From now on I will be updating investments I'm adding to my portfolio. Therefore, everyone will have a chance to see where I'm putting my money and can comment on it.
Our fund just bought some PUTS on Gold. We usually do not trade, but we have a huge standard deviation parabolic event, which could correct at least a few hundred dollars.
On Friday we had 98% bulls according to Daily Sentiment Index. Last night was followed by another 98% bulls day. ETF inflows into the SPDR GLD are now at monthly record highs. Recent Merrill Lynch Fund Managers Survey placed Gold into an extremely overvalued position, which was a good guide in previous corrections. I also noticed that SPY ETF now has less net worth than GLD ETF. That is really remarkable. All in all, the current mood makes this quite a contrarian bet for a few months, until the price shakes out weak hands.
As a side note, all day today on CNBC and Bloomberg we had a gold bull after gold bull. CNBC has a poll which is asking if Gold could hit $130,000 levels. Totally insane. All in all, I think we are ovrdue for a serious correction around the next couple of months, despite the strong seasonality that usually happens in September.
Can you please share with us, where do you get the information about the Daily Sentiment Index?
ReplyDeleteI guess most readers will also be interested to know that.
Thank you in advance.
Regards,
Ili
Nice one Tiho.
ReplyDeleteI was about to make a post about shorting gold and expecting you to come and bash me, but it looks like we'll be on the same side of the trade on this one :-)
What strike and expiry are you buying?
Daily sentiment index is from trade-futures.com
ReplyDeletehttp://www.trade-futures.com/dailyindex.html
Tiho,
I agree with you, though you might be a bit early; in my experience you tend to see a higher high with a bearish divergence in the DSI before things top. Overall though I agree. Puts are a great way to limit risk while betting against a parabolic trend. As always enjoy the blog, it's part of my morning read now. Thanks for the hard work.
-Will L.
Spot on man!
ReplyDeletepej - I am not perma-bullish on commodities, as I realize that anything that goes straight up in a vertical line, also comes down just as fast. The difference here is that usually I don't try and catch price fluctuations but rather the entrie moves. The entrie move in Gold and Silver is a long secular bull market which probably has several years to go. I know you don't agree with that, but according to history most secular bull markets last about 18 years, and this time won't be different. Gold and Silcer started 11 years ago, in 2000. Also, usually all secular bull markets, be it NASDAQ stocks in 2000 or Gold 1980 or Oil 1980 end up in a huge bubble.
ReplyDeleteWe are currently not in a bubble. The public is still lining up in a frenzy to sell their Gold, not buy it. When I see everyone buying Gold, when I see huge portfolio allocations by managers towards precious metals, than we will be in a final bubble. When CNBC calls themselfs Commodities NBC 5this thing will end and there is still plenty of time left. A lot more rallies and a lot more corrections. But it is all one move up. So in my opinioon, this is just going to be a correction, most likely a strong one, so I decided to buy some puts.
When everyone gets extremely bearish on Silver, and we drop to the 62% Fib retracement from the May 2011 peak of $49 towards say $29 or something like that, I will be buying HUGE orders. Most like 50% of our funds portfolio.
Will - thank you for the nice comments. Since I'm not a short term trader, I am not the best at looking at intra day tops or divergences. However, I did notice that Gold pulled back couple of weeks ago sharply and than rallied more into last week and even into this Monday, while the RSI diverged between those two peaks, while extremely overbought. Who knows if I'm right, I guess we will have to wait and see.
ReplyDeleteI forgot to say I'm extremely bullish on Gold and Silver, but because everyone else is, including 98% of bulls on DSI and huge ETF inflows, I thought I go short Gold for awhile. It's never good to be on the same side of trade. On the other hand, I'm extremely bearish on Treasuries, but I am not convinced that this is the top just yet. I think we have one more rally up in Treasuries andmone more decline in the stock market. After that I would most likely short Treasuries.
Good call, today was the top, too?
ReplyDeleteI am not sure about that Anonymous. You are going to have to ask Nostradamus in regards to that.
ReplyDeleteDunno about that. You made some awesome calls since I've been following this blog. You must have made truck load on sugar dude. Some average ones too, but I noticed that when you make a call which doesn't go your way, you are still protected. How can I explain you buy low and it might not be a proper bottom, but it's still some sort of a bottom which gives you a rally so you can tighten stop losses.
ReplyDeleteI followed your call on buying Nikkei at 9300 as it rallied from June of this year. You showed us how there ws record amount of short interest on the shares. It went all the way to 10200. I was thinking this is awesome. So I was up a lot. It started to reverse and now its lower, but you still called a bottom and I managed to walk away with some mirror profit as I tighten my stop losses. Following your blog is a great way to trade I think, not sure if others agree.
i like this blog man. you got quite a knack for this stuff i think you should be on tv not those boring bankers who get everything wrong. if people listen to you since july (link here) when you said to stick with silver, wheat, cotton and later coffee they would be up lots of money and missed the crazy crashes in shares in every country.
ReplyDeleteantonio from england
p.s. where do you live man?
Anonymous - I'm glad you noticed. Thanks for the nice words. Nikkei is one of those markets were it's worth buying value on cheap because it's almost 80% down from it's all time high. Any further sell off could be the up and coming secular bottom low, so it's worth trying to buy bottoms. When the Yen finally weakness, the market will explode!
ReplyDeleteAntonio - like I keep saying commodities are in a secular bull market, while stocks at best will go sideways. However, in saying that, equities will do better than cash or bonds, I would also stop buying precious metals at current point as we could correct somewhat. If and when silver goes down, I hope I'm smart enough to buy more so I can ride out this secular bull market!
Oh and I live in Australia for now. That's where we have a commodity boom! =]
ReplyDeletedid you just like pick a perfect top on gold? nice man nice.
ReplyDeleteTiho is a smart man. Let me tell you something, the best way to make money in crazy times like these is to (buy puts on parabolas), (or buy when nobody else is and the media is full of pessimism). Of course you must always be patient because usually parabolas go much higher than you expect, or the pessimism takes longer to go away.
ReplyDeleteI tell you this from personal experience. These were the best trading situations in 2010 and 2011 at least for me and I will explain why.
1. Go long EURO around 1.2 - everyone was saying EURO will go down to parity, to 1.1, the media was full of pessimism and there was reason, but bad things don't happen so fast because nobody is ready for me. So I personally went long then and made some good money.
2. BP - British petroleum , the media was full of people saying it will go bankrupt, the shares went ot 27 USD, now they are 39 USD and was much higher. I remember when all the news was about the oil flood.
That was for Longs due to max pessimism. I haven't seen such high pessimism even during the recent stock market crash. Which I also found good buying opportunity for a while.
Now to parabolas. Never enter position in size to short things going parabolas. Use put options instead ! They give you limited risk (the option price), and high reward. Here is what I did.
I always buy puts out of the money, because they are cheaper, and if I'm right and parabola go broken, the downside of the asset is high.
So near 47 USD Silver, I bought put options with strike 35 USD. I knew it was very deep out of money, but I just wanted to reach it. Big parabolas like silver, always correct atleast 30%. That's why I bought so out of the money. My option was for short-period of time. I made 500% of my option, for the 2000 EUR invested to buy the option, I made 10000 EUR.
The next parabola was USDCHF, I bought calls out of the money and made some good money also.
The next parabola formed was gold. It's now imploding. I bought gold puts yesterday too, same as Tiho.
XAUUSD 1 770,40 15-ноември-2011 Long Put 70 49,66 99,49 6964 3488 USD 2419 100,34 %
So my option is already in 100% profit , 2400 EUR.
I bought it to 15 November 2011, with strike 1770 USD, which is already reached.
Let me tell you this, parabolas always form because super high optimism about an asset, many factors supporting it, and it goes too much higher than 200 DMA.
Pre intervention, the two week rise in the CHF was a 7.8 sigma, one in 300 trillion event. Of course, it's very hard to buy the put options at right time, you always want to buy early, that's why you must hold more than you want and you must look for red flags.
I will tell you the red flags for SILVER, CHF and now GOLD.
For silver it was Margin Hike 1, then another one, and it broken the parabola because it dried the speculative flows that was feeding the parabola
For CHF, it was SNB, such forex exchange movements are harmful, they know it and did a super high quantity program to flood with francs.
For gold, it went super high from 200 DMA, speculative flows came even during stock crashes which are also bad for gold (if you don't believe you didn't make your HW).
The red flag was again, margin hikes. That's the purpose, they do it when there is parabola in assets that are not needed for economy support. Gold and silver are not needed, that's why the hikes on them are big, and drain the speculative money.
That's all for now. Just wanted to help a bit.
Regards,
Ili
Very interesting stuff Ili. You sound like you got your strategy worked out pretty well.
ReplyDeleteI must agree with the Swiss Franc, as you would have noticed from my recent articles on the blog. Same with Gold. I think Treasury Bonds as well as Japanese Yen are next, as all the safe havens unwind for awhile. Fear trade with the Safety Crowd has been over done, that is for sure!
Congratulations on all the right wins!
Regarding treasury bonds, I agree that they are in bubble, but I'm not sure when there will be good short. I don't think I will participate.
ReplyDeleteAbout Japanese yen, I'm short Yen from the beginning of 2010, for a target USDJPY 120, but so far I have lost much money. The problem is this, retail traders are long USDJPY (nobody own Yen), ask someone if he/she has Yen ... (Check FXCM - 92% of their traders are long USDJPY), nobody has yen, also there is gigantic carry trade that keep making yen go up when there is a problem. So, Yen must weaken, but until it does, might go very high ... even 60 USDJPY .... that's why I don't recommend holding positions in size, I again recommend options.
Buy out of the money calls USDJPY with strike 85-90 USDJPY, they are cheap , buy them for 2 years. Risk 10k for example, If they expire 2013, buy double (20k) ... and in the end, USDJPY will go to 100-110, and you will make killing.
I want to add something. I'm not some kind of superman. Before I got right silver and CHF, I had 2 options expired worthless, and I lost some 2k eur, but compared to the profit of 10k eur on silver later, and 8k on CHF, I did super good.
So, it's not only to make it at the right time, but also have good money management. When trying to catch parabola high via options, always keep in mind you might be wrong, and be able to double the size of the option after the parabola keep going up. At Silver 40 USD, I knew it was parabola and bought option, it expired worthless, then I double near the high and finally got it.
By the way, I personally know Jim Rogers, with whom I met in his house in Singapore this year. I was there to open bank account and buy some yuan :) He is a very smart and nice man. Really knows his stuff and is most of the time right.
Reagrds,
Ili
I definintly do not think anyone is a superman, however you do take decent risks around the right time, which seems to pay off for you and that's good to see. Like you said yourself, money managed is one important aspect of managing money.
ReplyDeleteIn regards to Treasuries, I am not 100% convinced that we are at the top just yet. But we are coming there soon. One more rally to new highs on the 30 Yr Bond will get more really interest for a short,
Finally, the reason I was not bearish on the Yen before, but I am becoming slowly more and more bearish, is because the sentiment is getting very bullish. But as you said, I'm not convinced that is is the top of the Yen just yet. I would be looking for one final rally in the Yen, just like in the Bonds, which after a powerful 5 year rally, would signal a bubble territory, at least to me!