Stratton

In Reminiscences of a Stock Operator, the bible of stock trading, Larry Livingston, the pseudonym for Jesse Livermore, the greatest stock trader of all time describes a situation where a fellow called Stratton has a corner in corn. Livingston is short corn and wheat. Wheat shows a handsome profit, but corn is a problem. Livingston wants to close out his corn shorts but knows that if he trys to close out such a large position, Stratton, as "squeezer in chief" will cost him a lot of money. So he comes up with a solution to his problem.  Livermore, knowing that the markets are correlated and move together, puts in an order to sell a large amount of oats. The orders cause a selloff in oats, as well as corn, and Livermore covers his shorts on the volume created. His problem is solved.

I have an aversion to conspiracy theories. But in this instance I feel that Goldman Sachs is part of a conspiracy to artificially cause a selloff in gold and silver that will not be sustainable. And that makes it easy to buy large amounts of gold, silver and basic commodities stocks at a low price.

I presume Goldman is short gold as they suggested in their news release a few days ago when they suggested shorting gold. I suspect they are covering their shorts.

Many of the basic materials have been declining for some time. They look to be bottoming. The U.S. economy, despite the most recent data is probably on the mend.

And the U.S. Dollar is weak by historical standards.

I think this lates downdraft in the equity markets and in the precious metals markets is a "headfake".

I think this is where the inflation really starts.

I will manage my positions so as not to take any large losses, but will position myself for inflation.


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Bottom? Or falling Knife.

In any timeframe, this is what I look for in spotting bottoms in price.

Don't bet the ranch, tho...

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Rally today?

The market feels like it is time for a small rally today....
Short covering probably.

And if the gold and silver declines are the result of ETF's and the ease of trading then buying and squeezing the shorts can be just as easy....

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Stocks under heavy pressure

Stocks are being sold heavily this morning. The price action brings to mind the heavy and persistent selling/buying that happens at the start of a longer term move.
The traders and bottom pickers are just smothered. There seems to be no attempt to sell the rallies, just sell.....

There will be a rally. When... And for how long?

For now.

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Why is DB weak?

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Gold vs. US$

Gold is quoted in US Dollars.
The US Dollar is weak. See chart:

And the US Dollar looks to get weaker. If the past is ANY indication....

Gold is weak. To say the least! Many reasons are given for the selloff in gold. From paper gold getting sold, to the expectation of no inflation, to the desire to own dividend paying stocks. And there are purely technical factors; panic and a desire to avoid more losses.

But, to me, gold is all about a safe haven from inflation. Yes, inflation is tame. Unless you consider the stock market as an inflated asset. Is the recent action in gold prescient of a decline in equities?

Is this mostly technical selling? Is inflation really dead? Especially considering that the US equities market has been pricing in an economic recovery.

And what about the US Dollar index as an indicator of the relative strength of the USD. A move to the lows of the USD MUST be inflationary.

If the USD continues down it seems hard for this amateur to understand how gold can stay down for long.......

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Bombs in Boston run

Two bombs have went off at the finish of the Boston Marathon.

The news causing further impact in the weak financial markets today.

My former humor seems incongruous and insensitive.

The Boston story here.

Closed out my short positions.

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Maria giggled

As I've said before, CNBC is on my television as I sit at the computer and trade. It is not so much what is said as the tone of the program as things get said. It provides me a general indication of the sentiment of the market and the tone of the participants is an indicator of the stress they may be under from their own positions in the market.

Another thing I've noticed over the years. When the market has been trending up eventually Maria Bartiromo, who does the "Closing Bell" hour, giggles. That is often the top of the move. It is uncanny.

Here is a copy of the email I sent to CNBC when she giggled last Friday:

That’s it! At 1536 on Friday Maria giggled. This IS the top! 

Sell’em boys.

 

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RCL to announce!

The CEO of Royal Carribean Cruise Lines on CNBC this morning promises an upcoming announcement of a new entertainment for vacationers on the cruise line.

I was wondering what it might be, considering the possibilites in light of recent cruise line developments and I am quite sure I know what the new entertainment will be! 

KEEL HAULING!

A new adventure in the leisure cruise.

There is plenty of room on the upper deck for travelers to gather with their KH tickets, (available in the onboard box office). And I have good news for gold investors! They will be admitted to the Keel Haul ride FREE!

Some of them are taking the ride NOW.


Doncha just love that Google image search.....

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How many dips can a dipstick buy?

Browsing my favorite blogs and sites tonight I came across this interesting read by John P. Hussman, Ph.D.  while visiting Mauldin.


A brief excerpt:

"Another pattern that we’ve trained ourselves to identify, with some concern, is an emerging tendency toward increasingly immediate attempts by investors to buy every dip in the market. This tendency reflects a broadening consensus among investors that there is no direction other than up, and that any correction, however small, is a buying opportunity. As investors clamor to buy ever smaller dips at increasing frequency, the slope of the market’s advance becomes diagonal or parabolic. This is one of the warning signs of a bubble. It does not require much of a "catalyst" for these bubbles to burst, other than the retreat of some investors from the unanimous consensus that buying every dip is an act of genius."

and another:

"One type of illusory yield is the earnings yield on stocks, where profit margins are presently 70% above historical norms, and where we’ve demonstrated both by accounting identity and with nearly 70 years of hard data (accurate even to the most recent 4-year period), that the primary source of this corporate surplus is a mirror image deficit in the combined savings of government and households (see Two Myths and a Legend and Taking Distortion at Face Value). Stocks are not a claim on next year’s earnings. They are a claim on a very, very long-term stream of future cash flows that will actually be delivered into the hands of investors over time. At present, the “forward earnings yield” on stocks is a terribly elevated and misleading representative of those cash flows, and investors are likely to find themselves disappointed if they use forward earnings as a “sufficient statistic” for long-term profitability. The other type of illusory yield is on junk debt, where yields have fallen to the lowest levels in history, and where the majority – perhaps more than all – of the perceived “yield” is actually a default premium based on the likely frequency of future default. "

the full article here:
Hussman

Next week may be an interesting time in the U.S. and world markets.....

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