Last night, in my article, I said,
"We should see some bounces tomorrow. But, with this sharp downward momentum, we should see a bit more selling before Friday."
Indeed, the market was slightly up for most of the day, but, sank to close in the red just before the close. But, instead of chasing puts, we played gold and silver today! We have been watching GLD (gold ETF) for a few weeks now. Just last Friday, I mentioned in the Trading Room:
August 28, 2009 7:09 AM
gold plays
seem to be trying to break higher…
GLD
still fighting $94…
AEM
strong…
PAAS
testing $20 again…
But, I cautioned to wait for GLD to break above the resistance at $94!
August 28, 2009 11:43 AM
gold plays
need to see GLD above $94…
On Friday, GLD was not able to break $94 and on Monday, it dropped lower. But, today, GLD opened above $94! My first comment in the Trading Room today was:
September 2, 2009 7:21 AM
good morning!
fertilizers
looking for a bounce…
gold plays
looking good. GLD above $94!
We jumped into Oct AEM 60 calls and already locked in profits at +88%:
September 02, 2009
12:48 | HappyTrading AEM ($62.80) Sold to Close AEMJL Oct 60 calls, at $6.00 +88%
10:30 | HappyTrading AEM ($61.20) Sold to Close AEMJL Oct 60 calls, at $5.00 +56%
07:44 | HappyTrading AEM ($58.70) Bought to Open AEMJL Oct 60 calls, at $3.20
These Oct 60 calls went as high as $6.1 and closed at $5.8. We also played the Sept 60 calls, which more than doubled! Besides gold plays, we also played PAAS for silver. PAAS was very strong and kept on climbing. We could see PAAS test $22 tomorrow. I copied some of the comments from our Trading Room to SeekingAlpha’s StockTalk. You can CLICK HERE to see them.
Some readers might ask, "Why didn’t you just enter the these trades on Friday and stayed in? You would have caught a bigger move with the gap up today." Yes, of course, we could have. But, the risk is much greater when a major resistance is not broken. Especially with commodity plays, things can turn the other way in a hurry. Also, a lot of times, if you go in before a resistance is broken, you might get shaken out of your position when the stock comes back down (for instance, buying on Friday and get shaken out on Monday). Then, when the stock finally breaks the resistance (like today), you might be hesitant to act because, psychologically, you already got fooled once; and, you might just miss the "real" move.
GLD (gold) ended +2.44% higher and SLV (silver) added +3.12%. Most of the gold and silver miners were up substantially: AEM +10.83% (upgraded to "buy" today), ABX +8.1%, GOLD +10.76%, PAAS +12.24%, SSRI +8.16%.
I think the gold and silver plays can rally higher for weeks to come!
Rest of the market was not as exciting today. But, hey, did you notice that AIG went below $35 and bounced back to close at almost $38!? Keep watching this one! The Dow closed down 29.93 points; SPX slid 3.29 points; Nasdaq fell 1.82 points:
GDX (gold miners) jumped +9.51% and XME (metals and mining) added +1.89%. UNG (natural gas) continued to sink, down another 7.98%!! XLE (energy) held up though, only a slight loss of less than 1%. MOO (agriculture) closed in the green. FXI (Chinese ADRs) also saw a small bounce.
SPX
SPX slid 3.29 points to close at 944.75, still under 1000. Its 10-day MA flattened. The MACD went lower.
Nasdaq
Nasdaq fell 1.82 points to close at 1967.07. Its daily MAs were flat. The MACD went lower.
Financials and techs were still on the weak side today, but, the strength in the miners were enough to keep this market flat. VIX closed lower after going above 29. I still think that VIX could test 30 from here. Big-name stocks such as AAPL, IBM, GOOG, GS, WFC, JPM are still on the weak side. So, be a little more patient.
Good night and HappyTrading! ™
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