Friday, January 30, 2015

Recap Of Last Night's Battle

As pointed out previously, the 100DMA (and the less obvious 150DMA) are the lines in the sand that will require a hero to save us all.

Of course it comes to NO surprise that it is yet again someone from the central banks that comes in and talk stocks up. I mean, who could have seen this coming?

Yellen said that there would be no rate hikes soon.

Interestingly, following yesterday's Silver Smackdown, CME is upping silver margins by 11%. The effect is that there is less money able to chase around Silver. I think it will actually help to reduce volatility.

The Baltic Dry Index is at massive multi year lows. Technology new normal? Or just lack of shipping demand.

Finally, onto my favourite chart regarding Oil:

All the dead cat bounces. Technically, NOTHING suggests a reversal. Lower highs, lower lows. Going in to catch these knives is clear and simple greed. Not that there's anything wrong with that. I do that all the time. Buying low is good. However, you must be prepared that we can still go lower. 

I read this article about oil which I find very interesting. It postulates that Oil either bounces back up to $88 or Oil stocks drop 40%. I'm not saying that it is right, but I'm saying that it is a pretty interesting argument.

I feel tonight will also be important, but only if bulls can bring the fight back to the 100DMA. I've hedged out my short positions and I'm back to where I was last week. I'm going to hang low and watch for a clean break either above the 100DMA or below the 150DMA. If it's clean, next week should see good follow through.

Personally, I think this is a great buying opportunity for people considering some precious metals. Unlike Oil, the space has been in a bear market for YEARS. We are seeing higher highs and high lows. The fundamental reasons to own it as a currency has probably never been better. The last time Gold and Silver were at these prices was back in 2010. I firmly believe that downside risks are very clear and the rewards to the upside makes the risk-reward ratio extremely attractive.

I would purchase more at this price, but my brain is telling me not to be greedy and preaches risk management through diversification. My asset allocation to physical precious metals is already a whopping 25% of my portfolio. That's not counting my stake in miners. My exposure to the precious metals trade is actually nosebleedingly high, especially for someone that is not in love with his investments. I'm not attracted to gold and silver as an asset class because it's shiny and pays me zero yield. I like it as an asset class because it's cheap, at least by my analysis. And by golly, I'm gonna sell it much higher sometime in the future.

I keep having to remind myself, buy low, sell high. It's honestly not an easy thing to do.

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