Dollar continuing it's plunge in Asia this morning, will we see a nice jump from Gold in NY today?

Rueters says spot gold down today due to world cup hangover????

"Gold down in volatile trade, dealers blame World Cup"

http://biz.yahoo.com/rb/060710/markets_precious.html?.v=1

It seems that these reporters have to say SOMETHING, I guess, even if it's complete nonsense.

I posted Friday morning that gold and GDX were looking toppy and wondered aloud if optionoracle had taken profits. I see from his weekly commentary that John Hussman took some which I think is very fine strategy.

Technically, this was the area that traders were looking for as a ST cycle high as well. The fact that BoJ could RAISE interest rates for the first time in a millenium is only adding to the nervousness. It's not the SIZE of the increse, which will be minimal (.20%?), but it's the PARADIGM SHIFT that accompanies such a move.

So I am not at all surprised here and am merely interested in the size of any retracement as an indicator of strength going forward. Let's look at g034s Fib levels....

SNDK seems to be coming into your accumulation zone Bill. Down 3 points on heavy volume. What happened ? Looks like a technical drop rather than any news.

Apple's new Ipod Nano was supposed to be in stores in September but looks like it's being pushed back to November/December. That's causing some NAND prices to drop significantly. 8gb Nand spot price is down over 30% from week ago...quite signficant. It's likely SNDK will miss their guidance but I bought a little to initiate a position here.

Real$ Rev; 7/10/2006 11:24 AM EDT

"A blogger posted an inquiry that is not at all uncommon in a tough market environment when frustration is high. It goes something like this: "Over the weekend I read an article by a major money manager predicting that the market indexes will be cut in half. He has a great track record and was suggesting to use any rally to unload your stocks because according to his studies the stock markets were due for a rude awakening and a drop of 50% was very likely. What do you think, Rev?"

I think that this sort of prediction can make for interesting reading but that it is downright foolish for individual investors to try to act on it. A small investor has the great advantage of being highly flexible. He doesn't need to waste his time on big-picture macroeconomic arguments. Individual investors should simply stay focused on the action in front of them. If the market is acting poorly like it is right now, then you should be defensive and have high levels of cash. When the market acts better, then you become more aggressive.

Why worry about what might happen months from now? If the market starts to break down, we are going to know it, and we have the ability to move to the safety of the sidelines.

You might avoid some of the downside if you are highly anticipatory and sell things very early, but there is a great likelihood that you will miss plenty of good opportunities before this gloomy prediction actually occurs. And even more likely is the possibility that the prediction turns out to be just dead wrong.

No one, and I mean no one, has ever consistently called long-term market direction. Sometimes someone will get it right and correctly predict a major swing, but there is no one who has done that consistently over many years. Those folks who made names for themselves by calling the 1987 crash were regarded as jokes when their subsequent predictions proved wrong.

Consider the long-term big-picture predictions if you find them interesting, but don't make the mistake of acting on them until there is some price action in the market to support the viewpoint. If the market is acting weak like it is now, you don't need any macro arguments to justify a cautious stance. If the action is poor, you respect that fact and act accordingly. It doesn't matter what the big pontificating gurus have to say. The market tells us what we need to know. We just need to pay attention."

Bill is traveling with Laptop

however, per one analyst's opinion:

"SanDisk stock has pulled back from earlier highs. Investors apparently fear a slowing in the company's rate of growth, and the possibility of flash memory supply overtaking demand, leading to sharply lower selling prices. Too, SanDisk is the subject of several lawsuits, which may have further shaken investor confidence, and it is committed to large investments in its joint ventures. We still rank the shares highly for the year ahead but, given the uncertainties, the stock is probably best suited for venturesome investors. " VL

MarkM-I'm out of gold and looking for short positons in the broad market. The 63-64 level in GLD seems to be a pivot area. If the advance begins to "fan" and lose momentum on a short term basis (and so far unable to rise above the 50 day average)it looks to me to need another leg down to carve out a sustainable bottom( 53-56 zone). SNDK looks like it may put in a spike bottom between 40-43. Hard to believe this market can make much headway with the semis in the tank. I'm looking for situations in individual stocks that are downside plays using options-specifically shorting what I consider overvalued August options and buying 2007 or 2008 dated options against it. I think the best this market can do is hold up for another week or to before reversing and trending lower into the fall.

Re: I think that this sort of prediction can make for interesting reading but that it is downright foolish for individual investors to try to act on it.

Excellent commentary!

TheAdonis:

Just asked Bill about something similar i.e. MU, although he didn't directly answer my question, his response does address yours.

"C.Note, pls understand that I rushed WIR 27-2006. I was tongue in cheek without the "lol".

I believe SNK is a buy in the very low 40's.
Hopefully you will make a reader comment to that effect. TIA.

/Bill "

SNDK: Someone said here, let it come to you. I don't think we are there yet.

However, this announcement is very interesting (Skype preloaded onto SANdisk cruisers):

http://ca.us.biz.yahoo.com/cnw/060710/skype_sandisk.html?.v=1

So, SNDK + telephony, that can be a killer app. Better yet if the cruiser just had a miniplug for a headset, then you take your little cruiser with you and make calls from any PC.

optionoracle-

I really respect the work of Lowry's although I do my own thinking and verification. This is what they recently had to say (as picked up by Jeff Saut):

“If the current rally is the start of a broad, sustained market advance, then the Buying Power Index should be in a strong uptrend pattern, reaching new rally highs ahead of the major prices indexes, and the Selling Pressure Index should be dropping rapidly. But, that has not been the case. Since the rally attempt began on June 14th, the Selling Pressure Index has moved essentially sideways within a relatively narrow range, indicating that the desire to sell has not been exhausted; rather, sellers seem to have simply held back on selling temporarily, perhaps to take advantage of the rally. At the same time, the Buying Power Index has dropped to new multi-year lows again this week, show that buying interest has been drying up as the rally has proceeded. . . . Rallies occurring in the face of weakening demand are usually short-lived.�

I have been harping on this theme for 2 weeks now as a warning to folks at this site to not get cute with longs here. The demand simply is not there--not with Institutions sitting this thing out. I do not see what draws them back in at these levels. Maybe lower, yeah, I could see it but risk/reward simply isn't there right now.

All I have left now with respect to gold and miners is strategic and hedging positions. I'll keep those on as I await the verdict by the markets.

"Hard to believe this market can make much headway with the semis in the tank." I said the same thing elsewhere this morning. The Naz is so weak it is dragging any attempts to rally down. It will continue to lead us lower as it Triple Waterfalls IMHO.

Bill asked to post this for the experienced to comment on strategies for buying DIA puts, with particular regards to strike price and expiry date. There are so many 'options' (no pun intended)...

For example:

105 December @ 1.70
108 January @ 2.80
107 March @ 3.10

That target strike price is about 5% below today's price and the expiry Dec 06-Mar 07. Is this reasonable?

Thank you.

As I wrote the above the Naz was basically flat. Now it has gone 10 dots into the red. These are continuing to look like defensive shift days where the only relative strength is in the large caps and megas like the Dow 30. Ugly action.

Bill's WIR tongue in cheek comment on SNDK hitting the low 30s might not be so far fetched. SNDK is tracing out a nice correction from a head and shoulders pattern, with a projected minimum downside in the area of $25.

Sandisk chart:
http://stockcharts.com/h-sc/ui?s=SNDK&p=D&b=3&g=0&id=p30194575321&a=78545728

Short term, it looks oversold, as the daily RSI is at 27. But 50 day MA recently crossed over (lower) the 200 day, and the 200 week MA is way down at $30.

I agree with MarkM that the risk/reward just isn't there right now in general. If we do get Bill's 21% correction, and an 8800 Dow, there's no way SNDK won't drop further in sympathy.

JMHO

d11-

Thanks for the chart with commentary. More people should do that.

That rounding pattern and failure of 46 support looks ominous. 50/200 Death Cross also. Nothing to like about that chart or the indicators.

rsm-I'm not sure what you mean be reasonable-the actual price of the option or the appropriate strike. There are several things to consider; timing of expected move, duration of expected move,and intensity of expected move. I assume you expect the market to move lower. Timing the move is critical to profitability. Because of the time decay of options as they near expiration one can get the direction of the move right and still lose money on the trade. You want to give yourself enough time for the trade to work-so if you think the market will bottom in October buying Jan puts would be safe assuming the original vol level of purchased put was not unreasonably high (in this case vol on Jan 108 put is 14.3 in the middle of its yearly range). If you feel the Dow will decline by 10% by the end of October, the DIA would be trading around 100 so the intrinsic value of those Jan puts would be 8. Because there would be almost three months to expiration the Jan puts would also have some time value which is directly tied to expected future volatlity. So in this scenario you would make a handsome return. The type of decline you envision would dictate what particular strategy to use. A slow steady decline lends itself to buying vertical put spreads or selling call spreads. If you envisioned a panic the outright purchase of puts would be the best plan. There are other strategies (collared put and calls against long postions), butterflies, condors, calender spreads etc. but without knowing your specific objectives it's hard to say one is better than the other.

optionoracle,

Thanks so much for the response. As far as I see it, puts are a 'relatively' simpler way for the little guy to make some money if one is confident of a market decline, without incurring the risks of short selling (although I may still lose all I invest - but no more).

What you mention was all in my head in one way or another, so I was trying to figure out if there was a way to eliminate some of the variables. I guess you are saying it depends on the type pf market decline I expect. I think this would be too much of a guess for me. My assumption is that the market will decline from now till the end of the year, and I am not a day trader. I am mostly safely into cash as well.

This morning the DIA was up and the puts I bought last week were up too (!).

Lastly, if there is a recommended site that discusses these strategies you mention, it would be much appreciated.

Again, many thanks.

rsm-

I believe Investopedia has an options tutorial and CBOT does as well.

Regards....

rsm-you can go to cboe.com and click on the learning center tab and read or download educational material. Good luck.

Marc Faber's (Dr. Death) Gloom Boom & Doom Report is no longer free. Annual subscription now required.

Always enjoyed his viewpoint in his written commentary as well as his thoughts expressed in magazine and television interviews.