Rydex data continues to be in neutral territory and the market has been in a sideways trading range from about 1110 to 1085. One word to describe this.....edgeless. This sideways chop has been making a meat grinder out of the fast money types. That one trader I mentioned last week before who has been self destructing with this account has been getting his clock cleaned even futher during this chop. He says he's just about ready to give up trading. I think that will do him a lot of good.
Gold is making new record highs yet again and I still think it's not done. I know the move is crazy relentless but that's what you see in the blow-off phase. Remember how banks stocks were ruthlessly dropping every day in Feburary and early March after already having taken such a beating the year before? It's the same idea. The same thing happened with oil in the summer and the same thing with tech in early 2000.
As mentioned with my previous post, the noose is tightening around the necks of the bears. This gap we've seen today gives them some hope that we could see another bull trap if the market breaks out tommorow. But I ain't going to bet on it because there's no edge with my favorite rydex indicators which are neutral. If you are going to play the short side for a trade in a bull market everything's gotta be lined up perfectly because as I've been saying for weeks, in a bull run, bearish signals have less bite and can be ignored or resisted for quite some time.
Watching how the market handles bearish signals and bullish signals has always been an objective way to know if you are in a bull or bear market trend. This is why in early April I had strong suspicions that the trend had changed from bear to bull. Admitingly I wasn't fully convinced but by about mid May I was.
A lot of the bear signals I made mention about 2 weeks ago typcially resulted in immediate and swift downside 18 months ago wheras this time and all through out the spring and summer, all we've seen was market resilliancy and/or modest pullbacks.
I was watching "Poker After Dark" just now and I saw Poker ledgend Johhny Chan make a rather big mistake with his play. He was holding AK while his oppenent Laak was also holding AK. Laak made a big raise and Chan re-raised him. It took Laak quite a long time to decide what to do. While talking out loud Laak figured Chan had QQ and so given that Laak had AK the proper play would be to either call or go all in and he chose the latter. As a result of this move Chan was put to a big decision and he too thought about it for a while. Chan ended up folding saying out loud that if Laak felt he (Chan) had QQ Laak could only go all in if he had KK. Did you follow all of that? lol!
This was a rather large blunder made by someone of the caliber of Chan. If Laak had KK and he openly admitted that he believed Chan had QQ, it would have been a no brainer for Laak to have gone all in almost immediately after Chan raised him. It's a no brainer and anyone would have done that because KK is the second best starting hand possible (only AA is better). For Laak to have thought about what to do for so long he couldn't have had KK unless he was putting on a show pretending to be perplexed. I suppose that's possible but I've never seen pros do such shameless things especially to others respected pros like Chan.
What's the point of this story? The point is that Chan, although a pro, is human and humans are fallible. They get it wrong and wrong big no matter how right they've been in the past .This applies especially to the markets. I've seen Gurus who have nailed it time and time again get it wrong and get it wrong big. Take for example Doug Kass who called the bottom in March almost to the day. He ended up going net short around SPX 940 or thereabouts and then "all in" short at 1030 with his top of year call in August. I'm sure Doug is still up on his calls overall this year but the point is that nobody is infallible and I tend to see people worship the ground of the guru who's had the hot hand. Take this guy Prechter you hear a lot about. He correctly called the beginning of the secular bull market in 1982 and then warned of an oncoming crash and great depression 2 in 1987. It would have been hard not to think that this guy found the holy grail of market timing. But he stayed long term bearish after his 1987 crash call and had the worst performance of market timers for decades missing out on the entire 1990's bull market. Nobody and I mean nobody is infalible.
I visit this local car forum here in BC from time to time to check things out. And guess what did I see today? Even those car guys are talking about gold making all time high. Some guy on the board said gold is the safest investment and he is going to liquidate rest of portfolio and move it all into gold.
ReplyDeleteI am not saying it's a top here but man it sure smells like it.
Thanks for that anecdote! When you start hearing things like that you know the days are numbered for gold because those are the types of suckers who buy near the end of the move but I remember hearing similar things in late 1999 early 2000 with tech stocks but yet we still saw the bubble blow to even greater heights before bursting!
ReplyDeleteThe same thing happened with those who panick sold out of equities last fall. I remember the panick of clients who jammed the lines at the call center in the office where I used to work recklessly selling everything in early October even though the TSX had already crashed big time. Ironically, it turned out to be the right move....for a few months because the TSX ended up gong significantly lower before hitting the final bottom. But now a year later those who sold in October look like donkeys. The same thing will likely happen with those people who buy gold today
That's the way bubbles and crashes work...when you see the warning signs of their end, the most explosive phase may still lie ahead as the panick to rush out (or in) fully plays out. But time is against these people who may get to enjoy temporary gains.
That's why I think with gold it's possible we'll see $1350-1400 as an ultimate top. It's a guessing game really. We'll see what happens.....