Stock Picks Expert

Regardless of the color of the book, traders did not like what they saw today. Crude traded below the 50 day MA but did manage a close above that level; in September at $76.30. We would be selling rallies if forced into the market, still thinking there is more down side. By the conclusion of the week we would expect an attempt at $74 in the lead month. Natural gas appeared to break out to the upside today but before we get too excited, understand yesterday was options expiration and today is the LTD for front month futures. Tomorrow’s action will be key to see follow thru and the AGA inventory report also comes out. We suggest purchasing October and November 50 cent call spreads.

The stock market did not like the Beige book and could be rolling over from here. Clients exited their August 1150 ES calls and bought back their September 1000 ES puts today at just better than 6 point ($300/per). This leaves them long September 1075 ES puts with a target of 1025 on the futures. If we roll over from here we will be looking to scale into shorts in various indices for clients with stops above the recent highs. We’re perplexed in the Treasury complex and have our hands full with the indices and currencies so we will stand aside until we get a clearer picture.

Wednesday morning's email from gold general Jim Sinclair - under siege yet again from the troops in the "community" - prompts today's post.

Mr. Sinclair often writes with a war mentality, pitting the gold community against the evil bullion banks - and a good chunk of the rest of the financial world. Don't get me wrong, I think there is plenty of evil out there (it seems that on Mondays, following a meeting or conspiracy of the assembled dignitaries in the G20, my investment accounts take the hit). But apparently a good chunk of the "community" gets its panties all in a bunch every time gold takes the hard hit.

Every now and then Team Macro Man has the satisfaction of making money, and making money for the reasons they expect. In macro, that can often be more rare than one may think. To wit, we have only "told you so" to say to the gold bugs and other trolls that have occasionally frequented this blog.

Gold has been looking pretty weak for a few weeks now to TMM and not because of politics, religious affiliation or the recently cancelled Indian wedding we heard about from a friend of a friend. Quite simply, the flows into ETFs (much of it composed of retail) seems to have gone a bit flaccid as of late. Orange is spot gold, white is total ounces in all the major ETFs - principally GLD US and GBS LN.

Gold is now reaching long term trend support after falling the last few weeks as investors returned to bid up the euro and equities. The bounce in equities, especially financial, retail and real estate may be short lived as volume indicates that there is not much conviction from major investors on the upside. Gold has recently been the safe haven as investors sought shelter away from the euro when it was having the sovereign debt issues. Now that those issues have been quelled, gold has had some selling and it has now reached an oversold condition and a long term trendline which is acting as major support.

Stock prices move in trends. In a bull market, it is quite often easy to identify the ascending bottoms. Being familiar with trendlines allows the investor to enter long term bull markets when they are oversold and at key support. An investor must always be aware of a stock’s underlying long term trend. This can be counter-intuitive and awkward, as most times when it comes down to support you have to think against the market herd and buy when others are selling. It’s like buying a winter coat in the heat of summer. Gold is on sale, and presenting a low risk, high reward trade, but it requires non conformity with the crowd which is not an easy task for anyone. Many of us like to be in what’s hot now situations, rather than seeing the bigger picture and entering into a trade when it is uncomfortable.