Patience is the Better Part of Valor

If you were to read over what we said last week, you would have to make very few changes in describing the state of this week’s indicators. That is not so bad as during the week we have closed out one position for a gain in excess of 65 percent, while our other positions, on average, have moved into profitable territory. While we had hoped to add another position to replace the just-closed Suncor (NYSE: SU) option, we think that watching for another day or so is the better part of valor.

Gold would, as was the case last week, be a natural addition – on the short or put side. But our problem with gold is that we continue to view the macro factors as so compelling as to make downside risks too shallow for betting on options which, of course, lose time value the moment you recommend them. Still were the gold indicators to weaken much more – in the past week they improved a touch – you have our word we would recommend a put option. But in return, we want your word that will not touch any of your gold stocks or other precious metal positions, which in today’s world remain necessary for insurance.

We do have a few projects in front of us that will hopefully make it easier to make more recommendations. Our feeling is that it will be relatively easy to develop an indicator for financial stocks, which will give us not only additional ETFs to focus on but also additional stocks as certain financials such as the big banks rarely stray in direction from the entire group.

Our second important project is to do more with currencies, which in general tend to have ETFs that are actively traded. One reason that we are more comfortable dealing with foreign markets is that China’s markets are becoming more open. Already we are using the Chinese currency and a China ETF as predictors for our other indicators and we think these variables will be useful in predicting other currencies other than the dollar as well.

So to sum up, stocks, oil, and oil stocks remain bullish, the dollar, bonds, silver, and commodities are neutral, while gold and gold stocks are negative. The only change from last week, therefore, is that commodities have dipped slightly from positive to neutral.

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