Gold gaps upward

What a wonderful day. Blue sky. Low sum illuminating golden autumn trees. Light chilly wind. This morning I saw a rainbow the like of which I have never seen before. It was sitting on the horizon. It was not a complete arc. In fact it rose only a short distance into the sky. But it was so broad and all its colours were intense and distinct. Not only that but market that has treated me well once more.

Gold gaps upward

Today's rise in the gold price has been accompanied by a rise in the dollar. My American shares are also doing well. As I suggested might happen, STP lost the ground that it had made by close of business but is doing well again now.GTIV has also chipped in a good performance. The UK shares I bought are, sadly, fading. About half are winners but they are offset by the losers. 

The big question is what will tomorrow bring. It looks to me that the Dow has stalled at the first area of resistance and is now deciding whether to bounce back off a weak area of support at 11720. If it does we should be in for another upward move. If not we return to the doldrums.

But today's chart shows the gap up made by gold. I ought to be taking some profits. But I see the main resistance a little higher than the present price. Today's rise is on low volume so there may be a bit more to go for. Greedy, I know but that's how I feel at the moment.

Invited out for an unusual tea. Cucumber sandwiches, beautiful harpsichord playing and a lovely bay horse. Exciting conversation on a wide variety of topics including renting cottages on  the Balmoral Estate  and ancient organs. And then a drive through the hills to enjoy the autumn colours.

Chocolate and Cola Cake with Cola Float

Suntech Power Holdings - Ready to bounce?

I thought lighting had wiped out my internet connection but a restart sorted the problem.

I am happy to report a second good day despite the pullback in the markets. It is mainly the precious metals that have generated profits today.

But so did those shares that I bought using bottom fishing selection criteria. Today's chart looks at the best performer: STP. I bought it on Friday and lost a little money. Then it surged yesterday. Today it gave me the heebee jeebees by running up and down. It could still fade before the day is out, but at present I am sitting on 16% profit. Since Friday! The others have not done so well and EK is losing me money. But I buy on the principle that you spread your risk across a number of shares and you don't attempt to cherry pick.

STP is a share that came up when looking for shares that had a reasonable fundamental value but had  dramatically fallen in price. In the big August fall, the price had been beaten down to a quarter of its previous value. By the time I bought it on Friday it had already started to recover and had risen by 20% in a fortnight. So it was a reasonable bet as long as it was in amongst other shares with the same sort of characteristics.

I am not kidding myself that this is a one way bet. The tricky bit will be persuading myself to take profits before there is a turn in fortunes. For now its fingers crossed time.

Was taken yesterday to a favourite local pub which has been awarded the Good Pub Guide dining pub of the year award and very well deserved too. It is the Potting Shed in Crudwell. Had beautifully gamy wild boar and plum burgers with triple cooked chips. Followed by a divine chocolate and cola cake. So soft and light it wasn't true. Accompanied by a true blast from the past: a cola float (ice cream floating in CocaCola). This is how to live.

Fear: still the dominant emotion

At last! A decent day. I have been waiting a long time for a day like today. I made the right judgement to buy shares in the US and the UK. And my gold and silver positions also chipped in some profits. But it is not time to stop feeling nervous since the market has been volatile and can turn on a sixpence. I need to be ready to jump if those profits start to evaporate.

As I suggested yesterday I bought some US stocks. They have generated some spectacular returns - in just one day: GITV +3% TSL +8.9% STP +15.3% CSIQ +5.1% EK -6%.

But there are lots of areas of resistance to break through as shown on today's graph.The first has just been broken at 11890. The second is the 200 day moving average at 11965. The third is at 12090 and relates back to support back in April and then there is 12300. The upward movement could snag at any of those points and hard won profits could disappear. I just have to hope that the shares I have picked move rapidly upwards and that I am not too greedy and cash in my profits in time.

I also have to hope that gold and silver are also carried upward by this rally.

Fear is still the dominant emotion.

Is the Dow Jones breaking out of its channel?

Is this the breakout for the Dow?

The big question is this. Do we have a break out? It looks very much like it. We can see a break in the price pattern of the Dow Jones. Instead of turning round when it hit the top of the channel it sat at the top of its travel for seven trading days while I had kittens. I had bought shorts and they were losing me money. Then today we have what looks like a clear break out. Some would say I am too precipitous in calling this move and I should wait for a higher low and a higher high. But today we do have a higher high and yesterday could be interpreted as a higher low after Tuesday which was an outside day and provided a local high as well as a new low.

Well I have ditched my shorts with a big sigh of relief and a horrible hole in my pocket. And more adventurously I have gone back into the market. I subscribe to a service called VectorVest which provides a system for picking shares. I have had it for almost two years now and when I first bought it I made a lot of money. Since then the opportunities for finding undervalued shares and realising a profit have been few and far between. And the ones that have arisen I have missed. VV provides a wide variety of systems and its greatest strength is that it allows you to backtest how well they have performed in the past. I have sought out the strategies that work best when shares have been beaten back as is the case at present. They tend to be shares that have lost ground fastest in the market but still have intrinsic value. They tend to have great volatility so one must be careful and be ready to take profits or cut losses quickly. So far I have used the system to mine for shares with special characteristics. I chose them on the basis that they did well in the past when the market situation was similar to the one we see today. So far I have only bought into the UK market and have bought the following shares. I am not recommending these shares and am well aware that I might have jumped into the market too soon and will get my fingers burnt. The shares are SGP LAM NWR INVP RGU EMG CSR AFR.

If the break out appears to be holding I may buy some US shares using the same system later.

For precious metals it has been a roller coaster of a day. There was a strong rally from overnight which strengthened as the morning went on and then faltered with the opening of the US market. The rally provided me with a decent profit early on which faded later.

My asset allocation is now precious metals 33%; other commodities 5%; equities 16%; cash 47%. 

Waiting game

Gold failing to glister

The DJ market is now back inside the channel and I bought more short ETF late last night. Perhaps a bit more later tonight.

But that does not make up for the dive in gold and silver. Very painful, not because of the fall but because of my heavy exposure. The question is whether this a fall or a continuation of the consolidation pattern. This is a very hard period to trade because there is no trend. Tricky to make money. Tricky to judge what will happen next. A horrible waiting game.

Ruled by fear

Dow Jones fiddling at the top of its range 19 October 2011

Frankly this market is boring. It is going nowhere. Although it is sitting at the top of its range fear has so far prevented me from taking out new shorts. And this is despite the fact that logic dictates that I should. What if logic is wrong and the market breaks out upwards? Yesterday's volume spike was not big enough to give me the confidence. Fear still rules me. I will stick with what I have till I change my mind.

We watch, we wait. Have no more to say.

Breaking the rules

Silver's roller coaster ride

The Dow is dancing at the top of its channel. Down this morning up this afternoon. Logic dictates that I should take advantage and buy more short positions. Fear dictates that I should not. Time will tell whether fear or logic will win.

I have a rule that I should not hold more than 10% of my portfolio in any one type of asset. I am currently breaking that rule by holding 33% of my assets in gold and silver the result is that I have to watch my total portfolio rise and fall dramatically as the precious metals get buffeted about by relatively small percentage moves.  Worse is the risk that I am wrong about the eventual direction of gold and silver prices. At present I can bear the pain because I bought my holdings close to the recent lows. But how would I cope if it turned out that the recent lows were simply stops on the way to a further fall, instead of a springboard back to recent highs. There is no question that I am playing a dangerous game. Just look at the drama that has played out in the silver market (today's chart) since February, just eight months ago.

The current breakdown of my holdings is: precious metals 33%, other commodities 5%, equity 4%, index shorts 9% cash 49%.