Crossroads

I went down to the crossroads, fell down on my knees
- Robert Johnson/Eric Clapton

Time once again to disect this market and see what our risk/reward ratio is like. As you know we have been at some mind bending levels since last winter but each time we seem to hit these levels the mindset quickly turns bearish only to be made to look stupid as it roars higher.

This time may be different as we have several factors at hand. One is the usual time of the year warnings but the biggest in my mind is that it is time for the stimulus money to show its hand in spades. Existing home sales were down,the Cash for Clunkers program helped somewhat but durable goods orders were down as well so how much is all this cash helping ? We can't forget about RIM and the BlackBerry as earnings disapointed huge and the share price was crushed on Friday.

We have had four straight down days on the DOW and the TA charts have relieved a lot of pressure without tanking the market and that is positive. We also have some serious terrorist threats popping up and the Swine Flu about to hit in a big way which will really test our health systems. If the hype lives up to the expectation this will in turn effect the bottom line in all of the economy.

Gold has had it's ass handed to it once again but I won't rule out a one day large move back up here but it has to happen soon as the US dollar seems to be showing some life and you know what happens to gold when that happens.

Oil also got whacked on supply levels and an economy peaking out on the stimulus.

So what do I think ? I say the DOW blows off another hundred points or two then settles down going into October. With this threat of Iran's nuke plant surprise, oil and gold will still be in play and as long as oil stays over $60 then stocks will be fine. If it dips below that level then we could get a 10% correction very easily.

Ultimately I ask myself, would you buy Apple at $180 ? Not. So stay diversified and be defensive but use your stock picking abilities based on underfollowed companies with new developments that will attract the risk money out there... sleeping dogs coming awake is the place to be.

Flim Flam Man

Pssst ! Yeah you .... c'mon over here man, have I got a deal for you !

As I posted earlier,this gold price rise will and has created the potential for the scam artists of our lower dredges of society to relieve you of your hard earned money. Apparently sleepy little Victoria has witnessed a connection to the latest Canadian version of a Bernie Madoff scam. According to David Baines of the Vancouver Sun there is a company and individual who touted the "gold mine" scam to unsuspecting sheep at "get rich quick" meetings. You can read the article below then visit the site and make up your own mind but I say since the guy has closed up the office for a "holiday" when the gold market is busting loose says this is just the beginning of another interesting Ian Thow type scene but with many scamsters with shady records attached who have been banned in the past.

Play safe kids,they want your money.



'Wealth coach' serves up gold bars and snake oil"

http://www.vancouversun.com/business/Wealth+coach+serves+gold+bars+snake/2023020/story.html


http://www.wealthbydesign.com/index.php


http://www.webmechanic.com.au/IFFL/index.htm

Admiring The Abyss

What a sight to behold isn't it ? Here we stand at the top of the largest bear market rally, enthusiasm is high,risk is back in vogue and Vancouverites and Victorians are buying houses like crack addicts down on Hastings and Main. The question is how long can this last ?


From the fundemental angle the jury is split. Some are screaming from the tops to watch out for another crash, especially with October looming. On the other side we have the bulls who are kissing the earth each day this roared back to save their bacon and are preaching this is a new bull market. I do not want to see a crash, a correction yes, but not a crash. Corrections allow for second chances wether it is oil stocks,tech stocks or gold stocks. Crashes end that dream for all.


But then we have a real estate market in BC that never really corrected,it was a blip that was so short lived it won't even register in the history books. I cannot for the life of me figure out how people will cheap out over buying a pair of pants, or drive around for days pricing out how to save a few bucks on the big screen TV but will throw away tens if not hundreds of thousands of dollars in insane bidding wars on a house when they are so clearly overvalued. The word "disgustingly" overvalued comes into play here.

But the clincher is the attitude one receives who dare says a bad word about this subject, as if acting unpatriotic, as if they stomped on our flag or some treasonous act of the like. Most real estate owners do not get the word "overvaluation" but they will be in the next year as this schizophrenic behavior cannot continue. Bizarre is all I can say.


Psychology is a funny thing and the stock market shows me everyday that sooner or later the law of averages,the ebb and the flow, the ying and the yang all come home to roost,all that is needed is patience.

Therefore ,the point of my rant is that technically speaking,stocks seem poised for a correction here as well as with gold stocks. My charts tell me so,the SPY has peaked, gold is correcting in baby steps,oil is trading within a large converging triangle that should play out one way or the other within the next few weeks. As well the talking heads on CNBC are even divided,so that usually spells a small correction at the very least. I can live with that...just don't crash please. The last look over into The Abyss was not a pretty sight.

Still positive on my three picks, EMG I hope to see something soon,as well as COO,both a real deal. SPW is still a month away so be patient in the meantime if you like the junior oil plays. Still working on one gold/silver play in particular,it will be a beauty. Stay tuned and play safe !

Golden Rope-a-Dope

It was another Ali-like rope-a-dope day for gold. Sellers/profit takers pressured bigtime this morning down to $991 and looking like it was lights out for gold, then bit by bit it clawed back with a right cross and and an upper cut closing at $1009 with a strong finish.

If you have watched the action on gold the last several years you have to see that this time this may well be "it's different this time". I am what you call a "cautious gold bull", as so many times gold has gotten smoked once above $1000 but the ability to bounce back a few times now is what has me thinking this time $1000 in a couple of weeks will be the support line the longer this type of buying action keeps up.


Of course on the downside risk there is the record high spec longs you have to be highly concerned about, but with all this Chinese trade wars and massive debt that there just may be some international support for gold maybe not as an alternative, but as a "just in case we're screwed" insurance policy.

Bernake says the recession is over, did the inflation threat play in as well ? So many mixed opinions on inflation, but something has to kick in down the road and that may be what's triggering the gold buyers as they can be very forward thinking.

One final caveat, " COMEX Commercial Traders Have Taken the Largest Net Short Position Against Gold & Silver Ever on Record". Usually a very strong sign of a sell down coming but the longs are record too and greater than the record shorts according The Aur Report :



"It is not unusual to see commercial traders go heavily short when gold makes a big run, but they have effectively gone "all in" this time with their total net short position setting a new record. These are presumably the most well-informed traders or "smart money." While this news is usually very bearish and a preclude to a massive sell off, it is interesting to note that the commercial net short position increase was actually less than the increase in total open interest. In other words, despite taking record short positions against gold, they were unable to absorb all of the buying pressure."


Some of the quotes from Goldessential.com were interesting:

"The trader pegged resistance ahead of $1,015 an ounce, the COMEX December gold high from February. “Above that could launch us towards the all-time high of $1,060 an ounce”, he added. "


"A COMEX floor trader added that “this is the second consecutive session that the contract [December] managed to post a settlement above the figure, which seems fairly constructive and still implies the potential to run higher”.

"He added that “there however seems to be a strong hand that is buying any dips. It looks too concentrated to come from various players”."




As always, caveat emptor !

Ride the Golden Bull

I am very impressed with gold's resilience this week, it looked for sure that the mid week selling pressure back to the 980's was the classic dump job hitting stops all the way down to the 960's and would clean out all the bids in one fatal swoop. But it was the opposite and this was most impressive a comeback to close at an all time "weekly" high. All other attempts over $1000 never ended the week above. Shows the power from when it touched $1033 once. Someone is supporting it not like any other time that I can recall.


Speculation on the buying can be from many places, the Chinese ? or the IMF, who wants to dump some gold in a huge way would want the best price wouldn't they ? Maybe they need a closing average to keep things kosher and $1000 is a nice round number. Or is it the dreaded gold cartel via Barrick/Goldman manipulating the price at their whim ?

At any rate, it makes for interesting weekend pondering of possible conspiracy theories of major proportions by key players of the world as well as the ruthless. I can just imagine how many gold stock scams are brewing in the planning stages right now just praying gold moves higher and forms a base well above $1000. Then the big "Game On" light will be lit for the next investing mania and one has to be extremely careful not to get scammed.


Still fine tuning a couple of gold and silver picks. I think they should be in everyone's high risk portfolio.... but there are some tricks to find the 5-10 baggers you want for the level of risk in the mining game. Next week will tell the tale for gold, and I think $1200 is not out of the question by Christmas into next year. Beyond that is a crap shoot.... in the meantime,buy cheap,buy quality,make money....it's that simple.

The S&P Rock 'N Roll Train

So far so good,the first two weeks of September have yet to show it's historical fangs. The SPY Index is making year highs as well as 8 month highs as glimmers of a bottoming process keeps the S&P 500 train just rolling along fine.

We all know this is a government based recovery so far and the big question remains : what happens to the train when Obama pulls his train out of the station ? Barring some out of control world terrorist events I wouldn't expect to see them pull out any time soon until they see what is going to happen with the US dollar and the health care bill get passed.

There are so many opinions out there right now that it makes it hard to even read them all,let alone honestly form any solid opinion on where this is all going so I will stick with the charts and play stockpicker. In the meantime the VIX shorts are getting smoked,the gold bulls are still alive by their short hairs watching gold swim just under the $1000 surface and the market pros are keeping a finger ready on the sell trigger as overbought levels are all over the place but nothing there to spook it... yet !

Gold $1000 Close De-nied !

It was quite the whacky day watching gold bust through $1000 and then the shorts/bears/conspiracists or whoeever you want to call them,slowly and methodically played rope-a-dope in pure gold cartel style working the price down step by step,deflating the goldbugs balloon once again. It was inevitable that $1000 would be breached by shear emotion but now we have a classic setup for gold to be once again denied any solid footing above this critical threshold.


There are a couple of caveats in all of this. As John Nadler on Kitco pointed out,there is a 600 tonne long position. How long will they stick around with a full load if gold can't clearly bust through and show some real support above $1000 ? That will be critical.

And number two, there was a comment by GFMS yesterday that there were some "clumpy" trades that possibly had something to do with this latest push to a grand.

But what is most interesting is Barrick,the Bady Boy/cartel-related gold company, released news after the bell that they are eliminating all their hedges as they see gold going much higher but in the process will take a $5 billion write down.

You have to think if this was not the real deal for gold to head up higher then why would the bad ass of the gold bizz do such a thing ? Not to say we may not pullback here but if we do,it will be time to reload. My spidey senses tell me it is gold's time to shine,not just because of all the US debt,but because the hedge funds have run out of big move style plays. With the S&P maxed out there isn't many games left in town and with this Barrick news it only solidifies the next move up is not "if" but "when".

September Blues

We now come to one of the best and worst times of the year depending on where you are in your life stream. September can bring a beautiful time for making changes to your direction in life, and open up doors to new beginnings. For a sports nut like myself, it is one of the best as we have the baseball pennant races heating up as they come down the home stretch as well as hockey training camps beginning, and NFL season kicking off.

On a sentimental/emotional front we have 9/11 coming up that always reminds us in spades of how fragile our system is.

On the financial/investing front it can be dowright scary,especially after last years total collapse and all eyes will be focused on what the big boys will do come Tuesday. The historical odds are a bit over 50/50 to a bad month ahead and those odds are not bad considering what we have just witnessed the past 12 months so I will expect to see some selling but not the wipeout many are predicting.

Yes we have massive debt in the trillions, yes the rise of the markets has been based on mainly stimulus money but as I have repeated many times,I will not underestimate the power of the bank money and funds that have sat on the sideline.

Once we get through a couple of weeks of fretting we shall have a better glimpse of what lies ahead. I truly believe we peered into the abyss and it wasn't a pretty sight and the powers-to-be will not want to see that sight again either. Rough times and slow recovery for sure, but I will be shocked to see us collapse back to the March lows. 500-1000 points is clearly a possibility on a correction but I think we saw the lows for a long time. Companies have gotten meaner and leaner and profits are what counts and that's all the DOW cares about.

I reiterate my stock picks for the month, EMG, COO.P and SPW.P later in the month. Still working on some silver and gold picks so stay tuned.

Gold breakout ?

As I have been mentioning, gold and silver have been on my watchlist for a while here and today it made a nice breakout move up $23 with an hour left til the gold market close. I was really taking notice yesterday when gold did not drop when oil did and the overall markets, which are wakeup signs of a possible disconnect,especially when the US dollar went up.

There is some big talk out there for several reasons why gold popped.

1. It's the seasonal time, Indian wedding buying etc.

2. But the second is a biggie and that is the Chinese who have taken massive hits on derivatives have basically told the 5 or so major banks they owe to shove it, we're not paying because you never told us how dangerous they were. In other words they say they got sucked in to buying useless paper and they are stiffing them. What happens when you stiff Vegas for betting big ? Hmmm... well not maybe the same ending but even if they pay up half the losses in the end,it could take much time and debate,not to mention the losses show up on the banks bottom line.


I may be out in left field here but I think this has been building behind the scenes much longer than we have been aware and could be one reason why gold has been so resilient the last couple of months with no major $50 swings down. There must be some major support to suddenly put a halt to that type of market action which has been going on for years now.

So what does one do to profit here ? As a master trader tells me, it is best to wait out the breakout and see how high the next step goes then see if it blows off some steam and reloads.

The other important part is to see if it can break the old highs of $1000, to me that is the ultimate signal. I am scouring for good cheap gold/silver plays and are eyeballing a couple but not ready to pull the trigger quite yet.

Also make note that in Canadian dollars gold is trading at around $1055 and the old high back in March was $1247 so there is about an 18% or so difference of room to work within before any thoughts of missing the boat if this turns into a major gold bull move to $1200 US as many have thought.

One final note,we had the Loonie and the US dollar move down today,now that is concerning but may be the currency intervention the Bank of Canada has been threatening to do. But how long can they keep it up ? Not long is my thinking.

Hungry Bear

Today was a lip smacker for those starving bears who have been calling a rally top for a couple of months now, but is it the real deal or will buyers step back in as in the past ? I felt a September chill today as the decline kept up even though manufacturing numbers were decent. Worries about banks and their profits ruled the day and dominated the airwaves. Seems like every one and their bear says this is a no brainer correction.

From a TA standpoint tomorrow will tell the tale as we only got a partial sell signal,but what is more important is going back to June,any correction/dip didn't last more than 4 points max on the SPY index and today was a 4 pointer going back a few days so a mini pullback has happened.

As I have always stated,I won't underestimate the magical bull money that props up this market and sends those bears back to their caves.

For those who missed my new pick , V.COO.P closed at 56 cents today, up from the 40 cent range you have picked up shares at a week back. Good luck to those who jumped in, I'm thinking $1 could be feasible given some time to develop.