W.O.F +

By -

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.

Gold and debt ceiling
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 1st
report 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
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Thanks for reading http://bbfinance.blogspot.com/  join
me in Twitter (@bbfinanceblog)for the real time market updates and calls.


World of Finance Plus

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:
    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.
  • 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:
    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:
    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
    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
    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:
  • 1.    
  • 2.    
  • 3.    
  • 4.    
  • 5.    
  • 6.    

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:

401K Plan Allocation Current

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:

401K Plan Allocation Future
The principle will remain the same. Keep it simple. 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