Tag Archives: risk

Precious Metals Risk Management

By Biiwii

[edit]  Profit booked on JDST and partial DSLV.  Off to NFTRH.com for an update.

As noted in NFTRH 352:

I thought about releasing my JDST position on Friday because it is very profitable and because it appears that capitulation is in the air. But then I thought about the margin clerk and all those names he may be preparing to call upon on Monday. I thought about how my main intent is not to profit from the precious metals decline but to be intact for buying its bottom. I am not now nor never have been a bearish trader of great skill.

I released a portion of JDST on Monday’s pukage because it had me weighted too net short (ref. the bit above about my lack of bear trader skills) after Monday’s big shoe dropped.  I thankfully kept the rest of the position, which is today at a 100% profit.  But that is still not the position’s primary objective.

Due to this disgusting chart’s measurement, I decided to buy 3x Silver short DSLV (now nicely profitable as well) a couple days ago as silver bounced.  After discussing the favorable trend developing in the gold and silver CoT structures last weekend #352 noted the following bearish technical situation in silver due to a loss of critical support.


The CoT are simply representations of what the various traders are doing on balance. The ‘commercials’ (incl. a large contingent of companies within the gold industry) tend to be net short but that does not force the large speculators to buy. These large entities buy, gold sector promoters tout it and then the whole thing gets cleaned out. Don’t personalize it. That is emotion. Use it. Anyway, technically silver can easily swoop down into the 13’s if a capitulation event comes into play. Understand that these price objectives on Au and Ag are not predictions; they are measurements.

I expect the macro to turn over the next several weeks to few months.  But for right now a process needs to finish up in the precious metals.  We will need to see what the heretofore perma bulls are saying.  Some have already switched bearish, which is positive.  But others continue to live in denial and I think this process wants to address that.

So I use the bear funds as hedges with a plan to (very) slowly add quality junior miners/exploration near the targets we have laid out, and hopefully these bear funds turn out to be profit vehicles if I can use enough patience and get the timing right.  So we’ll see how that goes.  They could be sold about 2 minutes after this post goes up or they could be held into a final swoosh.  They are dangerous vehicles, however, and not for long-term holds.

I don’t pretend to be a fancy trader because I can be a Keystone Kop in that area sometimes.  One thing I do pretend to be is a hard core risk manager and that has been working out very well.  Hopefully soon, the other side of ‘risk manager’ can emerge.  That would be ‘risk taker’ when RvR gets compelling (ref. Q4 2008).*

* As noted a million times already, the macro funda (for US players, anyway) are not currently what they were in Q4 2008.  Not nearly, as long as the stock market remains aloft and Treasury yield spreads remain depressed, and as long as market participants take the Fed seriously.

The All Everything Phase

Dialing in the theme from Friday’s post to a shorter-term view, the 2 year yield has more than compensated for the rise in CPI over the last year, as the CPI-2yr ratio shows.  That earlier post had shown a bigger picture in which the 2 year yield had declined dramatically vs. the CPI, but is in a gentle incline lately.  Flipped over and dialed in time-wise, that gentle incline (decline) is not so subtle.  Goldilocks lives there.


Continue reading The All Everything Phase

Euro and Gold

I am not counting on gold going up in USD at this time because with all the anti-dollar hype and its upside reversal (from critical support) yesterday and today I am leaning bullish on Uncle Buck.  The Euro on the other hand is doing this…


There is also the case of the Euro and gold, which was the center of fear and loathing in 2010 and 2011, as gold took on too many panicked sponsors.  Here is the big picture monthly view of the European fear gap getting closed out.  Europeans who want a long term value opportunity could be buying now (most probably aren’t) as opposed to what they actually did, which was to buy in 2011.

Continue reading Euro and Gold

A Warning on Junk Loans

Record margin debt is not the only dangerous sign of the overly leveraged and speculative atmosphere the Fed has encouraged.  Now the head of the world’s largest distressed debt fund, Howard Marks of Oaktree Capital, is warning of the dangers as retail investors gobble up distressed debt.

Oaktree’s Marks Urges Caution as Money Flows into Junk Loans

Here is a pretty scary line…

“You can’t go on strike and refuse to buy the securities you’re paid to invest in, because the market may not turn for months or years,” Marks said. “Never forget the old adage, being too far ahead of your time is indistinguishable from being wrong. So you have to buy but with caution.”

So in other words, the thing just keeps going until one day… it just ceases to go.  Yeh, that’s a great fundamental underpinning right there.

From Sentimentrader.com:



If the monthly chart of the COMP is to be believed, 4% is the ‘reward’ side of the risk/reward equation in tech stocks.  COMP could gobble that up in 3 days.


Bulls have surely won.  The market has gone much higher than I for one thought it would when I got bullish on its prospects in late 2012.  Much higher; but then I am not a bubble chasing momo.  I am a conservative player with a negative view of the mechanics that have produced this bubble.  Still, there is no use denying its reality.

Continue reading 4%

Credit is Gold #1 and Icebergs

Guest Post by Doug Noland

The evolving EM crisis took a turn for the worse.

Backdrops conductive to crises can drag on for so long – sometimes seemingly forever – as if they’re moving in ultra-slow motion. Invariably, they lull most to sleep. Better yet, such environments even work to embolden the optimists. This is especially the case when policy measures are aggressively employed along the way, repeatedly holding the forces of crisis at bay. In the face of mounting risk, heightened risk-taking and leveraging often work only to exacerbate underlying fragilities. But eventually a critical juncture arrives where newfound momentum has things unwinding at a more frenetic pace. It is the nature of such things that most everyone gets caught totally unprepared.

Continue reading Credit is Gold #1 and Icebergs

Palladium Gold Ratio Thinks it’s a Credit Spread

If you back out the fact that it is a measure of metals, the Palladium Gold Ratio is just that, functionally at least; a credit spread and economic indicator.  NFTRH manages PALL-Gold by a bigger picture weekly chart, awaiting the firm signal of a turn. PALL-Gold was an early bullish economic indicator we used 1 year ago right along with the Semiconductor ramp up.

But for today, PALL-Gold (PALL-GLD) is taking a drop that is somewhat milder but in line with paper spreads like Junk to Investment Grade, Junk to T bond.


Yen on the Move

NFTRH has been noting that the Nikkei had lost support, while its whipping boy in the mirror, Johnny Yen was looking a little bottomy.  As of today, here’s Johnny…


One of a multitude of indicators I see now that show risk flying ‘OFF’ as greedy casino rats the world over try to abandon ship.

Risk Still ‘ON’ by TLT-SPY Ratio, but…

TLT vs. SPY is but one indicator of the current ‘risk on’ condition for the stock market.  The broad market (unlike some individual stocks and sectors; seen retailers lately?) has not made any technical breakdowns and beneath the surface indicators like TLT-SPY have not made any definitive moves to rein in risk taking.

But it is indicators like TLT-SPY and several others that would ultimately tell the story of a ‘risk off’ situation.  For now, TLT-SPY has positive divergence and is grappling around with the 50 day moving averages.  It looks constructive at least with RSI above 50, although this has happened a few times previously before ultimate failure.

Conclusion:  We’ll just keep our mid-year plan (+/-) for a market top front and center until something triggers to change that.  This market could well have another mighty suck-in in store for the public.