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
In the morning I mentioned about WOF+ , a weekly news letter
which will be delivered to your inbox free every Sunday evening. The 1st
report is appended below:
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me in Twitter (@bbfinanceblog)for the real time market updates and calls.
World of Finance Plus
report: September 30, 2012, Sunday.
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.
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 1/3rd
of 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.
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.
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.
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.
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.
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
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.
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:
on them as we get closer.
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
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:
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
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