The markets have been in risk on / risk off mode for several years now all moving together against the U.S. Dollar. Last year Gold and Silver outperformed the stock market futures but this year it’s the other way around. With Ben Bernanke’s latest testimony (along with Apple’s blow out earnings report) it appears that risk is back on. The dollar made a new multi-week low today and both Gold and the Nasdaq closed back above their 10 day moving averages on the daily charts.
I’m already long gold as of 4am this morning and will be buying the silver etf (slv) tomorrow if it rallies above today’s high (it’s 10 day moving average). That will complete my “risk on” basket of futures. My favorite markets to trade are the Nasdaq 100 futures, gold and silver. I have found the best trades in silver are when gold breaks out ahead of time and then silver has to play catch-up. Those trades can be very dramatic and fun to participate in. Silver has been the dog of the two in the past year ever since it had it’s big blow off top last year. I’m thinking it’s time for at least a rally back to $40 but some think we will see $75 silver in the coming months…. I’m not holding my breath on that one.
The Nasdaq 100
I’m also long the Nasdaq 100 futures as that rallied above both it’s 10 and 20 day moving averages today. Strong results from Amazon after the close followed a blow out quarter from Apple Tuesday night so that should keep some support under tech stocks here. Large cap tech stocks remain pretty inexpensive in this environment so I think investors will be pleasantly surprised over what can happen the next couple years.
Jeremy Siegel was on CNBC yesterday talking about how the market can go much higher over the next 2-3 years based on the fact that stocks are historically cheap when compared to interest rates. You would have to go back to 1980 to find the ratio as compelling as it is today. Looks like we could once again have some significant gains, but I’m a little leery of things getting choppy this summer like they did last year. I will be keeping sell stops in below the 10 day moving average, I’m not going to get married to anything on the long side this time of year. Have a profitable week in the markets!
Is the world economy improving or ready to fall off a cliff? Demand driven DEFLATION vs. Monetary Policy lead INFLATION. The U.S. seems to be in recovery, Europe seems to be stabilizing, China is still slowing and many say that Japan is the next collapse in the making. It’s hard to know with all these cross currents which ones will have the greatest impact on stock and commodity prices.
If you look at any oil chart they are telling a story of economic strength that is going to keep consumption high enough that prices must rise to ration use. In the western part of ND the Bakken Oil Field is being developed so rapidly due to these high prices that there is starting to cause environmental concerns. However, as long as prices remain over $100 per barrel (or even above $70) there will be no let up. Looking at world oil prices Brent Crude is $15-20 above ours, closing at $125 per barrel yesterday.
World Stock Markets
Many look at the S&P 500 or Nasdaq as the stand out performers but realistically we have had huge rallies in all the European markets as well. The emerging markets are still significantly below their 2010 highs but most developed markets are back to pre-crisis levels. Even European markets (disaster central) are back to the highs they achieved prior to the meltdown last August.
You can see by the chart below that the German Dax is back at the highs despite the fact they are paying for all the bailouts:
The following chart is the FTSE which represents the London stock market. They are less involved in the chaos than Germany but due to their proximity and economic ties are just as affected by the slowing effect of all the austerity measures going on. However, as you can see the FTSE is back at multi-year highs.
The one that makes the most sense being at new multi-year highs is the Nasdaq 100 as Apple and other tech companies have been relatively unaffected by the European crisis. The Nasdaq recently hit levels it hasn’t seen since the Internet bubble was deflating. The huge run in Apple stock has been a major driver for getting this index into new highs.
Gold, silver and especially Gold mining stocks have been under severe pressure for months but finally reversed today. For most observers with any bit of common sense it’s obvious that this huge overhang of debt will eventually be monetized through money creation. It’s highly unlikely that everyone is going to settle for 2 decades of “Austerity” to pay down all the debts. As for the U.S. we are headed into the abyss as Obamacare goes into effect and 42 million baby boomers hit the medicare and social security system. The U.S. will not do “Austerity” we will run the printing presses!!
So for most investors the question is not whether or not to own gold and silver, but just a matter of timing.
Individual stocks and, to a smaller extent, mutual funds are what most new investors are familiar with. Investing in either one has its own set of advantages and disadvantages, where individual stocks are considered more volatile and can be traded at any time of the day. On the other hand, mutual funds are determined by the accumulated value of the underlying assets that comprise the fund. They can only be sold once per day at the end of a trading session. In addition, more fees would have to be shouldered by a mutual fund because of the additional maintenance. Of course, it is possible to combine the best of both worlds into a single fund. They are structured very favorably, making them a favorite among traders, so it is a good idea to learn how they work to get the most of your investments.
ETFs can be traded at any time of the day, just like individual stocks, but are also similar to mutual funds in that they are an accumulation of a number of assets that combine to determine the overall value of the fund. They aren’t as large as mutual funds, and as a result, don’t need to be managed. This means less fees that the investor ultimately shoulders. A commodity ETF can come in several different forms that one can invest in, such as an oil ETF, gold ETF, copper ETF or silver ETF. You can also take advantage of more investment opportunities in the stock market through a a Nasdaq ETF, S&P 500 ETF, and possibly even a higher risk/reward leveraged ETF. An ETF is a great way to diversify your investments, especially multiple ETFs. Another great thing about ETFs is you can save on taxes that are assessed to your investment. Every time a mutual fund reorganizes its investments, a capital gains tax needs to be shouldered. ETFs are different in that they only have such a tax assessed whenever it is sold.
Finding out what you want to invest in can be a challenge, but there are brokers you still make smart investments with the help of a broker. With so many discount and full service investment brokers making their services available, they are a great option if you have no experience trading in these funds and other investments. Although some discount brokers may not actually charge that large of a commission percentage, they can still make their money through a variety of fees, such as inactivity and maintenance fees instead.