Tuesday, June 18, 2013

Market Outlook: This Precious Metals Fund is an Immediate 'Buy'

Gold is a Short-Term Buy
SPDR Gold Shares (NYSE: GLD) gained 0.86% last week. In the futures market, gold has been holding support after reaching a price objective defined by the top formed last year. Commercial traders are now more bullish than they have been at any time in the past two years.
Gold Market Outlook Chart
Commercials are gold miners and other traders who know the industry better than anyone else. Miners could be bullish because they are aware of changes in demand, or they might know that supply will be tightening. Their timing is not perfect, but it is useful.
Activity of commercials in the futures market is shown as a green line at the bottom of the chart above. Raw data from the Commitment of Traders (COT) report has been converted to an index so it is easier to understand. High values are bullish and low values are bearish. Hedge fund activity is shown as the black line. They are more bearish than they have been in two years.
The next chart shows the positions of small speculators in the market. These are individual traders and smaller hedge funds. This chart shows the raw data from the COT report, which is the net position in contracts. In the most recent report, small speculators were short 683 contracts. This is the first time they have reported a short position since 2001.
Gold Market Outlook Chart
In the past, buying when small speculators were short as a group would have been profitable over the next month. Three months after small speculators built up a short position, gold has been higher 62.5% of the time.
With several reasons to be bullish on gold in the short term, ProShares Ultra Gold (NYSE: UGL) is a buy. UGL is a leveraged fund and should move twice as much as gold on any trading day.
Recommended Trade Setup:
-- Buy UGL up to $59
-- Set stop-loss at $54
-- Set initial price target at $64 for a potential 8% gain
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Western Refining, Inc. (NYSE: WNR)

Western Refining, Inc. operates as an independent crude oil refiner and marketer of refined products. It operates in three segments: Refining, Wholesale, and Retail. The Refining segment owns and operates two refineries, and related refined product distribution terminals and asphalt terminals, as well as operates a crude oil gathering pipeline system. This segment offers crude oil and other feedstocks into refined products, such as gasoline, diesel fuel, jet fuel, and asphalt to the wholesale distributors and retail chains. The Wholesale segment distributes gasoline, diesel fuel, and lubricant products. The Retail segment operates retail stores that sell gasoline, diesel fuel, and convenience store merchandise. As of February 22, 2013, it operated 222 retail stores in Arizona, Colorado, New Mexico, and Texas; a fleet of crude oil and refined product truck transports; and a wholesale petroleum products distributor that operates in Arizona, California, Colorado, Nevada, New Mexico, Texas, Maryland, and Virginia.
Please take a look at the 1 yr. chart of WNR (Western Refining, Inc.) that I have shown below with my added notations:
1 yr. chart of WNR (Western Refining, Inc.) WNR has formed a small channel with a slight uptrend to it over the last (3) months. A channel is simply formed through the combination of a trend line support that runs parallel to a trend line resistance. When it comes to a channel, I always tell my students that any (3) points can start the channel, but it's the 4th test and beyond that confirm it. You can see that WNR has multiple test points between the channel resistance (red) and channel support (blue). Following the WNR channel can provide you with both long and short trading opportunities.
The Tale of the Tape: WNR has formed a common chart pattern know as a channel, in this case, an up-channel. A long opportunity could be entered on a pullback to the channel support, which at this point seems to be around $30. Short trades could be entered at channel resistance OR if WNR were to break below the channel support.
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China’s Credit Bubble About to Implode: Fitch Analyst

One prediction made more than any other over the past couple of decades is that China's miraculous economy is headed for a fall.

China bears have pointed to a long list of disasters-in-the-making: questionable economic statistics, skyrocketing real-estate prices, ghost cities, corruption, pollution, civil unrest and growing debt.

Yet, despite all of these concerns, China's economic machine just keeps chugging along.

But this time it's going to be different!, says an analyst from Fitch. This time, China really is screwed.

According to Ambrose Evans-Pritchard of the Telegraph, Fitch analyst Charlene Chu has concluded that China's growth is fueled by a credit bubble that is unlike anything the modern world has ever seen. This debt bubble is leading to massive overbuilding, Chu says. And when it finally bursts, as debt bubbles always do, China will be looking at a Japan-style depression and deflation. (more)

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Baltic Dry Index Shows The Global Economy On The Verge Of A Slowdown

My advice: if you want to know what’s happening in the global economy, do not look to the key stock indices. They are misguiding investors into believing all is well, while the global economy stands on the verge of an economic slowdown.

In these pages, I have written about major economic hubs in the global economy, namely China, Germany, and France, going through an economic slowdown. But now the smaller countries are flashing warning signs as well.

India grew at the slowest pace in a decade in its fiscal year (ended March 31, 2013). The Central Statistical Office reported that production in India at factories, in utilities, and at mines only increased by two percent in April from a year ago. In March, it increased 3.4%.  (more)

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Investment 101: Real Estate: The housing price conundrum

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Forget Altria, Buy This Stock Instead

Some of the best investments are businesses that provide products that customers can’t live without.
One example is consumer staples, like food or clothing. Or even utilities.

But some discretionary items aren’t really “discretionary” per se, they’re downright addictive – like the so-called “vice stocks.”

They may be controversial, but it’s hard to argue with the fact that they tend to be very profitable companies.

Plus, like the stock I’ll go over today, many are devoted dividend payers.

So let’s take a look at Imperial Tobacco Group PLC (ITYBY) (more)

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Confidence of homebuilders jumps as recovery deepens

Confidence among U.S. homebuilders surged in June, staging its biggest gain since 2002 in one of the strongest signs yet that the housing recovery is gaining traction.

A majority of homebuilders say conditions for new construction are favorable, rather than poor, for the first time since the housing crisis began seven years ago, according to a closely watched index released on Monday.

Executives in the homebuilding industry say a steady rise in home prices, tighter inventories of properties up for sale and a slowing trend in foreclosures have helped the housing market regain its stride over the past year.

Even so, the big jump in confidence registered this month by the National Association of Home Builders/Wells Fargo Housing Market index was surprisingly robust.

Pete Flint, chief executive of online real-estate company Trulia, said conditions were just right for confidence to blossom, with supply of available homes still trailing a rising tide of buying sentiment.
"We are in the early days of a real estate market recovery," he said. "The supply of homes for sale is still relatively small because sellers are reluctant to list in a rising market. They want to sell at the top." (more)

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