As regular viewers of our videos know, we are constantly adding new video products. Guests on our videos now include:
Jake Bernstein of Jake Bernstein's Weekly Market Letter on market trends
Mark Leibovit of VR Trader.com on market timing
And of course me, Ira Epstein
http://iraepstein.linngroup.com/videos.html?rand=0.021
I have also begun recording mid-day webinars. Customers will be invited to attend during the weekday. Each day's webinar is posted on our website at this point in time under Ira's Research.
It's my belief that until proven otherwise, the peak in July prices was seen this past week. It's not saying much since there's but one more trading day left in July. From a historical perspective, this peak was about a week late in coming, which means prices have skewed themselves a bit to the right. My guess is that whatever the current break brings the price it breaks to may be the lowest prices we see for a long time. At least historically speaking according to the above chart.
August is typically a consolidation month, a month where long strategies should be employed. By September you should have your trade strategies in place, looking for a strong year end rally, a rally that I think capable of making new highs for the year.
Gold's Trend
It's time to change trading contracts from August to December. Also, in a deviation from what I typically do, I am going to display the Monthly rather than the Daily Gold Chart. The Monthly Chart of December Gold Trend is up. Support is at the 18-Day Moving Average of Closes, 896.1.
As long as the most recent low of 865 is not broken, the pattern remains one of prices staying over the 18-Day Moving Average of Closes, which in and of itself is bullish. Observer that each break low has been higher than previous break lows. Again a bullish factor. What is not bullish, but isn't yet bearish is that the most recent high of 990.3 did not take out the previous rally high. This means that the highs are lower and the lows are higher. The market is therefore in the process of narrowing in its overall trading range.
I expect the month of August to be choppy. However given past history and current economic conditions I expect gold to set and confirm a low going into the fall quarter, I think establishing an option strategy now makes sense in gold.
Corporate earnings are boosting stock prices. Housing prices and sales have stabilized. Some analysts are saying the recession is over.
The Chinese tried to float the idea of tightening up their credit markets, only to see stock shares on Chinese exchanges immediately plummet as did energy prices. Last night the Chinese Government made an announcement "clarifying" their position, stating that a policy of "easy money" is to going to stay in place for the time being. This statement is part of the reason crude oil prices jumped $3 a barrel this morning.
As the Asian economies grow, demand for raw materials grow with it. A lot of the growth in Asia due to their own internal demand, not demand for good they export. For example, car sales in China are up 48% year over year. Think of all the parts needed to build a car and all the companies and materials needed to support and keep sales at this pace. What about road infrastructure?
My main point is that world stimulus plans are finally kicking in. US and British home prices are stabilizing. The time frame to see impact from stimulus plans has begun, given that we're about 6-months into the announcement of the plans. Implementation is different than an announcement of a plan. Implementation can be seen everywhere. For example, road construction in America is in high gear. Take a road trip. You're bound to see it.
Has the consumer begun buying consumer goods? Not yet. School sales are anticipated to be slow. However, retailers have adjusted. My guess is that Christmas sales will be where the bullish surprise comes, as many expect things to get even better within the next 5 or so months. If so and consumer sentiment gets stronger, consumers will part with some of their savings given the Christmas season of giving. I wouldn't expect gangbuster sales, but more sales than last year.
My point is that somewhere very soon the early stages of inflation will grab hold. What's even more important is the lesson to be learned when the Chinese tried to turn off their easy credit policy. It is not an easy task. It comes with a price that can punish an economy that does so. Especially when first implemented. I don't see the appetite in the US as being ready to do this or the need to do so just yet. I believe we'd rather error on the side of inflation than error on slowing our economy down by tightening up credit.
We are seeing a lot of surprises. Most bullish in nature. Stocks at new yearly highs, raw material purchases like soybeans this morning and so on.
Let's try to reach for a couple of Gold Call Spreads with the intent of holding them for a longer term.
December Gold 1000 Call versus the December Gold 1050 Call.
My recommendation is to enter this spread at $7.00 and hold. Your investment cost is $700 exclusive of commission and other small transaction fees. Overall potential is about 6 to 1.
December Gold 1000 Call versus the December Gold 1025 Call.
My recommendation is to enter at $350 and hold. Your investment cost is $350 exclusive of commission and other small transaction fees. Overall potential is about 6 to 1.
