Revised targets:
AAPL - 300 (Eoy 2010)
GOOG - 900 (Mid 2011)
SPY - 130 (Eoy 2010)
The structural bull market in stocks remains intact and will continue to be good until SPY breaks its support at 96.94.
Stay long and stay strong!
Saturday, December 26, 2009
Saturday, December 19, 2009
Update on GLD
GLD is precariously placed at its 50-day SMA. There was a massive correction of 4% with very large volumes on 12/4.
GLD really has two support levels: $100 (+-2%) and then $95 (+-2%).
In the next week, if retracement continues, it will definitely mark the beginning of mean reversion that can go all the way upto $95.
Any breach beyond $95, will designate beginning of bear market for GLD.
Strategy:
#1 - Short term downside is likely based on high-volume
#2 - Hold GLD positions but not add to it
#3 - $95 on GLD will mark a pitched battle between bulls and bear -- participate in it.
#4 - If you are a GLD bull, double down at $95 with a very strict stop-loss of 2-3%
GLD really has two support levels: $100 (+-2%) and then $95 (+-2%).
In the next week, if retracement continues, it will definitely mark the beginning of mean reversion that can go all the way upto $95.
Any breach beyond $95, will designate beginning of bear market for GLD.
Strategy:
#1 - Short term downside is likely based on high-volume
#2 - Hold GLD positions but not add to it
#3 - $95 on GLD will mark a pitched battle between bulls and bear -- participate in it.
#4 - If you are a GLD bull, double down at $95 with a very strict stop-loss of 2-3%
Sunday, December 6, 2009
Near 4% Gold correction -- what does it mean?
Friday, Dec 4th was a significant correction day for gold. I pulled trigger on some of my gold positions when the correction became too severe at one point of time. The correction did find me napping. I don't like emotional trade anymore, but I did end up doing one today. It made me wonder and I resolved to myself that I need to do a little more homework going forward so that I am always prepared for upto 10% correction the next day.
Here is what I have found based on my analysis:
#1 - Bonds didn't strengthen while gold corrected. Even though bonds have reverted to mean, there are hardly any buyers. Bond yield is going up and is at its 2year SMA.
#2 - Gold was in an overbought period with a 20% appreciation in last 50 days. A correction was on the cards so this should have hardly come as a surprise
#3 - Unless gold depreciates by more than 6% in comparison to index, gold will still be outperforming index in a significant way on a trailing 50 day basis.
#4 - Gold (GLD) has a strong support around $100, so continued correction upto 10-12% will not change the structural bull market in gold upto that point
#5 - Central banks have been a net buyer of gold recently. Are they smoking crack? Perhaps they know something and riding on them may not be a bad idea even now.
#6 - If Gold's reversion to mean process has started (which I doubt at this time), however, I don't want to be closed to that possibility. In this case, it will retrace to its support of $950 (extrapolated value) in the next 3-6 months.
In summary, its probably best to not add to your gold positions at this time as correction is possible. However, if you already have positions it is time to HOLD and either
a) wait to add more positions when it corrects to $950-1000 or
b) enjoy the profits if it doesn't correct and keeps the upward trend.
Watch index, and gold behavior in the next 1 week, it will provide clarity on where gold is headed from here. A more than 6% correction relative to index will suggest getting out of gold and waiting for it to reach its support levels between $950-1000. ($950 preferably).
Having said all this, likely scenario I have is, an overshoot to $1400 in the next 6 months, followed by 2-3 month correction to $1200 (and $1200 will become the floor/support at that time).
Here is what I have found based on my analysis:
#1 - Bonds didn't strengthen while gold corrected. Even though bonds have reverted to mean, there are hardly any buyers. Bond yield is going up and is at its 2year SMA.
#2 - Gold was in an overbought period with a 20% appreciation in last 50 days. A correction was on the cards so this should have hardly come as a surprise
#3 - Unless gold depreciates by more than 6% in comparison to index, gold will still be outperforming index in a significant way on a trailing 50 day basis.
#4 - Gold (GLD) has a strong support around $100, so continued correction upto 10-12% will not change the structural bull market in gold upto that point
#5 - Central banks have been a net buyer of gold recently. Are they smoking crack? Perhaps they know something and riding on them may not be a bad idea even now.
#6 - If Gold's reversion to mean process has started (which I doubt at this time), however, I don't want to be closed to that possibility. In this case, it will retrace to its support of $950 (extrapolated value) in the next 3-6 months.
In summary, its probably best to not add to your gold positions at this time as correction is possible. However, if you already have positions it is time to HOLD and either
a) wait to add more positions when it corrects to $950-1000 or
b) enjoy the profits if it doesn't correct and keeps the upward trend.
Watch index, and gold behavior in the next 1 week, it will provide clarity on where gold is headed from here. A more than 6% correction relative to index will suggest getting out of gold and waiting for it to reach its support levels between $950-1000. ($950 preferably).
Having said all this, likely scenario I have is, an overshoot to $1400 in the next 6 months, followed by 2-3 month correction to $1200 (and $1200 will become the floor/support at that time).
Sunday, November 15, 2009
Is this a bull market? -You betcha
SPY has run up from the low of 67 to almost 110. Many of us have been wondering, what's next.
If this is a bull market, a correction is great for the bulls who would like to buy more on the dips. I am a bull and I would love to see a correction to buy at lower levels.
On the other hand, if this was a suckers rally, and new lows will be set (double-dip recession), then this is a great time to short for patient bears.
A lot of debate has been raging around inflation, deflation and a bubble in the bond market.
The question for me has been how do I discern what's going on and what side am I going to be on?
I looked at the following facts ("what is fact for one person may not be a fact for another... please feel free to disagree") and concluded "it's a bull run".
Fact #1: Feds want inflation instead of deflation (money printing aka quantitative easing)
Fact #2: US (Feds) can't afford deflation. Housing prices have stabilized but if deflation kicks in now, it can drop the prices further by 25-30% and will put the financial sector under tremendous pressure.
Fact #3: Feds want currency devaluation to support increase in prices (including housing). Not only do the Feds want USD devaluation, they are currently succeeding in it with the help of Central banks around the world
Fact #4: Gold is outperforming stocks
Fact #5: All being equal, when currency goes down, stock prices adjust upwards to reflect corresponding change in earning adjustment. It pays to be in stocks that have international earnings (they benefit from favorable currency fluctuations)
Fact #6: Banking crisis (risk to the financial system) is over.
Fact #7: SPY is approx 15-17% above is 200 day SMA. Even a 15% correction at this time, will not change the fundamental structure that this bull run is here to stay.
Fact #8: Follow the trend -- gold rallying, USD weakening, house prices stabilizing, bond rates are slowly increasing (after a little bit of dip earlier).
Based on all of the above, I am firmly footed in the "bull" camp across both asset classes- Gold, Stocks
If SPY corrects below 92.6 (in the next 3-4 months) along with strengthening in USD currency, then I will have reason to switch direction.
If GLD drops below 89 USD then, I will consider being a gold bear but until that happens, I am a bull.
My targets:
GLD - 160 (2 year)
AAPL - 320-360 (2 year)
GOOG - 750-800 (2 year)
SPY - 1500 (2 year)
USD - devalues 20% more from here in 2 years.
Note:
1) This is not a recommendation just a collection of my thoughts and ideas based on my technical analysis
2) If circumstances around the world changes, the direction/positions may change considerably
3) Technical analysis isn't about having a crystal ball. It is about identifying the next step depending on current statistics.
4) I will update the blog when I view that the direction has reversed.
5) Its better to be in Gold (GLD), than in a stock index.
6) For stocks, I am trying to pick stocks that have large international revenue to benefit from currency devaluation/adjustments.
If this is a bull market, a correction is great for the bulls who would like to buy more on the dips. I am a bull and I would love to see a correction to buy at lower levels.
On the other hand, if this was a suckers rally, and new lows will be set (double-dip recession), then this is a great time to short for patient bears.
A lot of debate has been raging around inflation, deflation and a bubble in the bond market.
The question for me has been how do I discern what's going on and what side am I going to be on?
I looked at the following facts ("what is fact for one person may not be a fact for another... please feel free to disagree") and concluded "it's a bull run".
Fact #1: Feds want inflation instead of deflation (money printing aka quantitative easing)
Fact #2: US (Feds) can't afford deflation. Housing prices have stabilized but if deflation kicks in now, it can drop the prices further by 25-30% and will put the financial sector under tremendous pressure.
Fact #3: Feds want currency devaluation to support increase in prices (including housing). Not only do the Feds want USD devaluation, they are currently succeeding in it with the help of Central banks around the world
Fact #4: Gold is outperforming stocks
Fact #5: All being equal, when currency goes down, stock prices adjust upwards to reflect corresponding change in earning adjustment. It pays to be in stocks that have international earnings (they benefit from favorable currency fluctuations)
Fact #6: Banking crisis (risk to the financial system) is over.
Fact #7: SPY is approx 15-17% above is 200 day SMA. Even a 15% correction at this time, will not change the fundamental structure that this bull run is here to stay.
Fact #8: Follow the trend -- gold rallying, USD weakening, house prices stabilizing, bond rates are slowly increasing (after a little bit of dip earlier).
Based on all of the above, I am firmly footed in the "bull" camp across both asset classes- Gold, Stocks
If SPY corrects below 92.6 (in the next 3-4 months) along with strengthening in USD currency, then I will have reason to switch direction.
If GLD drops below 89 USD then, I will consider being a gold bear but until that happens, I am a bull.
My targets:
GLD - 160 (2 year)
AAPL - 320-360 (2 year)
GOOG - 750-800 (2 year)
SPY - 1500 (2 year)
USD - devalues 20% more from here in 2 years.
Note:
1) This is not a recommendation just a collection of my thoughts and ideas based on my technical analysis
2) If circumstances around the world changes, the direction/positions may change considerably
3) Technical analysis isn't about having a crystal ball. It is about identifying the next step depending on current statistics.
4) I will update the blog when I view that the direction has reversed.
5) Its better to be in Gold (GLD), than in a stock index.
6) For stocks, I am trying to pick stocks that have large international revenue to benefit from currency devaluation/adjustments.
Wednesday, July 8, 2009
OIL & QQQQ: are at an inflection point
QQQQ:
SMA(50) - $35.19
SMA(200) - $31.76
Having closed below the 50-day SMA, it is getting increasing likely that market will tank towards the next support level of 200-day SMA.
Question is: whether this is a fakeout. We will know in the next couple of days.
If 50-day SMA holds in the next few days, going on the long side for 10% gains would be a good idea.
However, if 50-day SMA continues to be breached, stay in cash and try testing waters at the next support level $31.76.
If 200-day SMA is breached (and you were testing it), take your losses and get out. The market will likely head towards retesting the previous lows of $26 (won't be pretty if I am having long positions from now till that time). I may think about shorting but I have resisted the temptation to try my luck on the downside.
SMA(50) - $35.19
SMA(200) - $31.76
Having closed below the 50-day SMA, it is getting increasing likely that market will tank towards the next support level of 200-day SMA.
Question is: whether this is a fakeout. We will know in the next couple of days.
If 50-day SMA holds in the next few days, going on the long side for 10% gains would be a good idea.
However, if 50-day SMA continues to be breached, stay in cash and try testing waters at the next support level $31.76.
If 200-day SMA is breached (and you were testing it), take your losses and get out. The market will likely head towards retesting the previous lows of $26 (won't be pretty if I am having long positions from now till that time). I may think about shorting but I have resisted the temptation to try my luck on the downside.
Gold where does it go from here?
Gold (GLD) is 5% above its 2 year SMA.
Current price ~ $89
2 year SMA ~ $84
It is in a consolidation pattern for a while now with a bottom forming on the short term cycle. $84 is a very strong support level for Gold. Therefore, a good time to buy will be around $84-$85 with a strict stop loss near $82. For those who are worried that it may not go as low as $84, buying some now may not be a bad idea. However, the stop loss is not very close and you should be prepared to take some short term loss, if it goes down further.
Repeat trade if it goes up above $84. Instead, if it continues downslide, $70 forms another strong support levels to buy (for a rebound).
Important support levels: $84, $70, $60.
Current price ~ $89
2 year SMA ~ $84
It is in a consolidation pattern for a while now with a bottom forming on the short term cycle. $84 is a very strong support level for Gold. Therefore, a good time to buy will be around $84-$85 with a strict stop loss near $82. For those who are worried that it may not go as low as $84, buying some now may not be a bad idea. However, the stop loss is not very close and you should be prepared to take some short term loss, if it goes down further.
Repeat trade if it goes up above $84. Instead, if it continues downslide, $70 forms another strong support levels to buy (for a rebound).
Important support levels: $84, $70, $60.
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