Bill Cara’s Blog for Feb 2, 2012
CTA Trading Desk Morning Report
[7:00am ET] Good morning.
Two days ago when interviewed on CNBC, CPM Group’s metals analyst Jeffrey Christian opined that Gold had reached a cyclical peak that day or perhaps the following day, and that prices would trend lower for the rest of the year. He cited excessive production, excessive sales of jewelry for cash, and lack of investment demand. While I respect the CPM service and its publications, I must note that he too often has made the same call only to be embarrassed as Gold reached much higher levels.
This morning technical analyst Colin Twiggs seemed to think that Gold might soon test 1800 and if it didn’t, which he says was just as likely, then the price would re-test 1500. But if it surpassed 1800, the next target would be 2100. So, with the price at 1750, maybe it’s going to 1500, 1800 or 2100! I’m sure that really helps you make a decision. NOT!
It’s a hard call to make at this point. On the same day of the Christian interview, CNBC’s Fast Money people seemed to really like Gold here. Among the group, Dennis Gartman talked of Gold in Euros, which I found amusing and I’ll leave it at that.
As for me, I think the next month will be modestly bullish for Gold prices, reaching higher into maybe 1800-1900, largely on its present momentum due to softness in the US Dollar. From that point forward, the Gold price is likely to struggle under the evolving problems in Europe – next with Portugal, Spain, and maybe Italy again, until the Dollar starts to pull-back based on Fed moves to strengthen the economy ahead of the November US elections.
But the real issue here for me is that, while the price of Gold may sidetrack, the share prices of the junior and intermediate size miners and developers ought to continue lifting based on cash flow and reserve expansion considerations. Traders will be wary of the dilution effect of takeovers of the majors, so I think those prices will underperform the rest.
As usual, I will be keying gains off the Rupee and the Ruble and the GDXJ:GDX ratio chart.
In Europe this morning prices are mixed and quiet except for Glencore (GLEN.L +5.6%) and Xstrata (XTA.L +9.9%). The amalgamation of these two sisters is about to happen finally. The result will be one of the world’s leading mining companies, particularly in copper and coal.
Here is the Hourly chart (UK time) of XTA in green and GLEN in blue. The stocks are up close to +20% in the past three weeks.
Have a good day.
[8:30am ET] Good morning, Geoff here.
Following yesterday’s rally, markets are mixed this morning with US stock futures slightly lower right now.
The S&P 500 continues to consolidate prior to moving out of a 2 week trading range. Perusing charts of the Cara 100 shows any number of individual names that are poised for a possible pop should the broad market rally. Look at the charts on names like; ERJ, DOW, ORCL, ABB, ABV, GGB, TS, ATML…and many more. Any one of those stocks could leap higher at anytime. Let’s hope they do because we are long; ERJ, ABB, ABV, GGB, TS and have buy stops in the others should they breakout.
To be clear, we also have GTC sell stops entered on other current holdings should they fail. In other words, the market is consolidating and could break either way so we will let the market’s price action dictate what happens to our strategies.
Btw, last month I wrote a lot about the defensive actions that we were taking, particularly in All-Weather. Holding cash, bonds and hedging gains doesn’t necessarily mean that you will underperform the market. All of our strategies, including All-Weather, are beating the S&P handily in 2012, so we must be doing something right.
What we are doing right is letting market action dictate our trading. We do not go “all in” on any one viewpoint, instead we have multiple scenarios planned for and trade based on which scenario plays out. Of course it is impossible to completely detach yourself from your opinion, but successful traders are able to turn on a dime and that is what we all need to improve upon. No matter how long you are in this business, there is always something new to learn and mistakes will be made. The sooner you realize that trading is not about perfection, the sooner you will be successful.
Currently, the market is showing definite signs of strength. However, the US dollar is due for a rally of some sort and that will put pressure on stocks and gold. It appears that too many traders are waiting to buy the dips for the market to decline too much, but we will see how it all plays out.
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
|Symbol||Name||Last Trade||Change||Related Info|
||61.20 (2.94%)||Components, Chart, More|
||2.57 (0.11%)||Components, Chart, More|
||3.68 (0.11%)||Components, Chart, More|
||16.82 (0.25%)||Components, Chart, More|
||2.15 (0.66%)||Components, Chart, More|
|^OSEAX||OSE All Share||457.26
||2.11 (0.46%)||Components, Chart, More|
||0.65 (0.19%)||Components, Chart, More|
||17.12 (0.28%)||Components, Chart, More|
||6.72 (0.12%)||Components, Chart, More|
||8.90 (0.91%)||Chart, More|
||3.42 (0.39%)||Components, Chart, More|
||6.46 (0.42%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||788.99
||7.11 (0.89%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara on Trends & Cycles
Vad’s Catch of the Day
Kaimu’s Sound Money
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report