Well, if you think that I lost money on the announcement you are mistaken. The day before the announcement I took 2 gold / silver mining positions as a hedge against the announcement. The logic was if they are going to go all in then commodities especially gold / silver will sky. Well it worked like a charm, these companies shot up as gold increased almost double the markets that day and broke to new highs a fraction under 1400 (currently 1394.10). The power of hedging. I got stopped out of my S&P short.
One disappointment I will have to admit is I may not see the highs of the Ciena put options again, which I could have sold last week for 250% profit :(
I have my reservations about this pop as the markets are OVER extended and should be topping.
I will keep tight stops in case there is a breakdown but until their is signs of a breakdown (which come on monday if there is a strong down day as this will complete a evening star candle stick pattern) but with the fed 100% committed to keeping markets propped the game has changed and you have to change also.
My strategy has and will continue to be:
Depending on the trend:
Short Market / put options
Long Metals via mining companies. I have added some Chinese solar companies recommended by a friend.
The reason I will not go long the stock indexes is simple, gold has outperformed the stock market for a very long time, and this past Thursday is a prime example of the general trend.
S&P 500 up 1.92%
GLD up 3.35%
Another reason to be long commodities rather than stocks is simple, QE from the FED only has direct impact on the stock markets with the US, but Japan, Euro zone, Brazil, UK all might be doing QE soon to combat rising currencies due to the US bold action. In this case, gold will go up in response because the more fiat currency there is the higher gold will go up. These additional QE by other countries will not directly boost the S&P 500.
We are now at new highs since April. The key to watch is if we hold this level and consolidate and continue up or we head for a correction before an additional push.
Markets can't go straight up (unless they are pushed up which is basically the case) but at some point they need to correct. With this additional stimulus I cannot say there will be a massive correction however, for this rally to be sustained I honestly believe a test of the 200 MA at 1250-1300 needs to occur.
The strange thing that happened on Friday is that the dollar rebounded a lot but gold and the markets were up? strange yes. A dollar rally will have to result in a market break down so keep your eye on this.
At this point the FED is all in, there will be $75 billion dollars a month pumped into the system, it is going to be interesting to see how stocks respond. With this coming in gold to $1500 by December to mid- January is not out of the question. Some of the mining stocks I am holding are SBB (my go to gold stock however it has not preformed as well as others), EDR one of the largest producers of silver, and AXR. Others i have on my watch list that i have mentioned in the past are GPR, FVI, FR. FR has done amazingly, since august it is up almost 150% from $4 to $10. GPR had a massive breakout since the beginning of september it has increase from $0.84 to over $1.50.
Silver has out preformed gold as expected with JPM and HBSC being under the radar for market manipulation. Silver just missed the $27 mark on Friday.
Massive rally, around the 17.50 mark I picked up some physical which I was unsure if it made sense at the time, however, now I am quite happy with the purchase.
Next week will confirm this market rally or be a reversal week. until there are strong signs of a reverse it is better to stick to the metals, especially if gold breaks the $1400 mark!!
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