Metals are the only equity in an uptrend right now and all trend traders are piling into the trend is your friend buy as it goes up crowd. Some points to ponder for the gold bugs and other bulls alike:
1. Where's the insider buying in gold companies? All I've seen the past 3 months is selling.
2. Gold is in a giant rising wedge right now, but you'll never find that on a gold site.
3. The US dollar is not going away, contrary to popular belief and with sentiment at gravely low levels, I ask non believers to look at what happened in March/April 2008 in the dollar index.
4. There is a dangerous level of complacency right now and I blame it on the "Fed Put". In other words, if there is bad news the fed will buy. Good news, then hey, more reason to party. People might as well be drinking and driving.
5. Where are the banks? I'll never forget how in 2007 everyone was saying to 'watch the banks- it can't be done without them'. Well, here we are and the KRE and BKX are both underperforming.
6. How about the semiconductors? More underperformance and insider selling from CSCO and INTC makes me wonder.
7. The metal trade is 100% leverage. When the general market indexes drop, traders will be forced to buy back those dollar that they continue to sell. This will lead to selling in the commodity sectors.
All the while, the believers continue to point to the usual suspects of China and India. Somehow, the media has led us to believe that Chinese now have a satiating thirst for commodities and food because somehow, in two years, Chinamen are eating 5 course meals instead of porridge. Simple explanation- housing bubble in China causing HELOC's and buying of cars and McDonalds food. All the while, Chinese believe that homes are a safer deposit place for their savings than a bank, which means we've got trouble brewing. This can't go on forever.
Baby boomer have been lured into another wall street trap of 'yield' as they set up for another big ball buster. Yield or dividends work in an uptrend. When a stock is falling, yield gets larger and price goes down, hence you lose money. Besides, who holds a stock for more than a few days anyway anymore? The momo stocks NFLX, FFIV, PNRA, AAPL will be dropped like a spoiled child dropping the latest retail fad in middle school.
To the chasers who believe it's different in the few real uptrends left: Do you really believe it's different this time? Was it different in 2007 when investors plowed into emerging markets and ended up getting decapitated?
Still sitting on my hands and I'll let everyone else chase the final few percentage points of this rally because to me, the risk/reward is horrible. Tradeable rallies, yes indeed, but bull market, I don't think so. Count me as one of the bears out there.
Most of the QE2 argument is solely for political gain and won't serve a benefit to society in any way. All the kings horses have not been able to fight the effects of years of credit driven excesses. Any type of QE2 will have at best, a short term effect. But hey, the trend is your friend until it ends right? When will you know when it ends? What if the 10% drop (mini flash crash) in AAPL last week didn't come back?
'I will have no man in my boat,' said Starbuck, 'who is not afraid of a whale.' By this, he seemed to mean not only that the most reliable and useful courage was that which arises from the fair estimation of the encountered peril, but that an utterly fearless man is a far more dangerous comrade than a coward.
-- Moby Dick
nuts:fingers crossed:nuts
