December Gold popped above 1700. This opens the door for a run back to the August highs at 1900. I’d buy it and get a trailing stop below. I’d buy it and not look at it on a day to day basis. Decide what’ you’re willing to lose. In this case, If you buy it at 1735, you have a risk down to 1640 on a surprise correction. Roughly 100 bucks an ounce risk. Look at 1800-2100 call spread as well to cheapen up the cost of the 1800 call. Bull call spreads are nice because they give you a defined risk/reward.
As for the Dow, we are flirting with the 13,300 level. I am still a little short here, but I am honestly uncomfortable. The market continues to display strength, in the face of continuing lousy numbers on unemployment.. The market is a future’s market though. You have to remember that. It seems to be discounting current negatives. The fact remains we are at the top of the trading range. We are at or near 4 year highs. People are bearish across the board, except for CNBC who only likes the bull side. But , with all due forgiveness, they are playing to their audience of 60 to 70 year old retired folks that like to hear bullish news. Can’t blame them for staying with a business strategy designed to appeal to those viewers.
Bottom line, I am long gold and short stock indexes. I am ready to run for the exits with my stops should the idea be incorrect.
Of the two positions, I like being long gold for a longer term trade the best.
Wednesday is another USDA report. The trend is bullish. Fight the trend at your own risk.
I like buying cheap put options to take advantage of a sell off. We’ve yet to have a significant correction. We are overdue.
CER