Thursday 1 November 2012

One Swallow Of Fall.

While it is true that one swallow does not make a summer, we have been calling for this bullish action for quite a while. It will be foolish to say that from now on prices will go up and up but it does look like the making of a short term bottom which the cycles have been calling for. SPX closed above 1425 which earlier was acting as a resistance. Let us see whether it holds tomorrow. Only folks who seem to be unhappy today are from our beloved rant blog. I shudder to think about the plight of anyone who was short after reading / listening to those unending rants. Few more times like these and when the time comes to really short, folks won’t have any money left to trade. Only GS and JPM will be able to short the market then. Brilliant plan indeed!

Tomorrow is a NFP day. Few have any idea if at all about how good or bad it will be but in reality, it does not matter. Most likely, markets will go up anyway to test the highs in the next few days/weeks, with occasional dips in between. So it does not matter if tomorrow is red or range bound, which is very likely, so long the red is not huge red. Only fly in the ointment today was that US$ was higher which resulted in gold and silver selling off from their morning highs.

But the silver miners like SLW and CDE have started to breakout even in this weak market.  I think both gold and silver will also move higher and test their respective high of the year. And all these should happen in the next two weeks. We will have to wait and see if gold is able to break through $ 1800. If not, we will get out of PM sector for a month and re- enter by mid or end December.

The next two weeks will possibly be good for swing traders. So far as investors are concerned, it would be a good idea to reduce the long positions on any strength and reduce the risk. And the risks are real. The fiscal cliff will not be sorted out before next year and there is no clear indication as to who is going to win the election. These are known unknowns and in times like these, cash is king. 

But from the swing trade point of view, I would probably buy out of money November calls for SPX that are cheap and get out by 12th-14th November.  But everyone has own style of trading and no one size fits all. So please do your due diligence.

Today QQQ was up almost 1.5% while Apple was up only 0.2%. Yesterday I wrote that Apple most likely has bottomed short term. If that is indeed the case and Apple is to test its 50 DMA it would mean a move of about 7%. That would definitely positively impact the Qs and other indices. The last high was on September 14 which was almost 45 days back and yet we had a tiny 5% correction. So we did not miss much by staying in the sideline. Also in all of those 45 days, we had two up moves and three down moves without any clear direction.  I had suggested not to short and hopefully it would have saved you some money.

Thanks for sharing my thoughts on the market. I have been busy with studies and waiting for the market to show its hand. So far things appear to be on script. I hope it will be interesting going forward and you will be able to make some much needed money.


  1. Takes a really cool headed person to be so patient! Kudos to you for being on the ball so often & yet not getting carried away. Your blog is awesome!

    Re Gold, if one were to buy in here @$1,715 & hold for the long term (say 6 mths - 1 yr) would you say this level is good or should we wait for a lower entry @U$1,700? My concern is if markets do correct around mid November, will USD then appreciate & Gold drop off? i.e. risk off trade.

    Thanks BB for your time & effort with the blog!

    1. Thanks.
      Re. Gold, it is going to $2500 but that may take some time. If you are able to accumulate slowly and not get bothered with $50-$100 correction now and then, then do not worry about it. But most folks sell out at the bottom just when it is time to buy.
      Market will most likely drop off mid-Nov and USD appreciate.