All commodities have experienced a large, much-needed correction. Oil, energy, metals, food; all the basic materials. The dollar has made a large move up. However, I’m not certain that we are at the beginning of a strengthening dollar just yet. I still believe America has a large inflation problem. Though there seems to be more evidence of global growth slowing down, which would bring down the price of commodities and materials down even more, I think now is a good time to take advantage of the dollar and commodities correction.
Here’s a chart of the Euro versus the US dollar:
There may or may not be further downside for the Euro. I’m guessing the dollar will weaken again over the next six months.
Here’s a chart of the gold ETF:
Gold usually increases along with inflation and oil. If we’ve got an rising inflation and oil, gold will go up.
Here’s a chart of the price of platinum:
I particularly like the prospects for platinum. I recently purchased some Jan. 2010 calls on Stillwater Mining (SWC), the only US producer of platinum and palladium. With many good reasons to expect a continuation of a commodities bull market, and this recent large correction, I felt the time was right to make such a purchase.
I used to be begin into technical analysis. I still find it interesting, but I certainly will never rely upon it. It’s about as useful as looking at goat entrails when it comes to purchasing stocks that will be gain in value over time.
That said, I just wanted to revisit a prediction I made in April this year based on a chart I created of the S&P 500. With the S&P at 1400, I predicted another steep drop to about 1200 in the coming months. Well, It looks like my prediction came true.
Of course, there were a multitude of factors that contributed to this outcome. It wasn’t just the chart and it wasn’t my extraordinary intellect. It could be luck. It’s probably just my belief that financials were going to get much worse before they got better, and that they drag down the rest of the market with them.
After reading Buffett and Graham, I’m now more wary than ever about trying to predict the future; it’s simply not a productive use of time. Time is best spent researching stocks in order to find which are undervalued and present a bargain and margin of safety.
Did I not say that the spread would narrow? After weeks of pollsters showing Obama far ahead of McCain, Gallup says both presidential candidates are tied among registered voters nationwide.
It’s been my experience that the spread eventually narrows as election day closes in. I don’t think this election will be any different. I expect Barack to regain his lead a couple of times, but in the end I think the two will be neck in neck.
Via streaming quotes, I’ve had the opportunity to watch how the market has reacted on days where there is a scheduled Fed announcement. The typical pattern is usually a slow build up until the Fed releases the statement at which point there is huge volatility. The market spikes up and/or down once or twice before deciding on a direction. It’s always a nailbiter. Today was no different. Here’s a 2-day chart of IWM (it tracks the Russell 2000) to demonstrate what I’m talking about:
Can you tell where the Fed made it’s announcement? Even without my big hint, I’m sure you could make an educated guess.
Anyways here is a longerterm chart of the IWM:
I still am in agreement with some of the bears out there that there is room for more downside to the markets.
I think this chart is fair warning.
Those who don’t learn from the mistakes of the past are doomed to repeat them. But you can never count on the markets doing what you think they will do. And furthermore, this advice is worth exactly what you paid for it: Nothing!
It was a long weekend for me. Drove up to Chattanooga, Tennessee with three of my teammates to compete in some bicycle races. Here are two charts that look good to me.
This is a chart of BUCY. I like it because it looks as though it is topping out and it is also very close to the top of its trend channel. Intermediate target price is $85.31 and longer term target would be approximately $67.
This is a chart of PCP. It’s broken several trend lines and I expect it to go lower. I know nothing about this company at all, but just going by the name, it seems to be involved in manufacturing precision castparts. With a global economic slowdown currently underway, I suspect demand for such things will fall. First target price is around $92.50 with a long term target of $75.
I sold into the strength yesterday, perhaps a little recklessly considering how utterly unpredictable the market has become, but I saw two charts trading at or near the top of trend channels and the third trade was in response to the retail sector’s large bounce after Walmart’s report.
Here we have DVN, at the top of its trend channel.
Here is a chart of Medtronic, MDT. Not a terribly strong stock, nor at a very extreme level, but I still thought it was worth a shot.
This is RTH, the etf for the retail sector. I had a put previously, but sold for a profit at 92. I thought yesterday was a good chance to reload.
Finally, the market is getting interesting once again. We are soon to be at another crossroads as the indices approach their 50 DMAs. Tim Knight recommends to handle these coming days with care and posts some charts of interesting short opportunities.
Here are some more charts and trading ideas if you’re having trouble finding something worthwhile:
As for myself, I exited a couple of my puts when the Russell was down 1%, a little too early, as it later declined another .7%, but best to be safe than sorry I guess.
Spanish Property Auction Flop Brings Down Gavel on Housing Boom:
Thanks to Spain’s slumping property market, house buyers are as popular as movie stars — and they can cause even more excitement.
Reporters outnumbered bidders as lot No. 1 hit the slate in Europe’s first “Dutch auction” for real estate last weekend in Madrid. Of 216 lots, 194 were withdrawn when they weren’t purchased at the reserve price. One man, investor Manuel Sainz, bought almost half of everything sold.
“Next stop Hollywood!” laughed Sainz, head of property company Las Terrazas de San Blas SA, as he fought off the press after buying 10 properties at discounts of as much as 30 percent.
The event shows the depth of Spain’s housing bust after prices tripled in the past decade. In January, the government’s housing policy director, Rafael Pacheco, called the slowdown “moderate and orderly” after January sales volume fell 27 percent from a year earlier as the global credit shortage forced banks to reduce lending.
Sounds as good as ever a reason to short the Spain ETF, EWP. Also consider the fact that the slumping U.S. economy will have an effect on many other countries around the world.
Since early January, MHO has retraced from $6 to $19. Now is a great opportunity to go short on this homebuilder. Also, though I’m no expert at reading a balance sheet, just a cursory look doesn’t instill a lot of confidence.
