Tuesday, October 6, 2009

Gold and the Buck

Lots of hype and excitement going on regarding the U.S. dollar and gold, wow. Almost like the 4th quarter of the Michigan State/Michigan football game last Saturday ! Go State by the way!

Anyway, I want to state unequivocally, here and now that if you are short dollars you should be very very nervous.

Stories like the one making the rounds like Demise of the Dollar by Robert Fisk are exactly what you would expect at this extreme in sentiment.
I will repeat once again for those that don't know yet....

NEWS CONFORMS TO THE TAPE !

This is exactly the type of news one could and very well should expect at this juncture of the tape on the U.S. dollar. The exact polar opposite of the fawning and glowing articles back in March with U.S. dollar trading around 89.


Don't forget to remember that the DSI (daily sentiment) numbers have U.S. dollar bulls in the single digits.

The corollary of this is that I would be extraordinarily cautious here with gold and with precious metals stocks. I realize the gold bulls don't want to hear this as bullion is going to $4 - 5000/oz depending on the day of week.

But the fact remains that the bullion is leading the stocks, and this is extremely dangerous! The stocks, unhedged producers anyway, should be leading the bullion, (with their leverage to the commodity) not the other way around as we are witnessing.

At the top of the page are the 5 year weekly charts of the marekt vectors gold miners (ticker GDX), the gold bugs (ticker $HUI), and the gold etf (ticker GLD).

I have left the charts clean of any obscuring or distracting lines or notations so you can easily notice how the chart of the GDX and the HUI has NOT made new highs like the bullion has. I repeat, in my experience, the GDX and HUI should be leading bullion (GLD) not following.

I am punting Powershares DB US Dollar Index bullish, ticker UUP on the long side here at $22.65 with a stop just below the recent lows.

Good speculating and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit Ultrashort Russell 2K ticker TWM @ $27.50 stop @ $26.40
Long 1 unit Ultrashort Financials ticker SKF @ $24.55 stop @ $23.49
Long 1 unit i-shares Barclay 20yr ticker TLT @ $97.80 stop @ $94.94
Long 1 unit US$ Index bullish ticker UUP @ $22.75 stop @ $22.44
Short 1 unit i-shares Russell 2K ticker IWM @ $61.70 stop @ $63.80
Short 1 unit Costco ticker COST @ $58.00 stop @ $60.11
Short 1 unit Vornado ticker VNO @ $68.30 stop @ $70.71
Short 1 unit Bed Bath ticker BBBY @ $37.75 stop @ $38.41
Short 1 unit Spiders ticker SPY @ $106.00 stop @ $107.06

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