Thursday, May 28, 2009

Nat Gas And Other Ways To Play a Neutral Market

While I do believe we are at the cusp of a large move down in the market over the next 4 months, there is no guarantees on where the market is headed. Playing sectors is basically playing the market and playing individual stocks can be frustrating.

But there are some plays I have been pointing out that really should be considered. First and foremost is Natural Gas. UNG is a really good way to play it and it just seems like it is time for Natural Gas. If you are a chartist, you have to absolutely love UNG's chart. The 20 day and 50 day MA's are running in parallel and the price of UNG is at the cusp (I have used cusp twice now) of crossing both at the same time which would represent a very bullish trend and likely to head to the 200 day MA from there.

Also notice how UNG does not follow the market so if you are not sure where the market is going, UNG is a great play both for long term and for day trading. UNG has lagged OIL and other energy components and historically lags. So I am loving UNG right now especially if it can get above 15.

Another play as I mentioned over the last few weeks is TBT which is the short treasury ETF. As I mentioned just the other day, TBT should be exhausted right now and treasuries will probably level out for awhile so TBT is probably not a great play at current levels. A good entry is probably around 51 which is going to be a key resistance.

GLD of course is a good market neutral play and is more of an inflation and anti-dollar play. I think GLD is a bit pricey right now and no sense chasing. Look for a pull back of about 5% for a re-entry. Gold at 900/oz is going to be a good entry for buying bullion and GLD. I have been selling some of my bullion on ebay recently. It has been perhaps one of my best investments since January.

Two other ETF's which should move regardless of the market are EEM and CAF. EEM is an emerging markets ETF and has performed extremely well for me in my trading account as well as my college accounts and 401K. It should continue its steady climb and is a great anti-dollar trade as well.

CAF is a bit more risky but you have to believe China banks are in better shape with the slide of the dollar and the fact China stayed away from the toxic debt other countries seemed to race each other to get into. China must, and will lead the world economy out of the mess we are in and the China banks will be at the forefront.

The VIX stayed within range of the 20 dma and perhaps is finally primed to cross it. Todays bounce in the market did not erase yesterdays losses so I expect the market to move lower on Friday and follow up on Monday. I believe on Monday the VIX finally crosses the 20 dma and we begin in earnest the move below 875.

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