The week is not over and by the close of the market today we are already down 4.5% for the week. We told readers last night to get long Gold (GLD). We told our members to get long on Monday and have out performed the market by 5%. In recent months Gold has had a high correlation between equities. Gold is know longer an inflationary trade as deflation is now an issue. However, we think long term Gold will act as a reserve currency opposed to paper based currencies driving prices higher. We have not hit the max point of pain in the equity markets and look for more draw down before getting long. Currently, the Vix is only trading $33.98, respectively, the Vix spiked above $45 in October when the S&P 500 broke 1,100. Risk is not pricing in a panic point yet, be patient, there is no rush to jump in.
As we wrote yesterday, the last several months we have been on target with our calls and in a zone. Don't get me wrong, after 25 years of being a market technician, I would never be so arrogant to think I could master Mr. Market. We told members to get long Sunday October 2nd at 1090 and told everyone who would listen to scale out of the market on the way to our 1275 target. We have been telling investors to wait for a retracement to 1188 before getting long again. As the market waits and hopes for a Holiday rally, I see less of a probability for my original year-end target of 1350. However, we will have an opportunity to get long before year-end for a move higher.
Last Friday, we wrote to our Forbes readers that a short term risk was The Super Committees failure to reach any resolution on cuts in the deficit. We told readers we would be a buyer on that pull back. Yesterday, we decided to get long Gold instead of the S&P. Additionally, last week we recommended to our member to start shorting Crude Oil at the $99 to $100 price level.
Look for relative value trades right now, go long utilities & health Care and remain short financials.
The chart below is from our Friday's article, it still relevant with the current market conditions.
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