Feb
20
2009

  GLD Might Recycle

Since last October, GLD has been in a pattern of only finishing the TD Setups before reversing direction, and not delaying the reverse until an entire TD Countdown had completed. But this last time, the Sell Setup finished on 1/30 and I had to make the decision whether to sell then, or wait for a countdown. My intuition said that since this was the highest closing price for a setup, that made it a little different than the previous setups which reversed soon after completion, so I held the position.

Not only does it appear that GLD will finish the whole TD Countdown to 13 (at it's current pace, it should hit next Thursday, but it could be a few days later), but it appears that the upward momentum might finish another sell setup before the countdown is complete. If it meets certain criteria, the sell setup will "recycle" itself, meaning it replaces the current count (yesterday was day 8 of 13) and the price will go another 13 days higher (note, while the setup days must be 9 consecutive days in a row, the countdown days do not have to be contiguous, so it's a minimum of 13 days, and in practice could take many more weeks to finish).

Either way, I'm watching this trade like a hawk. If I execute properly, there is a chance that I'll have covered about 5 months of living expenses with this one trade. Which is good, since my XLF sold at a loss yesterday on a trade trigger, which while it doesn't make me negative for the year, it does wipe out most of the gain I booked from the sale of FXY at the end of January. The upside is that if I can book enough gain before the baby is born then I might just move 100% into cash for the weeks following the birth. While I might miss out some upside, protection from downside will be well worth it, and I won't feel like I have to follow the market daily when I should be paying attention to the baby.

Who knows-- if I trade right, I might be able to cover our annual expenses (well, pre-baby, I don't know how much more the baby will cost, but probably not too much if I'm breast-feeding and not using diapers) in the first half of the year. Then anything I make after that will just be extra.

When inflation was running over 4%, I had a fairly high target to hit to cover both our expenses and make sure our principal kept up with inflation. But with DEFLATION in effect, I don't have to worry about the principal losing value, and just have to earn enough to cover expenses, which is MUCH easier. Especially when the cost of the expenses is going down. I really like deflation.

Terry and I were even toying around with the idea of selling our sedan now, with the expectation that in six months or so we could buy a new model of the same car for the same price as we sold our current '05 one. We might have actually done it if we didn't have a baby on the way-- see our other two cars are both 2-seaters, so we'd have to turn off the airbags to put a baby seat in the front, and we couldn't go anywhere the three of us as a family, etc. So our scheme is just not practical at this point. But I throw it out there for anyone else who is jonesin' for a new car. We have a strong feeling that the prices (especially for luxury vehicles) are going to come down, down, down in the coming months. The problem is that our trade-in value will also go down correspondingly, so it's hard to benefit from a direct match-up timing-wise. Ah, well, I guess we don't have to optimize every single transaction in our life. And there's nothing WRONG with our current car, it just lost its completely silent quality after about 2 yrs, so now it's just quieter than most other cars instead of being completely silent on the inside. It's a small thing, worth trading up if we could do it on the cheap, but not worth paying a big premium.