Gary Tanashian's  Instablog

NFTRH33 begins with a review of what subscribers and prospective subscribers can expect the letter to be, and not to be. This segment is reproduced below.

We then proceed to a technical view of the broad stock market and a look at some indexes that led the rally off of poor and unsustainable sentiment. The commodity picture meshes well with that for broad markets and the gold sector, keeper of the best fundamentals I can find, is looked at as usual in detail from short term to intermediate term perspectives.

I am also expanding NFTRH a bit now that the crisis of late 2008 and early 2009 is in the rear view mirror and allowing for a little 'fun', whereby aside from the usual ratios and indicators, that sometimes bore even the writer, we will look at individual stocks from a technical standpoint. In that regard, four of NFTRH's gold stocks are reviewed for potential pullback points where new buying might be considered. NFTRH has and will continue to identify good profit taking areas as well for traders so inclined.

The 'Wrap Up' section sees parallels between the status of the USD and the gold-silver ratio and how they may dovetail with possible short term events in global markets. Portfolio composition and risk profiles are then reviewed (the 'capital preservation' portfolio is +10.5% and the 'speculation' portfolio is +41% from respective baselines at the beginning of Q4, 2008).

NFTRH33 continues what I believe is a seamless and ongoing narrative on market events and probabilities in times that I consider among the best in my personal experience with regard to things making sense and moving in concert, which allows rational and revisable planning.

Excerpt: What NFTRH Is, is Not

I think it is time once again to highlight in detail how NFTRH sees itself, its mission and its areas of interest. This review is inspired by a pair of emails received last week, although I think it is a good idea to go over these distinctions once in a while to reinforce the identity of the letter in an effort to give subscribers a solid feel for what it can be depended upon to provide as we move forward through often challenging market and economic environments.

The first email came from a now former subscriber who wrote the following when asked for feedback as to how the letter did not meet his needs:

“Your letter is very well written and eloquently done. However, I felt it did not serve my trading style.”

‘Well written and eloquently done’ mean nothing if I get the mechanics wrong. They mean nothing if I am following the herd and leading the readership over a cliff, like a pied piper only too happy to tell you what you want to hear. That is because I am here to get the mechanics of the intermediate market moves right, no ifs ands or buts.

What I am not here to do however, is to show you what a great trading jock I am or how I can get my subscribers in and out of things based on proprietary short term signals without a care in the world about the big picture, about the macro story that is in play serving as the backdrop to the short and intermediate term swings. In short, NFTRH is very attuned to the macro fundamentals as it attempts to define and tell an ongoing story that makes sense every step of the way. This is a story onto which its investment or trading stance is overlaid at any given time.

This leads me to the second pertinent email, received Friday night from a current subscriber, which took the form of a simple question:

“Is it a good time to take some profits off the table in the gold stock sector?”

I will never be the writer who sees signs of oncoming correction, alerts his subscribers to sell out, and then writes a public article a few weeks later crowing about how ‘our subscribers were safely in cash based on our call’. Some people may want an all-knowing writer to micromanage the markets for them but you, dear NFTRH subscriber are going to get a manager who gets the market’s turns right much more often than not while avoiding the stress that comes with being jerked in and out based on a short term view I receive directly from the trading gods through my mystical crystal ball.

I give you much more credit than that. When I write about increasing risk and when I show likely areas for corrective activity in the HUI gold stock index for example, and when I write things like ‘traders are locking in profits and investors are looking for buying opportunities lower’ I am giving you wiggle room to make decisions. That is because there is no ‘one size fits all’ in trading and portfolio management.

Speaking of portfolio management, long time readers know that I personally see myself as a ‘portfolio tweaker and risk manager’. I am not a pure trader and I am not a buy and hold for the long-term cultist. Since 2002 the speculative portfolio has delivered excellent returns using this strategy, annualizing at approximately 27%. In short, I seek the highest gains possible while keeping the risk profile in a range where it passes the ‘sleep test’.

This involves trading, and I do indeed enjoy a knock out trade as much as the next guy and gal, but it also involves making distinctions and living with those distinctions along with thoughts like ‘dohhh, I saw the correction coming… why didn’t I sell out entirely?’ once in a while. As an example, FRG has finally blasted off but I did not sell any more of it (after trimming the Preservation portfolio position, which was overweight) because that one is an investment. There are also trades in the portfolios along with many positions on which partial profits will be taken.

So, to answer the question posed in the second email, yes, last week was a good time to be taking some profits off the table, if that is your orientation. With the HUI at 320 premarket on Monday, May 4, NFTRH Update sent out a chart showing the short term target of 360. On Tuesday, May 12, NFTRH Update sent out the following during market hours with the HUI up 3.2% at 352.62:

“HUI, as the attached chart shows, has come close to target. I cannot specifically recommend a course of action because everyone's orientation is different, but I will say that this is a logical spot for would-be sellers looking to lock in profits, to do so. I have not sold anything today or yesterday, but am looking things over from that perspective.”

I personally did subsequently do some trimming and trading, thus lowering the risk profile of both portfolios, as you will see at the end of the report. Does that mean I am bearish? No, it means I have taken some profits that were earned by buying recent corrections. A weekly chart of the HUI was sent out shortly after the daily chart, which shows a reasonable chance of gold stock upside to the 375-400 range (pending short term corrective activity at the 360 area), the top of which does look like it holds potential for significant corrective activity. But we will deal with that at the appropriate time.

So as not to turn the segment into a gold stock piece, let’s get back onto the original theme. The miners will of course be looked at later in the report. For now, let’s end this segment with some bullet points clearly stating the NFTRH mission.

NFTRH:

• Is a macroeconomic newsletter that cares deeply about the global market environment and associated psychology/sentiment that serves as the backdrop to any given investment or trading stance.

• Uses in-depth and unique technical analysis to drill down into said environment to gain perspective about potential turns, confirmations and trends. NFTRH is comfortable in positions contrary to convention.

• Is written by a person who considers himself more a portfolio manager than a short term trader and will make distinctions between stock ‘picks’ as to whether they are a short trade, longer term trade or investment.

• Has exceeded subscribership level and retention expectations, now 7-1/2 months in, which, it can only be assumed must be because it is doing something right.

Before proceeding on to this week’s analysis, it does occur to me that NFTRH, having been launched during those historic days of panic in Q4, 2008, has been heavily focused on ‘the indicators’ for the macro markets to the detriment of having enough space for some of the fun stuff, like technical analysis of individual stocks for example.

Yes, sometimes I bore myself with all the ratios and indicators, and yes, I am the same guy who gets a geeky thrill out of finding stocks with certain patterns or set ups that make me think about $$$$. So I will be more open to this going forward as long as the backdrop is stable and I feel it is appropriate. Again, I want NFTRH subscribers to be apart from the great momentum-driven herd. But we are allowed to have fun once in a while too, are we not?