Tuesday, November 09, 2010

9 November 2010 The Edge of Realty


 9 November 2010 The Edge of Realty

In 1968, Elvis recorded a song for the Singer TV Special now knows as the 68 Come Back Special. One of the songs which did well for the King was “If I can Dream”. The flip side of that piece was a song called “The Edge of Reality”. I never cared for the song, but its lyrics were kind of haunting me today as I watched the 4th day of corrections in various markets and a sharp correction in Gold today.

She drove me to the point of madness
The brink of misery

If she's not real then I'm condemned to

The edge of reality.

We have been asked several times this week if the run is over for gold. Just yesterday, UBS sent out a great piece entitled, “Is Gold Worth 1,400 An Ounce.”  (Thanks Tim) The article sites the need for some big money folk to take a profit for year end which could trigger a sell off. The it goes on to explain how some of the European government bond problems may continue to support gold. The it goes on to describe many of the physical demand issues on the gold stuff and how they all point to a bullish commodity.

Here is my current answer if someone asks if it is too late to get into Gold. I would have to say yes. At $1,410 an ounce I still see an upside to $1,600 or 1,650. We would suggest you look for a retraction to $1,360 before we see the 1600+ Q 1 2011. Most of you know I am not a chartist, but for commodities, the charts can not be ignored. There is resistance in the 1450-1460 range and support at 1350-1360. That is not me saying this but almost all of the great chartists out there have looked at their tea leaves and defined that range as the current trading range of the yellow stuff. If it breaks 1350, we are taking all of our 30+% profit in multiple accounts and suggest readers do the same. If we see the price come down to 1360 is and start to rebound, we will buy more and ride it till it pushes through the 1450 range on its way to 1600. Either way we are out at 1550 or 1350. I highly recommend the UBS article if you can get a hold of it. It also sheds light on copper, palladium, platinum and other industrial metals.

It’s Three, Four, Five Strikes Your Out at the ol’ stock game.

Please keep an eye on your profits tomorrow. We have had four days of downward pricing and we had some decent volume today. Investors Business Daily refers to that as 4 distribution days meaning institutional investors are selling off. Five out seven down days with volume always gets me a little nervous so please have your stops in place. We are not ready to call this rally over, but we are watching it close.

If we get a fifth day of losses, here is my suggestion. Look at your holdings and let’s say you have an average gain of 12% right now. That means you some gains above 12 and some below twelve. Look at those above twelve and scrutinize them very closely to take some profits. Specifically look at their volume and their direction over the last 7 sessions. If they too have corrected downward and volume is picking up, take some profit off the table. Then look at your laggards to see if there are any that you might want to put some cash into. Look for those who are below your average but recently have had some upward movement and increased volume. There may not be any but if there are think about buying into them a bit.

If this is a correction, it is always nice to take a profit, for we might be reaching The Edge of Reality.

Salve Lucrum.


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