Gold Prices and Inflation

Gold prices are generally seen as inflation hedge. If inflation is increase, gold prices will increase. But that is not always the case. McClellan has analysed this in his web site.

You have probably heard the idea that gold acts as a hedge against inflation, but this is not quite the right description. An up move in gold prices signals a coming up move in the inflation rate about 14-15 months later. So if you believe that inflation is going to pick up and want to protect yourself, then the best course of action is to buy gold 14 months ago.[1]

Gold is a crisis hedge(=insurance) not really an inflation hedge[2].If there is an anticipation of a greate bull market no one needs an insurance. There is no need to keep gold[3]. When the gold prices are declining this is generally bullish for the stocks. Falling dollar is also bullish for gold.

[1] http://www.mcoscillator.com
[2] http://www.inflationdata.com
[3] Intermarket Analysis: Profiting from Global Market Relationships, page 123

Analysing Oil Prices

I found different methods to confirm the trend of the oil features. The first method is from a briefing quote.

Ideally, near-term futures prices would be below longer-term prices. That relationship is described as a contango market and it reflects a more natural order of things whereby prices are higher the further out one looks because of the greater sense of uncertainty that exists with respect to the supply situation over the long haul.

This contango relationship is not unlike interest rates.

A typical yield curve is an upward-sloping one where short-term rates are lower than long-term rates because there is less risk of default in the shorter borrowing period.

In essence, the futures market can be considered to have an inverted curve. Buyers are paying a premium to ensure immediate delivery because of heightened concerns about supplies being inadequate, notwithstanding OPEC's more complacent view of things.

The second method is from John Murphy(www.stockcharts.com) Market messages. He is telling that the oil stock prices must confirm the price of the oil. If there is a divergence something is going wrong. When oil stocks and crude oil move in the same direction it confirms the validity of the trend.

[1]http://www.briefing.com/
[2]http://www.stockcharts.com

Money : Making sense of so much market data on a given day

Click To Play

ADVISES TO INVESTORS OR TRADERS

1. BE CONSISTENT:

Do not be a fundamentalist one week and technician next week. If you are a fundamentalist do not use one ratio on week and next the next week. If you are technician do not use one pattern or indicator one week and the next pattern next week.

2. LEARN WHAT MOST INVESTORS NEVER DO:

You can not make money by reading today's fundamentals in the newspaper. What you read from the textbooks are only one aspect and very known aspect of investing. Technicians can see what the biggest and most informed investors (e.g. institutions) are duing by looking at the trading volume.

Fundamental or technical analysis are not a crsytal ball to the financial independenc. Markets are very complex it is not possible to make proper fundamental forecast by collectioning all the information. Technical analysis provides a simple way in comparision to fundamental analysis. But do not forget that markets are not simple to understand. You can make failures. It is ok to make failures. If you have a system with positive expantancy you can make money even if you are less than 50% of the time right.

3. TRADING IS NOT ABOUT KNOWING, IT IS ABOUT DOING 

Trading is not about knowing it. It is all about doing. All the trades know higher highs, higher lows. And such strategies. But trading is all about doing. Trading is a verb not a noun. "being a good trader is not about making money(paper trading). Making money is about being a good trader(real trading=doing)."[1]

[1] The Kirk Report : http://www.thekirkreport.com/2007/03/learning_how_to.html

RISK-RETURN RATIO

Take trades if your risk return ratio is high. e.g. greater than 1.