Taking Advantage of Negative Sentiment

[rknigh2]

I am a bit excited to see the negative reaction from the market after the positive US numbers and stimulus efforts by China and BoE. How long can the markets "risk-off" before they are forced to react positively to positive news? Or are we simply waiting for the 2008-like sell off? Is liquidity really that tight?

Personally I have TP'd the majority of my oil juniors, but will continue to hold the precious metal miners from the dip early last week. A strong US dollar is biggest short term fear. If there is another "risk-off" move by the markets today and into next week, I hope to see sideways movement for gold and another great buying opportunity for energy. Thoughts?

The flip side is... the markets react positive, USD may weaken, Gold should still move sideways, and I'll have to wait a bit longer for an energy/commodity buying opportunity. OR there is a global-slowdown-induced free fall and I hopefully won't pull the trigger on my 60% cash position too early.


What is everyone else doing with this funny reaction to the positive news?

[kcowan]

What is everyone else doing with this funny reaction to the positive news?

The offical acknowledgement that these economies need stimulus is only positive as official reinforcement of how much trouble the economies are in. True it is not new news to savvy investors. But what did you expect?

[Belguy]

I don't see much cause for optimism in today's job U.S. job numbers and neither do the markets which have continued their downward spiral.

[dogcom]

Many people don't see the relevance of the seasonal in investing but it is probably the one thing that is always true in the market. Sure it doesn't have to go the way you think it should but certain factors are just there at certain times of the year that are not present in other times of the year. Summer is when traders go on vacation meaning volume is low and you can get swings going either way which would be harder to do in the late fall for example. Between Oct to May there is a lot of volume pushing the trend usually higher because of all the money pouring in from retirement savings and so on. So it takes a lot more selling to turn this trend around.

So when the positive news comes out at a time when the market is a little overbought it doesn't take a lot of selling to turn it back down. Gold is the best opportunity right now as this is the time when money is looking for it. It is not a certain thing but it is the one of the better investments to make money at this time of the year. Also I still believe gold is in a secular bull market and has most of the correction behind it after the top last October. It may get nailed a bit more if the stock market collapses again but would soon turn up from a v bottom. The fiat currencies of the world are in big trouble as we have known since 2000 so until we get past the credit crisis things will be very volatile.

[Belguy]

Just as an aside, July is generally the best month for the markets in the third quarter and so a bad July could be considered another bad omen.

[dogcom]

July often is following a weak May and June just like this year and has thus done well as a result, making it more of a bounce month.

[zylon]

well, I do recall one year when July followed April
and I never did find out what happened to February
... but that was either in the late 60s or early 70s

[rknigh2]

The offical acknowledgement that these economies need stimulus is only positive as official reinforcement of how much trouble the economies are in. True it is not new news to savvy investors. But what did you expect?

I suppose it is negative news in that it is "official news" that the economies need help, however unnecessary "official news" was. I suppose I expected a more positive reaction from the market because of the Chinese intervention and to a lesser extent the British stimuli. I look at the other option... what if the ECB kept the rates at 1% and there were no surprise stimuli? I highly doubt the markets would have said "HEY! I guess everything IS fine" and continued to move higher.

I guess I see it as one of two options:

a) The good news staved off an inevitable short term larger decline

or

b) The good news confused investors and markets nervously move sideways and/or crawl up


For the next few weeks I am comfortable with my primarily gold and cash positions. The market clearly is terrified. I just don't forsee the major sell off we have been calling for the past 3 years atleast until after November. In the mean time... Best case scenario, markets will creep higher, sprinkled with irrational sell offs and buying opportunities. After November, all bets are off.

Two pieces of news move me to a cash and firearms position... 1) true growth numbers from China (heh) 2) confirmation of the US fiscal cliff/bush tax cut expiration

[dogcom]

Ok rknigh2 you left us here with cash and firearms. So tell us why all bets are off after November, what do you think might happen after that. I expect a lot of problems because of the destruction of debt, but what is your take on what takes place after November give us your opinion.

[rknigh2]

What I mean is, I doubt we'll hear any real talk of the tax cut expiration until after the elections.

If the euro debt crisis is creating any real sort of uncertainty, the "destruction" of the outstanding $15 trillion in the US should shake the markets a bit... or maybe we get another ten years and go along our way.

I guess the question to ask is... how long can the US or EU continue to build debt before investors say "that's too risky" and pull the plug for good? Is that even possible? Would you invest in an economy with 105% Debt/GDP? How about 150%?

Speculation. I see an extension or restructuring of the tax cuts (avoidance), and as long as liquidity remains, we will continue to move sideways for another ten years.