The markets keep getting crazier, and right now essentially untradeable, unless you are scalping. The problem is once we finish with the exuberance of a deal with the fiscal cliff, we move right into 4th quarter earnings. Personally, I do not think they wrote estimates down far enough, so the drama continues through January. Then we deal with the debt limit increase. It is not a matter of when, but if the Republicans can extract any concessions first. I doubt it for either negotiations, but it will cause severe dislocations until it passes.
I must play defense until the debt deal is done. I will take my signals, but lighter, and will hold some hedges like last week holding UVXY calls. Then I believe, gold, silver, energy, and XIV will move higher, much higher. The Fed's are now monetizing nearly 100% of the deficit, and the good news is that since the Federal government receives those interest payments from the Fed, this debt is phony, so no new strain to the budget. The bad news is that the monetary base is rising in my estimate over 12%, and if velocity increases, inflation pressures will start to become intolerable.
If my scenario holds, we will get a large lift in all risk assets, then equities will fall away, with volatility rising, as energy squirts ahead, and people see the pricing at the pump, then gold, silver, and the miners will be the last man standing, before they rollover. My view is we don't clear this initial mess until the end of February, then we zoom for six months.
Let's see how it plays out.
In 2012, I launched a paid service based on my signals. We posted over 260 trades and the signals produced an average annualized gain of approx 70%. The buy signals worked great, the sell signals depended on me to manually post the exits. Administratively was too much, so I now have completed the automation of both the buy and sell signal. It takes away my bias on the trade, we don't miss any trades in the watchlist, and if we reverse back up, will get us right back in the trade. I expect even better results in 2013. I also decided to pare my watch-list down to 10-12 stocks/ETF's. They are spread across gold, silver, energy, nat gas and technology sectors. For the 1st quarter they are:
If you are interested for 2013, the signup is located at www.realtimetradingsignals.com/. It is $20/month, cancel at any time.
I also am going to start sharing my SPY buy/sell on my public Twitter site @Bobloveshawaii. Just click on the link to the right. You also will receive nightly commentary, most nights during the week. The SPY signal will be free for now, so you can see that it works.
Stop by every Saturday at arum-geld-gold.blogspot.com for an update on the week and week ahead.
Disclosure: I am long XIV.
Additional disclosure: I am long any of the stocks mentioned at any time in the last or next 72 hours.