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Tuesday, February 17, 2009

What Do I Do Today?

"He who is prudent and lies in wait for an enemy who is not, will be victorious." - Sun Tzu, The Art of War

This Blog entry will seem familiar to a few people. The reason for that, is that I've received a number of emails asking that very question. Now what? What do I do? What do I buy? So I figured it was time to answer that question in a blog entry, rather than in numerous private emails.

The answer is, I'm not sure. At the current moment? For myself, my own trading, and my own investing and trading? I'm waiting, and I'm watching. And yes, Dan has a plan.

So what am I watching? What is the plan?

I'm watching two markets that I believe are the 'end result' and the sum of all the fear, uncertainty, doubt and ill-liquidity that is the current economic disaster. I'm watching the U.S. Dollar. And I'm watching the stock market as represented by the DOW Jones.

1) If the US Dollar weakens (Say, 84.50 and below on DXM9) and the stock market starts to rally? I'm going to take another nibble into the stock market. 3% of available cash, towards a dividend, long term stock. Add to my PG or PEP positions. That's capital starting to move back towards the market. This eventuality would be a great thing for the economy over all.

2) If the US Dollar strengthens? Say, past 89 to 90 on DXM9? Then deflation is continuing (and worsening), and saving your cash is the best bet. In that scenario (if it came to pass) - you may even want to hold off on purchasing any metals. The main worry then is to make sure the balance sheet of the institution where you have the money? Is healthy and strong.

3) If the US Dollar weakens (say below 84), and the stock market goes below the Lowest Lows of November? Buy metals. Physical, real, metals, which would probably be rising in that situation.

The U.S. Dollar is really going into a very tight triangle. Myself? I watch? When I see it break one way or another? I'll probably make my decision at that time. That's the plan moving forward.

Which of those three eventualities am I currently seeing form and take shape? Well, as I sit and write this entry? I'm watching the Dollar move to new highs, and the stock market sink.

(Click to Enlarge)

Cash. Cash, as in the U.S. Dollar. I've said it for a while now, and for the time being it's still my song.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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