The Steam has run out.......

All data points to a market correction!

If you check the chart data for equites, gold, and the USD they all seem to fall right into line for a market correction. I'll show you what I mean....

On the DJIA chart below notice the areas that I've circled. Up top you'll see the relative strength Index(RSI) which has just begun its decent from a huge peak; a good sign that some weakness is to come. Also notice that the MACD lines at the bottom of the chart have just turned down from a serious peak as well, and they have crossed paths, usually a sign of a downturn in the chart. The Dow has been losing some momentum in the past few days and this is the first time in five weeks that it closes down at weeks end. All of this paired with some not so good retail sales and some scattered negative sentiments should point to a market correction.


Typically when the markets turn down, the Dollar becomes a safe haven and gains ground. So again if you look at the circled areas you'll notice the corresponding evidence in the RSI and the MACD. Looks like the dollar could have a rally; how big I dont know.


All of the inverse evidence can be seen in the gold chart below, as it moves opposite the dollar. The RSI still shows above average strength however the chart is for the 13th of august and doesnt include todays negative closing. I believe that the government is going to pull the country from this recession by any means necessary(increased gov. spending). Likewise inflation is bound to follow once the trend begins, so I think gold is a great asset to any portfolio however any purchases should be postponed until the price comes down a bit with this correction. Again I dont know how extensive the correction will be given that there is still a major mortgage crisis unfolding, and we all know how bad news can effect the markets.


I positioned myself in Proshares Short Dow 30 (DOG) to try and gain from the downturn. There is an ultrashort position named DXD and also there are financial short positions which are SEF and SKF. This fall we're going to see the first major spike in option Arm resets, so a real estate short could be in order as well. All though it must be timed very well, for minimal exposure.

Another Potential Gold Chart Trend

Market Pop could Boost Dollar

The market rally may be very close to hitting its peak. There are alot of mixed feelings about the markets which seem extremely overbought. Is there really enough supporting data to jusitfy the extended rally? Irrationality seems to have taken the reins recently as markets surged higher on only better-than-forcasted earnings and positive words from the fed. There seems to be more supporting evidence against a recovery than for one, which is why I think that our rally could return to bear market before long. The third quarter could still hold positive earnings for some businesses, especially those that benefit from the cash-for-clunkers programs and the like. The second wave of the mortgage crisis will most likely amplify the downturn as negative sentiments and bad news mix to create a greater sell-off. move into short positions on the Markets and Financials, Real Estate shorts are a good position as well. I may also buy a small stake in Atlantic Energy Solutions(AESO) as it seemed to perform well during the last market downturn.

Gold Chart Convergance

After todays performance it seems as though the convergance trend I posted yesterday has a higher level of validity. If the chart continues along the trend we should see a bottow around the 935-940 level and from there we could see a breakout to the upside.
There is a chance obviously that the breakout could be to the downside but I think its unlikely. The converging boundary lines are leading higher and thats usually a good sign that the breakout will be a positive one.

Another Potential Gold Chart Trend

Whether Gold Breaks the 980 mark now or later its all good news!

Natural Gas Outlook: begin taking profits

I shifted my position on Natural Gas Fund UNG today to begin taking profits. I really hate to change my stance before the winter months because normally thats when price increases would take place. If you bought around the low 12's when I originally posted my buy short order you would be up about 10% now, which isn't a bad gain by any means for under 30 days. The reason I had only suggested to buy for short amount of time is the same reason I'm postponing my buys on all other commodities right now; I believe the "bull market" will come to an end this fall. I've named some of the reasons for a turn around in earlier posts but to reiterate; second wave of real estate/ credit crisis, an overbought market, poor underlying fundamentals, unchanged or growing unemployment, and very low consumer spending. These are many reasons that the huge bull market is a fake. We're not even half way through the real estate disaster that started the whole mess, right now we're in the eye of the storm.
I would reccommend holding your shares long but the supply is so great and there have been so many new discoveries that I think the prices will be held down until a greater use for gas surfaces. It would be a great alternative for fueling our cars. Buy the lows when the markets turn down if anything, Im sure there will be some profits to make from there.

Gold Chart Outlook

The uptrend continued today with a gain of 1.14% while the dollar seemed to flounder around not really making any significant movements. What we accomplished today was a hurtle over the resistance level around the 960 and now the next resistance level we're looking at is around 980 so actually a great feat today. Once we break through that 980 we'll be ready for testing the 1000 mark again. I just hope that we can break through 1000 before anything serious starts to take the wind out of the bulls sail. I have a feeling that things will be good throughout august and probably into the October range before people start hearing about the next wave of Real Estate disasters and so on, but no sweat for us because there is always a balance and we've located the other end of the see-saw. So for now we have clear skies with a light breeze, a possible chance of showers tomorrow, but all in all a strong end to a rollercoaster summer.
Thanks for reading, and good luck!

The Rally Continues: Time for the Handoff

Today we had a huge rally in the markets, and it seems like the Dollar made up for its friday performance.
The bulls have officially taken the reins... let them! Its funny how this always happens, the market works in extremes. First everyone gets scared and people panic (the market gets oversold). Then a natural rally occurs, and some how people become overly bullish (the market becomes over bought).
If you havent already passed off your shares to a speculative bull, I advise you do so.
This market, though very impressive, is getting to the tipping point. Sure we've beat alot of horrible earnings forcasts, but we're seeing minimal consumer spending, excessive unemployment and an ever-looming threat of continued credit carnage spurred by toxic mortgages. The financial sector is about to recieve another aggressive kick in the groin when these option arm's, ALT-A's, and commercial loans begin to default.

So where should you be positioning yourself to benefit from the disaster?
Chances are that when the bears regain control of the markets the dollar will see a decent rally as investors look for a safe haven. That means that commodities will most likely take a hit. I don't think that its necessary to sell off your commodity positions as long as you have some extra funds to average down, but I would recommend holding any purchases until you see a decent pull back. Some other positions that I see as profitable are shorts, especially in the real estate and financial sectors. There are ETF's that are set up to take advantage of bearish moves in different markets. So take any profits on equities pretty quick here and keep your cash ready for attractive prices in gold, oil, silver, and also short positions on financials and real estate.

SEF - Short Dow Jones Financials
SKF - UltraShort Dow Jones Financials (2x leveraged ETF)
SRS - UltraShort Dow Jones Real Estate (2x leveraged ETF)

Friday Overview

The Dollar is down 1.3% right now for the day and surprisingly the markets didn't move upward very much. I think this is a sign of at least a short term decoupling of the Dollar from the US exchanges, something thats actually more normal than what we've seen recently. The dollar is under a lot of pressure right now from both our foreign creditors who may be starting to diversify their holdings, and also from within as US investors begin to move their money into the more attractive markets. So I think that the decline of the dollar will continue at least for a short time until we hit the next resistance point.

I also think that the markets are due, as I said previously, for a correction sometime soon which may bring the dollar some support. They traded pretty much sideways today as early gains were chewed up by the later day selling.

Oil Prices were up 3.7% to 69.45 today which is great for anyone that listened to me previously and has been buying into the dips; I'm sure there will be more to come.
The facts shows higher oil prices in the coming years with a declining supply, aging infrastructure, increasing demand from emerging markets, etc. so enjoy the ride it should be a good one.

Anyway, thats my cap for the week, remember to get yourself into a solid Canadian Gold or Silver company if you haven't already. Its going to be a money maker, as well as oil, alternative energy, and other commodities.
Another thing I've been thinking about recently is the world's water supply. Places like China have a horrible fresh water situation, and the demand is only growing with the industrialization and population. I'll post on this in more depth next week.
For now have a great weekend!

Oil Stocks: Get in and Average Down

There are a few reasons I believe the markets will need a correction sometime fairly soon before they continue their long upside trends. First is my gut instinct that tells me nothing ends in months that was created over years. We've seen a major crash in equities since prices peaked in the 4th quarter of 07, and recently an almost equally impressive resurgence in the markets carrying the DOW up a total of 42% since its March lows. It just seems normal for there to be some sort of correction in the market before we continue much higher.
We've had a lot of good news recently with better-than-expected earnings, especially from the banking sector that seemed to help carry the prices higher. However, if you disect the "good news", you'd realize that we're only about half way through the entire real estate crisis, we still have high unemployment numbers coming in every month, we have seriously curbed consumer spending, and we have not many actual revenue increases. The fundamentals haven't improved at all. Most of the profit increases are only due to cost cutting, and the actual increases we do see come from banks like Goldman Sachs and Meryl who have been awarded massive bailout and stimulus injections. They've had billions of dollars that they've been able to leverage and invest in the rising markets to produce these spectacular earnings reports. I just dont think that the "green shoots" are going to hold out forever, just like a drug addict, at some point there must be a withdrawal even if it isn't a total collapse.

Also, at some point the FED is going to have serious pressure to increase the interest rates in order to soak up all of the liquidity, but I just don't see them being able to do it. Just that alone could be enough to cripple the already teetering financial system. However, If they don't raise the rates we'll be looking at creating another serious bubble and ultimately instigating an irreversible inflation cycle.
Their plan is to let the economy stabilize and then hike the rates to soak up the excess liquidity, but I dont know if the government can really afford to pay the rates if they have to.
Whether the Economy recovers or collapses Oil will be a solid investment because either the demand will increase and supply will be short, or the massive liquidity will drive prices up. Commodities in general should be a good place to invest for the coming years as the Asian and other emerging economies continue their development.

My advice is to buy into Oil Stocks now and continue to average down during any weaknesses. The prices will rise long term based on supply and demand imbalances.