I suppose many investors assume that the rise in commodity prices is a monetary phenomenon. However looking at gold and oil in Euros, Pounds and Yen we see they are both in strong bull markets even when measured in currencies that are appreciating strongly. The US is exacerbating the problem by printing too many dollars but the underlying cause is a supply/demand imbalance.
Posts
72 comments:
Gary,
what do you think are the best ways of being in the commodity bull?.
Gold -> GLD
Silver -> SLV
Oil -> Stocks! (the PE of the oil companies is so low that I think the'll do better than the same oil)
Sugar -> IPSU
Corn -> ??
Platinum -> ??
Agricultural -> DBA, MON?, something more?
Natural Gas -> ??
Thx.
semson,
If you want to use only the stock market for your materials trades, then GLD, SLV are good. Gary has also pointed out a few strong mining stocks (SA and SIL, I believe). Keep in mind that GLD and SLV hold physical metal, and your gains are taxed as if you own physical metal, which is at the 28% collectibles rate (no matter how long you hold it). If you trade futures instead, the tax treatment is 60% long-term and 40% short-term (no matter how long you hold it), which usually works out to a rate around 20%, +/- depending on your tax bracket for the short-term part.
As for IPSU, I have a little bit of that, but the best way to play sugar is clearly via futures contracts. The problem with IPSU is that they are a refiner, meaning they have to buy their material (sugar) on the market. So unless they can maintain net margins as the price goes up, their profits may suffer a little.
Doc said it pretty good. The silver co. is SLW. I hold SLV in my Roth account and physical for my main investments. DBA has possibilities. CNX is a good Nat gas play. I don't typically buy many individual stocks myself. Maybe XLE or OIH would be a less risky way to play oil than trying to pick specific stocks. We will get more and more ETFs as the commoditity bull progresses.
Gary -
if you or another investor know the answer to this one, im all ears.
the rise in oil in the past year has been very significant. so has the fall in the USD. i gather that as dollars fall and oil rises, there tends to be something of a net neutralization to the full impact of oil's price increase.
Q: in the past 30 years, when oil has spiked rapidly (preceding a recession) did the USD fall or rise? how did the USD behave in comparison to today's environment?
thanks,
Mr. T.
T, The dollar had been falling in 90 I'm not sure about the early 80's. The early eighties were the end of the last commodity bull cycle. In 90 it was the breakout of the first gulf war that spiked oil. The last 5-6 years IMO have been more driven by supply and demand pressures than a devaluation of the currency although that has definitely contributed to the problem.
Gary, let me get this right. the devaluation of the USD has *contributed* to the problem of oil price rising.
i guess i was thinking the devaluation of the USD has somewhat *mitigated* the effect of oil price rising.
are we talking about the same thing? if so, what am i missing?
thanks,
Mr. T.
The dollar is in the course of reversing. Commodities are as well.
Sell commods.
T
I guess it would mitigate it somewhat for the foreign and emerging countries since their currencies are rising - and hence they have a little more buying power for oil and commodities.
But not the US.
This bull market is different from the past IMO in that the US is playing a lesser role.
So the calls for a recession may not ring true unless the rise in Oil begins to affect the other global countries - not just the US.
And as Gary pointed out - the price of gasoline is not rising - isn't it rising gasoline which hits the economy - not oil?
To me the fact that they could take the Oil price down to $55 in January and now have it at $90 shows that a lot of the price movements are not demand supply - but political manipulation - in other words 'they' have means to get the oil price down if they really wanted to.
And it seems lately that a falling oil price is taken as a sign of political weakness for Bush or a Putin - or any of the other 'masters of the universe'.
After all they have 'colonies' to maintain -right?
At some point they will have taken things to far with their political games and their need for rising commod prices to support their empires and their associated need for money printing to keep the masses happy --> and then we will see the results.
But until then....
Enjoy the party.
I guess I'm of the same opinion as Boone Pickens. I think we've seen peak oil or are very close to seeing it. Global demand is now starting to surpass global production. The oil price dropped at the begining of the year which fit in with the fifth year decline that usually occurs during secular bull markets and served to seperate the first phase from the second phase of the bull market. That's my opinion anyway. Of course there's probably no way to determine if I'm right or wrong but I'm going to keep investing under the assumption that I am.
Hey bulls, be careful out there! Nasd will dip to at least 2600-2650 support area. At least! Don't kid yourselves now, thinking that we get a rally on Monday and everything is ok.
You shouldn't listen to the permabears, because they're always negative eventually they'll get a carrot right. But i'm a raging bull and i'm turning scared. So ya gotta pay some attention to that.
Gary,
the numbers are worse this week than last week
and i've only been reading this COT stuff for about 2 months and i get it...it's an easy read....
only thing different is USD is Bullish, so i don't get that.
COT IS BAD = SHORT THE MARKET
Zee
SHORT canada, austalia,europe,GOLD,SILVER,stocks
IWM is a little bullish
QQQQ mini is total SHORT
but QQQQ is slightly bull
VIX is 50/50
OIL is 50/50
TECH reporting good earnings, but getting pummeled, so that is worrisome, for the QQQQ
japan bullish, so i guess buy TM
USD, extreme bullish, hurts GOLD STOCKS BAD
Gary
I definitely won't be fighting the trend in Oil.
In fact I will be looking to reenter the Canadian oil sands stocks - once they announce their new royalty scheme this week.
Seasonals will be kicking in between now and December.
In fact the natural gas index $XNG has been looking pretty good - it made a new high the past month - while $XOI did not.
This is in line with the somewhat bullish indications for Ngas on the COT.
I believe T Boones's latest quip was that Oil will hit $100 before $80.
Still, I am aware that at any time if 'they' want to - they can bring the price of oil down - especially if the US economy is in serious trouble (unless geopolitcal issues prevent them from doing so).
At least they will try to take the price down.
Also I there has been some recent economic reports I read somewhere - showing that the recent price rise in oil - is way too far ahead of recend demand increases and projections.
And I think the energy bears will be quick to point out that there has been a lot of new discoveries this year.
Now, for conspirary theorists - the inverese correlation between oil and the price of certain stocks - like Citigroup - is quite amusing.
If Citigroup and other US stocks are going down - oil is going up - when oil is going down - these stocks go back up.
One can read into that what they will I guess - but we all know who are large holders in Citi and many of these stocks.
--
Gary, any guess as to why the commercials are reluctant to short Silver - while they are going nuts shorting Gold?
With the record OI building up in certain markets - I think you were implying we will be seeing a large move soon?
Makes sense to me. That OI has to get closed out somehow.
---
Zee
According to your website:
"I have been blogging for almost one year now, trading stocks for 7. It wasn’t until I switched to Stockcharts paid subscription service, that I became totally dead on accurate"
hmmm - totally dead on accurate?
I would have thought that after 7 years of trading you would have realized that it is impossible to be dead on accurate - and in fact it is probably not desirable to even strive to be dead on accurate.
So if you got some holy grail -
then let's here about it... we are all ears.
This NY Times article seems to lay all the current woes on the table and put them in a nice clean
(optimistic) perspective.
http://tinyurl.com/2huh78
Zee says COT is BAD so we SHORT the market and GOLD and SILVER.
Gary says COT is OK and we should buy the market, gold and silver.
??!??!?!!
A Crash of Epic Proportions?
Stay tuned....
I don't know what Zee is seeing in the COT's that would make him think the big money is short because they aren't. The commercial net position is extremely long by historical standards. It's not as long as it was several weeks ago but it's still long.
Listen to Trade on this one. No one is dead on accurate. I've got news for you it's not that easy. No one can see the future. How hard is that to understand. There's no such thing as a cyrstal ball or magic or unicorns or someone that can predict the stock market with any kind of consistent long term accuracy. I know we all want to believe that it is as easy as listening to someone tell us what to do but it just ain't. The only way to get the odds in your favor is to find a system that has a positive expectancy and have the discipline to follow it.
Trade,
I suspect the commercials aren't shorting silver quite as hard as gold because it hasn't gone up as much.
Anon,
I suggest you decide for yourself what you should do with your money. Don't take my advise or Zee's advise. Examine both sides make your own decision and then stand behind it. Better still find a system that works for you and follow it.
since june 5th everyone here has been saying silver will outperform
gold.
on june 5th slv was 137 and gld was 66.7 on closing price.
10/19 closing price was 134.5 for slv and 75.7
yes, it will turn at some point, but gold has been the premium bet!
anon,
Yes you are absolutely correct at the moment. I believe in the long term silver will outperform but it doesn't hurt to have both.
Gary,
I've got a hunch. I bet if you check your blog stats you will find that Zee & Beanie have the same IP....just a hunch...
tradeit,
Oil could move from $55 to $90 simply on supply/demand. S/D works in a non-linear fashion. The biggest price differences come from the margin. For example, with supply constant, a 10% increase in demand may bump up the price of X by 5%, but the next 10% increase in demand could bump the price up 20%. It just depends on where you are on the S/D curve. Add in a reduction of supply, and things go vertical.
That said, speculators do play a big role, though I hardly think their actions are manipulative.
I personally believe we are on the verge of one of those moves in silver, but a little more weakness may be just in front of us first. A week ago, I pointed out the similarities between the consolidation periods following the 2004 vertical leap and the 2006 vertical leap, and stated that a minor pull-back to about $13 would set things up nicely. We saw a move toward that on Friday, and I think we're almost there. I'm guessing that by mid-November, we'll be ready to run.
Gary, Trade et al
Just posting a little frivolity amongst all the heavy discussions. Who says "Crystal Balls" don't work.
My post here to Trade 9/20/0:
Trade,
These anon's crack me up. The anon's who were going on about GS, SlV, Slw and a couple others certainly disappeared quickly as did 2sweeties. Anyway, my take on the markets is this. FWIW. This is crystal ball analysis. LOL
US Markets: We will see chop through next week and then a sharp move up to mid October. I think the COT will begin to move to the short side next week (I will leave that to Gary)and then there will be a sell off into November. From a fundamental standpoint, I believe the "Big Boys" got what they needed "rate cut" which gives them a window of opportunity to reposition for a downturn. I know this is contrary to Gary's facts and figures, but that is why Crystal Ball analysis is not worth beans.
The rise in the overseas markets are beyond my comprehension. I remember saying the same thing in 1999 about the valuations of the dot.coms. So I think at some point before the end of 2007 they will be in for a real attitude adjustment. It will probably be caused by some financial or forex hiccup. Wish I could back this up with all sorts of charts and figures, but this is just the way I see it from a psychological point of view.
September 20, 2007 1:29 PM
The only Crystal Ball anyone has is between his or her ears. And sometimes we should listen to that little voice.
Just a fun post amidst the heavy tenor of the conversations.
Wish I knew what was going to happen this week!!! LOL
BTW
On a serious note:
I am not sure if any of you have noticed but it seems like half of So Cal is on fire. Just incredible. I live miles from these areas, but the smell of smoke and falling ashes is as if it were a block away.
My prayers are with the firefighters and the people in these areas.
Witness the evolution of a crash of epic proportions...
Asian stocks are headed for a crash, taking the world with them. I need you to sell on any rise. Don't second guess anymore. I could be wrong (25% probability) and Ben Benanke takes out his Heavenly Sword and surprisingly saves us swiftly, but don't bet on it until the meeting. You don't need to go short but you need to be totally out of margin unless you want to run yourself thru a Pulverizer.
short FCX!! Going down.
Lol.
Beannie needs to fork $50 and become a subscriber.
Embarassing.
For the last time, China does not lead us, we lead China.
thedoc
thanks... for the insights
I've been continually buying silver stocks on extreme weakness like today - flip them after they bounce for the day's pay - but keep a little as a core position - thus slowly building a core position on weakness.
jfs
Where did ya buy your crystal ball?
Please keep it nice and polished - we might need it still.
LOL
I'll go over the stats in more detail in the daily update but large gap down openings after a week of extreme selling pressure the week before are often exhaustion gaps and the returns in the following month have been very positive historically.
Note that the GOAX is almost uniformly up (GOOG, APPLE and BKX) which is Tom 2Oc's crystal ball.
I really think Tom is pretty good with these indicators, and am glad he's reopened his blog again.
Hope he'll stop by again as he has in the past.
Here's his blog site.
I took some profits on the FCX puts. Will be buying back near the close.
beanster, YOU TOOK PROFITS ? i THOUGHT YOU WERE OUT BACK AT THE woodshed GETTING ASS-RAPED , SOMETHING ABOUT EPIC PROPORTIONS , YOU ASSHOLE , YOU CANT SEE INTO THE FUTURE , NOW SHUT THE FCK UP.
The current market looks an awful lot like last May when a two month consolidation began, after a solid run-up. My bet is we see a similar consolidation before another run-up into mid-Nov, then another sharp correction and a final run at the bull high in the traditionally strong Jan/Feb timeframe. Friday's numbers were ridiculously emotional, typical of the sharp corrections while climbing the wall of worry.
The more important question is what does the Fed do at the end of the month? I know Gary's answer :)
Quiet here today...
Too quiet....
Took 75% profits on XHB Nov. 24 call options. Not bad for two days trade on a , guess what tradeit,- TA!. Lucky again I guess.
Also got back long in QLD @$112.10 after riding the "pattern" B/O from $100 to $117. Will take profits again on the first technical breakdown.
Actually the high was $118 which was the target of the... guess what tradeit?,.... A pattern!. $82-$100 B/O. Look at the high on 10/11. Damn voodoo science.
Closed CERS longs. May re-enter.
But hey , tradeit has made it clear TA doesn't work so I guess I should give it up.
Contrary to your last post to me tradeit, I've been doing quite well lately, best year so far.
Don't mistake my disdain for you as traders regret.
Good luck all.
Hey Plunger, go get a Xanax or something.
_______________
And in other news, CRAPPL saves the bulls again.
I'm going to have to change their nickname... one of these days.
Hey Plunger.
Look at that aapl hitting target in after hours.
Strange, that the market gets smashed and aaple hits a pattern target of a pattern that doesn't work...
and ya notice how those that say that patterns don't work just can't seem to post a winning trade before the fact?
ok, sorry, promised i would't post no more,,,, i'm gone playing some other beautys!
Yeah, I understand completely Pattern. I been wasting my time as well.
AAPl is a great stock to trade BTW.
Long ATR also today. Complete trend play though.
Jake, Take a viagra or something. That way you can ... ahh you get it.
Plunger, funny
My most recent recognizable pattern is to take a viagra and watch my stock shoot straight up -:)
Pattern,
LOL , Seems like this voodoo science has got some old life left in in yet.
I wonder what "tinyURL" tradeit will post to disparage TA today?
BTW, Lotsa ETF charts looking good lately. Most have options available. I'll post some later. Check em' out when you get time.
You guys do a lot a crowin', without a lot o' showin'.
Seems a familiar refrain on the internets.
_____________
My recommendation of Xanax was not a joke. It's for depressed people.
Think about it.
Jake
your just too blind to see.
I posted started aaple when back in the 130's then posted target to 180's
I posted googs explosiveness near perfect at 514ish
I posted to sell slv 130ish and buy back 1 day before it exploded from 116ish
i posted gmcr one day before it exploded...
those not posting patterns have been the only failures here.
show me up please, i want to learn!
Well I did buy silver in 03 at roughly $5.50-$6.00 and I'm getting close to being up 300% in 4 years. That's about 70% a year on a big portion of my net worth. I didn't buy it because of a pattern but because of the inflationary cycle I saw the US entering. I don't think anyone would call that a failure.
thedocument,
thanks for your explanation on the commodity plays.
Best.
No Gary
I certainly wouldn't call that a failure. Congrats on your admirable success! Thats longer then I have held anything.
The issue was posting trades here ahead of the trade, not past success.
Gary,
As you mentioned in a update Platinum is outperforming the rest of PM during this bull. Do you think is a good idea to buy Platinum miners (there is not a ETF such as SLV) or you prefer to stick to Gold and Silver?.
Thx.
As long as we are all making money - that is the main thing.
Good on you.
I don't get too excited about profits. And I got nothing to prove.
After making 3% in my day trading account the first few hours this morning - I just took the rest of the day off to cycle.
It was 77 degrees here today - a record for October I believe.
-
I just find it funny how you guys always show up at certain points when the market is acting the way you want.
Where were you the last few days during the decline. Patterns weren't clear then? Had a loss maybe?
-
And Plunger - really - you were pretty rude a while back with your posts - and some of your comments were down right ignorant and insulting.
I'm sure the 80-100 million French speaking people weren't too amused.
So please - get some class.
Trade it said,
"I just find it funny how you guys always show up at certain points when the market is acting the way you want.
I've been here the whole time. I read the blog almost daily. I just quit posting mostly because of your arrogant disposition.
Where were you the last few days during the decline. Patterns weren't clear then? Had a loss maybe?
I only trade when I think its to my favor. I actually have done quite well lately. But we all have losses. Right?
-
And Plunger - really - you were pretty rude a while back with your posts - and some of your comments were down right ignorant and insulting.
I'm sure the 80-100 million French speaking people weren't too amused.
So please - get some class.
I don't recall insulting you at all
I was rude? I guess a french canadian would know it when he saw it, but I didn't see it that way, . I thought you were arrogant, smug and presumptuous. I could care less what the French people think, where were they when we needed them? Libya, Iran, Iraq? And if what you pass for is class, I don't want it.
Yeah Jake we know what its for.
But your diagnosis skills are not as good as your verbal skills, but hey you can't google "personality" can you?
Try "wit".
Think about it.
Well I'm not French Canadian - can't speak a word of French -
but I do read the Montreal papers from time to time.
Gary, quite a few readers have posted about Alex Roslin - the guy running the cottimerblog out of Montreal.
He's gotten a fair bit of national press over the summer and fall - and some of the well known supposed TA gurus and chart wizards have even been talking about his stuff.
I tried to figure out what he is doing - and it seems to be more a 'work in progress' than a system.
I contacted him - and he almost implied the same.
He keeps changing his rules - in some cases almost to suit the data IMO.
I could find little use of it personally.
Gary, your work on the COT far outshines his - and yet he is getting written up in the press.
Gary, have you considered getting
more exposure for the Smart Money Tracker Blog?
---
Oh and Plunger - Please stop watching Lou Dobbs 24 hours a day on CNN - that stuff can rot your brain. LOL
Nice update tonight Gary.
$SPX looks like 1490 is the bottom of the coming trading range. Worst case if we make a double bottom in this consolidation phase is 1475 (which would mirror the 1998 final bull leg).
Also, not much volume traded between 1465 and 1490.....and almost all of it was buying. This should provide a strong rebound zone.
Also, weekly SMA (13) $TRIN is sky high (1.38).
The only higher reading in the past 5 years occured in Aug '04 (1.47). The $SPX then went from 1040 to 1210 in 4 months!
Some good $$ trading this index while it consolidates.
Anybody else long $SPX?
Mr. T.
Trade -
I'll absolutely 'second' your nomination for Gary's fame.
I, too, have spent some time trying to figure out Alex Roslin - and very quickly - months and months ago - KNEW that Garys' contribution is infinitely more valuable.
My hunch is that Gary is not doing this to 'make a name for himself'.
But I am convinced Alex Roslin is concerned (obsessed) with himself.
Everyone can say what that want, but that's my two cents.
Mr. T.
I think I've got enough exposure as is. I had no idea what I was getting into when I started this blog or the subscription. Most of the time I wish I'd never started this as it's taking up way too much of my time but then on the other side I do get to exchange ideas with many great investors and people. So in that regards it's all been worth it.
S,
I just invest in gold and silver. Not even sure what the platinum miners are or if there are any specific miners that just mine Platinum.
VMW ready to launch...
120 after earnings
Mr T
btw
following up on our previous discussion on FXI
Today on the daily chart it hit the first trend indicator we discussed - the 13 period smoothed simple moving average - this has acted as support in the past during its parabolic runs.
Noticed how it bounced hard off that trend marker today.
I'm already long China so won't add given the reputation for volatility in the last 2 weeks of October - but if we by chance get a large pull back within trend to the 7 period smoothed simple average on the Weekly - I may add back in - as this has been a good buy point before.
good luck
An interesting point: over the years, I have found the 65-day SMA to be of utmost importance to the SPX since it provides pivots points more frequently than other periods. Today's test of 1490 also saw a test of the 65-day MA.
What is of particular interest is that this is the first time in this bull market that a 10% or more rally off a correction's low has failed to produce a new high in the 65-day MA before it got tested again. Perhaps this occurence reflects nothing more than the severity of the August correction. I don't know. But it somehow strikes me as a sign of weakness. If anyone has spent more time analyzing MAs, comments would be appreciated.
Trade -
Dude, the FXI is going to blow it's ass off if (when)it gets above $200.00 .......
Should be before 10 am est.....tomorrow.
Thanks for the head's up!
Mr. T.
Could be T,
..but that little spike on the FXI weekly could mean consolidation.
I took some money off the table then - it triggered some sell discipline being too far above trend.
But it could run hard again - it's pretty fickle - every dip seems to bring a big reversal.
Gary,
You have a great blog. I think it's unfortunate that fools like BEANIE and ZEE put out a bunch of newbie garbage out there as they pontificate what the markete will do next. I wish you would ban these clowns.
It's obvious that the markets will make a run at recent lows but of course the bull market will continue before Christmas.
Jimmy5
doc
interesting point re $SPX 65 DMA.
i have no insightful answer other than to look at the 98 final bull leg.
it had this situation later in the leg - late 99. but still managed to go from 1233 to 1553 in the following 6 months.
Mr. T.
Now that was funny! Jimmy5 criticizes beanie for trying to predict what happens next, and then does exactly that in the next paragraph. Ha! Good work.
trade -
just look at the daily - 4 day down trend line is $204 ish
Mr. T.
Thanks, T. There is no doubt that calling tops is a crap shoot. Other indicators I look at are conflicting: the 10-day MA of the CBOE put/call ratio is historically low (a bearish sign as a contrary indicator), but the 10-day MA of the Nasdaq Adv/Dec ratio is at a level that usually turns prices upwards. No clear signals out there right now.
Joker Jimmy. lol
I got one just for you ---> VMW about to blow the lid of 120 Wed earnings. Get buying!
BTW the Bollingewr band crash trade on the SPY closed positive today for a 1.1% gain.
doc -
no clear signals out there - i agree.
guess i am hanging my hat on the COT, VTO and Bollinger Band trades, FED easing cycle, a few weekly indicators that suggest we can go higher - OBV and ChiOsc, and my interpretation of some daily indicators like positive and negative volume.
but i'll be the first to admit i can construct an equally impressive list of indicators that do not confirm these.
glad it's just money....
Mr. T.
Trade -
if i got this right, HSI is up 1,003 overnight.
any chance FXI breaks out today?
lol
Mr. T.
i am looking at a bid/ask for FXI in the $207 area....
Gary said...
BTW the Bollingewr band crash trade on the SPY closed positive today for a 1.1% gain.
October 22, 2007 8:17 PM
What is the risk/reward ratio for that trade? COnsidering the Gain is 1% the stop set at .25%?, .33%? Or is there any stops? You just hold this until three Fridays or something?
Considering it saw another low after the initial signal, it seems the loss risk far outweighs the reward?
Whats the reason for this trade? Just to "play" or do you "hope" for a big bounce?
It just doesn't make sense from a guy as adamant about money management as you Gary to take these types of trades.
P,
Here are the rules for the Bollinger band crash trade. While it was originally designed for the Q's the results are basically the same for the SPY.
Earnings plays today:
COH- PM - Down in the premarket on guidance warning. Will be a value play in the near future.
TRMB- AH Always a good play. Average gain on BTE[better than expected] earnings = 5.78%
ICLR - beat est. already moving up this AM. Average gain on BTE earnings = 3.48%
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