buying ZSL, effectively shorting silver

It's a great time to short silver. When markets rise silver has been going down, and a big market bounce is arguably due. When markets drop, silver has been dropping or at best staying steady.

Gold is up nearly $200 this month so far, as a "flight to safety" which ironically will eventually prove to be anything but safe, as is everything else that goes parabolic including silver when it was at $50 at the beginning of May. Gold might not be at a top yet, but silver was in early May when it crashed and now its bounce seems over and the next leg down begun.

It is extremely rare for something to break down as badly as silver did this year and then recover to new highs. If the recent market panic and massive spike in gold can't lift silver to new highs, probably nothing will. Based on that, while laughing off the many fantasies that abound about silver being used as money or massive conspiratorial short positions due to unwind any day thus spiking the price to $100 or higher, we're of the very unpopular belief that silver below $30 is not far off.

When we make the most unpopular trades is when we realize the biggest gains, and we've done that very consistently over time in this blog. Here's hoping this will be another one of those big counter-trend wins.

ZSL is a levered inverse ETF which goes up in double proportion to drops in SLV, the silver ETF. It closed Wednesday at $13.44 We're going long. Downside risk is probably another 10-15% while the upside is 50-100% or more. A reasonable risk/reward in our view.

Very aggressive traders may consider November calls on ZSL at $20 or $25 strikes, last offered at $1.20 and $0.65 respectively. We're comfortable with the already high risk and profit potential in the double-levered ETF.

Options speculators might also consider $50 or $55 August calls on TNA, if wishing to profit from any big market bounce that could occur imminently. August calls on those strikes were offered Wednesday at $1.00 and $0.35 respectively.

We'll probably play the options if there's at least one more big downward move intraday in the equities markets.



We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or for mentioning any stocks or companies in this blog. If we hold existing positions we divulge the fact. This blog is merely a diary of some of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

To be notified when this blog is updated : Please e-mail christianguinness@hotmail.com with "Subscribe to blog" in the subject line or click here to do so automatically if your computer is configured accordingly. We have never shared our mailing list with anyone, nor will we. Please note that we only send update notifications when a trade idea is diarized or updated, not if a blog entry only contains general commentary.

selling FXP +32%, BZQ +45% & buying TBT

A quick update on past entries diarzied here.

FXP is now 32% higher than our 2nd entry in late May. It'll at most go up another couple dollars, we believe, before a material correction, so we're selling that 2nd portion while keeping the original position which is at roughly break-even from our entry in December 2009.

BZQ is up 45% from our entry in late May. It'll probably go much higher in time but for now we'll step aside and book these gains.

We'll go long TBT, an ETF which is double-inverse to the 20-year U.S. Treasury Bond. It closed today at $26.62 and we'd not be surprised to see it as low as $20 but if it gets there we'll possibly buy more. For now we'll just hold this position awhile and if we're blessed with a quick price appreciation we'd book it and update the blog.

Those who shorted Apple on our suggestion were stopped out for a loss of just under 6% and those who hedged it with a market long as we suggested in the link below came out well ahead on the pair trade as BGU was up 22% when the Apple short was stopped.

No other changes, and certainly no surprises with respect to the recent market action per this commentary published just days after the apparent market high for the year : http://ridingthegravytrain.blogspot.com/2011/05/goldman-sachs-share-price-signals.html

A follow-up can be read here : http://ridingthegravytrain.blogspot.com/2011/06/update-fxp-bzq-qid-faz-aapl-hao.html Indeed a market rally began immediately after we predicted it, which turned out to be one of the biggest weekly gains in many years.

Early in the last week of July, subscribers to our paid advisory were given a short-term sell signal which remains in effect today. By the beginning of this month even our conservative readers were signalled to be short or hedging longs, and anyone reading this knows what a lucky call that seems to have been. We refer to these as "signals" because we use a proprietary indicator that does a reliable job of catching market turns in different time frames. Speculators follow the short-term signals, while investors consider the longer-term signals.

At this stage our thinking is that gold and especially silver are marking tops of some duration, as are bonds, while equities are still overvalued but due for a big bounce. We remain very bullish the U.S. dollar, though we'll change our minds on material weakness and if so we'd sell out of our May 5th entry into UUP.



We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or for mentioning any stocks or companies in this blog. If we hold existing positions we divulge the fact. This blog is merely a diary of some of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

To be notified when this blog is updated : Please e-mail christianguinness@hotmail.com with "Subscribe to blog" in the subject line or click here to do so automatically if your computer is configured accordingly. We have never shared our mailing list with anyone, nor will we. Please note that we only send update notifications when a trade idea is diarized or updated, not if a blog entry only contains general commentary.