Gold and gold miner stocks have underperformed in 2012 disappointing most traders. That being said it has traded in a large sideways range since September 2011 and remains stuck in this range as of this week. Investments trading sideways are not my preferred investment of choice because some commodities and stocks for that matter can trade sideways for years before making another bull market rally.

That being said in the last six months gold has started to show life that a new bull market may be starting. 2013 is starting to look as though gold, silver and precious metals miners could lead the market higher if they can break out of their basing patterns. Until we get more bullish price action I am not planning to get long.

Take a look at the gold ETF and Gold Miner charts:

These daily charts show the trend (up/down) along with short term extreme overbought/oversold trading days. The key to long term success is to trade with the trend 90% of the time. Only years of experience will you know when it’s ok to break the rules and even then the odds are stacked against you.

Gold Weekly Chart:

Gold Daily Chart:

Gold Miners Daily Chart:

SP500 Stock Market Analysis:

The last five years I have been fine tuning my SP500 index trading with the use of cycles, sentiment, volume, momentum and the volatility index. Until just recently some of the data I use for generating these extreme overbought/oversold conditions were only available after the market closed. This made the high volatile trading sessions difficult to truly know if an extreme level was reached during the trading session. The exciting news is that a new data feed and a top notch programmer is allowing me to turning this once manual calculation of 17 data points taking me an average of 25 minutes to figure out into a system that generates signals in real time complete with profit taking signals, tend direction and a protective stop which self-adjusts depending on the market volatility and cycle stages.

Two other benefits are that during extremely high volatility levels and mixed cycles the system does not generate any signals. This allows us to avoid the large daily swings in price that typically shake even the most seasoned traders out of the market for repeated losing trades. Also during potential trend changes when cycles and volatility become choppy trading signals are not generated helping to avoid the volatility that takes place during reversals points when the bulls and bears are pushing each other around.

Below is a very basic version of the trend and signals for the SP500 index as it does not show profit taking, trend reversal stops or protective stops for individual swing trades yet, but it’s coming soon.

Crude Oil Weekly Chart:

Crude oil has been making a move higher in the past four weeks but it’s now testing resistance and the chart shows a high volume doji candle. This is pointing to a pause or pullback in price should take place.

Natural Gas Weekly Chart:

Natural gas futures have been under pressure the past couple months but it may have put in a bottom last week. The daily and 60 minute charts show strong buyers stepping in here.

Weekend Trading Conclusion:

In short, gold and silver remain in a sideways/down trend on the daily chart. The weekly long term outlook is very bullish and once I start to see real buyers enter the market in terms of volume and price patterns I will start to accumulate a long position.

The stock market overall remains in an uptrend. We are waiting for a pause ro pullback before getting long the index. But that being said there are other sectors and commodities starting to look ripe for big moves. They are not there yet but getting closer each day.

Keep in mind that stocks, commodities and trading in general go in waves. There are times when you are busy with trades popping up left right and center and there are times when setups just do not happen. On my free stock charts watch list in November and December I posted 16 stocks and ETF setups and only one stock went south which happened to be a short trade (count trend trade). You can view my watch list here for more info:https://stockcharts.com/public/1992897

Crude oil is giving mixed signals and I am avoiding it until the daily chart gives us a bullish setup.

Natural gas weekly chart looks bullish but the current price is now trading at resistance. It must break this level before a full reversal can be confirmed.

If you would like to keep up to date on market trends and trade ideas be sure to join my newsletter atwww.TheGoldAndOilGuy.com

Chris Vermeulen

Disclaimer:
I currently do not own a position in these investment but plan on buying them in the near future. This material should not be considered investment advice. Chris Vermeulen is not a registered investment advisor. Under no circumstances should any content from this website, article, video, seminar or email from Chris Vermeulen (TheGoldAndOilGuy.com) be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

The financial world is pretty exciting right now – the rapidly shifting investment landscape tends to draw and hold most people’s attention, but what is frequently forgotten is some basic – yet essential – big picture planning.

Imagine that you are three years away from retirement and contemplating a future move to a warmer climate for at least part of the year. Would a reasonable person hire a builder to construct their dream home without a basic blueprint? Would a prudent person look through a bunch of brochures of attractive show homes, agree to similar concepts scribbled on the back of a napkin, then sign over a small fortune to a salesperson? Unfortunately, this parallels the norm in today’s financial services industry.

When I first meet with clients, few have ever had a truly comprehensive Wealth Management Plan (WMP) prepared. Even fewer have a WMP that is updated regularly, and almost no one has an Investment Policy Statement. Investment accounts are often scattered around in different places with no sense of what the objectives are, and there is rarely a unifying strategy about how to get “there,” wherever that might be. In the vast majority of cases, even high net worth investors have entrusted their nest egg to one or more institutions without a comprehensive financial blueprint. This is a recipe for disaster.

Just a few of the MANY important reasons to have a holistic WMP created and maintained include:

• A greater sense of context for your family. How do world events really affect my financial life? How much capital do we really need to achieve or maintain financial independence?
• Lower anxiety levels regarding your long term security. Do you need to make 10 to 15% per year to retire when you had hoped, or will a steady 4 to 7% return from current levels keep your family “in the black?”
• A very clear understanding of your investment priorities. This should result in more appropriate initial investment recommendations, which should lay the groundwork for a mutually beneficial long-term professional relationship. It also makes you a more patient investor

A great WMP is essentially the synthesis of the technical and the human. The technical stuff is left-brained and the human is more right-brained. At the center of this should be your own unique, deeply personal Life Goals. Your Life Goals flow from your values, beliefs and priorities, and should become the unifying principles behind all of your major decisions. The process should be dynamic, candid, collaborative and flexible. It does NOT need to feel like “work” but it does require some effort.

A comprehensive WMP addresses all of the following areas that are relevant to your family situation:

• Financial Security – cash reserves, and group and personal life, disability, critical illness and long-term care insurance coverage
• Retirement Planning – location, lifestyle, volunteering, part-time paid work, etc
• Investment Management – protecting and growing your nest egg
• Tax Minimization  – so you are paying only what is required under law
• Estate Planning – current Wills, Enduring Powers of Attorney and Personal Health Directives
• Planning for Aging and Health – aging beats the alternative, but planning in advance is essential
• Optimizing Business Values – growth, succession, disposition
• Debt Elimination – especially before interest rates escalate again
• Post-Secondary Education Funding – for children or grandchildren

In the introduction I also referred to an Investment Policy Statement (IPS). I’ll cover this in more detail in future, but an IPS is essentially a contract for how your capital will be invested. Most external IPS’s I’ve reviewed do NOT have a clearly articulated framework for managing risk, choosing to focus mostly on capturing upside opportunities. This is another recipe for disaster.

How important is your family’s financial security? Do you have a current and comprehensive Wealth Management Plan AND an Investment Policy Statement for your nest egg?

Cheers,

Andrew H. Ruhland, CFP, CPCA

President of Integrated Wealth Management Inc. and

Portfolio Strategist with ETF Capital Management

New research from The Real Asset Company finds that Q1 is the best time to watch the gold price make gains from month to month, which suggests the end of December or right at the beginning of the year are the times to get on the gold investment band-wagon.

Not “if” but “when” to invest in gold

According to World Gold Council data, it is estimated that in the UK alone 600,000 people will be looking to invest in gold, for the first time, over the next 12 months. So we thought we would try and give some helpful advice as to what to look out for in gold price action in 2013, based on the last 12 years.

We looked at the gold price action since 2000 and how it changed from month to month, hoping it would give us some indication as to when is best to invest in gold. We looked at the percentage change in the month end gold price, month to month, across three major currencies – the US dollar, the British pound and the euro.

We can see that there are some clear months when the gold price, on average, appears to perform weaker than other months.

From the graph above we see that across all currencies December, or the beginning of January, is most likely to be the best month to buy gold bullion, regardless of which of these currencies are chosen. On average the month-end gold price decreases by 0.4% compared to November, but increases by 2.5% and 2.1% in January and February respectively.

Months when we see the worst price performance are July and October, the only two months where there are simultaneous decreases in the gold price at month end across all currencies.

It is unsurprising that October is a bad month for gold (but a good month for gold investors); gold’s track record for the Halloween month is a bad one. For instance, between the mid-1970s and 2011, the London PM fixing price for October fell by 0.9% on average compared to a 0.6% gain in other months. This often blamed on the brutal behavior of stocks in the same month and the slowdown in gold buying before the Asian wedding season.

…….read more HERE

Few know that Albert Einstein invested much of his 1921 Nobel Prize money in stock markets. However, he lost a bulk of it in the stock market crash in 1929. Pity that he could not lay his hands on Benjamin Graham’s Security Analysis that was first published only in 1934. 

But he is not to blame. For in those days investing hardly called for any qualitative checks. What was lost on Einstein is not a secret formula to help find cheap stocks. But the behavioral trait to buy only when others are fearful. 

Now 1929 was not the only time when stock markets gave a torrid time to investors. But even as late as 2007, there were few lessons learnt. 

The analysts at Wall Street used complex formulae to see how the past performance can be used to simulate the future. They ran screens, tested scenarios and compared with standard deviation of peers. Being objective about their investing decisions came naturally to them. They could estimate the minutest change in company’s earning power with a single basis point change in pricing. But the immodest pricing of subprime home loans did not draw their attention. They ‘objectively’ invested and re-invested in papers with zero valued collateral. This was purely out of their greed for higher ROI (return on investment). Eventually when the loans turned bad and banks were on the verge of insolvency, the objectivity of such investing came to be questioned. 

Since investing is widely acknowledged to be a science, objective assumptions should throw up accurate estimates. However, as a scientist will tell you, the subjective element is necessary even in separating different elements of a molecule. 

Many leading scientists today compare cutting edge science with art. Investing behavior too, however logical, cannot be typecast. In other words stock picking methods cannot be standardized or computerized. There has to be an element of subjectivity. The human element, if you will. Benjamin Graham himself although a stickler for numbers, left enough scope for behavioral decision making. The ‘margin of safety’ concept in his legendary book is a product of the same. 

Leading value investor Seth Klarman calls value investing as “the marriage of a contrarian streak and a calculator.” Now not all value investing is contrarian. In a recent blog, valuation expert Aswath Damodaran classified value investors into three categories:

• ‘Screeners’ who look for stocks that trade at relatively lower valuation multiples compared to closets peers 
• ‘Contrarians’ who look for value in the most beaten down stocks hoping that valuations will reverse to the mean. 
• ‘Activists’ who acquire large stakes in undervalued or poorly managed companies with the belief that these will eventually unlock shareholder value.

If you notice each of these approaches have a tinge of behavioral element involved, besides the math. Hence even if you are as good as Einstein in the latter, ignoring the behavioral aspect in investing will do no good. You could be famous but not rich.