A few charts I am looking at into May with brief commentary:
$AAPL $GOOGL $BIDU $GDX $SPG $BXP $MSFT $SLV
It was April 2011, and Silver had just touched $50. An amazing move from sub $10 in late 2008. Analysts and speculators alike cited many reasons for the 500% move. First it was the disparity between the price of Gold and Silver, which was near historic highs. Then it was the weakness in the US dollar, which had just just touched 73. Next was the rise of the SLV ETF, which created hundreds of tons of Silver demand during the Spring of 2011. With the Eurozone debt crisis gaining steam, folks also used Silver as protection from possible currency and market fluctuations, ie. a safe haven from risky assets. Others said it was simply supply and demand. And then of course there was the realization by many, that policies put in place by Central Banks around the world, would cause massive inflation.
While Silver was hitting highs in 2011 not seen since 1980, the Federal Reserve was nearing the end of its second round of quantitive easing. An unorthodox program that had folks buying Gold and Silver to protect themselves from possible inflation risks associated with the Massive Bond and Mortgage-Backed Securities purchases. Little did they know, that program would turn into QE-infinity a few years later, and the Japan would add fuel to the fire with its own massive easing program.
It does not take an economist to figure out that when Central Banks print money, inflation should follow. Buying Gold and Silver ahead of that move seemed like easy trades. And easy it was, as both commodities yielded huge returns for investors from 2009 until 2012.
But things have started to change recently. The concerns of a collapse in the Eurozone in 2011 are replaced by promises of the ECB to do whatever it needs to do to preserve the Euro. The USD is much stronger then in 2011, and the feared runaway inflation event has not happened and possibly the reverse could be happening, as their are now concerns of possible deflation. The U.S. economy is showing signs of recovery. The global financial collapse that was coming... the one that had folks clamoring for safe haven assets, is not happening. So WHAT HAS CHANGED SINCE 2009 to warrant the current 250% price increase in silver?
Cumulative inflation since 2009 is under 10%, meaning the price of silver adjusted for inflation should near $10. So is it demand that adds the extra $14 to the price of Silver since 2009? One would think so, as the Silver Coin has been met with record demand this year. But to me that is just typical of what this market does to folks. The ones who watch the commercials and TV ads entitled "With Gold at Historical Levels, now is the time to get in before it goes to $2000" , promising huge returns for those who are in early on this Gold and Silver rally. And unfortunately those will be the folks holding the bag when Silver is back under $10.
So in summary, we think Silver is ready for the next leg to the downside. One that will have Silver near $20, and some folks on the verge of more margin calls. With inflation not an issue, The Eurozone not in collapse, and with Silver still up 250% from its 2009, we think this is the time to grab some puts for the carnage.
Check out our Monthly chart for Silver and see for yourselves. And while scratching your head wondering why Silver is dropping again over the next week or two, ask yourself what has changed since 2009...
Silver and Gold the place to be to hedge against central banks printing money.... right?
What a great start to the week with CMG continuation and SODA explosion. Lets hope the MOJO continues. As long as this market stays somewhat flat and melts higher these multi-day runners should continue. ONTO THE WATCHLIST:
SODA - like her for a multi-day breakout. With GMCR continuing to run expect some carry-over to SODA. Stock should be over $50 already IMHO so anything is possible. Grabbed 42.50/45 calls ontop of my 40.
MAKO - Think its the play of the day here im thinking. Joining the oversold bounce bandwagon. Figure she tests $20 today or tomorrow. $20 calls the play.
SLV/AGQ - will look to grab calls as the shake yesterday should be enough to break the next leg. AGQ 60 calls / SLV 34/35 calls
Others on watch: COH, TIF, PCLN, CMG, GMCR, LNKD
Short list today, want to keep focused on the few movers. Stay tuned to chat / twitter for alerts!
Lets have a great day!
Everyone is talking about the big news about QE3 coming thursday. As long as there is an announcement about extending the date for low rates AND some type of unorthodox easing program, i think the market continues to rally. Hopefully it is slow and steady 🙂 which will provide an environment for certain stocks to continue MULTI-DAY runs... those are the types that have the better odds a of returning huge gains.
On watch today:
SODA - Liked her at the start of the year and the story is even better now then before. Still a large short position and looks like folks have lost interest last few weeks, which means CHEAP CALLS. $40 calls @ .35/.40 looks like the play. Tight bollinger bands means impending break possibly coming.
WYNN - always on my watchlist and the real MACAU rev numbers for august came out. 2nd best month on record but still slow growth. I think WYNN looks to push over $110 this week and will play accordingly with $110 calls @ .33 or so. Playing WYNN recently has gotten me burned, but will take one big move to make up for it and then some. Think this maybe the week...
AIG - bought some calls last week that didnt pan out. The govt is selling $18 billion in shares from its stake and will become a minority shareholder. AIG selling off PM but i think this will turn today and head towards the $35 strike... Will look for some lotto calls at open.
Others on watch today: SLV, AGQ, GLD, AAPL, PCLN, LNKD, NFLX, SINA, BIDU -
Was a great class last night.
Hope to see everyone in chat and lets have a great week!!