UPDATE: We are OUT of this trade as of 12-01-2010. It worked!
The truth is that it’s about the only thing that is working. I thought the other day when gold bounced off of some support and Europe was falling apart that the dollar up, gold up, and stocks up scenario was in play but IT IS NOT!
The scenario since 11-04-2010 is:
DOLLAR UP
GOLD DOWN
STOCKS DOWN
From 11-04-2010 to this morning the numbers were:
UUP UP 5.13%
GLD DOWN 2.79%
SP500 DOWN 1.86%
So gold is actually doing WORSE than the US Stock market!
NOTE: UUP and EUO will likely give you a K-1 on all accounts and taxes on IRA profits to deal with, so speak to your accountant if needed. Schwab did the paperwork for me last year, but your broker may not do so. The other issue with these ETF’s is that they rebalance daily and reflect time loss on futures contracts which will degrade your return relative to the move in the US dollar index or Euro, respectively. If they simply go up and down, you will lose money, not stay even. We are expecting an up trend now, so I feel they will work, but it’s your money and your decision as to how to invest it.
I recommend moving out of this gold trade as there is also a head and shoulders taking shape that could drive down gold further. I am maintaining my long position in gold as a hedge, while dropping the trading position. If you do not yet believe this, fine, but please set some stops. I could be wrong if there is a higher level of panic perhaps.
The dollar trade looks like it will work, and gold may not, so why risk it? The point of setting mental stops where you will get out, is that there is no point in giving up all your trading profits!
I’ll have more charts later today or tomorrow morning on my BLOG page (see link below). And I’ll save something for my FREE subscribers that will go out by this weekend on the SP500, so please sign up using the second link below if you have not already done so. It’s FREE!
Enjoy your day.
David
You can review more of my most recent comments on the markets HERE:Market Timing Blog at SunAndStormInvesting.com
Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.
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