Market Outlook/Potential Opportunities:

Gold is stuck in a pennant formation, torn between two arguments as to which way it will turn. Technically we are still in that formation. But we did get stopped out on DZZ. This is an Exchange Traded Ultra short Note on Gold. September appears to be the month that Gold breaks out of its pennant formation and now it looks like it might be up, but we are not going to chase it. We will wait for a good confirmation one way or the other and then buy into a retest. I still feel there could be a false breakout setting up in Gold. The stock market still has a few upward projections, but now has a couple of distribution days. We closed out the Aerospace position (ITA). We were filled nicely on our limit order. We are trying to buy some short funds, but only at our price on rallies. I feel that we will get a nice up move in these next two weeks to sell into. We might even try a dollar cost averaging type of approach where every two days of rally we buy another short fund. We do not want to go the Ultra-short route at this time. The magnitude of any correction is in question at this time. We only have two positions left so we have plenty of ammunition to attack the short side. Lets be careful how we do it.

I was asked how do I divide up positions. This is a portfolio that will at times have up to 10 positions. Each position should carry an equal dollar amount, so if you were trading this with a 50 thousand dollar account, each position would be $5000. So when you place a trade you are going to buy whatever number of shares to equal $5000. At the moment we are down to 2 positions so there is only 10% invested at this time. The rest should be in short term instruments (money market). I know it is tough just keeping so much of the portfolio on the sideline, but the big money in this account is made when we get some great lineups in a lot of markets and have the cash to push it in. Right now, I guess that I am in a risk aversion mode, but that could change very quickly.

Current Long Portfolio:

Buy DTO (Ultra Short Note on Oil) @ 80 It closed at 86
Sell stop at 84
Long NLR ( Nuclear Energy ) @ 23.4 It closed at 22.8
Sell stop at 22.5

Current Short Portfolio:

None

Recently Closed Positions

Bought DZZ (Ultra Short Note on Gold) @ 21.2 Sold at 19

Bought ITA ( Aerospace ) @ 41 Sold at 45.2

Short RJA ( Agriculture ) @ 7.1 Bought at 7.1

By Bill West

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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