BROAD MARKET SELLS OFF AGAIN

Will the next signal be a buy???







Mortgage lender American Home Mortgage Investment (AHM) fanned the market's credit fears, saying its borrowing pipeline had dried up and that it was considering liquidating assets. The stock, already in a nose dive this year, crashed 90% in gigantic volume. Is there a 10 year pattern that predicts a low for 2007? See this link http://media.wiley.com/product_data/excerpt/1X/04714305/047143051X.pdf

I look for $HUI to test support at 320 if broad market continues to sell off. Today the Gold/XAU Ratio is 4.46. If this ratio reaches "5" I will again look for another gold stock trade--many times spot gold cycles to a low in August--I will be patient in finding this entry.

WAS LAST GOLD TRADE A FAKEOUT?

See this link: http://www.kitco.com/ind/Sobolev/jul262007.html

The recent moves in gold have been a bit complicated to decipher. "The inverse correlation between the stock market and gold is historically strong, " said Mark O'Byrne, director at Gold & Silver Investments Ltd. "While gold may have become correlated with the broader U.S. stock markets and the bellwether S&P 500 in recent weeks, in the fullness of time the historical low-to-negative correlation will reassert itself."
Gold/XAU Ratio 4.45

Markets Continue Decline

Today I sold my gold stock potfolio--I am almost 100% cash in T-Bills-total gain on this trade about $10,000. Yes I know I am closing this position while the weekly close on th HUI remains above 320.

It was the market's worst week since the bull market began more than four years ago -- both in terms of percentage losses, downside volume, and bad breadth. All market sectors and industry groups fell. Every single market index closed below its 50-day average in decisive fashion.

The DJIA has closed higher in five of the past eight trading days, but declining stocks outnumbered advancing stocks in seven of those eight sessions. That type of negative breadth divergence has occurred only 15 times in 75 years – the majority of which were in bear markets.

On Monday of last week, the DJIA hit a record high while declining stocks overwhelmed advancing stocks by a 2:1 margin. That ominous divergence has never occurred in the past 75 years of market history.

Stocks plunge; Dow down more than 310, Gold Stocks Plunge

Today stocks (as we warned 2 days ago) began To Fall In Near-Panic Mood.

Tomorrow I plan to buy several stocks on my watch list. My weekly stop loss on the HUI is unchanged.

Gold Stocks Decline

A weekly HUI close below 320 is my stop loss on this current buy signal. If profit taking continues another 2 days I may make additional purchase of gold shares on my watch list (AEM,MDG,PCU).

Gold/XAU Ratio 4.41

"This market can be as exciting as driving a Ferrari, if you keep calm on days like these." Julian Phillips

Broad stock market under pressure. Distribution days 3 for Dow, 4 for Nasdaq, 5 for S&P and NYSE COMPOSITE in recent weeks.

BROAD STOCK MARKET SELLOFF -- LOOK OUT BELOW

Look at what happened to Country Wide Financial.

Spot gold higher but gold stocks down-- the big news is today's stock market selloff which in turn drug gold stocks down.
Gold/XAU Ratio 4.38


Bill Gross, manager of the world's largest bond fund group, Pimco, said the subprime mortgage market's troubles are spreading to junk bonds.

Gold Stocks Bull Market - The Next Phase Has Begun

see this link
http://www.marketoracle.co.uk/Article1577.html

Looking Back 5 Week Moving Average

Previous tests of the 50-week moving average have preceded significant rallies over the past year. Two consecutive weekly closes above the 5-week moving average constitute “confirmation” of a new upleg in the gold bull market… silver tends to exaggerate the trends in gold and… a tentative buying level is beginning to be described.After bouncing decisively off the long-watched support at the 50-week moving average last Friday, the holiday-shortened week began with a move back above the 5-week moving average and ultimately closed there, a key level for the health of the current short term trend. Though it proved to be somewhat of a seesaw week, with gold retreating back to the 5-week average on Tuesday and breaking through on Thursday, the proprietary trend cycle charts gave us a buy reading Friday morning for a rally that took gold to a bullish weekly close. Recall that two weekly closes above the 5-week moving average is an extremely bullish trend signal. July 8,2007

Mild profit taking gold stocks

Most-active gold for August delivery on the COMEX division of the New York Mercantile Exchange was up $6.60, or 1 percent, at $684.70 an ounce, dealing between $675.80 and $687.60 -- which marked its loftiest level since May 10.
Mild profit taking for HUI but yesterday, the HUI rallied above four previous tops at the 370 level to close at 371.11, it's highest close since May, 2006. The next upside objective is to better the May, 2006 closing high of 394.22. The Gold/XAU Ratio closed at 4.32.
Several new stocks are on my watch list--I will buy if the gold stocks correct in next several days: AEM, MDG, and PCU.
Heavy volume in broad stock market selloff--this may mark the beginning of the long awaited correction.

I promised a few days ago to write a few lines about trading discipline. Find and develop your own investing and trading stretegy. I am a trend trader and prefer trading gold and other precious metal stocks. I have found that over the years we develop certain habits much like tendancies in our golf swing. Our golf swing is determined in a great way by our setup, grip, stance alignment etc. Excellent golfers always have a game plan and visualize their shots. In our trading our attitude and mental capital are our greatest asset. I have developed several trading rules over a lifetime of investing--the most important and only written rule is "don't lose money." Dennis Gartman a well known market writer, trader and analyst has a list of rules--my favorite being, "there is never just one cockroach."

Two excellent books on buiding discipline: SELF-DISCIPLINE IN 10 DAYS BY THEODORE BRYANT (COMPLETELY UNRELATED TO TRADING BUT DISSECTS OUR OWN INNER CONFLICTS AND BARRIERS TO SELF-DISCIPLINE) and TRADING IN THE ZONE BY MARK DOUGLAS.

My main reason for writing this blog is to record real time my thinking about each trading decision.

Today was my last vacation day at Horseshoe Bay Texas--tomorrow evening I fly back home to Arkansas. Played a rainy round of golf today on Apple Rock golf course only one birdy--sandy small greens.

Notebook on current Gold Stocks Trade and Vacation at Horseshoe Bay House

On 7/2/07 I wrote "Today I found a good entry point in gold stocks---see current COT http://cotstimer.blogspot.com/2007/06/bullish-signal-for-canadian-gold-etf.html I bought AUY, GSS, BVN, SRLM. Gold INDX support is 640 with resistance at 720 and $HUI GOLD BUGS INDX shows support at 270 and resistance at 370"

BVN was downgraded by a major analyst and sold 7/10/07. AUY was sold 7/11/07 at a nice profit and replaced with a very promising Junior Gold stock TGB.

Now for the rest of todays notebook story. See the chart above for TGB Taseko Mines. TGB is up 15.21% since buy date of 7/12/07. TGB remains a likely takeover candidate. Today, Russell Hallbauer, President and CEO of Taseko, commented, "All of the Taseko team in Vancouver and at Gibraltar have done an exceptional job
over the last 15 months advancing this complex project. There are very
few mining companies that have the ability to more than double their
production in such a short time frame at a very low capital cost. This
accomplishment truly sets us apart from our peers."


Gold for August delivery closed $4.40 higher at $678.10 an ounce on the New York Mercantile Exchange, the contract's strongest closing level since May 15. It traded as high as $678.50, its highest intraday level since June 5.0.

The gold/XAU Ratio closed at 4.28.


The Dow Industrials closed above 14,000. The broad market remains bullish.

Today is my lovely wife Margaret's birthday. We have been married 42 years. We go to dinner tonight with my younger son Shawn and his wife Amy. We have 4 grand children (ages 6 months to 10) living near Horseshoe Bay Texas.

I am hoping to get my golf cart running soon--The cart (A Roll's Royce Replica) came with the Horseshoe Bay house which we bought six weeks ago fully furnished.

I fly back home Sunday to Arkansas and back to my full time day and night job as an ENT surgeon. Because of HIPA regulations and patient confidentiality I do not write much about my medical practice.

Something about vacation days and spending more time at home reminds me a "Churchhill" story. He reportedly said that he and his wife had tried to have breakfast together only once on "Holiday" and they both found it so disageeable they never had breakfast together again.

I still have not posted anything about trading discipline--but discipline and trading patience are two hard learned virtues. I waited over 9 months for this current gold stock trade and we will not know it's final outcome until we close it and book our profits.

Big Move in Gold

I am on vacation this week--at my second home at Horseshoe Bay Texas. My golf game always gets better when I play everyday--3 spectacular Trent Jones courses--I birdied #17 and finished #18 with a par for an 81 on Slick Rock course.




Gold futures for August delivery rose $7.80, or 1.2 percent, to $673.70 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for a most-active contract since June 6.

Broad market down--distribution day for the Dow, S&P 500 and NYSE composite. Any session with a price loss of more than 0.20% counts as a distribution day for the indexes in question.

Minimal reaction of gold stocks

Gold/XAU Ratio 4.46
Gold Low/High 661.60 - 668.20
Dow Industrials 13,971.55

Broad stock market Bullish

Little Change

HUI closes at 352.70 -4.12 -1.15%. Broad market rally continues. COT now more bearish for S&P 500. I am holding on to the bull's horns on this gold trade--I am profitable so far so I can ride this current position back to break even if necessary.

Gold slips--gold stocks stable

Gold/XAU Ratio 4.41


Gold/XAU Ratio 4.41 My gold stock trade is +$23,000--$10,000 booked the rest is unrealized stock gain.

Broad stock market continues its bull run.

Newmont Huge Volume Signals Inflation

Today I sold Auy with nice gain. Bought TGB,ECUXF,SMR. Huge volume on Newmont Mining signals big things ahead for precious metal stocks and continuing inflation. Gold/XAU Ratio 4.42 Nasdaq and broad market new highs--only 2 distribution days in IBD count. Look for consolidation and profit taking tomorrow.

SELL AUY TOMORROW

High cash burn rate for Yamana gold and P&F sell signal continues. I have made a lot of money in AUY--first holding Desert Sun Mining prior to Yamana gold takeover.

Plan to buy TGB P&F double top breakout and IBD A- rating with Barron's Stock Grader buy at 62.3 score--Positive news at www.streetinvesting.com. TGB closed at $4.18

Also will buy two silver stocks ECU Silver Mining ECUXF and Silvermex Resources SMR on TSXV

Today August gold was down $2.30 to $662.10. The $HUI Goldbugs index was -1.54 to 353.07

The broad stock market seems to be in a trading range. There have been 5 disribution days for S&P 500 and DOW.

Profit Taking -- Sell BVN

Gold/XAU Ratio 4.54 Today I sold BVN--a major analyst gave a down grade. Profit of $2,200. I will keep a sell stop at resistance level on $HUI 320 or $XAU 130.83 on my gold and silver stocks. Plan to buy TGB if trades near its resistance at $3.50 but there probably will be 2 or more days of distribution before buying TGB. MY gold stock portfolio (AUY, GSS, SRLM)is up $17,000.

IBD records a distribution day on NYSE and Nasdaq.

COT SIGNALS BUY FOR SILVER STOCKS

Most recent COT gives a buy signal for silver stocks. August gold up $7.70 at 662.50.
Watch for profit taking in next several days. Now available is an inverse global gold ETF that correspond to two times (200%) the daily performance of the S&P/TSX Global Gold Index. HGD is the symbol for Horizons BetaPro S&P/TSX Gobal Bear Plus ETF. To my knowledge this is the first inverse gold fund. If my current gold stock portfolio continues to climb I will consider protecting profits with this ETF if short term corrections are spotted.

The Gold/XAU ratio today is 4.5.

On my watch list Taseko Mines (TGB) closed up 4.43% at $4.24. I will buy on a significant pullback otherwise I won't chase this stock. I will post more about self discipline and trading. I waited almost 6 months for this current entry into a gold stock portfolio trade. To date this $300,000 portfolio is up $24,000 in 5 trading days. Given my previous trding experience I know that this entire profit can be lost in one trading day if there is a sudden selloff.

Good luck, Good trading and God Bless.

Gold stocks climb

Today the Gold/XAU Ratio 4.50. A new Junior gold on my watch list is TGB. TGB would be a likely takeover target.

Stock market remains bullish but watch out for sharp correction in next several weeks

Gold Stocks Rise--Spot Gold Declines

Today the gold/xau ratio is 4.63. Many traders also monitor the HUI/GOLD ratio.
See http://www.zealllc.com/2005/huigold2.htm

Nasdaq again at new high--No change in IBD distribution days.

So far my recent gold stock buys are profitable--excellent gains today for GSS

Subprime Mortage woes, weak dollar and gold

These two links give the interrelationship of U.S. subrime mortgage problem, weakening dollar and rising gold prices. http://www.marketoracle.co.uk/Article1445.html

http://bloomberg.com/apps/news?pid=20601087&sid=a3McD.nQwvR8&refer=home

Timing gold stock buys

http://www.kitco.com/ gives the gold/xau ratio near the bottom of the page each day. Today the ratio is 4.79. Readings near 5 are historically good times to invest in gold stocks. Readings under 3.2 are good times to sell.To put some historical context on this measure, since 1974, the Gold/XAU ratio has been greater than 5.0 about 15% of the time. When the ratio has been this high, the XAU has followed with annualized gains of 89.6%, on average – a figure that remains high even if the data is split into multiple samples. When the ratio has been greater than 4.0, the XAU has followed with average annualized gains of 27.4% (though the finer profile of returns has been sensitive to other conditions such as interest rates, economic trends, and inflation).

In contrast, when the ratio has been less than 3.0 (meaning that the gold stocks are very elevated relative to the actual metal), the XAU has declined at an annualized rate of -36.6%, on average.
Importantly, the return/risk profile for precious metals shares is strengthened further if the economy is experiencing weakness. For example, when the Gold/XAU ratio has been greater than 5.0 and the ISM Purchasing Managers Index has been less than 50 (indicating a contracting U.S. manufacturing sector), gold shares have appreciated at an average annualized rate of 125.6%. In contrast, when the Gold/XAU ratio has been less than 3.0 and the Purchasing Managers Index has been greater than 50, precious metals shares have plunged at an average annualized rate of -49.9% Th e currentPMI - from the ROB Report on Business Jun 2007 Jul 2, 2007 is 56.0

Stock Bull Market Continues--Gold declines

Nasdaq hit a new high with only one distribution day in past few weeks, 5 distribution days for s&p 500, Dow and NYSE. IBD counts distribution days in two ways — in terms of time and proximity.

For the time element, count down days in higher volume seen in the past four to five weeks. As that period moves forward, older distribution sessions become less relevant and fall off the count. For proximity, when the indexes rise and move to new highs, count those days that occurred when the market was significantly lower and drop them off the count.

Gold for August delivery fell $3.80 to close at $655.40 an ounce on the New York Mercantile Exchange. HUI 336.25 -0.98. My gold stocks portfolio is down -$1,133.59 but still with basic gain of $3,610.09.