Wednesday, December 4, 2013

Using Options to Capitalize on Strong Fundamentals for Gold

Our trading partners J.W. and Chris had a great discussion the other day which spurred to the creation of this interesting and educational gold futures trading article we wanted to share with you.

Throughout most of 2013, gold futures have been under major selling pressure. Gold opened the year trading around $1,675 per ounce. As of the 12/02/13 close, gold futures were trading around $1,220 per ounce which would mean that thus far in 2013, gold futures have lost more than 27% of their value.

Looking back to September of 2011, gold’s all time high came in around $1,923 per ounce. In a little more than 2 years, gold prices have dropped around $700 per ounce representing a total loss of more than 36% based on the 12/02/13 closing price. I would say most analysts would agree that gold has been in a bear market over the past two years.

Before we begin looking at a few ways to use the gold etf GLD option structures to take advantage of higher future prices in the yellow metal, I thought I would focus readers’ attention on some bullish fundamental data for gold. Let us begin with a chart of the Federal Reserve’s Total Assets which is shown here......

Read "Using Options to Capitalize on Strong Fundamentals for Gold"



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Evidence on Why Gold Is Falling on the Verge of a Dollar Implosion

By Bud Conrad, Chief Economist

Bud Conrad, Casey Research chief economist, predicts in this fascinating interview with Future Money Trends that the U.S. dollar will implode and be replaced with a new currency, quite possibly one backed by gold. Then why is the gold price dropping like a brick in the face of dollar devaluation?

Watch the video for Bud's eye-opening answer…




Is now a good time to load up on gold—and how should you invest?

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Are the Arsonists Running the Fire Brigade?

By John Mauldin



The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.
– Alan Greenspan
If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.
– John Maynard Keynes
And He spoke a parable to them: "Can the blind lead the blind? Will they not both fall into the ditch?"
– Luke 6:39-40

Six years ago I hosted my first Thanksgiving in a Dallas high rise, and my then 90 year old mother came to celebrate, along with about 25 other family members and friends. We were ensconced in the 21st floor penthouse, carousing merrily, when the fire alarms went off and fire trucks began to descend on the building. There was indeed a fire, and we had to carry my poor mother down 21 flights of stairs through smoke and chaos as the firemen rushed to put out the fire. So much for the advanced fire sprinkler system, which failed to work correctly.

I wrote one of my better letters that week, called "The Financial Fire Trucks Are Gathering." You can read all about it here, if you like. I led off by forming an analogy to my Thanksgiving Day experience:

I rather think the stock market is acting like we did at dinner. When the alarms go off, we note that we have heard them several times over the past few months, and there has never been a real fire. Sure, we had a credit crisis in August, but the Fed came to the rescue. Yes, the subprime market is nonexistent. And the housing market is in free-fall. But the economy is weathering the various crises quite well. Wasn't GDP at an almost inexplicably high 4.9% last quarter, when we were in the middle of the credit crisis? And Abu Dhabi injects $7.5 billion in capital into Citigroup, setting the market's mind at ease. All is well. So party on like it's 1999.

However, I think when we look out the window from the lofty market heights, we see a few fire trucks starting to gather, and those sirens are telling us that more are on the way. There is smoke coming from the building. Attention must be paid.

I was wrong when I took the (decidedly contrarian) position that we were in for a mild recession. It turned out to be much worse than even I thought it would be, though I had the direction right. Sadly, it usually turns out that I have been overly optimistic.

This year we again brought my now-96-year-old mother to my new, not-quite-finished high-rise apartment to share Thanksgiving with 60 people; only this time we had to contract with a private ambulance, as she is, sadly, bedridden, although mentally still with us. And I couldn't help pondering, do we now have an economy and a market that must be totally taken care of by an ever-watchful central bank, which can no longer move on its own?

I am becoming increasingly exercised that the new direction of the US Federal Reserve, which is shaping up as "extended forward rate guidance" of a zero-interest-rate policy (ZIRP) through 2017, is going to have significant unintended consequences. My London partner, Niels Jensen, reminded me in his November client letter that,

In his masterpiece The General Theory of Employment, Interest and Money, John Maynard Keynes referred to what he called the "euthanasia of the rentier". Keynes argued that interest rates should be lowered to the point where it secures full employment (through an increase in investments). At the same time he recognized that such a policy would probably destroy the livelihoods of those who lived off of their investment income, hence the expression. Published in 1936, little did he know that his book referred to the implications of a policy which, three quarters of a century later, would be on everybody's lips. Welcome to QE.

It is this neo-Keynesian fetish that low interest rates can somehow spur consumer spending and increase employment and should thus be promoted even at the expense of savers and retirees that is at the heart of today's central banking policies. The counterproductive fact that savers and retirees have less to spend and therefore less propensity to consume seems to be lost in the equation. It is financial repression of the most serious variety, done in the name of the greater good; and it is hurting those who played by the rules, working and saving all their lives, only to see the goal posts moved as the game nears its end.

Central banks around the world have engineered multiple bubbles over the last few decades, only to protest innocence and ask for further regulatory authority and more freedom to perform untested operations on our economic body without benefit of anesthesia. Their justifications are theoretical in nature, derived from limited variable models that are supposed to somehow predict the behavior of a massively variable economy. The fact that their models have been stunningly wrong for decades seems to not diminish the vigor with which central bankers attempt to micromanage the economy.

The destruction of future returns of pension funds is evident and will require massive restructuring by both beneficiaries and taxpayers. People who have made retirement plans based on past return assumptions will not be happy. Does anyone truly understand the implications of making the world's reserve currency a carry-trade currency for an extended period of time? I can see how this is good for bankers and the financial industry, and any intelligent investor will try to take advantage of it; but dear gods, the distortions in the economic landscape are mind-boggling. We can only hope there will be a net benefit, but we have no true way of knowing, and the track records of those in the driver's seats are decidedly discouraging.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – Please Click Here.

© 2013 Mauldin Economics. All Rights Reserved.


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Tuesday, December 3, 2013

Mid Week Market Commentary - Crude Oil, Natural Gas and Gold for Tuesday Evening December 3rd

Crude oil closed sharply higher on Tuesday and above the reaction high crossing at 95.63 confirming that a low has been posted. The high range close sets the stage for a steady to higher opening when Wednesday's night session begins. Stochastics and the RSI are diverging and have turned bullish signaling that sideways to higher prices are possible near term. If January extends the rebound off last week's low, the 38% retracement level of the August-November decline crossing at 97.96 is the next upside target. If January renews the decline off August's high, the 75% retracement level of the April-August rally crossing at 91.18 is the next downside target. First resistance is today's high crossing at 96.19. Second resistance is the 38% retracement level of the August-November decline crossing at 97.96. First support is last Wednesday's low crossing at 91.77. Second support is the 75% retracement level of the April-August rally crossing at 91.18.

Natural gas closed lower due to profit taking on Tuesday as it consolidates some of the rally off October's low. The mid range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If January extends the rally off November's low, the reaction high crossing at 4.045 is the next upside target. Closes below the 20 day moving average crossing at 3.731 would confirm that a short term top has been posted. First resistance is the reaction high crossing at 4.045. Second resistance is October's high crossing at 4.092. First support is the 10 day moving average crossing at 3.838. Second support is the 20 day moving average crossing at 3.731.

Gold closed lower on Tuesday as it extends the decline off August's high. The mid range close sets the stage for a steady to lower opening when Wednesday's night session begins trading. Stochastics and the RSI are oversold, diverging but remain neutral to bearish signaling that additional weakness is still possible near term. If February extends the decline off August's high, June's low crossing at 1187.90 is the next downside target. Closes above the 20 day moving average crossing at 1266.60 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 1243.60. Second resistance is the 20 day moving average crossing at 1266.60. First support is today's low crossing at 1214.60. Second support is June's low crossing at 1187.90.

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It's on tonight!....Limited seating for this free webinar. So please, serious traders only

Join our trading partner John Carter of Simpler Options tonight, Tuesday evening December 3rd, for his FREE webinar "How to Boost Your Returns With One Secret ETF Strategy".

It all gets started at 8:00 p.m. eastern but get registered right now as there is limited seating and Johns wildly popular webinars always fill up right away.

If you watched this weeks new video you have an idea of what we are up to. And how we are trading ETF's in such a way that the market makers can not get the upper hand on us. In this weeks class John will be taking his methods to another level. And he is sharing it ALL with you.

In this free online class John will share with you....

    •     A Powerful Simple Strategy for Trading Options on ETFs

    •     The SAFE Levels to Take Trades

    •     How to Minimize Your Risk

    •     The Very Best ETFs to use

    •     Which ETFs You Have to Avoid Like the Plague

           And much more...

Simply click here and visit the registration page, fill in your info and you'll be registered for Tuesdays FREE webinar.

See you on tonight,
Ray @ The Crude Oil Trader


Watch "How to Boost Your Returns With One Secret ETF Strategy"

 




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Monday, December 2, 2013

Limited Video Re-Release: Nine Reasons to Trade ETF Options

We just found out that John Carter and the staff at "Simpler Options" still have this weeks video up and LIVE. We thought it would come down as John gets ready for this weeks free webinar.

Here's what traders are learning in John's latest video.....

    *   Why ETFs are his Favorite Instrument for Options Trading

    *   The Best ETFs for Trading Options Most Traders Have Never Heard of

    *   How he wires $34k every week from his trading to personal account

    *   Why Trading Options on ETFs is Perfect for Small Accounts

    *   Why Market Makers Can't Screw you with ETFs

And a LOT more!

Watch the video HERE

Please feel free to leave a comment and let us know what you think about these simple ETF trading methods.


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Sunday, December 1, 2013

Why You Lose Money Trading & The Answer

How to turn your trading into a simple automated trading strategy: you know the difference among a winning and losing trade – we have all experienced both and know the excitement and the frustration associated with it.

The brutal honest truth is a tough pill to swallow. The fact that most of the time it’s not the strategy that has failed; it’s you (the trader) which is why you need a simple trading strategy drawn out on paper with detailed rules for you to follow.

In today’s report I am going to talk about how you can stop losing money and become a successful trader. We all know that before you even enter a position, you must know where you place your stop-loss order. If you don’t know where you stops are to be placed then you are trading with a major disadvantage.

Your position entry is not complete without having a stop price figured out. It blows my mind why so few investors use stop-losses. If you are guilty of not using stops, you need this information. It might be the difference between retiring on time with a big nest egg or retiring later and still just churning your account.

If you plan and place stops you are planning to win, but prepare to take losses because you will get stopped out and you will have to get back up, brush yourself off and trade another day. So with that said we need to look at the psychology around taking losses because it’s not easy to manage, and is the main reason individuals do not use stops. Being proved you were wrong flat out SUCKS!

Successful traders understand they must know where they are going to be stopped out before they enter a position. They have to know ahead of time what a wrong trade looks like so they can exit it quickly. This is a rudimentary fundamental that EVERY trader knows the answer for.

Do You Have A Trading Strategy That You Can Trade Like a Robot?

Can You Answer The Following Questions?

1. How do you know when to sit tight or cut your losses?

2. Do you have rules to tell you when to sell a losing position?

3. Do you have rules of when to move your stop to breakeven?

If you cannot answer these questions properly, you are not alone. And what it means is that you need to establish some rules for yourself. All the trading rules in the world are meaningless if you do not use them. That is why I am telling about what’s really going on with you when you refuse to manage your risk in a proactive and professional way.

Most traders refuse to take a loss for two basic reasons:

1. They cannot admit they are wrong.

For most traders, this is just too painful to admit. It’s interpreted as failure or feeds a persistent, negative self-image which none of us enjoy feeling.

Humans by nature prefer to remain in denial instead of acknowledging their losses are causing them pain. This type of trader often has to lose it all before he begins to change (or gives up trading). I know this very well. I lost it all twice when learning to trade. It was not until the second time that I hit rock bottom (financially and emotionally) that I embraced trading rules and hired a mentor to help keep me inline with my trades.

2. The loss is too big relative to their overall portfolio size so they can’t afford take the loss. 

Know this, there’s no such thing as just a paper loss. The investment (stocks, etf, options or futures contract) is worth what it’s quoted whether you realize it or not by closing the position.

Both of these examples are a form of self-delusion that millions of investors, both large and small, suffer from.

If what I am saying here is making you uncomfortable or bringing up feelings of anger or powerlessness, then that is a good sign. It means you have enough common sense and self-awareness to change what you are doing.

Example of How You Can Make Your Trading Strategy To Be More Automated:

TGAOG

A successful trader uses a different strategy from that of a losing trader (you) by looking at the pain from the loss in an impersonal way. They know the loss as a sign that something went wrong with their approach, or their execution, but NOT that something is wrong with them.

Winning traders separate who they are from what they do. They learn and know, that their trading losses lie in their approach to trading the market and not a reflection of whom they are as a person. The pain they feel is quickly transmuted into motivation, which fuels their desire and determination to become a better trader through refining their trading strategies to better navigate the financial market place.

Both are learned responses and within your control. The opportunity for growth from the pain of our losses are the same. It’s what we do with this emotional pain of a loss that matters, not the loss itself.

Stick with my proven Simple Automated Trading System
Make winning a habit.



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Friday, November 29, 2013

Silver, Gold & Miners ETF Trading Strategy – Part II

It’s been over a week since our trading partner Chris Vermeulens last gold & silver report which he took a lot of heat because of his bearish outlook. Last Friday’s closing price has this sector trading precariously close to a major sell off if it’s not already started.

On a percentage bases Chris feels precious metals mining stocks as whole will be selling at a sharp discount in another week or three. ETF funds like the GDX, GDXJ and SIL have the most downside potential. The amount of emails he received from followers of those who have been buying more precious metals and gold stocks as price continues to fall was mind blowing.

Precious metals continued to fall on Monday and Tuesday of this week and selling volume should spike as protective stops will be getting run and the individuals who are underwater with a large percentage of their portfolio in the precious metals sector could start getting margin calls and cause another washout, spike low similar to what we saw in 2008.

Here is Chris' updated ETF Trading Charts with Friday’s closing prices showing technical breakdowns across the board....Read "Silver, Gold & Miners ETF Trading Strategy – Part II"



We are doing it again....This week's FREE webinar, "How to Boost Your Returns With One Secret ETF Strategy"
 


Wednesday, November 27, 2013

Elliott Wave Forecast: Bull Market Nearing Interim Peak on SP500

Back on September 12th with the SP 500 at 1689 we forecasted a run in the SP 500 to 1829, a very specific number. We use Elliott Wave Theory and Analysis in part to come up with projected pivots for the SP 500 and this was our projection.

Elliott Wave Analysis is based largely on Human Behavioral patterns that repeat over and over again throughout time. It’s really crowd behavior or herd mentality as applied to the broader stock markets. This can also apply to individual stocks, precious metals and more. At the end of the day, an individual stock is worth what investors believe it is worth, and it won’t necessarily reflect what a private valuation may accord it.

With that in mind, the stock market as a basket of 500 stocks can pretty easily be patterned out and then we can apply our Elliott Wave Theory to that pattern and predict outcomes. Back in mid-September, we believed we were in a 3rd wave up of the bull market as part of what we call Primary wave 3. The primary waves are 1-5 and Primary 3 is usually the most bullish of the 5 primary waves with 2 and 4 being corrective. Well, within Primary wave 3 you have 5 major waves… and we projected that Major wave 3 would be running to about 1829.

This projection was based on the 1267 pivot for Major wave 2 of Primary Wave Pattern 3 which was a corrective wave. We then simply applied a Fibonacci ratio to the Major wave 1 and assumed that Major wave 3 would be 161% of Major 1. That brings us to about 1822-1829… and here we are a few months later heading into Thanksgiving with the SP 500 hitting 1807 and getting close to our projection.

What will happen afterwards should be a Major wave 4 correction. We expect this to be about 130 points on the shallow side of corrections, and as much as 212 points.

So the Bull Market is not over, but Major Wave Pattern 3 of Primary 3 is coming to an end as we are in a seasonally strong period for the market. We would not be shocked to see a strong January 2014 correction in the markets as part of Major wave 4.

Here is our September 14th elliott wave forecast chart we sent to our subscribers and you can see we continue now along the same path.....Read "Elliott Wave Forecast: Bull Market Nearing Interim Peak on SP500"


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Fundamentals Rendered Irrelevant by Fed Actions: Probability Based Option Trading

The fundamental backdrop behind the ramp higher in equity prices in 2013 is far from inspiring. However, fundamentals do not matter when the Federal Reserve is flooding U.S. financial markets with an ocean of freshly printed fiat dollars.

As we approach the holiday season, retail stores are usually in a position of strength. However, this year holiday sales are expected to be lower than the previous year based on analysts commentary and surveys that have been completed. This holiday season analysts are not expecting strong sales growth. However, in light of all of this U.S. stocks continue to move higher.

Earnings growth, sales growth, or strong management are irrelevant in determining price action in today’s stock market. In fact, the entire business cycle has been replaced with the quantitative easing and a Federal Reserve that is inflating two massive bubbles simultaneously.

Through artificially low interest rates largely resulting from bond buying, the Federal Reserve has created a bubble in Treasury bonds. In addition to the Treasury bubble, we are seeing wild price action in equity markets as hot money flows seek a higher return. Usually fundamentals such as earnings, earnings estimates, and profitability drive stock prices.

However, as can be here the U.S. stock market is being driven by something totally different......Read "Fundamentals Rendered Irrelevant by Fed Actions: Probability Based Option Trading"



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