Discussion in 'ETFs' started by jedwards, Nov 5, 2009.

  1. I have a lot of GLD but I too think that we're nearing a top given the irrational exuberance.

    Does shifting over to TBT make sense? I feel that it still provides protection against inflation/hyperinflation as well as even modest recovery. The only thing that could affect it is flight to safety which would affect both GLD and TBT. So it seems to me that my risks are still the same but my benefits are greater by holding TBT.

    If we have a modest recovery, interest will go back to more normal levels, and TBT should rise. However, GLD in the same scenario will plummet. The only thing that GLD will protect against is a destruction of the US dollar and hyperinflation, but I think TBT will do the same thing, as the interest rates will skyrocket as well. So TBT protects against the same thing that GLD does, except more and better. The same thing that will hurt TBT, flight to safety, will also affect GLD.

    Am I missing anything in my analysis?
  2. ccwells


    jedwards, I do believe that GLD is near a top and that TBT is headed higher. I may disagree with your fundamental reasoning, but I agree with the outcome. The outcome is what matters anyway.

    I base my projection on technical analysis. GLD has not confirmed a change in trend and is nowhere near so. However, TBT has signaled a potential change in trend. I do believe rolling some of your profits in GLD into TBT is a sound decision. You can move more over as necessary.
  3. yea going into both i think is a start play... tlt looks like it broke the support, TBT nice play but long term just watch out for tbt may deteriote since its 2x.
  4. gold has been at a top for over a year now and will continue to move higher. The feeling of missing a ripper rally does suck.
  5. ccwells


    TBT has recently found good support at the 55 EMA. It has moved above it, back below it, and now back above it. However, this last move above the 55 EMA has held price up. The 13 EMA has crossed above the 55 EMA with today’s close, which indicates a change in trend.

    The next significant point concerns Elliott Wave analysis. Forgive me if you are not that familiar with Elliott Wave analysis, but try to follow along. This could be crucial.

    The move from 10/2/09 through 10/15/09 is a clear five waves up to indicate a change in trend. Since that move, I can count three waves down to the 10/20/09 low and a five wave up move from there to the 10/26/09 high. Then there are another three waves down and five waves up to the 11/6/09 high.

    This is where it gets a little complex. Elliott Wave rules does not allow for overlapping of wave four into wave one, wave two cannot retrace more than 100% of wave one and the third wave cannot be the shortest wave.

    The first five waves up to the 10/15/09 high are the first five waves and it is very clear-cut. The next two five waves up push to higher highs of 10/26/09 and 11/06/09, but they do overlap. However, this overlap does not break its previous lows. That means that wave two never retraces more than 100% of wave one.

    Since these two back-to-back higher highs are five wave patterns, it indicates that the pattern is still moving in the main direction, up. What this is showing is consecutive waves one and two. There are three one and two wave sequences. This indicates that the third wave is going to be an extended wave. This helps make sure that wave three is never the shortest wave and not all that uncommon.

    Therefore, what is the implication of all this for TBT? If my count is correct, expect a huge rise in price over the next couple of days or weeks. Third waves are usually intense and since this potentially could be a third wave of a third wave of a third wave, it should be impressive!

    Volume should significantly rise to push the price higher. Expect the volume to go ballistic surrounding the last third wave.

    MACD and Slow Stochastic are positive and continue to rise. Expect these indicators to end up overbought for an extended time.

    There was a bullish engulfment candlestick today although it was by the slimmest of margins. This could also indicate higher prices from today.

    I expect the price to reach the 54 level minimum and potentially could make it to the 58 level.
    • tbt.png
      File size:
      16 KB

  6. Irrational exuberance?
    Are you kidding me?

    How much has it moved y-o-y?

    Irrational exuberance is when something makes a crazy move (like several hundred percent) in a short period of time (like a year or less).

    This could just be the beginning of gold. It hasn't gone parabolic yet.
  7. ccwells


    You may be right. However, with all the ads on CNBC telling you it is time to buy gold and every analyst on the Financial Networks telling you that gold is heading to 2000 because of future inflation due to the government stimulus, I have to be a contrarian.

    I do not believe gold is heading to 2000 from current levels. Due to the above-mentioned facts, I believe the move to 2000 will be from much lower prices.
  8. Ads predicting gold will go to $2500 have been around since at least Y2K. Their existence should not be used as an indicator of gold's future price.
  9. IMO if hyperinflation becomes reality a leveraged short bet on long bonds will outperform gold, not on a risk/reward basis but on nominal profit.

    In a hyperinflation scenario (50,000% annualized) 10/30y bonds will become completely worthless. I'm not in this boat, but if I was then this would be the bet to take: long dated, far out of the money put spreads on 30y treasury bonds.
  10. trom


    TBT's price is path dependent. The price of TBT provides no information about the price of treasuries. You could be totally right on shorting treasuries and make $0 or lose money by holding TBT.
    #10     Nov 12, 2009