Wednesday, 16 January 2013

Deja-Vu?

Almost a repeat of last year.

The Indices keep grinding up while everyone calls for the top and correction.
Last year, the Jan OpEx had a rare gain and so far this year, we have opened lower but sharply reversed for everyday of this OpEx week.
Historically Euro is weak during January but the history has been over written both last year and this year so far. Euro refuses to go any below 1.3200 and as a result, there is no sell signal in Euro.
So where do we go from here?
First thing first. We don't need to front run and short the market just because some of our favourite TA indicators are showing overbought.
Next, while the Indices can definitely grind higher, just like last year, the risk;reward is not favour of huge gain without some correction.
In such situation I follow the rule:

Cash is King.

PM sector is on the verge of long term break-out (silver already broke out) and I would rather put my money in gold and silver than in equities. We are long PM from beginning of January and some selected commodity shares.

I think Coffee is making a long term bottom but I am waiting for confirmation. Nat. Gas trade which went against us, will come back to us in few days. And I like Oil long term. Bonds are making a bottom and TLT will most likely give a buy signal sometime soon. So you see, there are plenty of fish out there without bothering much about equities.

Regarding US Bonds, I think this is probably the last bounce we will see in bonds for many many years to come. So if you are long bond funds, you may think of getting out in the strength.

Equities are in the process of making a complex top but the top will come when everyone has given up and raised their hand in resignation. May be few weeks away but definitely not now. We may see some correction, we want to see correction but that may not be the start of the major drop in price. But for my plan to play out, we need that correction soon and I hope it arrives tomorrow. As I have written before, till SPX 1450 is taken out, we have nothing to worry and in fact would be a buy opportunity.

Lets wait for tomorrow and see how it plays out. In the mean time, we sit tight with our positions.

Thanks for sharing my thoughts. As always, stay frosty.


5 comments:

  1. Thanks WOF! I want to suggest that other than coffee making an intermediate bottom, cocoa looks pretty good. The risk/reward looks pretty good here but a buy signal is necessary. Using NIB, a weekly close above 31.20 would be good place for a starter position.

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    1. You are absolutely right. Cocoa is forming a bottom and we need a buy signal 1st.

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  2. Go figure. After my mentioning NIB last night, we get a 2% gap up this morning. LOL!

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    1. That's OK. It should come back to test the breakout line and if it holds then a good sign of the bottom.
      I like coffee here and waiting for it to close above the buy point.
      Then the cycle is up for all of 2013.

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