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Since I had been thinking, and writing, that a move to S$P 1100 was possibly in the cards, as unbelievable as it has been to actually witness it, the “straight shot thesis� for all of you who get my newsletter, it’s a good time for reflection. After seeing a top tick around 1096 on the S&P, there is obvious hesitation in holding onto excess futures positions at current levels, speaking silver and gold. I will flat out admit it, the COT structure has me scared. I am quick to hit bids. I have always condoned holding onto a physical amount of metal that suits ones risk profile/liquidity needs, and I will not touch that, in terms of hedging strategies going forward. With that said, the paper I often use to augment a position has been late in and quick out. Sure, the COT structure has damaged my psyche, despite gold’s rather “on time� technical breakout. At this point, I do believe the break out was for real. I do see a vibrant December, maybe even November. It’s hard not to envision a peak in March, right on time, like the rest of them, except those that push a bit further, into April.
So here’s my strategy--I am going to pay the COT report its due and I will continue to hold out for $970 gold. With that said, I fully assume the COT will nowhere be in “flat out buy� territory if those prices are seen this fall, simply because it is so stretched in the bullish direction. Obviously some may say that a down move of epic proportions is in store, but I don’t subscribe to such angles. More likely, we are seeing the characteristics of Phase 3 unfold, namely a much wider level of participation among the investing public. As such, perhaps inflated COT levels reflect a new normal, much like analysts are struggling with their broad based comparisons of an economy stuck in the mud when you view it through a lens oblivious to financial trickery. Yes, a new normal. I greatly suspect that any selling, still a pipedream, will be caught at technical support, currently a tad lower than $970 gold and the resulting bounce could very well be of the V-variety. For now, caution reigns again. Yes, yes I know I have been reluctant versus other writers. But the breakout is still young, and many reasons behind the reluctance have served to limit its scale thus far, about 90 points. Not a shabby run, but not explosive either. Anyhow, not much fundamental analysis here. I assume it’s clear that this government has chosen the option of inflation. The exit strategy has many questions. First off, does one exist? Second, when will it be implemented? Third, how? And then the big one, will it be orderly or not? Gold seems to be adjusting for these odds. Unfortunately for those that keep the bulk of their savings in US dollars, a miscalculation on the part of our leaders, shame on us, could prove particularly painful. That is why I keep my bars. Just in case. Silver and Gold, though my futures account is currently barren like a desert. Just putting it out there.
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John Cassimatis has been managing his own capital for 14 years in various markets.
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