Click chart to enlarge The chart above shows the past 4 years of GLD, which tracks the price of Gold. We would never short a stock trading above an uptrending moving average, but we would lighten up on GLD at this point, and continue to lighten up on it if it advances from this point. We're not saying it can't go higher, but that if it does, it will inevitably return to its current price sometime in the next few months. In other words, it isn't about to get away from any potential buyers at this point. Don't chase it. Although very bullish, this chart looks ripe for a 7%-8% correction (at least to the low 100's).
14 comments:
Snot
Welcome back from wherever you've been. I hope this blog hasn't gone past the point of no return...
I've been 100% uninvested for the past 8 months. I'm just not convinced that any particular trend is worth following with my money. I agree with you more than ever about real estate. Here in Michigan, the deals abound, and I plan on continually adding parcels bit by bit. As for eventually investing in stock, I think, unfortunately, that I will be buying foreign for the forseeable future. I'd love to invest in domestic companies, but with the dollar weakening, and potentially tanking, I can't see the point.
I used to go by sbbuilder, but it's been so long since I logged in to this account that I couldn't remember my password.
Hi sbbuilder, hope all is well. We can revive this blog, but there's no reason to do it until there really is new leadership in the market. When that happens, we'll make it take off. Could be a couple years, though.
Regarding domestic stocks, we have to agree with you. 2008 has probably made millions of investors vow to never invest in the market again, let alone individual stocks. Who could blame them? Now we've got this great technical bounce from a severely oversold condition, but it's nothing more than herd mentality for now. We'd love to become either bullish or bearish, but we have nothing to go on. Everything just feels so neutral at these levels. Wouldn't it be nice to have oil go to $4.50 a gallon again? At least then we could call for Dow 6,500, knowing that Americans can't afford to weather that storm again. A catalyst (either good or bad) with that amount of clarity and predictability would entice us back into looking at something other than a position in just the indices.
Steve, by not investing in the last 8 months, you missed a 58% rally on the DOW and similar rallies in the other indexes. If you were afraid to jump in anywhere in that rally that many refer to as a "V", what would it take to get your money off the sidelines? There is always risk. It will never be a sure thing. Maybe you should put your money in 5% or 10% a month at a time and if the market turns against you, reverse the process. If the rally continues, just continue it at a comfortable pace with stops in place.
As for being afraid of putting your money into domestic stocks because of the weak dollar, it is the weak dollar that is responsible, in large part, for the rally of the last eight months. Watch the dollar. Every time the dollar goes up just slightly, the stock market goes down. According to Art Cashin, the major threat for a big correction is if there is a short covering on the dollar.
As for a new leader, consider GOOG. Their market cap is huge now, approaching MSFT numbers. They have billions in cash. They have zero debt. They can't grow at the rate of a small company, but they are still growing. They are acquiring smaller companies and developing lots of new ideas of their own and branching into new areas. They recently bought a small company which may mean they will have a chance to become your phone company one day. They have been developing software that works on-line for some time now, which is frightening to the likes of MSFT, as the Fools have been hyping for a year now. They are still the king of search and know how to make money on ads on-line. GOOG is at the top of its channel at the moment, though, so not a good time to buy it.
Steve, I live in Tampa, FL and you can buy lots for back taxes on nice property. I am staying away as we have so much property that it will take years for it to go up to a point I can make any money. I have develped lots and sold to builders in the past. I am running out of options to invest so sticking with stuff like oakbx and prpfx along with some etf's. If you come this way, I will show you some nice dirt. Good luck.
Considering it's near the top of its channel, each jump higher for the market tempts us to unload DDM and SSO more and more. Another 150to 200 points on the Dow and we'd be back to an all cash position. Maybe we'll get that tomorrow, if we're so lucky.
Google is a great company, but its market cap is too big for our taste. It may be the best leadership (along with AAPL) that the market currently has, but it's far from a new story. We're looking for innovation on a scale that takes us to the next level of technological development, whatever it may be.
If Meredith is right, the next leadership is financials taking us down:
Meredith
She caused the market to dip this afternoon. Imagine having that kind of power and not being in government.
who is she?
bri1444, I am spending winter in your neck of the woods and am interested in what kind of parcels you've got. I've developed in other states before. When you mention the back taxes stuff do you mean places like Charlotte and Hernando county or closer to the Tampa metro?
AK, Hernado County, write me @ bri1444@yahoo.com. Bri
Hi,
My name is Kirk and I am the founder of http://www.theoptionwriter.com. I found your site through a Google blog search I was doing this afternoon and wrote down your site to touch base with you. I was wondering if you are possibly interested in an affiliate program between our two sites. It’s very similar to AdSense. We would pay you 25% of the subscriptions you send our way and the same percentage of all the same recurring subscription payments (pretty healthy stream of income). I’ll be honest with you and say that you're not going to make $2,000 a month this way. However, most of partners are in the $100-$200 dollar range depending on your site’s traffic.
Please let me know what you think about this. We don’t give out the link to sign up because we are selective on our partners. So if your interested please let me know and I’ll send you the sign up link. You can email me back at kirk@theoptionwriter.com
Thanks for your time in advance!
Kirk, thanks for the offer, but we have no interest in generating income from this blog. It is just a forum for finding the next wave of leading stocks, and for killing time until then. -Snot
We just sold our SSO, but are still holding DDM. We'd be completely out if the market would give us what we want... another 100 point rally to the very top of the channel. We were wrong about the short term for gold, but that really is a toppy-looking chart at this point. Gold and the Dow cannot go up together for too long before one team wins. Either the economy is weak and people are flocking to gold, or the economy is strong and people are flocking to stocks. Can't have it both ways. We're hoping to be completely in cash by some point over the next week or two.
Good advice from Mark Hulbert 11/24/09 in Market Watch (c) Dow Jones and Co, 2009, means that a person either should be in cash or something conservative right now or have a hedge:
"Treasury bill yields are now as low as they were one year ago, during the darkest days of the panic and financial meltdown. . . . But why should rates be just as low today? After all, it would certainly appear as though today's economic and financial conditions couldn't be more different. Take the stock market, for example, which is coming off the strongest eight-month rally in decades. . . . I think it would be fair to say that the stock and T-Bill markets can't both be right about the financial risks that exist today. . . . Richard Russell, editor of Dow Theory Letters, referred to this situation as 'the mysterious disconnect... With many investors so concerned with safety, how is it that they are continuing to load up with stocks?' Regardless of which of these two markets you think is out of touch with reality, it is sobering that there is a huge chunk of the marketplace -- representing hundreds of billions, if not trillions, of dollars -- that not only disagrees with you, but thinks you don't even have a clue. This in turn should prompt all of us to double-check our assumptions, reassessing our investment rationales. A large number of us are going to be spectacularly wrong."
But then, the market could go sideways for a year or two as both sides wait in vain for a move. I'm focusing on dividends as we wait.
After this latest spending bill passage, along with its 2% raise for Federal workers, I'm more than ever sure that our dollar is headed for the scrap heap of world currencies. I will be investing in off shore companies from here on. The strong current pulling the dollar backwards will offset any meaningful gains produced by companies here. I realize that this analysis is oversimplified, but I think that the reasoning is sound.
One of the few compelling domestic companies that intrigues me is Google. I know that you panned it in a previous post, but this is one company that shows signs of not resting for one minute. Building and selling its own phone? That's gutsy. I like it.
Merry Christmas (not happy holidays, or season's greetings) to all.
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