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I think an update is due for
everyone. Times are unprecedented and markets are very dangerous.
I’m
sure you are all well aware news is unfolding regarding the potentially six
nuclear meltdowns in Japan now, faster than you can really keep up
with. The reality is it’s surely much worse than is being let on
at the moment.
The
devastation from the tsunami alone is staggering and the death toll sure to
rise to well to over 50,000 souls and it wouldn’t surprise me in the
least to see it closer to 100,00 once all is said and done.
Here is a heart-wrenching presentation with before and
after pictures. Whatever issues we deal with on a day to day
basis pale in comparison. Imagine your whole town wiped out in minutes
as occurred to so many in Japan.
This
latest crisis is veiling what is occurring in the middle east which in and of
itself is a market moving event. Four journalist have in fact just been reported missing
in Libya.
So
what should we do with our investments now as they are being pummelled?
That
is the question filling my inbox these days the most.
We
have advocated that cash is a position many times in the past, and now even
more-so. It’s a case of sell first, ask questions later.
We’ve
sold all our swing trading positions with the exception of a few short
positions and are now looking for bottoms so we can add to our mining
portfolio.
Everything,
even commodities, is getting hit very hard so far this week and it’s
likely to continue if/as news gets worse.
There
are going to be very good buying opportunities to come in the days and weeks
ahead and you have to be ready.
Let’s
take a quick look at some of the hardest hit areas that we like to focus on.
The
S&P index is in a falling trend and just recently tested another level of
support. It’s ugly and could easily get much uglier.
It’s now lost all it’s gains for the year and is now negative.
I’ve
had a target of 1,440 since late November 2010 on this index after it broke
out of a cup and handle pattern, and that may be hit eventually but the cup
and handle target is now annulled.
Markets
hate uncertainty and we’ve rarely ever experienced this much
uncertainty. Stay away from any type of trading unless you have solid
rules.
I’m
not even going to show any precious metals charts. If you’re
trading them you should have been out of them long ago or you have no
business trading. Taking losses is part of trading and must be welcomed.
As
for physical metals, if you own your allotment, then go do something
else. Don’t worry.
If
you are looking to buy or add, use this weakness wisely.
Selling
has to occur as investors are raising cash due to margin calls, or simply as
a consequence of having the pants scared off them.
Don’t
be a hero here. Step aside.
The
CCI which tracks most commodities is the one chart I look at to see how
commodities did on any given day if time is short. It did take a
beating and dropped below it’s 21 day moving average as well as
it’s uptrend line.
We’re
seeing some support here at horizontal support. We’ll likely see
a test of the 100 day moving average soon or even a dip to the $600 area on a
technical basis.
In
reality nobody knows. If we see a nuclear meltdown or, heaven forbid,
another large quake and tsunami in Asia or even on this side of the pacific
ring of fire then all bets are off.
The
Dr. copper’s holding here for now but is by no means out of the
woods. Holding the $410 area is great to see. If we do penetrate
this level then look for support at $390, then $370.
These
types of washouts are great healthy moves, but there is just too much
uncertainty to even attempt to call a definitive bottom yet.
The
XAU is a fair representation of the large gold and silver miners and
it’s chart is quite ugly. A solid downtrend is in place
now. The index did test and hold it’s 200 day moving average so
far but you’d have to have an extremely short trading timeframe to want
to try a buy here.
This
is a scalpers market. There is no true trend.
The
GDX represents the junior gold and silver companies pretty well and
it’s been killed lately as well. We are not touching anything in
this environment.
It’s
rare times like these with no clear direction that you must avoid trading
unless you watch every tick and can enter and exit positions in
seconds. And even with that ability it’s a very difficult task.
This
is the best time to study and research companies we’ve had in a long
time. If you’re not into that, it’s a great time to take a
vacation and get rested up for the next periods of strength which could come
sooner, or later.
The
main message I want to get across today is that nobody knows what is
occurring for sure in regards to the nuclear plants in Japan and as such you
should go into capital preservation mode.
Last
night Japanese markets rallied and closed up close to 6% but recall that the Bank of Japan has injected $688.3 billion
into their markets over the last three days. The US is only injecting
$600 billion over months, not days in the form of their QE2 programs.
That
amount of money was injected and still the markets were obliterated and are
down solidly still even with yesterday's recovery.
The
fact is buyers aren’t there, other than newly injected support funds,
but selling has subsided for now at least.
For our subscribers and ourselves
we’ve cut all our swing trading positions with the exception of a few
bearish positions. I feel that you really have to be short a little bit
because things could really move lower in a hurry.
We’ve
been sitting on an unusually large cash hoard in out mining portfolio for
about 9 months now. It’s not been fun, but this is the type of
event we’ve been waiting for. Our buy list is getting cheaper by
the day and we will soon begin to nibble on our favourite miners from small to
mid-sized.
We’re
really no fan of the majors since they have a hard time replacing reserves
and just don’t move that much. They will have their day when they
move lots and we will swing trade that action, but as for owning them in out
mid to long-term portfolio, we’ll continue to pass on that idea.
Once
again, my prayers are with those affected by this tragedy. And for
everyone whose portfolio is the only thing being affected, count your
blessings.
Please
take care of yourselves and your portfolio and enjoy these historic times as
much as you can.
Warren Bevan
www.preciousmetalstockreview.com
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