Hulbert on Gold Bug Sentiment...
Always interesting food for thought:
online.barrons.com
Actually, I would have pegged the sentiment reading a little
higher than Hulbert did. What do you think?
On a 1 to 10 rating (1 suicidal - 10 euphoric) how would you
rate sentiment in the gold sector?
Fwiw: I would have pegged it at a 9-9.5 here lately.
Of the three main components of trading: fundamentals,
technicals, and sentiment, I believe sentiment is the most
poorly traded, as it represents every traders worst enemy -
emotion.
I'm always asking myself - who is going to buy my stocks
at a 20-30-50% premium from where I own them today, and
what is going to be the catalyst that's going to cause
them to do that?
Is there a central bank meeting where a rate cut, or a QE
announcement could be a major catalyst?
Is earnings season approaching and could there be news from
either individual companies, or sectorwide - that could
light a fire under the stocks?
Are the currency, bond, or equity markets at a key inflection
point that could trigger a major move in gold (in either direction)?
Or, are we entering a quiet season, where sentiment and
shareprice momentum may roll over into a news vacuum?
There are two components to all those question: who and what.
Let's start with who.
The who question always starts with gold bugs themselves,
the true believers, the faithful, the ever optimistic.
Are they already in, and to what degree?
Fundamental values aside, buying into the abyss last October
and November, held the promise that a sharp rally off the
bottom would be likely, because that move could easily be
powered by the re-entry of gold bugs alone.
What's the situation today?
Obviously quite the opposite, the bugs for the most part,
are already - all in.
So who does that leave, who's next in line?
The momentum players and the commodity/inflation players.
But, that's also a double-edged sword, as the commodity/inflation
players often become divided among oil, natural gas, copper,
base metals, and agricultural plays. And any arrival of the
momentum players (being the most fickle by definition), is
always a when, not if - fade signal.
You have to have a handle on the fundamentals, the technicals,
and the sentiment of these competing, alternative sectors
as well.
And that brings us to the "what" questions...
At what stage are these competing sectors in?
Are oil, natural gas, copper, industrial metals, and the Agri
plays leading, or lagging gold?
Fundamentally are they over-valued, or under-valued?
What's the sentiment?
Are they dominating the headlines, and the lead stories
on the business news channels? Is Barrons pumping, or
panning them? Are the pundits hot, or cold?
Are they dominated by small spec's, or are the institutional
players leading the move?
Are the stocks cheap to the underlying commodities, or
fully valued?
What's the technical trend for each?
Is gold likely to receive sector rotation from these
alternative asset classes, or more likely to see funds
rotate out of gold, and into these other classes?
How do these alternative sectors compare on a risk to reward
basis?
Where is the money on the sidelines most likely to flow?
Which sector has the most remaining upside? Gold at $986,
or Nat Gas at $3.75 for example?
Which have moved the most/least off the washout bottoms
from last October-December?
At the end of every week, you should spend a couple of
hours reviewing the charts and the fundamentals of the
competing sectors to gold, and asking yourselves these
questions.
Want to make more money on the rallies, and give back
less on the pullbacks?
Do a weekly "question review" of your positions.
Keep a trading notebook/journal.
Buy 2-3 of those super-big 3-hole punch notebooks and
keep a journal of your weekly question sessions, copies
of charts with notes, notes on your trading (wins & losses),
and notes on major headlines, sentiment shifts, and any
catalyst that moves the market.
I've got years of these notebooks and fwiw, last week I
spent an entire day going back and reviewing my thoughts,
and my notes on the last two major gold moves in the
spring of 2006, and last year's 500 HUI/$1000 Gold top.
Pros document everything. They don't wing it, rely on
memory, or trade day to day on the fly.
Want to make more money?
Ask better questions.
And if you're not keeping a professional level trading
journal - buy a 3 hole punch, and a couple of extra-large
3-ring notebooks and start this weekend.
SOTB |
