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It's a good time to reflect on my previous thoughts that a move to S&P 1100 was possibly in the cards, as unbelievable as it has been to actually witness it -- the “straight shot thesis” for all of you who get my newsletter.
After seeing a top tick around 1096 on the S&P, there's obvious hesitation in holding onto excess futures positions at current levels, speaking silver and gold.
I'll flat out admit it, the COT structure has me scared. I'm quick to hit bids. I've always condoned holding onto a physical amount of metal that suits ones risk profile/liquidity needs, and I won't touch that, in terms of hedging strategies going forward.
With that said, the paper I often use to augment a position has been late in and quick out. Sure, the COT structure has damaged my psyche, despite gold’s rather “on time” technical breakout. At this point, I do believe the breakout was for real. I do see a vibrant December and maybe even January. It’s hard not to envision a peak in March, right on time, like the rest of them, except those that push a bit further into April.
So here’s my strategy -- I'll continue to hold out for $970 gold.
See also, Gold Bulls May Get a New Way to Own It
With that said, I fully assume the COT won't be in “flat out buy” territory if those prices are seen this winter, simply because it's so stretched in the bullish direction. Obviously some may say that a down move of epic proportions is in store, but I don’t subscribe to that. More likely, we're seeing the characteristics of Phase 3 unfold, namely a much wider level of participation among the investing public.
As such, perhaps inflated COT levels reflect a new normal, much like analysts are struggling with their broad-based comparisons of an economy stuck in the mud when you view it through a lens oblivious to financial trickery.
Yes, a new normal. I greatly suspect that any selling, still a pipedream, will be caught at technical support, currently a tad lower than $970 gold and the resulting bounce could very well be of the V-variety. For now, caution reigns again.
Yes, yes I know I've been reluctant versus other writers. But the breakout is still young, and many reasons behind the reluctance have served to limit its scale thus far, about 90 points. Not a shabby run, but not explosive either.
Anyhow, not much fundamental analysis here. I assume it’s clear that this government has chosen the option of inflation. The exit strategy has many questions. First off, does one exist? Second, when will it be implemented? Third, how? And then the big one, will it be orderly or not?
See also, Deliberating the Fed's Exit Strategy
Gold seems to be adjusting for these odds. Unfortunately for those that keep the bulk of their savings in US dollars, a miscalculation on the part of our leaders, shame on us, could prove particularly painful.
That's why I keep my bars. Just in case. Silver and gold, though my futures account is currently barren like a desert. Just putting it out there.