Weekly Grail Report

I’ve spent roughly 64 years studying the stock market on a daily, weekly and monthly basis. I’d say that 80% of the time I was perplexed or unsure of my stand. I know in the advisory business you are always expected to know exactly what’s going on and where to place your money. In my experience, the more cock-sure the advisor, the bigger the quack.

One problem is that the stock market isn’t always talking, and when it isn’t, many advisors create scenarios so they can carry on the illusion for their readers that they, at all times, know what is happening.
– Richard Russell

Russell says he was perplexed or unsure of his stand 80% of the time. Even though he didn’t say so, I’d bet that it was the other 20% — when he apparently was more sure — that he was the most wrong. That’s the way it works. If you ever get to thinking you have a handle on what’s going on, watch out. That’s usually when Mr. Market is about to show you who’s boss.

So in a perplexing and unsure way I’ll timidly say that it sure seems like the mining stocks are about to do something pretty exciting, doesn’t it?

The gold ETF (GLD) — owned by the Long Term Timing portfolio — is up a very nice 4.63% over the last 30 days. But the junior miner ETF (GDXJ) — owned by the ATR Trading portfolio –  more than doubled that performance, up 9.78%.

And Silver Wheaton? Goodness gracious…

SLW –  also owned by the Long Term Timing portfolio — is up 20.35% in a month. In fact, SLW is making new all-time highs.

By the way, I haven’t written about it in a long time, but SLW has a great business model. The company doesn’t own or operate any mines. Here’s what happens –70% of of all silver production is a buy-product of precious metal or base metal production (Which is one of the exciting things about silver, but that’s another story in itself). So Silver Wheaton makes deals with mining companies to buy up to 100% of their silver production at a pre-determined price of about $4 an ounce.

The company has no capital expenditures. No production costs. It only has about 20 full-time employees. It’s a cash flow machine is what it is. SLW has been my favorite “mining” stock for a several years. It’s good to see it making its move.

Oh, I shouldn’t have to remind you, but I will anyway. Don’t think that mining stocks are getting expensive. On the contrary…

The gold/xau ratio is still well over 6. When it gets below 4, then we’ll start talking about the mining stocks being too expensive. We’re a long way from that happening.

ATR Trading Strategy

The portfolio is about 59% invested. It owns GDXJ, AGQ and LBJ. LBJ is struggling right now, but the  other two are doing fine. I’m sure there will be some additions and maybe subtractions in the portfolio soon.

COT Strategy

COT is about 88% invested. The portfolio is over 40% invested in double leveraged SSO and QLD. And both have been doing very well. But if the stock market corrects, and I think there is a good chance that it will, the COT will suffer for awhile. But that’s why we diversify among strategies.

The only reason I think the stock market may be heading into some turbulence is that it hasn’t had a 10% correction since it started its advance more than a year ago. And the bullish sentiment is as high as it was in December of 2007, shortly before the 2008 disaster. Don’t get me wrong, I don’t think we’re going to see anything remotely as bad as what happened in 2008. But a significant pullback would not be surprising.

Also, I bet that natural gas wouldn’t make a new low. If UNG doesn’t get going soon, I’m going to lose that bet. The big commercial traders sure think its too cheap. But it wouldn’t be unlike Mr. Market to prove us all wrong.

RSI Reversal Strategy

RSI finally had a trade last week with DZK. And, as usual, it was profitable. But this strategy has been really quite since January. However, as of Friday, several of the leveraged ETFs have 2-day RSIs in the twenties. So it won’t take much to get some buy signals. With RSI Reversal you just have to stay patient and stay alert.

Magic Formula Strategy

Magic Formula is about 78% invested. However, CEU doesn’t look like it wants to cooperate. So we may be dumping it soon. But that’s going to be my strategy with this portfolio — take some 2% of equity losses to find the ones that are going to double and triple in price.

I sure don’t know in advance which ones are going to be the winners. And I don’t know anyone else who knows either. The portfolio bought IDCC last week. I’ll probably make another purchase or two soon.

Long Term Timing

Well, April ended on Monday. So it’s time to make possible changes to this portfolio. And the big announcement is there are no changes to be made. Everything is above its 10-month moving average. MOO looks a little shaky. So does EEM. But the precious metals — GLD, SLV, GDX and SLW (up 88%) are all doing fine.

Somebody once said that truly successful investing is a boring process. This is the portfolio that proves the point.

Have a prosperous week,

Larry