CASH IS KING ..... but 3 opportunities emerging

'One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do.

Unfortunately Investors can't just sit there and wait for something new to develop'

Jim Rogers (Co founder of the Quantum Fund with George Soros)

Over the years I have found that as an adviser a sure fire way of losing clients is to do exactly what Jim Rogers's invaluable rule demands. Investors surmise that investing nothing means doing nothing. In reality when I am not invested I work far harder in attempting to find the next opportunity than when I am fully invested.

My first experience of the unexpected disappearance of clients by doing the right thing was when I held cash in 1974 during the worst UK stock market crash ever. My investors just hated the thought of seemingly paying for nothing even though their capital was being preserved for that opportunity somewhere along the line. It did so in 1975 with a 300% rise in 3 months!

Coupled with this investor dilemma is investor's inability to refrain from chasing performance and then dipping out as the inevitable correction takes place. When investors look at charts with impeccable hindsight they invariably notice that the time to buy was at the bottom and the time to sell was at the top. In practice even after this earth shattering experience they continue to buy after a rise is almost over and panic out after the correction just as the market is about to rise.

What is the answer?

My loss of clientele in the '70's spurred me to find an answer to this dilemma and has exercised my mind ever since. This is my conclusion. From the investors point of view he must find an adviser with a good track record over a reasonable period of time to ascertain that the manager has the where with all to exit markets in the bad times and recognise the lows or near lows of bull markets in the good times and act accordingly. The investor must also have the courage and patience to hang in if his timing of entry was wrong and trust in the manager to continue his proven past outperformance. Above all the inexperienced manager who has led the way in a bull market or has failed in past bear markets should be avoided at all costs. The leading inexperienced bull market managers are invariably a high risk taker and will fail disastrously in subsequent bear phases.

'Unless a man has trained himself for his chance, the chance will only make him ridiculous'
W. Matthews

We at Gann Management offer an alternative approach to management via our Zenith educational service where the personal ability to anticipate future tops and bottoms is taught…this being an invaluable tool especially in avoiding the disastrous effects of bear markets both from a monitory and psychological point of view.

So where are we now?

We are 80% in cash with profitable shorts in Tin and the FTSE Techmark. Now is the time to wait for the next opportunities to emerge. The question now is 'Where to from Here'

THE WORLD STOCK MARKET OUTLOOK

Today's World Market survey places the vast majority of markets either on or just under heavy resistance to further progress. There are no markets which are even remotely looking like a buy. There are several markets where the short term trend has turned down and could signal 'shorting' programmes in the near future.

As for my triple top FTSE 100 analysis of the 10th June progress to date has been disappointing. There has only been a 'gradual' fall from the 4500 resistance with no break out over 4500 nor a sharp fall from the level. To date this is suggesting a possible difficult summer sideways move with little profit potential. This could be a case for patience until the arrival of the explosive September and October season. The informed buyers are still selling more sharply than the index is falling. This is not yet a sell signal but would be if the index rallies against continued Informed Buyers Index weakness.

The trends for the UK, US & Europe remain down with lower tops and bottoms.

There is little here at the moment to excite over the next couple of months.

COMMODITIES DEMANDING ATTENTION

Since we revived interest in commodities in 2005 after our huge success in the '90's we have managed to achieve world class returns with our more pragmatic approach than our gung ho '90's attitude which produced such astonishing results but which subscribers found difficult to live with.

Last time we saw the Soros performance figures we have been able to hold our heads high when comparing ourselves with the Soros mid twenty returns. Indeed our consistency could possibly evoke fears of a Madoff Ponsi type scam if it were not for our daily exposure of pre-analysis, day of action and constant exit placements. The results have all been confirmed by daily focus pronouncements, e-mails and text messages. Such records have all been conserved since 2000 on our web site…access being freely available to everybody. It could be time for our investors to concentrate on this area as the longer term looks far more favourable than the stock and Bond markets.

Again I would reiterate my view that commodity trading, when subject to our iron disciplines, is far safer than equity investment with its not too infrequent 'out of the blue' overnight extravagant falls and rises.

The commodity CRB index has corrected back to the levels of October 2008 but the chart shows a support level not too far away. This is supported by the analysis of the Continuous commodity index.

We have no less than forty possible trades lined up should the markets move as expected so this is an area demanding attention.

GOLD BULLION & MINES I have been mulling over this WTFH report for some time. The delay was due to my initial bullish Gold interest in early July which was shattered by continued weakness in the bullion price also being reflected by weakness in the various Gold Mines indices.

The common feature of all gold bullion and indices charts is that they have just broken below rising angles with drops to the next lower angle some distance away suggesting sharp drops. Patience exercised over the next few weeks could bring big rewards.

The charts under show falls down in early August to:-

828 for Gold Bullion 2000 for the UK Gold Mines Index
260 for the US Gold Bugs Index
250 for the Canadian Gold Index

CURRENCIES CLOSEST TO ACTION TIME

Sterling has benefited from strength since March of this year against all the major currencies. However the move has drawn Sterling up to significant resistance with Sterling weakening from current levels. The US Dollar; the Euro; the Yen; the Norwegian Kroner; the Australian Dollar and Swiss francs are all close to triggering buy signals against Sterling. This is an area demanding instant vigilance

THE BOND PUZZLE

I have recently been apprehensive in entering the Bond markets as it is essential that the appropriate currency is at least holding its own against sterling. This has not been the case since March so the recent strength in Bonds from our support levels were not taken up. This has been proved prudent as the Bond gain of approximately 6% was nullified by a fall of over 10% in the US Dollar against Sterling, as well as was other major currencies.

However, Sterling is now weakening against other currencies opening up the possibility of purchases for US Treasuries and Bunds. This could prove to be a double whammy with possible asset appreciation from the Bonds and also the currency itself.

Concentration on coupling currency and Bond risks could produce sound profits.

SUMMARY

There would not appear to be much likelihood of profits from the stock markets unless weakness develops more momentum taking markets through near support. The commodity markets are approaching a support area and thus inviting interest. Gold and Gold mines appear to be falling under angles intimating falls to the next angle down which puts Buy signals a little way off in early August. Sterling weakness looks imminent presenting opportunities for Foreign Exchange profits. This currency opportunity could also open up Bond prospects.

Regards,

Fred Stafford