The market started Wednesday off in the red and managed to turn things around in the afternoon before giving up its gains in the final two hours. There wasn’t any panic selling and it appears both bulls and bears are waiting to see how Friday unfolds with Triple Witching. Then again, the Volatility Index (^VIX, 49.84, down 2.53) was at 80 just three weeks ago and is now below 50. As the VIX continues lower, the market gets more confident.
Although the VIX retreated, the Dow finished lower by 100 points and closed at 8,824. The S&P dipped 9 points to 904 while the Nasdaq slipped 10 points to 1,579. Once again, the Dow couldn’t penetrate the 9,000 level and several more failed attempts would not be good.
The dollar tanked after the market had a full day to digest what the new Fed rates will do for the economy. The dollar dropped more than 4 cents to $1.44 versus the euro. Over the past week, the dollar has plunged nearly 10%, moving well away from October’s two-year high of $1.23 versus the euro. The Fed frenzy is weakening the dollar but we got a ways to go before we should panic.
Of course, I’ve been bleeding yellow as the gold stocks have rallied but all of our positions hit their stops yesterday.
Barrick Gold (ABX, $35.49, up $0.58) traded as high as $37.84 and our December calls were closed for a 100% return while the January calls were closed for about a 30% gain.
Goldcorp (GG, $30.62, down $1.03) fell 10% from its high of $33.20. The December 30 calls (GGLF, $1.25, down $0.90) traded as high as $3.30 and were profiled at $1.65 Monday morning. Good thing we set that $2.90 stop, huh? The January calls returned 25%.
It was all downhill for Newmont Mining (NEM, $39.17, down $0.84) after the stock hit a high of $41.79. The December calls were closed for a double while the January calls returned about 35%.
All-in-all these were great returns for three days worth of work. Gold finished at $868 an ounce, up $26, and could continue higher. I’m not quite sure if gold will break $1000, let alone $900, but it worked well for us this week. There will be another opportunity to trade gold again (we have traded gold numerous times this year) and we made a few triples this time around.
The last time gold broke $900 was September 23 when gold prices surged more than $44 an ounce to settle at $909 for the day. That was the same day oil jumped $25 to over $130 a barrel. Those were huge moves but now gold is at $870 while oil is at $40. See what I’m saying…
Rick Rouse
Rick@OptionsMentoring.com
