Is Anything Cheap?

 

 

 

Trader Scott’s Market Blog

December 14, 2016

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The geniuses at the central banks of the world have created a situation in markets where very little is cheap anymore. We basically have to judge what is relatively cheaper instead. The insanely low interest rates have anesthetized market participants and risk is no longer a four letter word. Yes, we go through short term bouts when people wake up for a few weeks, but then it’s back to bed for a few months. But that will change. Higher, and sustained higher, interest rates rates will cause people to remember markets are about risk, first and foremost. This, in general, has been slowly forgotten by way too many market participants. But the sustained higher rates will bring back more sustained periods of volatility, as the central banker’s opiates will be much less “successful”. So we need to be prepared for that. Of course there are some investors who are still very aware of risk. This would especially include investors in commodities and some emerging markets. But that is a relatively small part of overall markets.

There will be some great investors out there whom I’m sure have identified markets they find cheap. My list is small, and agriculture leads the list. Many agricultural commodities have lagged for decades and are not remotely close to their all time highs. But just to add, because something has lagged for years and is probably cheap, it doesn’t mean it can’t get cheaper. Meaning, just because something is cheap, it is absolutely not, by itself, a reason to buy. MRCI is a good site to look at very long term market charts. My main way of investing in agriculture is RJA. This is an investment for me and bought only into weakness, but I did take some profits over the summer. Another interesting market long term is natural gas, but as in yesterday’s post, it’s gotten way ahead of itself currently. A few other markets for down the road, but only if they get cheaper and set up well, are emerging markets, and China, and India.

A market which is hugely overvalued long term is US Treasuries and yields are going much higher over the years. But markets don’t go one way every month and they are interesting for the time being. This is a trade only.

As for PMs, it’s hard to call a market cheap when it’s up almost 5x from the lows. Gold in July 1999 at around $250 was incredibly cheap. But silver and the mining stocks currently are quite cheap long term. As for silver, my plan is to give it some breathing room to have some reactions in and around the Fed meeting, but it is trying to rally. There was a quick reaction today, and tonight we’re right back into resistance at $17.10. There are a lot of buy stops at $17.22ish, and the strong hands would like to hit them. My long term buy point would be back at the November 24th support area.

 

 

About

img_0074bwcrsmTrader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.



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'Trader Scott’s Market Blog – Is Anything Cheap? – December 14, 2016' have 7 comments

  1. December 14, 2016 @ 3:48 am Aamer

    Hi Scott,

    May be worth looking at uranium….and water as a theme. Re EM…thank that with a strong dollar and higher rates they may be a pass for now.

    Whilst the move may have happened….infrastructure investments are bound to go up because there a so few bubbles left to blow.

    Thanks,

    Aamer

    Reply

    • December 14, 2016 @ 10:17 am traderscott

      I agree about uranium and h2o Aamer, the problem is the vehicles to invest in them. And I agree generally about infrastructure. Are you that confident about the hopium surrounding the space tho?

      Reply

  2. December 14, 2016 @ 5:01 pm traderscott

    I’ve been stating that the relative strength of silver and miners to gold didn’t make me bullish, it actually concerned me gold was lagging. I just don’t believe we end this without gold having a whopper selling climax, and then start to lead. And silver got right up to the top of resistance $17.20, but not quite to where the buy stops are sitting. But it actually makes that area more explosive now.

    Reply

    • December 14, 2016 @ 5:28 pm David V.

      Everything went according to their script today, they even gave us the hour to tune in.

      Reply

      • December 14, 2016 @ 5:37 pm traderscott

        Yes, but the the stock market thing didn’t work out that great, especially the big pick up in volume.

        Reply

    • December 14, 2016 @ 6:03 pm Jon

      So gold is now at the lower monthly support 1142-1157. One more push lower on big volume to complete the washout? Miners are also at major support GDX 19.80, GDXJ 32.50 ish on big volume. Should we buy the support break or wait for buying volume? Sentiment is in the toilet based on other blogs I visit.

      Reply

      • December 15, 2016 @ 12:09 pm traderscott

        Yes sentiment certainly is – only one component of the low tho. There are a couple of ways to do this Jon. If you’re planning on selling some into rallies and accumulating that way, then yes, buying breaks of support works well. If not, just nibble a bit and understand you’re accumulating. Just keep using the breaks to buy someone and let normal market forces work for you. Or, wait for a massive selling climax, with the rally, and buy into retests of those lows. The third one is excellent, but it sucks sitting there and watching the rally with no position. I wish this were easier.

        Reply


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