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Top Calls of the Year


Updating some solid 2008 picks.

Wow, time flies when you're having fun! 2008 has certainly proven to be one of the most interesting starts of the year for the markets in a long time. It's hard to believe next week will be March and before we know it we'll be finished with the 1st quarter.

Let's take a look at my calls for 2008 to provide a quick update on three positions: the Japanese yen, Gold, and the PHO (PowerShares Water Resource Portfolio).

Obviously my best call for 2008 so far has been the Japanese yen. I have been bullish on the Yen since mid 2007 and even after a solid move higher last year, I still think there is considerable upside in this currency. As the credit crisis has now become full blown more quickly than most had expected, the yen is already more than halfway to my near term target of 1.00. Also, Buzz & Banter readers should be pleased with my call last week to add to yen long positions near 0.92 as it has rallied strongly from that level. The Japanese Yen continues to provide a great hedge to the credit crisis, and ultimately I think it could trade at the 1995 highs longer term.

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Gold has been another great performer so far this year, and is the main reason I wanted to update you on my picks for 2008. I highlighted Gold as one of my top three picks for 2008 when it was around $800. I updated my Gold call again in my 1/9/08 article as it was in spitting distance of my $900 near term target.

Obviously Gold has remained well bid and blown through $900 and is now just shy of my longer term target of $1000. I would use this recent strength in Gold to take profits on long positions as it approaches $1000 if you have them, and Professor Cooper has also done a great job of pointing out the possibility for a top in Gold. Simply put the risk/reward is not favorable for long positions here, and the volatility in this commodity can be brutal. Just look at what happened in 1980!

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Please note the start of negative divergence in the RSI which could indicate Gold is getting tired up here and the $1000 level could prove tough resistance.

The PHO (PowerShares Water Resource Portfolio) has been my worst call so far this year, although I will say it has held up relatively well against most other equities. I recommended it around $21 and at the time my risk level was the 200 day moving average around 20.50. This proved to be a good short term stop level as the PHO declined to $17 during the swift bear market in January. Notice how the PHO has been able to retrace a good part of the January decline and has failed right at the 20.50 level. (old support becomes new resistance)

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If you are looking to reduce equity exposure this would be a good opportunity to exit the PHO as it looks like it will roll over here at resistance. However, I continue to like the PHO theme and I think it will be a good long term investment. I would looks for a test of the lows around $18 to set up a nice double bottom formation and I will be watching that level to add to long positions for a strong run into the end of 2008 for PHO.

Be careful out there!
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No positions in stocks mentioned.
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