Market Sense and Sentiment

[Caradoc]

Bob: Thanks for the invite on Bernard's old penny pick board. The time for pennies will come again, but we'll all be 5 to 7 years older because it will be the frothy 18 to 24 months at the end of the next bull market. There's a supposedly true story about a New York company that went public two days before the 1929 crash. It was the [forgot the name] cemetery that you could see when taking off from LaGuadia airport. Despite the fact that the cemetery was already full, the stock went up 41% in those two days. Go figure.

The next bull won't start until the current rally collapses so our big bear market can finally come to an end. When the real bull finally starts, the thing to buy won't be as exciting as pennies; it will be longterm bonds from medium-rated companies that need only an improving market to become top-rated. Then, when rising market improves the rating, it's easy enough to unload top-rated bonds that are still paying the higher interest of a medium-rated bond. Profitable, but not a lot of fun.

Hate to sound negative, but almost everything is overpriced (S&P at 30-something times earnings? Forget it!) and when the next bull comes it may take the DOW all the way from 1500 to 3000.

So what am I doing instead? Gold. Tell me if the 10-year chart looks like what some call a spoon and others call a cup and handle:
http://www.kitco.com/charts/popup/au3650nyb.html
If so, it's due to move briskly when it completes the parabola at 400 or so. And there's a whole potful of non-TA reasons why gold is going higher.

Yeah, I've got a small horde of 1-ounce coins, and 20 to 30 percent is better than what banks are paying, but the gold stocks are better if you can remember to buy low and sell high.

The one with the most predictable trading channel is Goldcorp (NYSE:GG). If you look at the series of higher lows, you'll see thet today was buying day and, yes, I was reinvesting what I took out just shy of 15.
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=gg&sid=0&o_symb=gg&x=7&a...
The next interim high may reach 15.75 or higher but I will have sold at 15.60. Why? Because capturing 5/6 or 7/8 is good enough and assures that I have cash to buy the next low.

What's really fun is jumping in and out of options.I even kept some of the January 12.50 calls because if it's above 20 per share (98% probability?) I'll exercise the options and avoid a taxable transaction by buying more of the stock. Meanwhile, the 15 and 17.50 options for January and April are cheap enough (i.e., as cheap as the 12.50s were a month ago) that a few hundred bucks gives you a hanble on a lot of stock.

I may start a gold/Goldcorp board and lay out the logic better than this post. If so, you got the gist of it already.

Regards,

Caradoc