for investment decisions for the emerging market debt and currencies segment of the RAB Emerging Market Opportunities Fund

 

/see: http://www.citywire.co.uk/global/barings-h...atest-news-list

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WHERE MIGHT THE GOLD CORRECTION END ?

 

I have two key indicators I watch: One relates to GLD, and the other to GDX:

1)

GLD / etf for Gold ... update

003k.gif

 

Watch the 144d. MA - currently at about $120 and rising quickly to $124 (eqv. to $1270 per oz.*)

Key support levels below there are: $113 / $1157 and $102.5 / $1050.

If GLD slams into $1270 and $1157 with volume, support may break, signalling a bigger drop, perhaps to $1050-1075/oz. or lower.

 

*(I use a ratio of 10.24 for Gold to GLD)

 

2)

GDX / etf for Gold ... update

002g.gif

(Note: GDX contract was new, and volume rose as the index slid in 2008.)

 

Watch the 252d. MA - currently at about $49 and rising soon to $50.

 

... Silver / SLV - is like GDX ... update

zzzef.gif

 

Watch the 252d. MA - and the "green" support levels

 

NEM / Newmont ... update : weekly-2007

001hu.gif

 

The long term chart suggests an important long term top may have been made on Newmont Mining, the largest gold producer.

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Yes I know its a Fib number, but sorry for the lesson, but how many trading days is that/ converts into how many years etc.?

Well, for the US, I count about 252 trading days per year : so call 987d = 4 years

 

I also use the 48 month MA on my Monthly charts; here's

 

SPX since 1980 ... update

002p.gif

 

I think you will agree that the 48mo. MA works rather well.

 

(I have shared these "discoveries" with only a handful of people - like Dominic Frisby is one - but I suppose it will not hurt to spread this knowledge a bit more broadly now. I'm not getting any younger.)

 

Notice anything interesting in the SPX chart above?

How I read that chart is that we may be at a very important turning point. The 48mo.MA is about to cross below the 160mo.MA.

And that may signal the second big leg down in the post 2007 crash.

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A Great Chance - to unload those Juniors and Exploration stocks?

 

We may be seeing that now. CDNX may peak between 1900 and 2000. Ideally: 1950-70?

 

The CDNX (Canadian Venture Index) ... update

goldrel.gif

 

The CDNX is still rising ...while GLD and HUI are coming off their highs

 

CDNX Monthly ... update

cdnxmo.gif

 

CDNX Weekly ... update : CDNX-2yr-D : CDNX-6mo-D : CDNX-10d

cdnxwk.gif

 

Creeping up the the cliff's edge?

 

CDNX Daily ... CDNX-6mo-D : CDNX-10d

cdnxd6m.gif

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COMPANIES MENTIONED at prior meetings

LAM.t / Laramide Resources ... update

lam.gif

"Buy the dips. This will be a billion dollar company someday. Uranium could be set for a run."

 

:rolleyes:

 

Just cut my holding as I need the cash.

 

A classic top and tailed I think.

 

I think you could be right though, the break out looks decent. If I get some cash coming back in I may look for some future dips.

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:rolleyes:

Just cut my holding as I need the cash.

A classic top and tailed I think.

I think you could be right though, the break out looks decent. If I get some cash coming back in I may look for some future dips.

Actually, I sold some too, taking some profits. But hold onto a decent sized position.

 

If I wasn't bearish on stocks in general, I might have kept it all.

In fact, after studying the CDNX chart, and considering how that is driven by rising U stock prices,

I might have held the ones I sold a bit longer.

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Actually, I sold some too, taking some profits. But hold onto a decent sized position.

 

If I wasn't bearish on stocks in general, I might have kept it all.

In fact, after studying the CDNX chart, and considering how that is driven by rising U stock prices,

I might have held the ones I sold a bit longer.

 

Ive held mine for a couple of years (my first lesson in 'always use stop losses') and it obviously didnt fare well in the overall market pullback. Fingers crossed we should get another opportunity to get in

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Ive held mine for a couple of years (my first lesson in 'always use stop losses') and it obviously didnt fare well in the overall market pullback. Fingers crossed we should get another opportunity to get in

It was a wonderful buy when it pulled back to $0.71, the Low for the Year.

In fact, that was back near the level of a gap near $0.75 from back in 2004 when the stock took off, as Jim Dines recommended it.

 

I had an unfilled Buy order back then just 4 cents lower (at $0.71), trying to buyback in after selling near $1.00.

It is not always easy to finesse the trading in and out. In fact, it is rather tricky. I didn't realise that I would have to wait for years.

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Some good seasonal indicators are in this post from GEI's Gold thread:

Gold20Seasonal.jpg

Bit dated this, but fwiw the seasonal pattern has shown a dip going into November. Have a little more cash than I need so will be looking to make a purchase around the end of the month. Definitely my last purchase this time, as will have soon stopped earning an income. :)

Another chart:

comex.png

A late downturn, may mean a later bottom to the post-October dip.

comex.png

 

Please take this with a grain of salt, since it is unlikely to exactly fit the historical seasonal pattern.

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Some charts for those thinking of Buying Oil

"He also said oil would be $150-200 within 6-12 months from now and in 2012 the price of oil will escalate exponential

even higher when these scheduled wars take place." - Lindsey Williams

 

BUYING OIL - 2

 

Let's Look at the Oily charts

 

USO / US Crude oil etf ... update

uso.gif

 

OIH / Oil Service Holders ... update

oih.gif

 

XLE / Major Oil Companies etf ... update

xle.gif

 

The first thing you will notice in looking at these charts is the relative underperformance of USO, the etf for Crude oil. I warned about this possibility in an article, Buying Oil, published on Financial Sense back in Jan. 2009:

 

"Bob": How do you go long oil at $40? Have you got a tanker to store it in?

 

aaaku3.jpg

 

USO uses those contracts to hedge itself - and, since it must rolls its positions forward on a regular basis to prevent taking physical delivery, it is not easy to consistently do better than achieve the market prices.

 

Think of it as climbing a ladder. As each month goes by, USO sells one month's contract, and buys the next month forward. In the current market with its steep contango. there's a big premium to "roll forward" into the next available month. In other words, the space between the rungs is big, and it must pay up, to get onto the next month forward. In practice, management has some leeway, and they do not have to wait for the last days, or even the last month, to roll forward. But roll forward, they must, since they are not set up to take physical delivery.

 

Think about the impact this "rolling forward" behavior has upon USO's Net Asset Value.

 

Since USO has limited funds, when the the forward rungs in the price ladder are higher, it is going to have to buy only a smaller number of barrels each time that it rolls. So it might Buy March (at $46.07) and Sell Feb. (at $40.83)*. It is paying 12.8% more per barrel to roll, and so it will wind up owning 13% less oil, and there will be 13% less barrels backing each share of USO. This is why USO now trades at $32.37 per share, versus $40.83 per barrel for WTI. When it started, there was one barrel backing each share in USO. Now each USO share is backed by 0.703 barrels (using March's WTI price.) In addition, something that I am not factoring into these calculations is the cost of the transactions (small) and the administrative cost of running USO (not small.) That is why I say that you might even lose money with USO if the oil future curve stayed as it is now.

UNQUOTE

 

There was a big enough rise in crude oil, that USO holders did not actually lose money since 23 Jan. 2009, but the 16.5% rise from $32.33 to Friday's close of $37.65 pathetically underperforms the 89% WTI crude oil price rise from $46.07 to $87.01. XLE was better, rising from $47.06 to $62.31 , ie 32.4%%. And OIH was better still: up from $76.24 to $126.09 - 65.4%.

 

===== : WTI Oil : --USO-- : bbls : ---OIH-- : --XLE-- :

23 Jan : $46.07 : $32.33 : 0.702 : $ 76.24 : $47.06

05 Nov: $87.01 : $37.65 :0.422 : $126.09 : $62.31

change: +88.9%:+16.5%: -39% :+65.4% :+32.4%

 

There was a big enough rise in crude oil, that USO holders did not actually lose money since 23 Jan. 2009, but the rise from $32.33 to Friday's close of $37.65 pathetically underperforms the 89% WTI crude oil price rise from $46.07 to $87.01. XLE was better than the weak USO etf, rising from $47.06 to $62.31 , ie 32.4%%. And OIH was better still: up from $76.24 to $126.09; +65.4%.

 

Here's a chart showing the decay over time of the Ratio of USO to WTI Crude:

zzzzmu.png

 

When I first saw these chart and data, I thought: Wonderful ! There's an obvious trade - Buy OIH and Sell USO, as USO declines relative to WTI, and OIH holds up better, I will make money. But then I decided I should first look at how the Ratio of OIH-to-USO performed. Here's the answer:

 

zzzzyf.png

 

This shows clear cycles in the Ratio. And at the current level near: 3.4, we appear to be at the top of the cycle. It would be better to wait for the cycle to bottom (at near 2.8), and that should take at least a few weeks, if the historical pattern holds.

 

====== so take: USO as : :$32.00 : : $34.00 : : $36.00 : : $38.00

Expected OIH: High x 3.4: $108.80 : $115.60 : $122.40 : $129.20

Expected OIH: Low: x 2.8: $ 89.60. : $ 95.20. : $100.80 : $106.40

 

Looking at $36.00 as a sort of reasonable mean for USO,

A keY range for OIH is : $100 - $122

 

OIH / Oil Service Holders etf ... update

001m.gif

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SO WHO's BUYING IT?

 

28 Consecutive Weeks Of Domestic Equity Fund Outflows

by www.zerohedge.com

 

This is getting boring. The only question is whether we can hit 2011 with no inflows… 2012? 2020? $86 billion in outflows this year, means mutual funds are hanging by a thread on asset values continuing to go up, as they have no dry powder left whasoever.

 

Weekly%20Flows%2011.17_0.jpg

 

Cum%20Flows%2011.17_0.jpg

 

/source: http://www.elliottwavemarketservice.com/20...-fund-outflows/

 

Insiders are big sellers too.

 

Will the Fed wind up owning all US financial assets - while individuals buy Gold?

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A new future for Queensland should help Laramide's stock price

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A new future for Queensland should help Laramide's stock price

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