Bill Cara’s Blog for Mar 29, 2012
CTA Trading Desk Morning Report
[9:00am ET] Good morning, Geoff here.
So, what’s up with Gold?
Sentiment is extremely negative which is a positive sign for bulls – but sentiment is not a great timing device.
We had a nice bounce from oversold levels, but it only lasted a few days before turning sharply lower. That is not a good sign for gold to move higher immediately from here.
By my count, the next great buying opportunity window should start in roughly 2 weeks and be open for the next few weeks. Trying to call an exact date is folly, so lets say the last few weeks of April would be the next time to expect a tradeable low to occur.
The dollar looks to have put in a low 3 days ago and a continued rally will put pressure on gold, possibly for a few weeks.
So; for All-Weather accounts, we managed to open and close profitable gold trades on both the long and short side in the last 5 trading days. However, catching each and every wiggle like that is not a high probability trading strategy for longer term traders. The way things are lining up, it looks like the next great buying opportunity in gold will be in a few weeks. If gold holds off on rallying until then, sentiment will be negative, technicals will be oversold and we will be in the timing band for a buy. If that occurs, you have to be long because that will be the trade that makes your year. Sure, the gold rally could start anytime before then, but a few more weeks of decline or sideways chop will shake out the last of the weak hands and provide even more upside potential.
For now, in All-Weather, we are trading around our core positions (long positions) in gold, waiting for the final low before overweighting the space. This strategy has worked many times over the last decade and will again. Although we are down to core positions, the final drop before the low can still be emotionally taxing, but that is exactly what we need to get the high probability set-up. In other words, embrace fear if it comes.
As I mentioned, the US dollar looks to be in rally mode. A break of the
February low will negate the bullish posture but until that happens, the dollar is going up. The correct trade seems to be selling stocks here, not buying them but liquidity continues to fuel the melt-up.
I keep hearing that the S&P is undervalued based on its P/E. Those analysts are using estimated earnings in their P/E calculation. I wondered what the “as reported” P/E looked like and I found this:
From the “as reported” perspective, the S&P 500 is expensive. The chart shows that since 1880, the market has only been more expensive on 3 occasions: 1929, 2000 and earlier this decade. That should give you pause.
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|
||13.64 (0.63%)||Components, Chart, More|
||7.20 (0.31%)||Components, Chart, More|
||34.04 (0.99%)||Chart, More|
||80.37 (1.15%)||Components, Chart, More|
||2.39 (0.73%)||Chart, More|
|^OSEAX||OSE All Share||478.11
||4.38 (0.91%)||Components, Chart, More|
||4.39 (1.29%)||Components, Chart, More|
||44.71 (0.72%)||Components, Chart, More|
||42.48 (0.73%)||Components, Chart, More|
||13.60 (1.38%)||Chart, More|
||10.61 (0.70%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||739.75
||12.89 (1.71%)||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