Tax Selling Season Rallies

 

 

Trader Scott’s Market Blog

December 22, 2016

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Tax selling season is coming to an end, and once again the miners are ending the year on a weak note. There are good articles about tax selling season out there. This post will look at the performance of the generalized index – the HUI – with the bottom in this season in each of the last four years before the explosive bottom last December. The gold bull market topped on 9/6/2011. A chart of gold and a chart of the HUI Gold Index shows what happened from the December lows. I’m only including these four years, because with any kind of analysis, I try to keep it in context of the overall trend of the market. The arrows show the December bottoms, and there were rallies in each instance. However, this is backward, rear view mirror analysis, so keep it in mind. Things are a lot different with real money on the line at the time. But it also shows why it’s so important to have some kind of profit taking (at least partial) “system”/approach. So when the positive January effect takes over, selling into strength needs to be a serious consideration after a while. If you had serious convictions about a much bigger bottom in place last year, you were well rewarded. The percent gains per season from the late December lows are, in order – 15, 8, 42, 40. Now obviously this is assuming we bought at the exact bottom, and sold at the exact top which is not doable by anyone. And all of the tops were in January, except the 2013 one lasted into March. And also, it really requires people to have the guts to just go ahead and buy into weakness, of which there certainly was then and is now. But, of course weakness itself does not necessarily indicate a major bottom, but possibly an opportunity. There were varying opportunities in December of last year, especially with the individual miners. And we know what kind of powerful moves most of them had this year. It says a lot about the future, as this move was so different than the last four years, but we still need to get thru this period. So there are two choices. Either you layer in a bit by bit into extreme weakness, or you wait for a bigger rally, and you buy into the reactions into new lows. This won’t be simple. But overall, the bottom will become more volatile and set up different buy points into reactions, just like last year. There will be re-tests and it is a process – the first rally is just the first rally. Like all things in markets, it’s just patience.

 

 

 

 

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 – Tax Selling Season Rallies- December 22, 2016' have 5 comments

  1. December 23, 2016 @ 1:09 pm Mark

    Hi Scott, as always, your insight is appreciated. Would you therefore consider NUGT as a contender to “layer in a bit by bit into extreme weakness”?

    Mark

    Reply

    • December 23, 2016 @ 2:26 pm traderscott

      Mark, it’s between short term trading and longer term trading or investing. But that’s for me, viewing markets from a trading mentality – more focused on risk than profits – and selling some into rallies. Those relatively stronger miners which some people emailed me about, 2 of them are up 7% and 10% from last week’s lows, and I took some profits off of the table today. So that’s how I layer. As investments, the 3X instruments are ugly. As short term and even intermediate term, they work well. I only use them as day/few day trades, and that’s it. I just don’t feel comfortable with them. I’m layering with individual miners. But I will buy a bit of physical silver on the big drops, and using different price points along the way, even tho I do not believe silver has bottomed.

      Reply

  2. December 24, 2016 @ 4:30 pm traderscott

    The speculator’s long positions continue to fall – six weeks in a row. The archived Cot reports can be viewed here.

    Reply

    • December 25, 2016 @ 6:57 am Fen

      Thank you very much, Scott.
      Merry Christmas to you.

      Reply


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