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Please note the comments above and the dates that they were published, in the context of the chart at the top of page 7. Down, then up; then down; then up; then down…all following a like sequence on a bigger scale as well, insofar as the last six months are concerned. The upshot: When a bear market-ready trader has his day, everything clicks…repeatedly...and for as long as he had had to wait. (The horizontal line in the following chart is what is referred to as neckline resistance, while the 12,000 level referenced in the Nikkei chart on page 4 represents neckline support.)
VIX From the January 6 report: “I have commented and maintain that this new bull market in volatility is defined by the 200-day moving average and this is most obvious by the chart immediately below.” For today’s purpose, there is nothing to alter from the above quote, since past again proved to be prologue, as evidenced by the chart on the next page. As is quite plain, and as is quite understandable for logical and explainable reasons, the stock market took off to the downside, as soon as the VIX hit its 200-day moving average. The latter appears on the chart as the upward-trending purple line. When it was hit, the counter-trending-to-the-market VIX spiked upward. We’ll see how far it goes this time. The VIX has been a good friend, in timing the market’s turns in both directions, so we’ll see if this remains the case, as part-2, forecasted for an early April conclusion for the “Dow 2008 1st-quarter hit”, manifests./P>
We conclude with a reprint from the February 4 report: “Strategy: Suppose you want to cut your risk in half and double your leverage too, and further suppose that you don’t mind profiting only little from a bigger collapse that occurs sooner, as you prefer to err on the side of caution, risk aversion and capital preservation, then an April – March Dow put spread is appropriate. It’s a matter of choosing the correct strike price…and the leverage is huge!” This is precisely what is unfolding. GOLD From the November 4, 2007 report: “At the beginning of the year, I forecast that gold would cross and sail past $700, perhaps this year, en route to $1000 with speed. The upside risk is too much to exit without a re-entry plan, and no quality re-entry plan can possibly exist this time. “We have benefited from another $150 move up, and the daily chart (immediately below), like the weekly, shows an overbought stochastic (joining other momentum indicators). Note how this thing can take off to $1000 now, with so much selling pressure gone (institutions needed money). Does the crowd expect it? Are the longs fully long?” “Forecasting that silver could make a low at $11.00 (since most investors would wait for $10.00 after a break of $12.00), I wrote that the last decline should be used to go 200% long. My reasoning was that silver has and had no reasonable physical chance of dropping to $5.50-$6.00. “I further reasoned that one’s investment year is largely made by such a trade that includes a subsequent move to $20.00, which is where we will be much faster that thought. Indeed, however, that a mere move back to $15.00 would go a long way toward providing a banner year, too. If 200% long since $11.50, what are returns even today at $14.00?” “…this move up in the metals may simply have been an initial move that merely requires a short term correction, before a yearend eruption to $1000.” Okay, we didn’t get $1,000 by yearend; call me pisher. The mantra in these pages has been: Just stay invested. Period. I could write long analyses like I used to, but there is an instructive discipline to expressed laziness here. China, India, American monopoly money - yada, yada, yada. At the beginning of 2002 (gold’s higher low at $280), I forecast a secular bull market that will last years and take the precious metals to dramatically higher new all-time highs. Gold was tradable until $500, I argued, but that it should not be touched thereafter. This is what we did. http://www.sidklein.com/docs/gold_summary.pdf. (The latter can be linked on any gold or precious metals link on the homepage.) The adjoining forecast was that bulls would not leave well enough alone on the way up, despite the preceding recommendation. The latter included that gold should represent 50% of one’s liquid holdings, upon its crossing $500 an ounce.
The following longer-term view of this decade shows what a simple investment gold has been, to stay ahead of capital or true wealth erosion. The same has been true of silver. The timing summarized in the link in this page’s second paragraph merely accentuated these facts, and provided what I suspect to be the best performance in the world, precious metals equities excluded. SILVER As you can see from this section’s quoted excerpt above (in blue), we went 200% long between $11.00 - $11.50, before scaling back to 100% long at $15.29 on January 6. As forecast in the excerpt above, this trade would in itself be more than enough to make one’s investment year. Why fight the simple??? It was repeatedly explained in these pages that there are 3 types of leverage that I am aware of: Options are fully paid-for instruments that are intrinsically leveraged. Futures are leveraged with implicit borrowing against the notional value of the underlying contract. The 3rd is borrowing in the form of margin. The latter, I argued, was appropriate for silver, since the possibility of it falling to $5.00 - $5.50 was next to zero, given the markets’ and earth’s fundamentals. So, 200% long at, say, $11.25, reduced to 100% long at $15.29. Today, we’re at $19.82. The return thus far equals: {(19.82 - 11.25) + (15.29 – 11.25) divided by 11.25)} RETURN: 112.09% SKC covers Japan, New York, gold, silver, select and strategic major currencies, as well as timely special situations. Of course, this includes timing and specialized use of derivatives knowledge. Realized rather quickly, the return demonstrated above illustrates why SKC might be the most valuable market letter in the world, for global investors. The 1-year daily and 8-year weekly silver charts that follow on the next page, make clear why executing a single strategy well can provide the returns cited here.
YEN (CURRENCIES) From the January 24 report: “In any event, bear this in mind as well: I was bullish the Yen at 117. It went to 123-124. I was told the carry trade would never be unwound because the US authorities were in control.”
Okay, now we know who’s in control. Like I wrote through what had seemed to be an eternity: The free market! And the same will have held true of Japanese domestic equities (which follow the Yen over time). As with all markets that defy value or that are manipulated, whether the subject is China, New York or precious metals, etc., no, this time will NOT be different! The longer fundamentals are ignored, the longer the reverse trend takes hold. Japanese stock investors are reminded of this and their extreme example will have been gold’s bull market and the extended bear from which it was born. Off the bottom, the Yen’s bull is already 8 month’s old and 16% to the good. Good fortune to all, Sid Klein LEGAL NOTICE: This market letter is the work product and intellectual property of Mr. Sidney Klein. It arises out of his training and profession as an international expert on financial equities. It is a private correspondence from Mr. Klein to his subscribers. Any person who copies or otherwise disseminates this letter becomes subject to international criminal and/or civil prosecution under the Universal Copyright Convention and the Berne Convention for the Protection of Literary and Artistic Works. Nearly all countries in the world have signed both of these Conventions and have pledged to enforce them through their own legal systems. In addition, Interpol may be called upon to assist in the international enforcement of these Conventions through its processes of arrest and extradition. If you are the recipient of a copy of this market letter, whether through the internet or by facsimile, you should immediately report to Mr. Klein the name of the person or entity who sent it to you. Send your email to sidklein@sidklein.com.DISCLAIMER: This market letter is intended to assist in the dissemination of information to private subscribers. The information contained herein represents Mr. Klein’s best efforts in good faith to advance knowledge to his clientele, but there can be no implied guarantee as to its accuracy or completeness. The information is given as of the date appearing on this market letter, and Mr. Klein assumes no obligation to update the information or advise on further developments relating to the information provided herein. No solicitation to buy or sell securities is intended, and none should be inferred. Investments are inherently risky, but investment risk itself is a function of individual preferences. Thus any opinions, recommendations, or judgments expressed in this market letter are of necessity abstract and general. They must be modified, accepted, or rejected by individual subscriber/investors whose risk averseness cannot be known to Mr. Klein. Email this Article to a Friend 351405987 |
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