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We may get some pull back here in the golden markets, as — ironically — the dollar declines and the Euro strengthens. This reversal would be a sign of diminishing panic, and may be taken as a cue for traders to offload some “bunker assets” like gold and silver and lovely platinum, the precious platypus of heavy metals (much like the late Ronnie James Dio, R.I.P.).
But as I said to a faithful reader today — do not forsake the bull for the distress of an uneven ride. Bulls can be ornery and force one to pour over the Yeller Pages for the solace of a chiropractor, but they are in the end, powerful avenues to wealth for long term trend traders. Until much further notice, we are in a PM bull, and all eyes should be focused on the quality names.
As a result, I must fall back to Allied Nevada Gold Corp. [[ANV]] again, despite their recent capital raise that has their stock back on it’s (round) heels. Still the weekly path could be no clearer here for those still waiting to participate:
The daily is a little more hairy but describes some nice entries. I like the 20-day here ($18.64) , but only if it holds like it has been since March. It’ll be worth waiting for, I think.
On the silver side, I liked [[EXK]] ‘s action today, but I still love Silver Wheaton Corp. (USA) [[SLW]] for the long haul. Here’s a look at the weekly chart and SLW’s quest for a more tolerant planet:
And here, again, the considerably uglier daily chart, which I believe is still under voice-command until further notice:
In short, I think opportunity will be knocking soon, in it’s best Vince Sham-Wow “Limited Tyme (sic)” pitch guise. There will be others (for example Cree, Inc. [[CREE]] and Veeco Instruments Inc. [[VECO]] who shined through today) but these are my two current foundation plays.
I am leaving Royal Gold, Inc. [[RGLD]] out only because it’s a different royalty animal, but I’d get any of that that was available as well, should we dip on the PM side.
Stay strong, despite the mugfuls of black charnel soap bubbling in your Campbell Soup Kids’ cawfee bowl.
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jake,
your silver stocks vs physical silver weighting rationale, if you would care to say?
Physical silver is an important part of your base portfolio… I’d own between 5-10% as insurance against inflation. 100 oz silver bars seem the most portable, but some prefer 400 oz bars.
Silver stocks are, save for SIL and SLW*, miners that are leveraged off the production of silver. Ostensibly, in a rising silver price environment, given decent management and cost containment, miners should increase in value faster than the underlying physical price because of that operational leverage.
As a consequence, I’m more heavily weighted in miners than physical and physical substitutes (like SLV, the silver ETF).
* (SLW is a royalty company that receives silver at a set low price in exchange for financing)
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Thanks much, Mr. Jake
Jake,
After the precipitous drop (flash crash), I decided to take your advise and get out of my mutes and set myself up with an online broker. Luckily, I had gotten out of the market well before the crash, but it made me reflect on what might have happened had I been in a mutual which didn’t allow for the use of stops.
So now I’m in the process of transferring money to e-trade which should take awhile.
In any case, if you don’t mind ,I’ll be asking you some questions with regard to trading style, stops, etc. and lots of stuff I didn’t have to consider when trading mutual funds, especially those that mimicked the s&p.
So now I’m thinking of stuff like how many positions do I want to monitor, how do I set stops, etc., as I don’t really want to spend my retirement glued to the computer and since I get up in Hawaii when it’s about 12 eastern time. I wish Gio felt better as I’m sure he could advise about trading in Hawaii.
Regardless of all of that, I will finally be set up to consider your suggestions by being able to directly buy stocks.
Unless I think we are at the cusp of a downturn, I rarely set stops. Most of the time I’ll sell calls if I think we’ve overshot but I still like the stock long term.
A lot of stops got reamed last week. I shouldn’t worry too much about watching the market night and day. You should be reasonably comfortable in a limited amount of stocks to play for the medium to long term. This day trading is for the birds.
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Hawaii, your question was not directed at me. However, I feel compelled to warn you about the slippery slope that is stop-loss trading. Consider this: if you were to have traded stocks without stops when the flash crash occured, you would, at present, be down only a slight amount from when that happened.
In fact, having participated in some buying while the crash was happening, I was up a good amount immediately thereafter.
These gains were at the horrible expense of traders who cling to stops.
It is reasonable to conclude that much of the losses came from traders who were trying to use stops to protect their downside, as ironic as that must certainly sound. The problem with stops is that they are not adaptive to the uniqueness of the moment. Once triggered, they order you to sell, regardless of the price you are presently at. Many people saw their stops, intended to preserve their gains, thus guarantee their losses.
The popularity of stops comes from their ease of use as a poor man’s hedge. However, as a hedge is concerned, they are a rather unstable and dangerous form. The true purpose of a hedge is to reduce your exposure to losses. As I’ve already said, stops don’t necessarily do this. There are better hedges in the form of options, partial shorting, and, of course, selling.
Do yourself a favor, my friend. Keep the majority of your wealth in stocks with good dividends, which will adjust to inflation as businesses adapt to pricing. Keep a smaller portion in quality commodities and fixed income bonds. Keep enough cash to pay the bills for a year. And keep yourself away from all debt.
Thanks Cain,
I’ll keep your points in mind and probably learn how to hedge eventually, although right now I’m still having trouble getting my head around it. As for options, I’m definitely not that sophisticated yet, but I’m sure I’ll learn.
My thinking on stops was that if I desire to become a part time trader, I might be able to place a limit order at night with a stop to know ahead of time the magnitude of loss per position if things went wrong.
I really don’t want to commit to sitting at the computer all day.
If this is way off, please let me know as I understand from the few books I’ve read that the use of stops is still much debated.
The use of stops is more limited to computer program traders who are already dedicating a portion of their wealth to mechanical type systems. And, they are considerably more sophisticated when writing the algorithms for their stops. For instance, you will frequently see distinguished gentlemen like Woodshedder talking about his stops. They are to aid in increasing statistical outcomes that are desirable.
If you’re interested, they’re the best ones to talk to.
I myself can count on two hands the number of times I’ve used stops, and they were all stop gains, because I felt a melt up brewing and didn’t want to miss out on a favorable exit point.
That being said, I would personally recommend that you:
a) read quarterly SEC documents, and learn how to spot questionable practices, so you can avoid shit bombs that go to zero, like GM was.
b) commit to holding some portion of your portfolio through thick and thin, strategically adding to it or reducing it, but never getting rid of it. You can determine the best choices from point a).
c) brush up on Beta theory and how choosing the right sorts of stocks will help give you plenty of time to exit in poor conditions.
and, if you insist on using stops;
d) do so responsibly and on only a select portion of your portfolio. Do not rig your life savings with nuclear material, because there are men in this world who are dedicated to striking your positions with uranium hammers, trying to fuck you over. We saw their presence only a few weeks ago.
Are you Vking(ing) it today? SSRX
I’d like to see it clear $12.75 with some gusto, here, King of V.
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I say if it goes above that level we strip the “nymph” down and make it “rain” while she pole dance’s for our amusement…
Sounds like you picked a bad day to stop snorting glue.
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Sold a little…the problem with this stock is it’s liquidity…have like 15,000 shares left.
Zee Germanz banning naked short selling as of 12 midnight…
As nymph mentioned earlier on the good docteur’s blog.
Mr. Gint
We’re all counting on you…
Dollar spiked to almost $87.50 this afternoon and silver and gold stubbornly in the green.
And what of pasta? Not far off my last buy at $41.88.
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Jake, Fly mentioned that the market’s going to go down with Germany banning short selling (just like it did here when it was banned in Sept ’08). How do you see that affecting the PMs now? From eyeballing the historical charts, all I can figure out is that the PM’s went down and then bottomed and recovered ahead of the general mkt…Not sure what other thoughts/perspectives you might have on this matter. Thanks for your patience in helping me understand these things:)
And, yes, the PMs did hold up much better than the general market today…PHEW!
I will have two of those with lips on the side…
There was an album years ago by Judas Preist called British Steel. And on that album there was a song that would exemplify here:
Called “Metal Gods”.
Those who are about to perish in the market salute you!
Jake, GG , GDX and silver look good here on the pullback. Gartman said to get out of gold on CNBC, do you agree or is he too early?
If you “get out of gold” when will you get back in?
This is not a trade for me.
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Tim Knight has declared that “Gold has officially jumped the shark”.
His evidence is the news that Sears and Kmart are offering a “Consumer Gold Buyback Program”, wherein shoppers can obtain “ProKits” to sell their gold.
Mr. Knight fails to understand the distinction between a buying frenzy (which would signal a top), and a scheme designed to get poor people who don’t know the value of their gold to unload it at a huge markdown. When Sears and Kmart are actually selling gold bullion, that will mark a top.
Get it? Joe Six-Pack buying gold = top. Joe Six-Pack selling gold = not a top.
Mr. Knight also trumpets the news that GLD is his “largest short position by far”, though we can expect him to claim he covered at a profit should gold spike to $1300.
You have to wonder about a man who feels the need to short a secular and cyclical bull market.
Jake would be smiling his face off if TIM got his ass reamed on gold shorts.
Unfortunately TIM’s one good trading skill is he always sticks to his stops so it’ll never happen.
There’s not a bigger idiot on the internets, and that’s given substantial competiton.
I just hope for his kids’ sake he gives up what he calls “trading” soon.
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Jake,
I had bought VECO at 43. Today I got out, taking a micro haircut. It’s breaking down it seems to me. Relative strength-wise, CREE is stronger. So if it goes to mid 60s, I’m adding there. AIXG took a big hit, too.
VECO is right on support as is CREE(maybe a $1 above) but VECO just took a little longer to get there.
Both are great companies and now would be a good time to load up if the market wasn’t insane and I wasn’t already 58% long. One of those situations where you have to just buy and deal with the short term pain. I’m getting my ‘fuck why didn’t I buy that’ ready for later.
The market is getting stupid and starting to piss me off so I may just go for it anyways.
Kinda like a mini version of Jan/Feb 2009 when I said ‘Fuck everything’ and just sold puts galore.
I was the same way in the period. Jeez, that was a painful time.
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From the way back machine, R.J.D., belting Rainbow in the Dark , in 1983. RIP.