It was a” hurry up and go nowhere” kind of a day. In the morning, around 8.30 AM eastern I sent out this tweet: “GMA. Going to be like yesterday. Risk rally on old stories and fade during the day. it has to break either way. Tiring” . Around 9.40 AM eastern this tweet;” Cash SPX opened with the same range of yesterday. Oil is selling off. PM sector is weak. We may get some selling later”. Then we had our little sell off and at around 12 noon eastern this one: “Well, we have the sell off and I think we are done for the day.rest of the day will be Chop Zone.”
There were lots of other tweets but basically those three sum up the day. More the reason you should join me in Twitter (@BBFinanceblog) so that we can communicate real time market action.
Coming back to the market, 1st let’s take a look at the daily chart of Euro:
To me, it looks like a bull flag and I think it will run towards 1.31 before it dives down again. Is it any wonder that markets are not selling off which everyone expects it to?
The short term cycles are down for few more days but as you know, I have changed my correction target to 30 DMA from 50 DMA and once we get a bounce from 1430 area, it will be time to go long. I am waiting for the corrections in precious metals but instead they are consolidating in this range for the next up move.
By the way, ED Yardani has this nice chart on Gold and Debt Ceiling level.
I do not see US debt coming down anytime soon, which means gold prices will go up and up.
In the morning I mentioned about WOF+ , a weekly news letter which will be delivered to your inbox free every Sunday evening. The 1streport is appended below.
I am sure, with every week, the report will improve more and will be a treasure trove of information for your investment / trading. Only catch is, initially, it will be limited to 1st 100 readers who sign up for the report. Read the report, see if you like it and send an email to :BBFinanceblog@gmail.com, with the subject as WOF+. I will contact each of you and set up the distribution. For more on WOF+ read here: http://bbfinance.blogspot.com/p/wof.html
Many of you have sent donation and many have disabled the adblock. Your support definitely makes it worthwhile to provide more and more free content. It took me almost four hours to compile the WOF+ Report 1. So, please help to keep this blog free and growing. After all, I can survive and devote time to the blog only when you extend help. I have also signed up with Amazon and a big link of Amazon is right next to the blog. When you need to buy anything from Amazon, do keep in mind that you can use this link. The holiday season is fast approaching.
Thanks for reading http://bbfinance.blogspot.com/ join me in Twitter (@bbfinanceblog)for the real time market updates and calls.
Weekly report: September 30, 2012, Sunday.
· Stocks: Bullish short term, Bearish intermediate term and long term. A top is due around November 9th – November 16th. Between now and the targeted top, general market is expected to remain choppy. While a run to 1550 in SPX is not ruled out, it will depend if SPX is able to close above 1460-70 convincingly in the coming week. A big topping pattern is being played out.
· T-Bonds: Neutral short term, bearish intermediate and long term. It is possible that the bull market in the bond market is coming to a close. The Fed now owns almost 1/3rdof the outstanding T bills and is able to manipulate the yield but it may lose the control over the yield in its pursuit of inflation. It may be time to take profits on TLT and reduce the exposure to the fixed income allocation.
· Gold and Silver: Bullish intermediate and long term. This is one asset class which falls in the category of ABCD (Anything Bernanke Cannot Destroy). The liquidity pumping by the central bankers of the world coupled with coming deflation will ultimately result in Stagflation. While most asset prices including equities will likely go down, Gold and Silver will likely benefit. The immediate price target for Gold is around $1900 and for Silver $ 40 by Mid-November. However a pull back to 30 DMA and / or consolidation in that range is required before gold and silver can start the upward journey.
· Oil: Crude cycles are down for the rest of 2012. With the global economy is a downward spiral there is no reason for oil to go higher unless there is a war. A war will be coming in our way sometimes in 2013 but for now Oil has more to fall.
· Grains: Corn, Wheat and Soybean have reached cycle top and I do not think there is much more upside scope for the rest of 2012. I would book profit and get out for now. The ETFs like DBA are a sell. However, US drought and increase in world population will keep the pressure on grain prices and longer term grains should be a part of everybody’s core position. End of the year would be a good time to review the possibilities of entering that core position. Right now, it is wise to stand aside and let the prices come down.
· Specific Stock: Apple: The immediate target is around $ 640 and bounce from there. It will retest its high of $ 700+ and only if/when it cross the high with conviction, we can think of higher price target. For now, I do not think Apple will be able to make new high. On the other hand, if we see a lower close than $ 640, then we have trouble ahead.
· Other DOW heavyweights: Other DOW heavy weights like IBM, GE , CAT or WMT are showing signs of topping and we need to keep an eye on them going forward.
· COT Report: The long position in Euro has reduced dramatically as explained before. Reading the COT report on CAD is little different. As Canada is the largest exporter of Crude to USA, it sells CAD and buys USD. Therefore the commercial position in CAD is generally always short. It is the degree of short which determines the direction of crude. As of last week there was 173K short vs.250K short of the week before. In other word, the CAD short position has gone down by 30% which is negative for crude. We can expect the crude prices to come down in near future.
T bond prices have a strong correlation with Jap.yen. The latest COT report shows that the Net short position in Yen is increasing and therefore we can expect the T bond to sell off in near future. This is consistent with the comments regarding the T Bonds mentioned above.
· Stock Picks: As of now we are waiting for the right opportunity to get invested. Be ready to come out of the position quickly and cut the loss if the things do not work the way we want them to work. It is always desirable to have a stop loss. These are the lessons I have learnt the hard way. Some of the stocks and ETFs I am looking at are:
More on them as we get closer.
· 401K Plan Manager: QEI has been in play but we have not yet seen the liquidity bursting the dam. May be the dam is getting filled up and somewhere, unexpectedly it will overflow. However he may think, Ben has no control over the un-intended consequences and flow of money in different sectors. As of now the Allocation model is as follows:
33% cash + Future Contributions = Money market Funds, Retirement reserves.
34% Equities = Keep it simple. Divide between blue chip stocks, Mid-market Growth Stocks and dividend stocks.
33% Fixed Income = Short duration, Total return & Real Return funds.
Going forward, we may need to allocate some funds to precious metals but it is not that simple.
From ehow: “Contact the company holding your IRA or 401(k) and ask about the availability of gold mutual funds and exchange traded funds. If you have a self-directed IRA with a mutual fund company you should be able to invest in mutual funds of gold mining stocks, or in mutual funds that track the price of gold. If your IRA or 401(k) is with a brokerage firm, you may also be able to invest in an exchange traded fund like the one that trades under the ticker symbol GLD. This exchange traded fund, or ETF, tracks the price of gold directly, so when the price of gold goes up so does the price of the ETF.”
Assuming you are able to invest in Precious metals either in physical form or in ETFS, Consider making regular investments into the gold portion of your IRA or 401(k) program. If your 401(k) program provides a gold option, you can allocate a portion of your regular investments into your gold investments. If you hold gold in your self-directed IRA, you can move money into that account on a monthly basis until you reach the maximum annual investment allowed by the IRS.
In that case the allocation for November should look like:
The principle will remain the same. Keep it simple. Reduce allocation from Equities and Fixed Income and increase allocation to precious metal sector. All new contributions for November should be held either in Cash or in PM sector.
And as we move towards the Fiscal cliff of 2013-14, we will continue to make changes in the allocation and do sector rotation while keeping costs down.
Please read the full disclaimer at http://bbfinance.blogspot.ca/p/disclaimer_12.html