$602 Was and I mean was going to be really really critical. It is so good to see Gold drive by like a Shelby Cobra!

Wow! A lot of people are being scammed by the fed right now, but there is a lot of smart money out there that just will not buy it! Although people are taking a breath for a moment over the "apparent" respite in Lebanon there is too much else going on. The retail season for Gold is starting, The $ is feeble and economic slowdown for the U.S. is a given now. Weekly we are seeing layoffs in the thousands. Bad for people yet good for gold.

Mr. Cara,

I have been checking your blog repeatedly today. The dramatic shift in your short term market forcast based on the treasury and stock market action last week has me very intrigued - especially since it is based on "alleged" market manipulation.

I also find your call bold because the other blogs I read are in the "head fake" or "low volume sucker rally" camp. Apparently, they do not take into consideration the "market manipulation" possibility. I for one have been in the "business" long enough to know that "these peoples" greed knows no bounds. There is nothing "they" will not do to empty out the pockets of mom and pop. I also see the November election issue and the importance of propping up the market until that time........unless - they crash it now and prop it up just prior to the election. But, obviously you do not feel that way.

I am holding long positions but they are well hedged with puts and tons of cash.

Interesting times.........

Hi, Bill,
First I realize you are here to help and are great at what you do, and many are thankful.
For me, I wonder if you could possibly refrain from making predictions in the future or at least address them as your "Surviving the Market Meltdown" has me loaded with puts that are basically worthless. Maybe let us know or address that no one can predict the market, I dont really have time to follow the market but do put faith in the site however, and have lost quite a bit and now you are saying we are going to new highs after calling for Dow 8800 by Sept/Oct. So I missed the bottom too, it stings. I dont have much capital to weather these viccisitudes..Look, I know its tough, we all do, but to say this Dow 8800 , and advise to buy puts, I did and refrained from buying on the bounce, and then now say new highs in the Dow?, it is enough to make me write here and ask that you please stop with predictions and then changing your mind, the market changes all the time, and many of us are now learning the hard way...Personally, I would rather be taught to fish than to be given seabass and not be a leaf blowing in the wind, being weighed down by heavy losses from such drastic changes in the winds. Anyway, just my 2 cents. Thanks for your wisdom anyways - RJ

RJ - You're kidding, right?

This site is all about teaching you to fish. Bill has made a concerted effort that he is NOT an advisor, so I (and others I am guessing) don't know where you got your seabass from.

There are plenty of other places on the web to go and you can probably pay for them as well.

ditto that.

r.j., you should go buy a c.d. and forget this game.

but if you stay, never blame someone else for your mistakes.

signed,
someone who has put peanut butter on and eaten plenty of expired paper

Gold broke through to the downside on the symmetrical triangle that has built up over the past 4 months. Until it reaches $640, the triangle is still valid with no support until about the $600 level. Regardless of today's gold action, caution is the order of the day.

RJ: Hopefully your puts are salvagable, interim this market may make a rally, long term it will see the levels that you mention.

I am new to this game too, I am inexperienced and most of my money is in 401k's that allows only infrquent trades. I have to make sure that when I take a position it will end up where I need it to be after the usual minimum 30 days that are required to not get on their excessive trader list.

Make sure that 1 you are an investor and 2 if you want to be a trader the reposnisbility is your own. You have to make your OWN dedcisions, use input from others if you will but ultimately the choice is yours.

Investing and Trading require confidence, patience, discipline and courage!

the gold stocks are acting pretty well here. i wonder if there is some international fear headline about to break. weak economy themes are painting the tape yet gold stocks - lately a strong economy theme - are popping.

transports are reverting to their role of millstone around the market's neck here. given the daily overbought status of the market indices, the best - i think - that the bulls can hope for short-term is a choppy consolidation to work off last week's binge. today, however, will show no lift.

RJ-Bill has spent most of his time "teaching his readers how to fish." He is especially sensitive to this issue-there is no way for him to know the intimate financial details of each person who reads his blog. Some are short term oriented traders, others are students new to the markets, others retired investors looking for some unbiased advice. He wants the little people (the owners of capital) to be able to suceed on their own and not get fleeced by the big investment banks. Successful speculation or investment requires one to play probabilities-there is no such thing as a 100% certainty. Making money also requires one to change his mind when the market action causes your opinion to be suspect. He is giving you the tools to trade like a pro and be successful over the long term. Humungous bank and broker are concerned about their commissions not your profitability. I think you need to review his comments and strategy over the past year before blaming him for your investment losses.

R.J. You really can't blame Bill for YOUR trade. If you choose to follow Bill you get the good and the bad. The market did a headfake and it will do that from time to time. Hey I got killed too, but I am not crying. I think your biggest problem is risk management if you say that "loaded with puts" and then added "I dont have much capital to weather these viccisitudes". Basically if you get greedy and treated the market like a sure thing that is a sure fire way to lose all of your money. Finally I think you should realize that the Dow is only about 2.6% away from its high, so basically Bills call for a new high could be as harmless as the market COULD rally for two days crap out and then we are down from there.

Bill ,
First of all, thanks for teaching me to fish. So far, I have tested your method of buying after following RSI etc. with a small amount of capital and almost all of them have been profitable. Eventually, I plan to risk more capital once I get more comfortable.
Regarding gold, I am wondering what was the relationship betw. rate, US dollar and gold price during 70's ? I would assume that dollar was strong because of high rates but gold went up due to high inflation. Which means inflation is more important than dollar strength for gold price. But I can also see why low dollar = higher gold price. I guess my question is : what is more important for gold price : inflation or weak dollar ? Thnks

rj,

In the end, unless you are paying Bill as your advisor, you follow your own path using Mr. Cara's blog as a guide. The 80/20 rule is valid for anyone, you're either right 80% of the time or wrong 20% of the time (or vice versa). If you cannot stand the loss, your advisor should review your portfolio and know this in advance.

Also, nobody can predict a crooked card game's outcome, unless they are the one calling the shots.

rj-

Bill's site has a wealth of information on it that could fill a book or two. See his GICS materials at top nav and his Trader Tools and Trend and Cycle archives on right nav bar. Great stuff. Ditto for his Accumulation and Distribution Zone analyses and his explanations re Dow 30 and Cara 100 stocks and prices.

Ignore anyone's "calls" (including mine!). When someone makes a call it's mostly just a little guesswork and a lot of ego. You have to do your own analysis and make up your own mind. "Experts" are all over the map on this market. If anyone had the all the answers or could reliably predict market direction the most logical thing that they could do would be to 1) shut their mouth 2) borrow to the hilt including money from family and friends, and 3) invest it all and go take a long vacation. You would never hear about them or from them.

If the ups and downs of this have you confused or scared make a resolution to yourself. Tell yourself that perhaps someone else should manage your money no matter how bright you are or how easy this is made to appear by anyone. It isn't and intelligence is about one-fourth of the game. There are lots of good money managers out there and there are lots of ways to match market returns over time with diversified portfolios and low expenses. Perhaps that should be your game. Beating the market is everyone's dream but by definition can't be achieved by half of all investors (less expenses even fewer).

(Last post of the week.)

Gold vs Silver vs XAU

Which is the best tell on metals at this point?

I believe Bill is correct to observe the importance of Silver and XAU are outperforming GLD at his point. If GLD is the vehicle directly effected by central bank activity we should expect distortion and misleading price signals.

Also note we are entering the best calender period for gold... and traders are absent as measured by Rydex PM assets. That is fuel for a move higher into this seasonal strong period if fundamentals begin to gain attention.

As we are entering the most dangerous window for stocks it is interesting to see traders getting more comfortable with risk there. Rydex bull:bear spread now in danger zone as is Rydex Beta Chase

JMHO, good luck to all

stockman,

thanks for the rydex information.

rj:

We're all going to reach the pot of GOLD at the end of the BEAR with Bill. Along the way, there are some pitfalls, well maybe shear cliff drop offs, but Bill has informed us of most, and even 'Chief Falling Knives' (as some have named me) has learned something different than you have and sees the light a little differently than you do.

It's time for you to install a brighter lamp, bind up those self inflicted wounds, and ask a few questions now and then. We all would be more than happy to help. I don't think I've seen a post from you before.

RJ just hit his thumb with the hammer. He's trying to learn the art of driving nails. He had to yell at someone.......it hurts!

rj
The posts regarding your comment are right on. Bill's blog is one of the most informative sites around. As an investor/trader you have to make your own decisions. Bill has continued to make great trading calls over the past 12 months. Most of them have been very accurrate.

Re: Yellow brick road...

To be honest I am treating gold stocks today
as just a day trade/overnight trade.

I don't like to throw too much money at something
which is just responding to an "exogenous" event - such as Iran.

Gold should have been moving in front of this news - it didn't.

If there is no follow through after Iran's "announcement" tommorrow - this could reverse - on sell the news.

... just some food for thought...

tradesman

Re:
"If anyone had the all the answers or could reliably predict market direction the most logical thing that they could do would be to 1) shut their mouth 2) borrow to the hilt including money from family and friends, and 3) invest it all and go take a long vacation. You would never hear about them or from them."

Excellent Commentary!

The above quote should be the foreword, the first paragraph, the first lesson, the final chapter and the afterword of any traders' primary reader!

Sentiment on staples?

If one is long staples for defensive purposes it seems (to me) it is time to evaluate how safe your position is in the event defense is REALLY needed.

XLP MoRSI(9) 85? WkRSI (9) 75.3 DaRSI (9) 70

While I expect these stocks (XLP) to outperform the SPX I am also aware of how far they declined on an absolute basis from 2000 ($27.50+/-) to 2003 ($17.50+/-).

Be careful with the safety stocks. JMHO.

RJ -

Maybe a few basic principles of money management would help you. One approach (from Alex Elder) says: never risk more than 2% of your total account on any one trade, nor risk more than 6% of total account on all open trades.

Use either mental stops, conditional orders, or formal stoploss orders to ensure these downside risk limits are not violated.

Plus, as Bill has emphasized over and over again, be agile in your thinking and your actions as conditions change ....

If you're not actively managing risk, it's too dangerous for you to trade your own money!

rj
I don't want to rub salt in your trading loss wounds, but I have a question. If you followed Bill's call in May, at some point in time, you should have been well into the green. The markets afterall went down between 8 and 15% from top to bottom. Why not take some money off the table after a good move in your favor?

Look at todays DOW, it seems to me that something is keeping this thing afloat when it seems it is about to decline further. It does not seem to be your standard supply and demand. Based on fundamentals, I think the market hit its high last week, but perhaps factoring in the powers that be I will be proven wrong.

RJ: Be careful when investing in long calls or long puts. I do these myself and am ahead on them, but my results consist of big wins and big losses, and I only invest this way with a small percentage that is the discrentionary/speculative part of my asset investments. I would suggest more due diligence when selecting an investment and never rely on someone elses opinion unless you can support it with your own due diligence, especially if it is taken out of context from a blog. If you want a stock picking / investment advice site, go to google and find one. Bill offers his years of experience for free and I for one see this as must reading along with the WSJ everyday.

Let's see how the next few days go.

As the Downtowntrader pointed out:

Keep in mind that sometimes on the monday following options expiration there is a counter move to the preceding action which would mean lower prices the next few days. Also, Traderfeed had some interesting data on the days following 5 day highs on the SP500.

Sorry, forgot to include Traderfeed data:

http://traderfeed.blogspot.com/2006/08/what-trend-research-suggests-for.html

Good point, stockman, the whole notion of "defensive positions" come from the "buy and hold" world of yesteryear, or for fund managers that have to stay long.
Taking a defensive position only makes sense if there is a reason to believe that a new offensive will be sucessful...and soon. And how often do we have that confidence when things are deteriorating?
Unlike the battlefields of old we don't need to retreat, slowly, to protect life.
We can hit the sell button and leave the battlefield instantly with the remaining troops.
It is the small investors "edge" in this electronic age, and we need to imagine ways we can capitalize...leverage this advantage.
Shouldn't we be brainstorming this based on risk evaluaton? Early exit capability should be huge..if we have the same information, in real time, as the "humungous.."
We need to enlist the fastest fingers in the world: our children, the high speed video generation of video gamers.
No, forget it, I don't trust anyone with my $.
Especially the young.
Bill, I can't seem to open your UBS goldminers list.
tradesman
Of course miners will reverse tomorrow, but unless you are in perfect "swing" coordination on these moves, I am sticking with the fundamentals.
Short: qqqq, Long: miners.
Luck to all.

Stockman is SO RIGHT about safety stocks and defensive positions. They are an invention of Humongous Bank & Broker to keep you in their game as they trade against you in weak markets. In times like these you pay them to eat your lunch. To swing your portfolio into safety stocks is simply to set you up for future trades as the market "recovers", as in inevitably does. Better to go into cash, rolling CDs, and precious metals and wait for the market to come to you. Add the commissions you have saved to the low yields on cash etc and as long as this exceeds your perception of the rate of inflation ( not what the government has manufactured to serve the purposes of special interests )- you will be in good shape to re-enter the market when serious money can be made with much less attendant risk.

Hi rj

Bill made a recommendation on DOW a few days ago and it made me money. DOW was oversold, huge insider buying and oil was getting weak (DOW buys oil for chemicals) so I bought. I made money and closed my position friday. Might buy again if oil goes down and market rallies after pull back.

The markets are very volatile right now...kinda scary...
at any moment Lebanon, Iran or a terror attack could
change everything.

Instead of puts try QID ultra-short Naz-trades like a stock.
QLD is ultra-long. Use close trailing stops.

Good Luck

This is a bit of an aside but it's worth noting: In areas probability/uncertainty, a position/investment with a positive EV can still result in a loss.

For instance: If someone offered you 5 to 1 on a coin flip, you will still lose half the time.

When this occurs, the resulting loss does not mean it was a bad investment/choice though.

rj
a wise man once told me that hogs will get slaughtered at market

RJ,

Benjamin Graham said that there are two possible ways to play the market price swings - the way of timing and the way of pricing. The intelligent investor can always derive satisfactory results from pricing, while the one who places his emphasis on timing will end up with a speculator's results.

I do not think that myself is a good speculator - so I mostly use this wonderful blog as a way to gauge the current price level - not to bet when the price will change. I suggest you to do similarly.

Net net, I think it is unfair for you to complain against Bill that he makes you lose money. I remember he said very clearly very earlier - this blog is about teaching to think - not to think for you. It is natural that Bill will not 100% right 100% of times - he is no God anyway.

Hope this helps.

rj, I know the pinch.

Consider two matters carefully:

1. Are you cut out psychologically and mentally to do your own investing and/or trading? AND do you have the time to devote to studying and learning? There is nothing wrong to answering No to both questions. You will make a lot more money if you recognize that you should not do your own investing because your talents/skills actually lie elsewhere.

2. If you believe that you can do your own investing, have you developed your own investing approach using information and ideas drawn from Bill and others? Option trading (which I don't do, but plan to learn more about) is tricky. Should you even be in that game? Should you be studying more and investing cautiously, following good money management rules re: position size, etc.?

People are drawn to investing and trading on their own (I know I am) because of the perceived view that they can make more money on their own and/or they really enjoy the process. They might be right -- AND THEY MIGHT BE WRONG. (Believe me: nobody enjoys the process when it's going against him or her.)

Right now I'm still learning. I'm also learning who is really worth learning FROM.

Bill Cara is one of these people. He's right on top.

Maybe you should stay out of the markets for a while, take the time to study Bill's information, devise your own approach (something that fits with your temperment, needs and time frame) and THEN proceed -- cautiously.

Personally, I wish I had known about this site long ago -- back before I (*groan*) bought Toll Brothers early last year on the advice of a different guru, albeit one with a really good Hulbert rating. I paid for that advice. Bill is (and has been) incredibly generous and gracious to all of us. There's a lot to learn. Read Bill's site with that in mind.

Good luck.

PS: I am giving myself a certain amount of time. If I find that I have to answer No to the two questions I posed at the beginning of this post, I'm not going to do my own investing anymore.