SRS update, GLD Puts, OSG exit

Move the stop up to 86.69 on SRS. The real estate stocks are getting hit pretty hard, so this inverse ETF is off to a good start. I will continue to provide updated stop loss points.

I bought July 87 puts for 2.25 on GLD and will track this trade on the blog.

I exited the July 85 OSG puts for 3.50 which is 50% loss. The trade got profitable quickly, but then made a recent sharp rally to the stop loss point on entry. One strategy on a profitable trade is to put a breakeven stop loss after some predetermined % gain. I probably don't do this often enough, but it is always easy in retrospect to say that when a winner turns to a loser. But if you get stopped out in a sharp flucuation before the stock goes your way again, you don't look as smart.

Pete

GLD - SharpCharts from StockCharts.com

GLD - SharpCharts from StockCharts.com: "GLD"

A Golden Triangle

Gold appears to be forming a triangle pattern before another leg down. It looks to me like the triangle is complete or extremely close to it. I will be purchasing some put options on GLD which is an ETF that tracks gold and has recently become optionable. From looking at the time length of the downward moves in the triangle as well as the time of the first leg down off the March high, I would anticipate a move lasting about 3 weeks and moving down to the 78-80 dollar range. I have included a link to a chart in the next post.

If gold is declining, does that have implications that the inflationary period of rising commodity prices and expanding credit (currency devaluation) is ending?


Pete

Harry Dent/ Demographics

I have a link to Harry Dent's website on the right hand side of the screen. I did not mention Harry's perspective in the last post, though it is the most fundamental and understandable type of forecast. His work is based off of demographics.

When you boil a market or economy down, a market that is producing, earning, and spending is a healthy one. All of those factors can be quantified demographically by looking at how many people in a population are of a certain age and where that age is in relation to the peaks and valleys of productivity, spending, etc.

We are fast approaching a time when the world's largest generation is going to move past its peak spending point, then not too long after, drop dramatically in productivity as the baby boomers mass retire. It is hard to imagine this being a good scenario for markets and the past research of Harry Dent will bear that out.

There are a number of free resources that you can view on the site. I would urge anyone reading this blog to become familiar with the basics of this research and look into how to protect assets in a deflationary period. It may sound like Doomsday talk, but realize that Doomsday has came and went for generations past, and there are reasonable fundamental causes and ways to forecast those time periods for the future.

Pete

Market Perspective

If you follow investing or trading for any length of time, you come across various analysis systems and gurus who have their time in the sun. I don't suggest following any one guru but there are a few voices that have my respect, and I thought I'd briefly pass some perspective along.

Glenn Neely form Neowave.com believes that we have entered a new bear market that will likely be severe and lengthy (4-6 years). His analysis is a logic based Elliot wave theory.

James Flanagan of GannGlobal.com shows that the average first leg down in a bear market is about 20-21% and takes about 4-5 months. That is very similar to our current situation. Also, the average first bear market rally is about 50% retracement of the first leg down. Also, right on que. They view our current market as a relatively early stage bear market.

Jason Geopfert of SentimenTrader.com shows similar stats as James Flanagan and seems to be favoring a bear market view until proven otherwise.

Bernie Schaeffer of Shaeffersresearch.com offers a more bullish view based off some recent comments. Bernie knows his stuff so I always find his comments useful when he posts them on his site.

On a shorter term note, I have posted a link to TickerSense blog which polls prominent bloggers on short term market perspective. I haven't followed this enough to know how accurate the blog community is, but it definitely can be used in a contrary sense. Looking at their history of the poll, shows that the blogging community falls prey to the same sentiment extremes as other surveys have shown.

http://tickersense.typepad.com/ticker_sense/

Pete

Quick Update on Short Term Model

Today the short term model got clearly overbought or "too high." I had traded the oversold signal last week using QQQQ call options and sold them today for 25% gain. I considered posting a trade on DXD to the blog, but there is something telling me that the markets could have some more upside in them, even if they continue down the next couple weeks.

The short term selling extremes last week brought lots of pessimism back into the market, which may put a short term halt to selling. And based off the low breadth readings, I have seen some other bloggers post past returns after such poor breadth which indicated very positive results up to 10-12 days later. So I don't want to jump the gun. If the markets rise further and create an even stronger overbought signal while remaining in a clear dwontrend, then I will post a new ETF trade.

Pete

Barchart.com - Charts - CLN8 CRUDE OIL July 2008 NYMEX

I am testing to see if I can post some charts on this blog. I have posted the July Crude Oil futures contract. There is a big harami candlestick as crude made a record surge to new highs on Friday then gapped back down Monday. This is occuring with technical divergence indicating loss of momentum. Also, while not visible on this chart, I believe there is a good possibility that the current advance has occured in 5 Elliot Waves and may be complete or near complete and ready for a decline.


Barchart.com - Charts - CLN8 CRUDE OIL July 2008 NYMEX

You may need to hit "Draw Chart" to view the chart.