Buy Bonds or Gold or Give the Money to Charity?

Those selling stocks and buying bonds or gold at this point may want to consider giving at least part of the money to charity instead of handing it to the market. Buying some gold for protection is fine but selling high quality stocks at this time to buy gold may turn out to be an irrational act. The same holds in the case of stock sales to buy bonds, or even worse bond fund shares, at record low yields.

Gold bulls have recently received another warning from the market that wishful thinking is not a good practice. This blog asserted that the probability of a down move was high at a time when the media was flooded by gold bulls. The down move turned out to be the actual event. By the way, this blog talks about probabilities because trading is the fine art and science of dealing with probabilities. Guessing or wishful thinking is not the way to deal with the markets unless you think you are very lucky. 

GLD_20121219

It may be seen from the GLD chart above that the attractor area just above $161 finally caused prices to fall. That area is defined by the intersection of the 200-day moving average with a horizontal support line and a lower up-trendline. This is a crucial support area and a fall below $160 may signal a test of support at $155 and then possibly a test of the May lows below $150. The RSI(14) is still above oversold territory but at some point this market will rebound a bit. Those who sold stocks and bought gold after October are losing money at this point, on the average.

TLT_20121220

TLT tested the horizontal support line at $120 after violating its 200-day moving average and rebounded. This ETF is not oversold with RSI(14) at 35.42 and it has a lot of room to the downside depending on what yields will do. This is not a primary market but a secondary one that depends on the evolution of the yield curve. Again, anyone who sold stocks and bought bonds after October is losing money on the average. I have also warned about stock bears getting fooled once again in this mid October post.

Disclosure: no relevant position at the time of this post and no plans to initiate any positions within the next 72 hours..

Charting program: Amibroker (Charts created with AmiBroker – advanced charting and technical analysis software. http://www.amibroker.com/”)

Disclaimer

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