Reducing DEE +166% , Market Update, Gold Update, Entering NUGT

In April of 2013 we announced we were "Shorting Commodities Via DEE".

We're up roughly 166% on the position, which for us is a double-sized position.  With the collapse in commodities making front-page news now, we're going to be selling 2/3 of the position, and we'll exit the remainder should DEE close below $65.

Last post, immediately below, was over a year ago.  We were anticipating an imminent market drop.  A week later, the DJIA was 600 points lower.  Ten weeks later, the DJIA was over 1000 points lower. 

For the most part however, we were incorrect because the turn lower in the monthly MACD which we were anticipating (see chart in post below) had not yet occurred.  We did well on some of our short positions, but most were closed around break-even or at a slight loss when markets continued higher. 

We then took time off from trading, not wishing to buy into a hyper-valuated melt-up or go short too early.  Holding positions such as our commodities short (DEE) and dividend-paying stocks such as LBS and VGR has served us very well, while taking profits on most everything else if it went much higher or dropped below our stop levels. 

LBS is up 69% in share price and is paying a 24% annual dividend ($1.20/annum, paid as $0.10 monthly, based on our entry price circa $5) since we purchased it in 2012.  At its highs it was up 132% from our entry (it traded above $11 last year). 

We originally purchased VGR in August of 2013.  Since then it's up roughly 44% and has paid 9.5% cash dividends as well as an additional 5% shares dividend!

We  did reduce some of our VGR position almost a year later, as detailed in this post - selling CWA +49%, reducing VGR +25%

In addition to being correct on commodities the past few years we've been stridently bearish gold, suffering much backlash and derision for it, yet proven absolutely correct.  We were also very bullish the US dollar, again against popular opinion and again proven correct. 

Regarding equities though, markets continued much higher than we'd expected.  This year however, the old adage "sell in May" would've been worth heeding as the DJIA topped in May then plunged almost 3000 points to the August low. 

Getting back to the trigger on the monthly MACD we'd been awaiting, that finally happened early this year and certainly anyone shorting the market would've been much better off as we'd predicted.  That should prove to be the case going forward for the foreseeable future.

Here's a look at the updated chart:

Here's our infamous "Psychology Of Gold Investors" graphic as it looked when we first presented it in late 2011:

We posted periodic updates, the last of which was in June of 2013 :

We'd now place both gold and silver between "Reflection" and "Acceptance".  There's plenty more downside left in both metals, and rest assured it will come, however it appears a major bounce may first be upon us. 

It's worth re-reading our last major post on gold, especially if you've lost money on the long way down.  Keep in mind that gold started a major bounce a few days after this post before continuing much lower, as predicted.

With that all stated, we're effectively going long gold via NUGT which closed Friday at $25.50  Gold closed Friday at $1083  We'll trade out of the position if gold closes below $1080 for three successive sessions.  That's been the low so far this year, and we may now be seeing a "double-bottom":

Also consider that bearish sentiment on gold is currently widespread and at extremes equivalent to those observed before each major rally since the 2011 high. 

NUGT is a levered play on mining companies.  Miners could drop even if gold rises, especially if equities in general continue to plunge.  A pure play on gold would be GLD, or a levered derivative play would be AGQ or USLV (levered silver positions).






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