I Am Contrarian And So Can You!
Have you noticed I never get tired of ripping off title's from Stephen Colbert? I had better hope he doesn't take notice.
In all seriousness though, I have made a living off of being contrarian and liking everything you dislike and loathing the popular play. I actually am contrarian and so can you!
In March 2009 no one wanted to be within 100 yards of a stock, yet I couldn't get enough of the tumble. Media stocks were all the rage last summer despite their lack of real earnings and traders couldn't snap them up quick enough, yet I wasn't jumping aboard that sinking ship. Sure enough most are trading below where they were at this time last year. Recently no one wanted anything to do with Chinese stocks and in the last month they have exploded higher. The UltraChina portfolio has been absolutely on fire and is now sitting just a hair outside the top 1% of all portfolios.
Needless to say I'm not always going to be correct in calling a reversal in the overall market, sectors or stocks in general, but I'd like to think I do a better than average job at it as is indicated by my history of recommendations.
Well it's time to ruffle a few feathers - so prepare for the next installment of contrarianism. It IS time to sell sell sell Gold and Silver. Yeah, I know TMFSinch is gathering up the pitchforks and the rabblerousers to argue against me and tell me why Gold is in a big bull market, and you know what....he makes some great points.
The problem with gold and silver is they are a predominantly technical oriented commodity. Sure they will correlate pretty well with action in the US dollar and rise/fall based on the policy changes from the Federal Reserve, but for the most part it's going to rise and fall because a couple heavy hitters using their technical analysis programs are moving in and out of the market.
All I'm really doing here is the same thing I did when picking out a bottom in March of 2009 or when I saw value in Chinese stocks...i'm looking for stupid! A lot of the time stupid materializes itself in the form of a market/sector/stock which is trading way beyond it's normal deviation. I really don't like the concept of moving averages, but they do help us determine if what we're interested in is not trading within it's normal limits. The last few times that gold and silver were trading this far outside of these ranges we saw at minimum of a 15% pullback in each commodity. Based on what I'm using I would call silver about 4 times outside of its standard deviation and gold is nearly at 3 times it's deviation, thus I am more bearish on silver than gold.
Does this mean this is the end of the gold & silver rally? I'm not ready to call that a certainty yet, but I am ready to claim an intermediate top here on both gold and silver - the valuations here just do not make sense and my indicators concur.
What I'm looking for is a retracement on silver to $20.80, on gold to $1244, and I'd be looking for the US dollar index to bounce back above 80. Yes this is a fairly short-term move I'm looking for here so don't consider this a long-term thesis to sell gold & silver and buy the dollar, but at this point in time these seem like the most logical plays.
On a side note, completely unrelated to the tulipmania that has engulfed the gold & silver markets, I go into whether or not it is time to abandon AstraZeneca here. Enjoy!
I welcome to impending empassioned feedback from gold and silver supporters. It's not that I don't see your side of the case, but you've had your move and it's become overextended which makes for the perfect short set-up.