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GLD Gold ETF and SLV Silver ETF

We were long precious metals coming into 2009 as gold, silver, and even platinum were climbing higher.  Eventually we got stopped out as the group consolidated for the next three months.  The last two weeks gold and silver have been able to breakout of the consolidation and is once again in an uptrend.  We went long in out model portfolio last week and are currently looking to add to our position if the trend continues.

GLD Gold ETF

gld-gold-etf

SLV Silver ETF

slv-silver-etf

In order to catch our trades in precious metals as well as other asset classes like stocks, bonds, currencies, and other commodities then sign up for a quarterly or annual subscription to The Macro Trader weekly newsletter with frequent intra-week updates.

Happy Trading,

Dave@TheMacroTrader.com

Weekly US Crude Inventory

Following up yesterdays post regarding what we see happening in the crude oil market we were happy to see the inventory numbers come out this morning and once again confirm what we have been seeing, namely that until Contango narrow significantly or goes away entirely there will be a large incentive for large energy traders to buy oil in the cash market and sell a forward contract to lock in a gain.

With Contango at 10% from the current month out to August there is a huge incentive for large speculators like global macro and energy funds as well as oil companies that have extra storage capacity to put this trade on and just sit on the oil until it has to be delivered.

Here is a chart of oil inventory data and as you can see we are at highs not seen since 1990.

Weekly US Crude Inventory

oil-inventory

Happy Trading,

Dave@TheMacroTrader.com

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Bear Markets and Bear Market Rallies

CNBC has 50 guests a day coming out and saying that this is “THE” bottom, Kass comes out and calls it a “Generational Bottom”, and investors that are flat or short are wondering if they are missing the boat.

In times like these it helps to put things into perspective. One of the ways we do this is to compare our current situation with similar times in history. As you will see in the following charts there is a good chance that you aren’t missing much at all.

This chart is of the current situation.  We have marked each move of 20% or more.  As you can see we have already had three rallies that were up 20% or more in a matter of weeks, or even days. If you had bought the top of the first 20% rally hoping to not “miss out” you would be down over 20%.

SPY-SP500 ETF

20

As you can guess this is not the first time that this has happened. Every extended bear market in history has had multiple 20% moves that have only sucked in the desperate traders only to burn them with a long fast fall back to new low. If you look at this chart of the 2000-2002 bear market we had four rallies of 20% or more before finally bottoming out and starting the 2002-2007 bull market.

SPY-SP500 2000-2002

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Going back farther here is the 1962-82 bear market.  Here we are using the Dow and the 20%+ swings are shown in the bottom pane where a reading of 1 means that there was a rally of 20% or more and a reading of -1 means that it fell by at least 20%.

Dow 1962-72

62-82

And finally we have the Great Depression.  Looking at the lower pane we can see that there were several different 20% or greater swings.

Dow Jones 1928-1940

20-depression

The market loves to fake us out.  Bear markets are always more volatile than bull markets and this one is no different.  While this could be THE BOTTOM we tend to think that it is A BOTTOM and we are currently short.

So you may be asking what would need to happen for us to change our minds?  The simple answer is higher highs and higher lows, also known as an uptrend.  Other bullish signs would be economic indicators that actually improved instead of worsened, improved and sustained breadth, and some actual leadership.  By the way, banks will not be the new leaders.

Happy Trading,

The Macro Trader

Dave@TheMacroTrader.com

P.S.If you are interested in learning more about Macro Trading sign up for our FREE Macro Trading 101 course in the box below.

US Equity Risk Index

For the week ending 1/9/09 our Equity Risk Index made a 6 month high of 38.89%. Last week crushed it and brought it all the way back to the readings we saw in November of 22.22%. When the market fell apart breadth fell apart and T-Bond relative strength picked up as money left stocks and went into bonds.

Stock Market Risk Index

So what will get the risk index climbing again? Consistent breadth, a real uptrend, and a decline in Treasuries would be a start. But what should be no surprise to our regular readers, we are not expecting that anytime soon.

Happy Trading,
TheMacroTrader.com
Dave@TheMacroTrader.com

P.S.If you are interested in learning more about Macro Trading sign up for our FREE Macro Trading 101 course in the box below.

Macro Trading 101

We at TheMacroTrader.com have one major purpose, to provide you with actionable and profitable trading ideas through our weekly newsletter and mid-week updates. Last year our model portfolio did a great job by beating the SP500, the Barclays Macro Index, and actually being positive for the year.  In order to better serve our current clients and to wxplain to prospective clients what it is that we do we are now offering a FREE Macro Trading 101 course.  It is a multi-part e-mail course that is sent out twice a week.  Each e-mail contains a PDF attachment that covers a topic related to global macro.  Our first few installments cover the benefits and advantages of global macro and then we start to delve into different asset classes, their drivers, and how to trade them.  Later in the course we will be getting into economic analysis, risk management, and even finally a gameplan that you can use to help you find where the best risk to reward opportunities are hiding.

To receive our FREE Macro Trading 101 course simply fill out the form below.