Wednesday, December 17, 2008

Looking for the exit

In terms of short-term trading tactics. To review the big longer-term picture:

*Secular and cyclical bear market in general stocks is ongoing
*Secular bull market in gold stocks in effect and the cyclical bear market within this secular bull has ended and a new cyclical bull market has begun
*Cash is king during the current deflationary bust but I trust gold more than U.S. Dollars as a cash equivalent
*"Buy and hold" general stocks for the long term is a foolish proposition right now

Now the short-term picture:

*The 1929-like crash in general stocks ended November 21st and we are in a bear market rally that should last until March or April, 2009. The first mini-leg of this bear market rally is just about over
*The first bull market mini-leg in gold stocks should end before the month is over.
*U.S. Goverment 10 and 30 year bonds are in a blow-off top for their current bull move

Today, I took profits on FCX and UYM and tried unsuccessfully to take profits on my SSO (double bull S&P 500) calls. I immediately plowed my profits into SRS (double bear on U.S. Commercial Real estate) at roughly $53/share. This is a very short-term play in an attempt to make 15-20% in a few weeks during the pending mini-correction in the stock market.

I am holding my gold stocks for a little longer but plan to sell after one or two more days of strength as this sector is also ripe for a correction soon (GG & RGLD are my primary current "trading" stock holdings).

Gold closed up for the day (as of 4 PM EST) but gold stocks closed down - this is not a good sign and suggests the impending correction in gold stocks is near. This impending mini-correction should last 4-8 weeks and will provide another outstanding buying opportunity.

I'll leave you with a "bubble alert" chart in long-term U.S. Bonds, with the ETF that has ticker TLT serving as an easily tradeable proxy:

This is what happens when deflation meets a government that gives risk-free money to banks that don't want to lend to businesses or consumers. Think about it. Zero percent interest money that can be invested in "safe" U.S. Treasury bonds at 2-3%. The credit crunch continues unabated despite the first helicopter drop. Sorry, Ben...

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