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  • The Market Creates a Buying Opportunity

    Posted on October 5th, 2009 No comments

    A new week has begun, earnings season is around the corner and the market has corrected the perfect amount. I see this as a perfect buying opportunity and I’ve been building positions in multiple stocks which I will outline below. First we must ask why this is the best opportunity to buy? No one can be 100% certain but I trust the technicals that I follow. I believe we have heavy support around 1000-1025 on the S&P and I don’t think our market can crack this point. If we do, all my bets are off and all my stops will be hit which is a minimal loss considering we are sitting at 1025 already.

    The stocks which I will be looking at most specifically are Citigroup (C) and General Electric (GE). I like Citigroup at $4.25-45 and I love General Electric at $15.00-50. I’ve taken my first positions late on friday afternoon and I anticipate by the end of October the returns will be substantial. We may see-saw till mid October, but once mid October catches a drift, Citigroup should propell to $6 and General Electric should be at $19. There is one factor that sits in the way and might play against my technicals, and that is earnings. Both companies earn by mid month but since forecasts are fairly conservative, it will be difficult to negatively impact these stocks.

    Lets wait and see. Enjoy trading everyone!

  • The Bull is Back – A Full Market Recovery

    Posted on September 16th, 2009 No comments

    If you watch business television, you will hear a lot about a W shaped recovery and a V shaped recovery. Simply put, my bet is with a V shaped recovery and we are well into it. Most analysts were expecting a drop once we broke 1000 on the S&P, and it didn’t happen. We are well through 1000 and approaching 1100.

    Is 1500 on the S&P possible next month? Absolutely not, but in 2010 I certaintly think so. I believe we are going to fight a little battle here at the 1075 range, maybe falling back as low as 1025. But generally speaking the charts are strong and very bullish. We are out of a recession and its only a matter of time till you hear Bernake say it.

  • Signals of Inflation

    Posted on February 17th, 2009 No comments

    Okay, so the chatter around the media surrounds ‘deflation.’ First off, the media has it wrong, we are NOT in a deflationary environment, instead we are experiencing disinflation. It’s important that we all understand the difference between the two words.

    Disinflation is a decline in the rate of increase in average prices. For instance, between 1981 and 1983, the annual rate of increase in the consumer price index (CPI) in Canada declined from about 12 per cent to about 4 per cent. Again, from 1990 to 1992, the annual change in the CPI dropped from 5 per cent to 2 per cent.

    Deflation refers to a sustained fall in prices, where the annual change in the CPI is negative year after year. The best known example of deflation in Canada was during the 1930s when prices fell more than 20 per cent over a four-year period.

    Why I keep hearing “deflation” really bothers me. Is the media trying to make us believe we are really living with deflation? Fact is, we aren’t. We are experiencing disinflation, end of story.

    Now the reason why I’m writing this article is because around January 20th, I have reason to believe that we have begun our entrance into the inflationary zone. Does this mean we might be at the bottom of the S&P? No, we still can move lower (6500-7000) before people realize we are making our move. With the constant stimulus packages around the world, the money supply is exploding. A few indicators that have really peaked my interest is the break on the BDI Index and the break away of hard commodities (gold, silver).

     

    Gold & Silver Break away from S&P around January 20th.

    Gold & Silver Break away from S&P around January 20th.

    As you can, around January 16th, gold and silver started to make their trend upwards in comparions to the S&P. For quite some time, Gold and Silver have idled around $1000 and $12 per ounce in Canadian currency, but that isn’t true anymore. The prices have finally started inflating. This is one signal that peaks my interest. More below…

     

    The Baltic Dry Index (BDI) increases over 100% since January 20th.

    The Baltic Dry Index (BDI) increases over 100% since January 20th.

    Another indicator I watch closely is the BDI index. As you can see from the chart above, the shipping and trade index is showing its first signs of strength in quite some time. 

    On the treasury end of things, it looks that bubble might be bursting.  I’ve added a position in TBT, a short on the 20 year bond. You’ll see the gap between TBT and TLT closing in, another indicator that the cash is starting to move again.

     

    A 20 Year Bond (TLT) vs a 20 year bond short (TBT)

    A 20 Year Bond (TLT) vs a 20 year bond short (TBT)

    So what does this all mean?  The 3 charts I’ve shown above are all indicating that things are slowly starting to break, which will utimately lead to the inflationary environment that we are all anticipating. With governments around the world injecting constant cash into our economies, it’s not a question IF inflation will happen, its a question of WHEN it will happen. My guess is much sooner then later…