With the dollar potentially moving into a potential daily cycle low, we are seeing a lot of action this morning in commodities. Momentum is confirming in many ETFs, and for those Refined Investors that would like to accumulate some additional names (with proper risk management/position sizing – see “A Primer On Risk Management”) there are entries right now in the following (make sure there is enough liquidity for your position size):
- OIH
- IEZ
- PXJ
- EPI
- PIN
- SPPP
- FCG
- PBW
- RJA
Keep everything in perspective, and no trade is better than any other. A lot of commodities have been beaten up for the last 15 months, and it will take time for the rest of the market to move in and support price. Manage your risk, and over time the growth will take care of itself. We continue to hold our long GLD and GDX trades until our target of the 50 MA.
Good trading all.
Steve Chapman, TRI
The big jobs number this morning would normally strike fear into the hearts of many asset classes, because it signifies a potential early withdrawal of monetary stimulus. We saw the typical spasms and gyrations post-announcement as money was reshuffled, and now going forward we have to effectively evaluate if the news was already priced in. Equities have been at highs (many floating above their upper Bollinger Bands), the dollar has been a rocket, commodities have been unloved, and anything precious metals related has been decimated. So we have to ask:
Is this jobs number already priced into the market?
We won’t know immediately, but if we see equities sell off (or stagnate), the dollar drop, bonds catch a bid, and commodities awaken, then there is a good chance that we will have to dislocate our brains from our buy/sell finger and do the opposite of what has worked so far in 2013. The market doesn’t have to make sense, and often times our intellect is the biggest obstacle in our path to making money. Let the price action alone dictate where you allocate your capital.
We continue to hold contrarian long positions in GLD and GDX with a target at the 50 MA, and those that are long SPY are keeping their positions small and stops close. With the dollar strength and bond weakness this morning, two markets that are closely watched for policy decisions, we could be coming to the first crossroads of 2013.
Good trading all.
Steve Chapman, TRI
For those that took a position in IBB, after being up 7 days in a row I think that we can be content with the move and step to the side. For those that didn’t take a position in GDX yesterday, it has formed a swing low this morning and it will be easier to manage risk if you are not forced to chase at this point. No move is guaranteed, but the further it goes from the low, the further your stop is away. Remember, we buy strength and sell weakness. Typically, this only happens when price jumps above the short-term MA’s, but we have an MA Envelopes trade in effect and so this is mean-reversion back to the 50 MA.
Don’t get greedy, and let the market work at this point. Miners have been going down for so long that it will be tempting to get out. Cut your losers off quickly and let your winners run, the opposite of what your mind tells you to do. If price doesn’t confirm, we wait for the next trade and do it all over again. Maintain the same expectations on every trade or you will get married to some of them.
Good trading all.
Steve Chapman, TRI
I am not predicting anything here, but I just wanted to point out what strong volume looks like. When elephants leave footprints in the sand, pay attention:
Both lows ended right on our MA Envelopes. That typically means the trend has been taken way too far. Place trades and manage risk appropriately.
Good trading all.
Steve Chapman, TRI
