Monday, August 3, 2015


There is absolutely no reason on earth to own gold - that's why, as a Contrarian, I like it around these levels! An old Wall St. maxim is "When everyone is looking one way, look the other" Gold is an Inflation hedge - there is none in sight for the foreseeable future; it pays no dividend, in fact, costs money to harbor. With all the calamities around the globe - Greece, China, Brazil, etc. it only goes DOWN. Countries needing cash for debt, are selling gold, used as collateral for other assets; finally, a stronger dollar (with imminent rising rates) will only hurt gold's price, measured in $$.

While riding it down, I decided to hedge it with JDST, DZZ, even looked at $GVZ, the gold Vix, but have had bad luck using the VIX to hedge the market - VXX futures calls, longterm VIX calls!
Even with Larry McMillan's recent talk at UC Extension solely on the VIX.

So what happened to the stock market? The Traders' Almanac, run by another recent local speaker -Jeffrey Hirsch-  used to say " the market rises more on the first trading day of the month than all other days combined! Not a good sign!!!! Another former TSAA speaker - Tom DeMark- as well as a chart from John Mauldin's newsletter- has compared the China bubble market crash to 1929 - a tight correlation, with 14% to go (TDM). Gunslingers can use the ASHR ETF puts to play this.

Last week's Sentiment Indicators showed no signs of today's decline - the AAII Bear/Bull ratio swung heavily to the Bear side - a Bullish FOR the market signal; A longer term signal from corporate Insider Selling to Buying swung from 180:1 to 16:1 (college funding??).
Recent signs, however, have shown a decay in market breadth - advance/declines, new highs/lows, etc. Market declines always precede this weakness, but these weakness don't always result in a market decline (??). As shown below, New Lows on the NYSE reached 600.

Here are the numbers:
Date> 7/31/2015 7/24/2016
Indices: DJIA  17689 17568
  NAZ  5128 5088
SPX  2103 2079
WklyVolume (Bshs). naz/ny…. 9.6/4.5 9.5/4.1
Specul.Ratio hi=bullish 2.13 2.32
Sentiment: put/call-CBOE  63 69
VIX>50-alltmlow=8.8 12 13.7
Advance/Dec-NYSE.. 2102/1135 645/2610
Weekly Net: 967 -1965
     Cumulative: 163222 162255
Weekly  NYSE hi/low… 182/600 245/626
New Hi's/Low's Nasdaq h/l 172/440 287/403
McClellan  Oscillator 18 -43
McClellanSum .+750/-1000 -338 -282
Newsletter Inv.Intel -Bull 43.3 49
Surveys-Tues Bear:-5yrs 17.5 15.6
Wed. AAII  -Bull  21.1 32.5
Bear  40.7 25.6
COT:SPX w/w large/small (net)k 7K/(13K) 9k/(16k)
COT:gold  comm.hedg long-short.000 (15K) (21k)
COT:OIL comm.hedg long-short. (244K) (257k)
US$-WSJ n/a 88.5
CEOinsider selling n/a .16:1
off.&bd b/s.vs. 10% holder b/s discont.
3-box rev Bullish%-  52 53
US equity -ICI Fund Flows week delay (3.2B)
MMF flows Change in $B UNCH 16.2B
MargDebt- top (300M) monthly  505B JUNE:
ETF:mthlyEqty/ Int'l/Bond-$B 1250/514/314 JUNE:
2-yr Tsy Yield: Inflation 0.67% 0.69%
TIP (ETF) Inflation 112.6 112.1

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Zero (IN)Tolerance

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