My 1st Million At 33 – yes, you can do it too

Gold reached my target of $650.  And it did so by grinding everyone higher.  I’m expecting a minor pullback maybe back to $620, and then the trading range may be moved to $610 to $685.  Since my cash is still on the sideline, I may be putting them into energy instead of PM (precious metal) now.  The cost of waiting is growing bigger by days.  I will choose to up my natural gas holdings first.

Looks like PM may not have a significant pullback.  The stock market in general still looks to be quite shaky.  NASDAQ seems to be in a bear market, rather than a bull market.  If the general market does pull back hard, PM should pull back too.  Again, the market leader right now is really PM and energy.  Liquidity always flows to the leaders of the market first.  Since the reasons for PM & energy to go up are usually antagonistic to the general market, it’s likely that they will rise alone.  But I’m hoping that the liquidity will return, and it can make the entire rally much stronger.

I am still deciding whether I should lightened up a little.  I really prefer to add to my PM positions.  My desired allocation right now is to allocate to 60%, still 5% more to go.  But HUI & XAU are underperforming gold, which is definitely a short-term negative.  However, at pullback of gold, I expect a positive divergence to happen again.  That makes the room of trading to be relatively small.  More likely, I will do some rotations from weaker to stronger stocks at this juncture.

A couple of days ago, the Hulbert sentiment for gold at marketwatch.com was showing that sentiment got bullish too fast for gold, and that was bad contrarianly for gold.  However, I’ve learned that market is NOT sentiment, but rather consisted by actions from market participants.  Sentiments are a good technical indicator, but more importantly, it’s what people do after having such sentiments.  From what I can see so far, the most bullish in gold probably didn’t get out of the last peak, and only added some more at the dip.  They are very cautiously bullish in general.  The traders of the gold market want to have a bigger pullback before put their money at risk.  And the bears of the gold market have declared the end of gold bull, and have zero, if not negative allocation in gold.  All these indicated to me that grinding up is the most likely result, assuming that gold is still in the bull market.  And if I had put my cash to work into PM, it would have made the PM market more bearish, since I am also a market participant.

I watch myself how I react to the markets, and yet sometimes it’s very hard or maybe impossible to tell whether my trading actions were taken after I have observed myself, or just simply as part of the entire market reactions.  It’s like you should take actions based upon going against your sentiments.  But the problem is that once you do this too many times, you start to get quite confused about whether you’re really going against your sentiment, or you are going against “the going against your sentiment”, or you have simply not yet going against your sentiment.  Got that?  Unless I’m entirely focused on the market, I just can’t tell how many times I have flip-flopped against myself.  But to do trading correctly, you’d better not go through any vacillations and only “flip yourself over” once.  By the way, you only want to “flip yourself over” closer to market tops or bottoms.  The rest of time, you should not flip it.  Tough mental exercizes for self-introspective market psychology for trading indeed.  That’s why most traders fail.

By the way, you also need to be self-aware of exactly where you’re in the spectrum of most bearish to the most bullish fundamentally to flip your decision correctly.  Market bottom is reached when the most bullish person gives up and becomes bearish (at least in actions).  Market top is reached when the most bearish person gives up and becomes bullish (at least in actions).