Today's Trades in Gold, Silver and More

It sure looks like we're getting that follow-through in precious metals that I was looking for. So, I added to my positions in GDX and BTG, adding to the original half-positions I put on on October 17th ...

(Updated chart)

(Updated chart)

However, I believe this is just the beginning of gold's next bull run. So, I'm adding another. I would add more, but I would rather wait for a pullback.

Here's a chart that helped me pick what to add ...

(Updated chart)

This is a chart of relative performance since precious metals bottomed on October 16th.  You can see that gold (GLD) is actually underperfoming silver (SLV), the large gold miners (GDX), silver miners (SIL) and junior gold miners (GDXJ).  The gold explorers (GLDX) lagged, and so aren't on this chart.

Anyway, those funds are fine. Then I put one of my favorite silver miners, Silvercrest (SVLC), on the chart. Obviously, it's a leader.

(Updated chart)

If we can get the breakout I'm looking for, this could go much higher. My target is $3 a share.

Silvercrest Mines (SVLC on the NYSE) is a producing silver/gold miner that is ramping up production and reserves.

Its principal property is the 100% owned Santa Elena Mine covering approximately 3,160 hectares and is located to the northeast of Hermosillo, Sonora State, Mexico.

I’ve talked to COO Eric Fier and found him to be a stand-up, straight-talkin’ guy. He told me what Silvercrest planned to accomplish this year and next, and I was impressed with his ambition. 

However, overhead resistance from the 200-day moving average may give us a chance to add at cheaper prices. So, I only added a half-position in SVLC today.

Trade Outside of Natural Resources

I also added a pick outside of natural resources.

Kraft (KRFT) operates food and beverage businesses in North America including convenient meals, refreshment beverages and coffee, cheese and other grocery products.

(Updated chart)

You can see that Kraft is breaking out of an inverse head-and-shoulders pattern. 

I've traded Kraft before and I like the stock a lot.  Importantly, it plays to the theme I talked about in a post earlier today, that consumers should have more money in their pockets thanks to lower gas prices.

There is a large segment of the American population that has to make uncomfortable choices between filling up the gas tank and eating more, better food. I think they'll be gobbling up Kraft products now that gas prices are cheaper.

Kraft has a solid business. The company reported second quarter earnings of $1.38 per share, which beat the consensus of analysts' estimates by $0.72. 

Also, Kraft is a dividend raiser. It sports a dividend yield of 3.89% with a payout ratio of 65% of trailing 12-month earnings (or 80% of free cash flow). Importantly, on October 1, the company announced a $0.525 per share quarterly dividend (a dividend boost of 5%). We've already missed the ex-date, but I like a company that keeps raising its dividends.

These are not official recommendations. I am not your investment adviser. You should not buy something just because some guy on the Internet likes it.  Do what is best for your own investing purposes. And you have at least until tomorrow morning to do your due diligence on anything I mentioned here.

Look for a Hidden Boost in Consumer Spending

The nattering nabobs on Wall Street are worried about the piss-poor jobs number this morning, and I can see that. U.S. employers added fewer than expected workers in September, which was before the budget battle in Washington even happened.  However, this does not derail my bullish thesis.

I'll show you why in one chart ...

This chart shows gas prices over the past two years.  You can see that prices are falling sharply. Prices were an average $3.89 per gallon on October 15, 2012.  They're now at $3.35.

According to an ABC story from earlier this year -- when gas prices were going up -- Merrill Lynch estimates that every penny increase at the pump is equal to $1 billion in lost consumer spending. 

Therefore, falling gasoline prices boost consumer spending by the same amount. And lower gas prices are probably boosting the economy right now.

So, the 54-cent difference in gasoline prices should translate to an extra $54 billion for the economy.

What's more, the EIA says that gasoline prices should continue to decline for the rest of this year and into 2014.

Something to think about when the doom-meisters sound their calls of woe. 

I'll have some picks to ride this trend in the Thursday issue of InvestmentU.com.

Rising Stops Will Lock in Gains (Hopefully)

My positions are doing well, which is a good time to start worrying. Luckily, my stops are rising, and that should help lock in gains.

As a reminder, I use a combination of initial, close-only stops and trailing, close-only stops. 

That is, I set an initial stop where I think it's prudent when first entering a position. That stop is activated if the stock closes at the stop or lower.  I then sell at the open the next morning.

When a position reaches a 10% open gain from the initial entry, I then raise the stop to the entry price.  It then becomes a trailing stop -- rising if/when the closing price rises. That stop is activated if the stock closes at the stop or lower.  I then sell at the open the next morning.

I gave up on intraday stops because it became painfully obvious the HFT traders were pushing the market down to activate my stops, and giggling all the way to the bank. I remember back in the day when trader would laugh and say "so you think the market is out to get YOU?" 

Thanks to high-frequency trading, yes, the market is out to get me.  It's out to get you, too.

Here are my open gains on my natural resources positions. No, I'm not showing you what the stops are.

It's not too surprising that all the open positions are in positive territory. It's been a good month for natural resources and for the markets generally. A bull market makes everybody look smart.

You may not think that EPI and CEW are natural resource positions, but in my view they are. EPI is India, and thus one of the biggest markets for commodities. CEW is the emerging market currency fund, and that's obviously linked to the dollar, which is (or should be) fundamental in commodity pricing.

An Example of a Trailing Stop

I hesitate to even talk about my stops on a public blog. You never know when some bot is fishing for information to use against you. But I'll give you one example.

TAN closed higher at 39.50 yesterday.  10% of that is 3.95. Subtract 3.95 from $39.50, and the new stop as of this morning became$35.55.

Since I entered this at just over $30 a share, that locks in a nice gain, PROVIDED that TAN doesn't gap down the day after the stop is triggered.

In the meantime, I'm content to let it run.  TAN gapped higher today, which is always good news, and the ADX tells me that this bull run isn't tired yet.  If TAN continues to rise, I'll continue to raise the stops.

That's one example. Obviously, I'm protecting nice open gains in PKD as well.  REXX just recently joined the raised-stop club. The rest of the picks are still working their initial stops. 

However, I don't become hidebound by the rules. I'm also going to raise my stop on DVN, because its big surge today brought it nearly to a 10% gain.  I might as well protect some of that, even though it's not at 10% yet. Stops can also be adjusted to take advantage of natural support in any stock. And I use wider or tighter stops where prudent.

DVN is surging partly because of the news of its deal with Crosstex. However, I also think DVN is surging because CNBC is talking about oil plays today. I have mixed feelings about that. I always worry that by the time the babbling heads on TV notice a trend, it's over.

My gold positions have eked out small gains, and I'll add new positions if we see follow-through this week. Interestingly, analysts from the big banks are now saying that gold is poised for a November rally. That also worries me, but we'll see.

I'm writing this post to give you an idea how I trade my plan.  You should have a trading plan as well, and it doesn't have to resemble my plan. You just should have SOME kind of plan.

This market seems simple right now -- everything is going up -- but it will turn and bite you like the rabid pig-dog it is, and it could do that at any time. You plan for the good times. You plan twice as much for the not-so-good times.

I keep saying this, and it's worth repeating: These are not official recommendations. I am not your investment adviser. You should not buy something just because some guy on the Internet likes it.  Do what is best for your own investing purposes. 

And good luck to us all.

Sunday Afternoon Reads

9 Signs That China Is Making a Move Against the US Dollar
the Chinese have started to aggressively make currency swap agreements with other major global powers, and China has been accumulating unprecedented amounts of gold.

And my own story on this topic from this past week ...
China’s Plan to De-Americanize the World
Wise investors shouldn’t worry. Not just because Congress finally got over itself long enough to avert the crisis (for now), but because there are ways to safely ride out – and even profit from – global economic storms.

Standing on the Shoulders of Immigrants
My story of my wild Irish-American family (my mother was one of 13 children) -- and some important things you should do with your own family as soon as possible.

As Mexico Overtakes US As World's Fattest Country, It Begins Regulating Food Consumption
the lower House of (Mexico's) Congress passed on Thursday a special tax on junk food that is seen as potentially the broadest of its kind, part of an ambitious Mexican government effort to contain runaway rates of obesity and diabetes.

Source 
"the gold forward rate has once again turned into negative territory in the London market. While this is not quite as significant as some people have asserted in light of extremely low LIBOR rates, it is still remarkable – moreover, negative GOFO rates always tend to provoke rallies in the gold price in the short term. There simply are no exceptions to this rule we know of."

Here's how U.S. debt per capita has changed under every president since JFK

Source

Weekend Reading -- NatGas, Jellyfish, Gold, Palladium and More

Weekly Indicators: heaving a sigh of relief edition
With the shutdown over, the next week should show how consumers are reacting. A looming question is, are longer term plans for spending on pause, given the considerable likelihood that the US government goes back to the brink of default in the next 4 months.

Poverty stuck at 15 percent — record 46.5 million
More than 1 in 7 Americans were living in poverty, not statistically different from the 46.2 million of 2011 and the sixth straight year the rate had failed to improve, the Census Bureau reported Tuesday. 

China’s London-Zurich-Hong Kong gold conduit — a major financial coup d’etat
Switzerland and Hong Kong are acting as a conduit of western gold on its way to China — and probably Chinese central bank reserves.

Investors Shrugging Off 'Washington Whiplash'
Despite potential for another debt ceiling fight, stock investors shrug off Washington messes

Crisis Is The New Normal
While the shutdown might look like the spectacular self-immolation of a band of bitter-enders, it’s better understood as the natural consequence of a decades-long shift in the American political landscape. 

5 Reasons Jellyfish Will Cause the Apocalypse.
But the SyFy Channel Jellyfish movie will be SO boring

The ocean is broken
"On the bow, in the waters above Hawaii, you could see right down into the depths. I could see that the debris isn't just on the surface, it's all the way down. And it's all sizes, from a soft-drink bottle to pieces the size of a big car or truck. We were weaving around these pieces of debris. It was like sailing through a garbage tip."

Business Cards Are Really Useless Now
I've downloaded both Bump and CardMunch; I'll see how they do.

Is the Market Ready for Its Next Pullback?
... If you're still waiting on that buying opportunity

Palladium Only Precious Metal Higher In 2013 So Far; Analysts See More Gains
 In particular, the amount of metal flowing from Russia is expected to slow due to a widely held view in the palladium market that state stockpiles – a closely guarded secret by the government – may be about depleted.

U.S. Gold Mine Output Rises 3% Month-On-Month In June - USGS
June output was 3% above the upwardly revised May production of 18,800 kgs. June output was down 5% from year-ago production of 20,400 kgs

Oil Companies Are Sued for Waste of Natural Gas
The value of flared gas in the state is roughly $100 million a month. They're burning it off to get at pricier oil

U.S. Is The World's Largest Producer Of Natural Gas. Here's What That Means


Over the past few years, fracking has had a huge effect on energy in America. Here's how.

Morgan Stanley: Natural Gas Production Is Getting A Second Wind, And Coal Is In For Even More Pain
Morgan Stanley says the Marcellus is about to experience a second wind, with 2014 production increasing by 2.2 billion cubic feet per day to about 70 bcf/d.

Friday Pick: Enbridge Energy Partners

Here is my trade for today. We'll use the chart price as the entry point.

I said I wanted to add more energy. Enbridge Energy Partners fits the bill.

(Updated chart)

Fundamentals: Enbridge is an oil and gas pipeline companies. It has a market cap of $9.55 billion, 314 million shares outstanding, and plenty of volume at an average 673.3K per day. It also sports a nice dividend yield of 7.15%. The fact that bond yields are falling makes hefty dividend-payers like Enbridge much more attractive. I believe this will help power EEP higher.

A bottom in oil prices may also help, even though as a pipeline company. Enbridge operates a "toll road" on North America's rising oil production. 

Zachs slapped a "strong sell' on this stock on October 13. Interestingly, Enbrdige has only gone higher since then. Zachs mentioned the negative earnings surprise, rising inventories, fines associated with with 2010 Michigan oil spill, and a dwindling cash balance. These are all true, and would give more cautious investors pause.

So if you prefer, other MLPs worth looking at include Energy Tranfer Partners (ETP, Magellan Midstream Partners (MMP) and Kinder Morgan (KMP)

I partly chose Enbridge because I believe the bad news is priced in. The company still has cash ($27.3 million). It is raising cash. Importantly, it is spending money wisely, building new pipelines to get crude out of Canada to ports and to US markets. the company carries a lot of debt, but that's what pipeline companies do. Earnings per share is expected to rise next year.

The company will webcast to discuss third-quarter results on October 30.

My target on a breakout is the July high of $32.90. But if we get another breakout there, then I'm setting my sights on $48. The trailing, close-only stop goes at $29.00.

Crude oil seems to be bouncing from the bottom of its range, but it has stronger support further down, and we may visit that. That means there could be extra volatility in energy stocks, and anyone who doesn't have the stomach for it should stay out.

I am not your investment adviser. Do your own due diligence before buying anything. And if you are inclined toward EEP, now you have all weekend to do your own due diligence.

I wanted to add at least one bank and maybe a social media pick, but that will have to wait until Monday. Have a great weekend.

Friday's Must-Reads

I'm entering some more trades today, and I'll have the charts up after the close. Why enter more trades when the S&P 500 just hit a new high?

Let's look at an updated version of this chart of the S&P 500 again, the one I posted on September 18 under the heading, "Your Next Best Buying Opportunity"

(Updated chart)

You can see that despite all the wailing and gnashing of teeth in Washington, the market shrugged off the crisis associated with breaching the debt ceiling.

It's not just that it's an artificial crisis, as I pointed out in my original post. I believe it's that the market saw three previous artificial crises on this side of the Atlantic alone in the past three years. Now, the market barely pulls back in a "crisis."

So, sure, we'll have another debt crisis in February. But it sure looks like the market is becoming immunized against these shenanigans.

Now, let's add in the following bullish facts ...

• So far, 85 S&P 500 companies have reported quarterly results, with earnings topping expectations by an average of 4.2%, according to the latest data from Thomson Reuters.
• S&P's bottom up operating earnings estimate for the SPX is currently $107.58, leaving the SPX's PE ratio at almost 16. Next year's estimate is $121.66. If the SPX continues to trade at that PE multiple, it renders a price target of 1946. 
• The US is now the top "oil" producer, if you measure by all liquids, and not just the black gooey stuff. That continues to help our balance of trade enormously.
• Overseas, in the other big economy that matters, China's economy grew at its quickest pace this year between July and September, at 7.8%.  Sure, experts are calling for a slowdown into the end of the year.  It wouldn't be the first time they've been wrong.
• Finally, the generational low is in the rear-view mirror. And we're breaking out higher. Holding 1575-1530 keeps this breakout intact.
  

Source


Those are the good things. Bearish headwinds include: 

• Consumer confidence that has been battered by all the political shenanigans. 

• The government shut-down sucked $24 billion out of the economy. This caused S&P to lower its forecast for annualized US growth to 2% from 3%. For more details on what the government shut-down cost, see this.
• Wall Street will start anticipating another, even worse budget battle in February. That will slow down corporate spending and money could flow to the sidelines again.

You can add your own ideas to this list.  Bu they say the market climbs a wall of worry, and that's just what I think it will do into the close of the year. 

Now, for those must-read stories ...

Chinese Scientists Invent Lightbulbs That Emit Wi-Fi 

Britain's gold exports to Switzerland are surging. And from there, it goes to Asia.

The Average 401k Balance Has Nearly Doubled Since the 2008 Crisis 

The "Baffling" Moves in Gold. Somebody's fat finger is showing.

Goldman: Now is Not the Time to Short Gold. Hey, wait a minute. You just said .... aw, shoot!

President Obama Bashes Bloggers Then Shills For Monsanto. Yeah, I saw that, too.
The Truth About the Deficit

Look for my charts later today. And if you slide early into the weekend, have a great one. Chill out and relax. Here, this will get you started ...