Don’t let anyone ever tell you bear markets are tough. At least bears are conditioned for rapid snap-backs and so set tight stops and get the heck out of Dodge when the inevitable reversals come.
But try trading a true, secular bull if you want some real whiplash action. The older these things get, the more ornery and difficult to ride.
Take for instance the gold and silver plays we’ve visited in the last week. You wouldn’t know you were in the midst of a nine-year secular bull with the wall of worry we’ve been climbing since our original early month break over $1,000 in POG.
And yet, despite the pullback under $1,000, there’s no question we are still in a strong bull in the precious metals, and the dollar is still in a death spiral, despite it’s launch today. Still, I lightened on some leverage today, as a result of [[SLV]] dropping below it’s long term 61.8% fib at $16.04. Specifically, I got rid of the 40 $9 strike December Silver Wheaton Corp. (USA) [[SLW]] calls I’d bought a few days earlier. I’m not sure silver will stay under $16 here, but prudence forced my hand on this one.
For that, I’ll never forgive Prudence.
Still loaded to the gills on the precious plays, and gold looks like it’s remaining close to the $1,000 mark even as the price of silver plunges down near $16, a significant level, I believe, as that makes gold over 62x the price of silver. That can’t last in this market.
I am going to continue to sit on my hands as I’ve been doing, and work the margins for the most part. If you feel you must trade, I’d focus on the more volatile plays, like IAMGOLD Corporation (USA) [[IAG]] which will likely experience a pretty frightening bounce here in the next two or so days.
For Prudence and her crew, I like [[GDX]] , which may drop all the way to $42.50 here first. I also will look to accumulate Royal Gold, Inc. [[RGLD]] — my superstar– if it gets any cheaper. This is a great place to start on RGLD as well, if you have not yet had the chance. [[CDE]] will also bounce hard, when it finally decides to do so.
Patience.
That’s all for now… more tomorrow in the comments section.
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Jake, are you hedging at all with any puts?
What would be the best way to hedge against pullbacks?
Thanks
I usually hedge with sold calls on my major positions, which is not a huge hedge for a change in trend direction. If I see that happening, I’ll just sell usually.
I didn’t even sell calls this time, however, so this drawdown’s a little more painful than most. I don’t think it’ll be much longer, however.
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“For that, I’ll never forgive Prudence.”
Coffee hit my keyboard on that one ;o))
You guys kill me.
Sorry I’m late with this today…
Louise Yamata on Bloomberg surveillance this AM (It might make a podcast later). Gold target $1,300 to $1,350. Could see pullback to $975 to $990. Regarding stocks, still in secular bear, but we may have seen the pivot low at 666. No new highs until next secular bull. Secular bear might last ~13 years (2000- 2013). Could see 2 (I think) more cyclical bulls in this cycle.
Jake what do you think about the dollar pop being caused by knowledge of new Iranian enrichment? I think the time frames line up. If so we’ll be headed back down in short order.
Sorry, missed this when I just posted below. I think Louise lines up w. a lot of longer term bears thinking, including Gary Savage over at Smart Money Trader. The Fed wins by wrecking the dollar again.
This bring to mind the old pre-Reagan years when everyone took for granted that high taxes hurt no one but “the rich.” When Reagan (and really Laffer and Friedman) educated the masses on how they were only cutting their own throats by stymieing capital formation, that whole “tax the rich” Marxist idiocy went away, and now has to be completely covered up by even the hardest Left Dems like Obama, who if you recall campaigned on TAX CUTS (lol!).
Now I wonder if the “cat will be out of the bag” on dollar destruction soon as well. People are getting smarter and knowledge is being disseminated quicker every day. How much longer will people allow themselves to be robbed by the Fed by way of dollar inflation?
I’m giving them into this next cycle, and we may see something akin to the Reagan Revolution, only this time regarding dollar destruction instead of high taxation of capital and income.
I just hope it doesn’t take a currency crisis to bring about that “change.”
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I remember during the Asian currency crisis watching a Jim Rogers interview. He was asked about the role of speculators. His reply always stuck with me: “when you have a currency crisis the locals are selling”.
We’re just warming up right now. When everyone is shifting all their 401k money to whatever international exposure they can we will see some real fire works. Everyone keeps talking about all of the cash in money markets that is destined for the stock market. The assumption is “our market”. That maybe an oversight.
UUP is beginning to sell off (along w. the dollar as DXY) and this may be the time to start nibbling on RGLD if you have not gotten any yet. GDX and SLW as well. Silver is firming from it’s lows.
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Hey Jake…..just saw this post and was incredibly happy to see it. Saw the GDX and SLW hold relatively nicely on that fib, so was anxiously buying the dips the last 2 days. No RGLD here but sure want some more of that GG, just couldn’t pull the trigger today. I will probably regret that. Nibbled at some AGQ as well, but was too similar to the GG to get overly excited about. I agree totally with the UUP / DXY. If it weren’t for short covering it would be all over for it. Looks to me like a couple more good weeks before a person has to get too excited, and even at that, it will be a slow recovery. My line in the sand for the UUP is drawn at 23.05, not sure what you see with it.
You mean your upside line in the sand? Yeah, that’s the August 5th low that was blown right through (on a gap down recently).
I think you an even use $23, because of that gap. If you go back to the summer of 2008, you can see that the dollar gapped up from that same $23 on 8/8/08. It was all over but the whinging after that.
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My downside target is still 21.95 or so.
I think we are extremely close to oversold here at these levels… and that GDX or GG are a good bet here.
I actually hoovered a little ANV right at the close… it held support and well…. I couldn’t help m’self.
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Yes, UUP upside to breakthrough 23.05 before I want to start scaling out. Target to the downside is sub 22, I just don’t know how far yet. I will take a look at the ANV, it wasn’t on my buy list. I really appreciate your anticipation of the metal plays Jake. I considered taking some of my SLV off the table last week, but held. Average cost of 11.65 for me. Piker size portfolio for me (At least from what I gather when I read iBankCoin material). I just couldn’t do it. Maybe some comes off by the end of the month, but I am really looking for at least a double even at my cost average.
I really do see that. FWIW, I’ve been buying SLV from about low 5’s to a bit over 13, and I am not planning on selling it (or GLD) for a while.
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Jake:
Worth nibbling away at Mon down here?
Nibble only. I’ve got a 61.8% short term fib at $77.02, since broken and a 50% long term fib (from the $6.21 lows to the 143.63 high) at 74.92. I’d be more confident seeing it bounce at that $75 area.
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Pretty funny article poking fun at the most recent Twitter valuation levels.
I think Uncle Howard uses this calculation.
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TLR sporting green today.
Yeah, wow. Couple of other goldies came green today — IVN, AEM, GSS, GFI… and NGD was flat.
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I’m glad I didn’t buy any when gold was higher after selling on the initial rip. Do you know ~the correlation between gold stocks and the physical price of bullion?
Any thoughts on how far this pullback could go like say maybe $950’s an oz?
Maybe $960-75. I’d be surprised if it went any further than that.
Last I looked gold was trading something like 6x the $XAU, which is historically pretty high (though it was like 11 times back in November). Anything higher than 4x is historically high.
Silver is also historically underpriced at these levels… over 60x vs. about 40+ in recent history. (back in the 19th century silver was “fixed” at 16 oz to one ounce of gold).
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Giants pitch an away game shut-out!
3-0 with schitty KC up next week.
Sorry KC Bill, but they do suck.
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Plus, the American League East CHAMPIONS host KC M,T & W after sweeping up the shitty Red Sox.
No need for the AK today.
RIP William Safire
Yeah, I saw that, thanks for mentioning.
Did he end up retiring out by you, or was that Max Boot I’m thinking of?
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Not sure where Mr. Safire retired. Kind of hard to imagine him leaving the East Coast, though.