Friday was a disaster, but hold that thought.
At the New York open on Friday, I made the following pithy comment–
USD strength today will likely put a severe dent in people’s wealth. We shall see how the day goes, but for some, particularly those who did not raise cash, it will be a disappointment.
Late in Thursday’s session I remarked–
As the song goes, timing is everything, but you still have to be holding the right cards… With the GDX and GDXJ down -2.8% each, my Goldminers are in much better shape, down -1.1%. I also took more off the table there earlier in the day, and hold substantial cash in these accounts.
Thursday evening, I commented in greater detail–
Yes Ventilation Blues, I have gone to a heavy weighting of cash in the Goldminer accounts because I am not convinced the strong price move earlier in the year represents a new Gold Bull. It may and that’s why I got long for a while. But then I saw that short-term bull phases were unable to take these stocks to new highs. Now I think the Bear and Bull are still fighting, and the Bear may be about to inflict some serious damage.
Since a bull phase is defined by higher highs and higher lows, I cannot ignore the facts that prices are struggling. Prices in the Goldminers today are lower than they were two months ago. The latest cycle low is lower than the previous one. A serious trader cannot ignore these facts.
Lots of volume shows the obvious interest by the public in these instruments. Marketing hype is heavy and the public is buying it. Volumes are high — but as I say prices are not moving higher. That is distribution.
The public thinks they are following a Gold Bull, but the public is often wrong, as you know. However, when I see distribution, I also distribute. So, I decided to take a few short-term losses in these Goldminer instruments in order to build my ammunition for use later after another big draw-down that would take these stocks into an accumulation zone, which I think is coming.
As I see it, the market is a game. Prices lift after the public is out and smart money has subsequently cleaned their plates and prepared a new meal for them to buy at much higher prices. I think that process is ongoing at this time. I may be wrong, but when in discomfort, the best decision is to go to cash.
The day before, after the close on Wednesday, I wrote–
After an early morning visit to the hospital for some hand therapy, I returned to the desk at 9:15 am, undecided on what to do. With the S&P 500 almost flat, it seems most traders were as well. I could see the Goldminers getting hit a bit and despite my usual unwillingness to sell into weakness, I did. Actually I raised a lot of cash today because something about the Goldminer market concerns me.
I think the S&P 500 and the Goldminers have to be taken down quickly and by a lot in order to trap the sellers in the subsequent rebound. So, I’m holding 33% cash overall and up to about 65% cash in many of the Goldminer accounts.
This morning, September 10, I cannot be pleased. Following Friday’s crash, I can report that my Consolidated account (-3.18%) did not beat the S&P 500 (-2.45%) performance. However, while my oft-repeated many words of warning did play out, how can I be pleased? I’m far from it.
Yes, we could have an epic up day on Monday to help some of us recover; but that’s another story, which I might comment on later. It is more important to study what happened and try to learn from the events of Friday.
While over 98% of US market prices on Friday’s very active session had fallen, the fact is that I did make several trades on Friday and every one, I think, was a Buy. I see from today’s broker reports that I was buying so often I even pushed the wrong button on one trade, which I will have to correct. You see I buy into weakness and sell into strength, and Friday was the pre-bounce market weakness I was anxiously expressing was due. Over-done, yes; but still the pull-back had been anticipated.
After I run through the dreadful performance details, I will say why things are not so bad.
The benchmarks for Goldminers, GDX (-5.34%) and GDXJ (-7.92%) were absolutely crushed on Friday, but by holding so much cash, my Goldminers accounts averaged a loss of -1.80%, which by comparison was a huge market beat. My International account too was down, but just -1.07%, which was another market beat. My problem was in the All Cap Growth strategy that included the one Adaptive Portfolio Strategy, which was crushed an average -4.72%, pushing the Consolidated Account down a whopping -3.18%.
How did this happen to my main account? My problem is that investment flows followed the -3.65% drop in the $WTIC Oil price, and my selected Oil company is a relatively high cost producer. That meant the investment models of the world’s largest asset managers – the people holding mega trillions, who on Friday were losing mega billions – decided to cash out on a losing day, and my one stock got hammered with a loss greater than -8 percent.
Two points to make: (i) The US is a net importer of roughly 5 million barrels of oil a day and the soaring USD should actually lessen the cost to the Oil giants, but XLE plunged -3.0% as well because the asset managers were panicked, and (ii) that, despite the Friday trashing, since the end of July, my All Cap Growth account is actually up by +0.85% and the Adaptive Portfolio Account in that group is up +0.78%, while the S&P 500 ($SPX) has plunged -1.99% this month. So, my clients in the main account cannot complain because my average gain of +0.85% in just six sessions is something to behold.
And, while my Goldminer clients were down -1.80% on Friday, since the end of July these accounts are up a whopping +9.35% (yes, in just six sessions), while the benchmarks GDX and GDXJ were up +3.61% and +5.46% respectively. That shows that I went heavy into cash at the right time.
With the superb Goldminer performance, my Consolidated account is still up +5.20% in this month’s six trading sessions versus the S&P 500 being down -1.99%.
As long as I can produce results like this, I will hammer away at HB&B and the Fed and a capital market system made so dysfunctional by the Fed interventionists.
But, other than the fact there was no Flash Crash, for which we must all be thankful, I’m still hugely disappointed in what happened Friday. I truly wish the Fed would disappear and that governments around the world would make it illegal for central banks to buy equities. First the money supply was handed over, then the bond market, then the mortgage/real estate markets, and now apparently the stock market. Central bankers want it all.
I am only one voice in a world of 7.5 billion people. All other capital market participants should be up in arms, screaming we are not going to take this much longer.
