Thursday, August 18, 2011

Caution when chasing

9:35 am (Hawaii) Best to be cautious when chasing. In particular, FAZ at 110 mph can come to a screeching stop and injure all those on its tail. The last time FAZ gapped up was Aug 5, when it went from a previous close of 62+ and reached a day high of 81. The next morning, Aug 6, it opened at 72 and from there, it has zigged and zagged lower, then higher, and then down to 55+ this week before today's run to 67.

Today's gap and increased volume — nearly double of yesterday's — comes on similar news to the Aug 5 gap. Bad news out of Europe, this time triggered by the Fed. But a 16% gain in FAZ, even on a more powerful new catalyst (Fed this time, rumors of a bank run last time), makes me cautious and unwilling to enter a position here at 66.59 with 22 minutes before the bell.

DGP is holding strong to its incremental gains, now at 67.77 as spot gold hits a new high. I hesitate to increase a position in paper gold; what's to stop the CME mafia from hitting the market with another margin requirement hike? I don't believe speculation is as extreme as it had been last week in gold or three months ago in silver. But anything will take the edge from gold trades, and bring it back a bit. So I'll be patient.

The alternative would be to just put both feet into these positions, walk away for a few days or weeks or months and trust that stop-loss orders would kick in should sentiment and fundamentals reverse. Not that fundamentals are changing overnight.

No touchie: SCO/UCO, UUP (dollar ETF), QQQ/QID (unless you babysit).

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