Financial topics

[Higgenbotham]

The following are two unlabeled weekly charts stacked on top of each other to show the similarity of the pattern. The chart on top is the S&P from the 2011 high. The chart on the bottom is the S&P from the 2007 high. Next I will make a new chart showing what the S&P did in the weeks following what is displayed here from the 2007 high.



Answer:



This is why I'm not short. I don't believe this pattern will repeat, but let me tell a story. In calendar year 2008, I quickly made $31,000 trading the S&P by the March low. To that point, every trade that year was a winner. At that point, I felt the market would bounce, and it did. After it bounced a good bit I began to go short again, adding little by little as the market rose. I put a stop in at break even on the year. The intent was to try to catch the crash. The market continued to rise and by early May I was stopped out of the position very near the high, losing the entire $31,000 I had made from January to the March low.

[richard5za]

This is why I'm not short.

Higgie, here is another view by Dr Clive Roffey who uses Elliott Wave and has a very good track record. Its on the Dow and his commentary is on the chart:

Data to 30 Sep 2011

Oct-01-Dow.jpg (34.69 KiB) Viewed 4985 times

On South African gold miners (stocks) and general equities he has this to say:

"Once again the gold market has sunk to levels of total stupidity. The breakout was a true upside break but the pullback to test was way overdone. This is a huge buying area for gold shares.
The rest of the general equity indexes look highly dangerous and on the brink of some serious downside breakouts. When these breaks occur the downside will be nasty. I rate this as a strong shorting area."

Richard

[Higgenbotham]

This is why I'm not short.

Higgie, here is another view by Dr Clive Roffey who uses Elliott Wave and has a very good track record. "The rest of the general equity indexes look highly dangerous and on the brink of some serious downside breakouts. When these breaks occur the downside will be nasty. I rate this as a strong shorting area."

Richard

That seems like a good projection and I'd give it maybe a 70% chance of being right (directionally speaking short term).

Although, to this point, the market action has not been weaker than the action from the high 4 years ago, I think stocks will be weaker going forward because events are compressing relative to 2008, and the fundamentals seem a lot worse.

Still, shorting stocks is not a trade I will take at this time and I remain 100% in US dollars. The US dollar index has rallied 8% from its early May low and has now equalled the performance of gold from early May. Lately, the US dollar has been stronger than gold and seems to be gaining a head of steam. It's interesting there's no discussion of this on the forums, and that may indicate the move is valid has much further to go.

I remember when gold first took off. Nobody believed in gold and there was an analyst who came on TV and said if gold went over $300 for 5 days he'd paint his hair gold. I loaded up on gold stocks when gold crossed $330 - Goldfields, Anglo Gold, Kinross, Goldcorp, Eldorado Gold, and Golden Star Resources (that one was a dog), and I almost forgot good old Bema Gold (what ever happened to that). I was so excited I called a friend at 7:30 in the morning to tell him gold was taking off. He never got long and missed the whole rally. He said, "You can't eat gold." Though I'm not nearly as excited about the US dollar, the whole backdrop feels similar. People hate the US dollar as much as they hated gold back then.

As far as this being a strong shorting area (as Roffey mentions), going short from the Osama high down to S&P 1220 seemed like a stronger gamble to me than going short now. As things look now, I'd still short an unexpected retrace rally to the 1270 or so area that knocks the bears off balance.

[RDRUNR]

This is why I'm not short.

Higgie, here is another view by Dr Clive Roffey who uses Elliott Wave and has a very good track record. Its on the Dow and his commentary is on the chart:

Dr Clive Roffey has been famously critised for not producing or providing a documented track record and is a well know biased gold bull.

Should I ask a car salesman if now is a good time to buy a car too?

[richard5za]

That seems like a good projection and I'd give it maybe a 70% chance of being right (directionally speaking short term).

My personal view is that general equities (e.g. Dow, S&P500, etc) will now begin their journey to a PE ratio of about 6 (certainly less than 10) but how many rallies along the way, or the exact route is an unknown. I am out of general equities until they reach their low PE ratio destination and become a cheap buy.

I have increased my exposure to gold and gold miners to 35% of my savings. I feel confident of a gold price above $ 2000 at some stage. I also suspect that gold is going to go parabolic in due course and that will be the time to get out, if not before.

As I write, Monday 07.34 GMT gold is up nearly 1.5% and silver up 2%. Lets see what the week brings.

[richard5za]

Dr Clive Roffey has been famously critised for not producing or providing a documented track record

In the past I was a subscriber to Clive Roffey and everything is documented. Its easy to see what he says and then in due course have a look to see what happened. I have no idea why someone would criticise for non documentation. My past experience of Clive Roffey is that he was very good in predicting buy and sell signals in all classes of equities. Yes, he is currently a gold bull, but that hasn't always been the case.

If you want to have a look at his webiste you can find it at www.charts.co.za; thats where I got the chart I posted on this website.

I unsubscribed from Roffey when I got into cash except for 5% of savings in gold. But now that I have taken a much larger position in gold and gold miners I shall be subscribing to Dr Roffey again.

[Higgenbotham]

Let's be very simple and say we expect the S&P to go from 1370 in May 2011 to 370 in 2 years by May 2013. So this would be 250 points every 6 months. If the S&P were to stay on this very simple path as an average, we would expect to see the S&P at 1120 by November 2. Thinking about stocks in this way doesn't make me eager to short at this time with the S&P already at 1130.

[OLD1953]

At bottom, the simplest and most basic reason not to get in any PGM at this time is this: everyone is talking about it. That's the #1 rule for PGM and for investing in general. You can forget everything else, but you have to remember, when everyone is talking about it, it's time to bail out. The top has been reached and possibly even passed.

This is very easy to test. Simply search for counter examples. Find the person who made money (and didn't lose it) in houses or stocks or bonds or anything of the sort, AFTER everyone wanted in because that was the place to put your money. You can't find more than a very few who actually got out with a whole skin, while it's dead easy to find hundreds that lost everything because they followed the herd. The herd is always too late.

[richard5za]

The herd is always too late.

Yes. Yes. Yes, absolutely

[richard5za]

and is a well know biased gold bull.

Just wondering? Do you resent people making money out of gold? As a matter of sentiment or logic?