I'm now sensing a breakout in commodities and miners (along
with a breakdown in the $USD).
(a) Spot gold currently 1338-> I think it may quickly
head to 1390.
(b) $USD spiking down to a one-year low.
(c) Oil prices @ 64.
(d) Traders are overly-focused on stock indexes, bitcoin and
cannabis. Absolutely no one is looking
at gold/miners.
Despite today's +2.4% move in GDX, I think it's the
beginning of a serious leg up.
If there's one sector that can run on a breakout, it's
miners. Reopening RYPMX (Rydex Precious
Metals) at the close.
Miners have been in a long basing pattern (over a year), and it's reasonable to think prices reverse right around here. However, I think odds favor prices breaking higher:
ReplyDelete(a) Negativity. No one is paying attention to gold. Any attention given is generally in the form of ridicule. That's the kind of asset I like to buy.
(b) Relative valuation. Over the past five years, the S&P 500 has returned over >+80%. Miners? -50%.
(c) Cyclical rotation. The $USD is beginning to decline in earnest. Commodities are beginning to lift in earnest. In my opinion, it's quite early in the cycle.
(d) Investor rotation. After stellar returns in stocks, investors are likely to begin looking at out-of-favor sectors.
(e) Global growth. Global economies are in sync. The need to replace aging infrastructure is likely to boost demand for commodities.
That's a pretty long narrative for a trade with a short horizon! Just trying to piece together what comes down to an intuitive trade.
2nd_ave, this reminds me of 2005, when global growth started picking up, inflation started going up, and gold+commodities started lifting. This seems to be the regular pattern in business cycles. Then, at some point, inflation will cause the Fed to raise interest rates so high that everything will crash :), and we'll start again...
DeleteHere is a chart of inflation expectations:
https://fred.stlouisfed.org/graph/?graph_id=87988&category_id=0
Notice, it has been growing steadily since the summer...
Thanks, David. I forgot that gold is also used to hedge inflation.
DeleteMy Achilles heel is the inability to stick with a trade. Odds are I'm out within 1-2 trading days. If I'm able to control the impulse to sell, the gains in this trade might be substantial.
NVTA is taking it on the chin after I sold it at $10. I wonder what's happening there now...
ReplyDeleteHey 2nd - I have been tempted to buy gold but I think there's a significant amount of people that view crypto currencies as a better play on inflation and hedge against fiat currencies than gold. I didn't buy into the crypto stuff at all at first. But I think for the younger generation they genuinely view it as a viable asset class...and that takes a large group of people that previously would have invested in gold out of the gold market. Follow Tom Lee at Fundstrat (previously with JPM) when you get a chance. He was right on the money about the overall market for the past 5+ years and he's been right on the money about Bitcoin etc for the past 12-18 months.
ReplyDeleteWhat is Tom Lee saying now? The 6-month Bitcoin chart seems like a perfect example of a bubble that has already popped...
DeleteWhich should bring even more people into gold now, if you are right and some of them viewed Bitcoin as an alternative...
DeleteHey David - Yeah my comment was quite ironic huh!? I'd imagine this is just another shakeout is what he's saying. Bitcoin has gone through 90% pullbacks before.
DeleteRIOT is moving quickly toward my target of $14. Placed a buy to cover limit order at that price, in case it spikes below $14 very briefly.
ReplyDeleteNice call, David!
DeleteKEM seems to have bottomed out and is on the way up again. Just bought some at $17.30 and placed a sell stop just below the recent low at $16.30.
ReplyDeleteLate post:
ReplyDeleteGold/ MIners giving back part of Tuesday's gains. All positions off here. Unfortunately, RYPMX (Rydex Precious Metals) will have to wait for end-of-day settlement (truly an unfair disadvantage for workplace accounts limited to mutual funds)->I will likely take a hit on the position.
DJIA +300 points to 26,100, probably setting a record for a +1000-point gain to a new all-time high. EEM (emerging markets) +1.39% to a new 52-wk high. Neither is a 'reason' to think markets won't continue higher. Against this backdrop, interesting to see red prints for FB (Facebook), AMZN (Amazon), and NFLX (Netflix).
Bitcoin briefly touched 9200 before bouncing back above 10,000. Is it time to buy? I'm not smart enough to know. (RIOT/ GBTC off another -5%/-7%).
RYPMX closed off just -1.24% (compared to a decline of -1.81% for GDX). Much of the difference can be attributed to the fund's largest holding-> FCX (Freeport-McMoRan), which closed the day up +2.3%. So a gain of +0.03% on the two-day trade. Sometimes (maybe even more than half the time), it comes down to luck. It's certainly not skill. I had better gains in individual mining stocks, but the gains were more than offset by losses in other trades (you don't wanna know!).
DeleteAs you all know, my trading style dictates taking (generally small) losses immediately. This often leaves me on the sidelines when former holdings take off the day after I sell (more often than I like to admit!). On the other hand, it enables me to maintain account balances at all-time highs.
YTD-> US/Global markets up between 4% to 5%. I'm up a little more than 1% (yesterday it was 2%!).
Very difficult trading environment for me. Having a hard time finding low-risk entries.
Picked up some ETH (Ethereum) and OSTK today. OSTK starts phase 2 of its ICO tomorrow, supposedly. I'm down on ETH - have been buying for the past 3 weeks with really small amounts.
ReplyDeleteBitcoin is bouncing today, which is normal after its sharp decline. On the 3-month chart, this bounce is barely noticeably, though. It hasn't even reached the previous support at $12500. RIOT is, naturally, also bouncing. It also hasn't reached its previous support at $23. Its high today was $21.44, which means that it did close the gap to the January 11 intraday low of $20.89. So it can continue its decline in an orderly fashion. :)
ReplyDeleteOSTK is currently at its yesterday's afternoon low of $72, so I figured I'll give it a shot and just bought some at $72.20. Placed a sell stop limit at just below its yesterday's low of $67.50/$67.20.
ReplyDelete"Bitcoin has gone through 90% pullbacks before."
ReplyDeleteBut not after its price has gone vertical...
David - Look at the 2011 (I think, can't remember) rally in bitcoin
DeleteDavid and I are on the same wavelength. Here's what I've been up to:
ReplyDelete1/19/18 @ 606 am:
All-out sprint in global markets since January 2.
What's interesting is that we've seen the same pattern play out (in condensed form) recently in two smaller sectors-> cannabis and (what they're now calling) cryptos. A series of gaps up that force sidelined investors to chase. Then the pullbacks.
One 'crypto' that I actually like is OSTK (Overstock). An e-commerce company that has aggressively bought into the bitcoin/blockchain sector, led by charismatic CEO (Pat Byrne). I think he's correct in asking 'What business are we in?'-> e-commerce is all about digital currency. I opened (@ 73) and closed (@ 74) one small position this morning to gauge the table. I may opt to open a longer-term holding.
1/19/18 shortly after the open:
Opened OSTK @ 71.90.
1/19/18 now:
OSTK hit my first sell limit order earlier today @ 75.48 (I try to avoid round numbers). My second sell limit higher (just below 77), but I'm happy with today's gains and taking off the second half now @ 74.95. One-day gain of +4.6% on 12% of the portfolio-> about a 0.5% for the port. Based on my usual benchmarks, better than current prints for the US indexes (VTI +0.39%) and the global market (VT +0.45%)-> another reason to cap the trade here.
Both RYWVX and RYWYX were closed @ 0730-> a net-zero transaction, of course.
Miners may have caught a bid here-> reopening GDX @ 23.6x. Also reopening a position in RYPMX (Rydex Precious Metals) at the close. This might be the only sector I'm willing to hold overnight (or over the weekend right now.
This thing habitually moves 10% a day. Just keep that in mind. I unfortunately sold at $74.3 today. There's a ton of news flow on this thing. I actually think the KR rumor was a rumor floated out to see what KR would trade like since there's a lot of institutions in that thing.
DeleteI kind of view OSTK's ecomm biz as a Travelzoo type business. I'm willing to bet if you give it another few years its worth squat. I don't know anyone that uses the platform. I've been approached by them to sell my products on there and they are very expensive and I don't see how I could sell at prices below what I sell them on Amazon. Anyway I think it's a dog. I see some people putting out these huge prices on the ecomm biz but I bet its worth $500m max.
The ICO exchange is a great idea, though, in my opinion. The stock lending idea seems good but I've been finding more and more companies offering this and I suspect that GS is coming out with something...
I don't think it really matters much that the ecomm biz sucks. I just don't see them getting a premium at all. There's so much hype around blockchain and its still early days, whether or not you believe its legit. And OSTK is the leader.
DeleteKEM -- the December lows might have been the long-term bottom for this stock. Moving my stop to my entry point at $17.30 so as to "not let a profit turn into a loss."
ReplyDeleteNice bump in OSTK today. Moving my stop/limit up to yesterday's lows at $70.50/$70.20.
ReplyDeleteI ended up selling OSTK too early today. Ugh. Nice catch David!
ReplyDeleteThe market is getting a bit frothy huh? 88 weekly RSI. Sure looks like we're heading for a short term spike type move. But I highly doubt we're near a top. Shorting is dangerous.
Bought back into OSTK today at $79. Gave up $5 on that flip.
ReplyDeleteHere's a good video for you - the gist is that ICO's (security ICOs, not utility) will eventually replace IPOs as well as bonds, asset backed securities etc...
https://youtu.be/vy36UUwfmAQ
Closed both RYPMX (miners) and RYEIX (energy) end of day.
ReplyDeleteRYPMX closed -0.03%, but RYEIX closed up +2.21%. I had 33% of the portfolio invested in each position, and ended the day up +0.73%. That puts me up +2.25% year-to-date.
Any other year, a +2% gain at this point in January would be reason to celebrate!
Closed OSTK at $77.5, loss of $2.00. Bought it higher and sold it for a loss. I guess I'm just getting skittish with this trade given how high up the stock is, how cryptos in general seem to have fizzled out, and how my calculation of fair value is roughly $100 using sum of parts, which means the upside is maybe 25-30%.
ReplyDelete"Anyway I think it's a dog."
ReplyDeleteOK, I'll sell my position once it makes the next higher high, at around $100...
My OSTK long is my hedge on my RIOT short. :) In the past few days, OSTK is doing much better than RIOT, so I like this hedge :)
ReplyDelete(a) OSTK (Overstock) was opened near the morning lows @ 76.xx, and closed near the afternoon highs @ 80.xx for about a 4% gain on an 8% position-> +0.325% for the portfolio. Now +2.58% YTD.
ReplyDelete(b) Partial position opened in SQ (Square) on the morning drop @ 44.xx.
(c) Spot gold plunged at the NYMEX open, then reversed sharply. Taking another swing at miners via RYPMX at the close. GDX (miners) currently +1.62% so buying on strength-> not my usual style but having traded in and out of the position over the past two weeks for a net gain of +0.58% gives me a little head room (it's all psychology). GDX-> current ask 24.15, I'll give it a day or two to test 25.
(a) GDX up around +2.7% on the +20 move in gold prices. Closing RYPMX (Rydex miners) end of day. My initial 'target' for GDX was 25. Intraday high was 24.84. Metals are an extremely volatile sector, and that's close enough.
ReplyDelete(b) Added a second tranche of SQ (Square) this morning on the drop to 43.xx.
Both OSTK and RIOT are down today, but RIOT is down more in percentage terms, so I am not complaining. :)
ReplyDeleteBTE hit my sell limit today at $3.5. My next sell limit is at 3.7.
ReplyDeleteBaltic dry index is up again today. Maybe its bottom is behind us. Just bought more NMM at $2.19.
ReplyDeleteWould love to hear your guys take on this chart. Seems to me if you take into account the dollar move over the past few months, this is bearish.
ReplyDeletehttps://charts.stocktwits.com/production/original_110317141.png
Either way, when it breaks out of that range it's going to be a good trading opportunity.
DeleteIt's difficult to predict moves in gold/miners, short-term or long-term. Had I held RYPMX an additional day, I would have given back all of Wednesday's gains. Whereas this morning it looks like I should have bought back in yesterday.
DeleteMy prevailing sentiment this morning is the thought that almost all trades from the long side are now high-risk. I may be wrong. But that's what I would say to anyone who asked.
ReplyDeleteBoth the 5-day and the 3-month charts of OSTK are now looking bearish to me, so I just sold at 74.85 the shares I picked up at 72.20, while I still have some profit there...
ReplyDeleteIf OSTK rises soon above it's recent high on the 3-month chart, I might buy back in...
DeleteAlso, I see that the upward progress in KEM has stopped, and so I just sold at $19.65 the shares I recently purchased at $17.30.
ReplyDeleteBought a little PACB today at 2.96. Do not know if this is the start of something, but they reported some sales which boosted the stock yesterday. It could have just been short covering. I just bring it up since someone on this board identified this a few years ago.
ReplyDeleteGold, what whipped it around the last few days was Mnuchin saying lower dollar than Trump saying he wanted stronger dollar which is what killed gold that day. Neither should be saying anything about the $.
My guess is that gold is going higher.
What might drive the markets higher? What looks good?
ReplyDeleteA lower $USD is a tailwind for oil Energy shares have been strong lately, but have under-performed over the past year. I last sold RYEIX (Rydex Energy) four days ago @ 84.72. The sector has since pulled back, with the fund closing @ 83.38 yesterday. Today XLE (energy) is showing signs of reversal, up +0.4% (finding support around 77). As earnings season continues, the sector is likely to report strong results for Q4.
Reopening RYEIX (Rydex Energy) at the close.
new post
ReplyDelete