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Gary Tanashian submits: To make money as a trader or investor on a consistent basis, through ever-changing cycles and market environments, it is critical that we develop the ability to step outside the noise of the moment and gain big picture perspective. Boy is there a lot of noise at this moment! My main areas of interest, the gold/precious metals, commodities and the broad stock market are all at varying points in their risk/reward profiles. Since this Letter is designed as an ongoing, real time chronicle of markets, I will not post an extensive in-depth analysis of the current state of these three investment areas. Rather, I will summarize where I think each one is amidst the noise of the moment.

Gold/Precious Metals: We are searching for a bottom and as difficult as it feels for an investor to buy while being negatively reinforced through painful correction activity, those who wisely avoided chasing rallies and kept cash for buying on hard down days, will eventually be rewarded for their foresight with out-performance gains.

I cannot say for sure whether yesterday, which felt like it included some capitulation activity in the sector (would-be Gold bugs or "inflation trade bulls" getting out at all costs) is the ultimate bottom for this correction. But buying in the depths of such days (I added Goldcorp (NYSE:GG) and a couple of smaller miners near the lows) should ultimately prove worth the risk involved. The correction is now nearly 5 months old and yesterday got within spitting distance of my target near 260 on the HUI. Note that I do not "go all in" but rather I am slowly accumulating and plan to have cash on hand in the event of Huey 260 and XAU 115. With the gold indices this close to our targets and the "Goldiocks scenario" becoming somewhat mature in the investing public's consciousness, I believe it is time to be looking for real value.

Risk/Reward Profile:
Excellent in near, intermediate and long term.

Commodities: I believe commodity markets may be setting up for at least a major bounce. For reference, see a chart of the CRB, which yesterday dipped to a new low below 293 (near our long-standing target of 290) before reversing upward to close above the previous day's close. Being one of those who discriminates between gold and general commodities, and given the current monetary backdrop and technical evidence in the bond market and economy, I cannot go long term bullish on commodities at this time. At the least, if the once and future "Helicopter Ben" fulfills his destiny and finds a way to inflate to beat the band, gold should be out ahead of silver as well as the general commodity pack. In other words, there would be time to accumulate commodities for the longer term based on signals that the "monetary metal" gives.

Risk/Reward Profile:
Good near term, neutral intermediate term and good in the long term.

Stock Market: What can I say? I own a grand total of ZERO bull stocks at this time. Herds of momo's, savvy traders, naive traders and heartfelt investors can ride this train. As I spotted this rally (beginning with the SOX downtrend break in August) and proceeded to absolutely NOT take advantage of it, the theme was that the market seemed to be running out of short-term bearish fuel to the downside.

To be specific, the one indicator that "creeped me out" was the public bearishness and distrust of the market. Now, I do not count that as a major fundamental underpinning by any means, but FrankenMarket has spun a slowing economy and incorporated the public's bearishness, the shorts' gall (and attendant short-covering), the now prominent Goldilocks story, the old "wall of worry" chestnut, the election / manipulation hysteria and any other noisy idea it could get its hands on and rampaged higher. You don't argue with this type of activity. Many tried in 1999 and did not have the staying power to reach the ultimate peak and ride the whole mess to shorts' heaven.

As a side note, the idea of "Dow 12K, 13K, heck why not 30K?" that I have noted over the last two years is bullish for stock prices, but that is about all it is bullish for. Either the broad market is the last holdout for bullish hope/denial/desperation and is about to follow the deflationist script into collapse or it is a harbinger of liquidity to come from the massive bond market and Bernanke's Fed telling us to look over here while warming up the choppers over there.

Risk/Reward Profile: Near term highly unfavorable, intermediate neutral and long term undetermined/uncommitted.

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Source: Risk Versus Reward in Gold, Commodities and the Stock Market