Each year traders try to navigate their way through the financial market and turn a profit. But this is difficult.

The stock market provides market participants with several opportunities each. With all the holidays and climate changes the market as a whole along with specific sectors typically have seasonal rallies and sell off in price.

As May approaches many of us are starting to figure out how to play the “Sell in May and Go Away” potential move.

I cannot help think stocks will start to struggle as indexes test new highs and key resistance levels. The good news is that when money is flowing out of one investment it typically flows into another which provides us with an opportunity to make money.

Risk capital has been flowing into stocks recently but with the stock market over bought on a short term basis traders will start to protect their capital and move to specific sectors within the market to protect their capital.

LONG TERM INVESTMENT OPPORTUNITY EXPLAINED – GUIDE/BOOK

Utilities have been underperforming all year and are not being talked about by anyone. This is a contrarian signal that it will likely become the sector of choice as fear creeps into the minds of market participants.

The chart below shows price of this sector is trading at the key 200 day moving average which should provide support. Also the bullish chart pattern is pointing to higher prices.

It Is The Season For Utilities!

The chart below clearly shows where price is trading today and what is likely to happen over the next 2-3 weeks as we enter May.

It Is That Time Again – Conclusion:

In short, US equities continue to be in a long term bull market. It is best to remain net long stocks as the odds of a trend continuing is more likely than not.

So I feel a great way to get involved in the market here is to get long the utility sector through the exchange traded fund XLU.

This is just one of many ways to play the market between now and the first week of May… If you would like to learn more or receive my personal trades join my newsletter today www.GoldAndOilGuy.com

Chris Vermeulen

A couple of weeks ago I was listening to an hour-long segment on CNBC with Warren Buffett. He brought up a great point about the type of investments he prefers and the difference between an investment versus a speculative trade. I feel what he mentioned is worth sharing so here it is.

He stated that he prefers to hold an investment which is earning money and generating cash flow. Meaning he prefers to own equities of companies which generate income for its shareholders versus a commodity which  does not generate any revenue.

While Mr. Buffett said that gold is a commodity everyone should own some of, he also clearly stated that buying a commodity in hopes that someone will pay you more for it later is purely speculative. Lets face it, would you rather own something that paid you monthly or annually a cash dividend or something that might go in in value, but may also lose value?

Investors and traders are primarily focused on purchasing gold stocks, physical gold via ETF’s, gold bars and coins which none of these provide any income the holder. But after doing some in-depth research I have found another way to invest in precious metals and commodities that will not only give you exposure to the gold, silver, and oil sector but it can also generate a monthly income stream to your portfolio.

Through Gabelli closed-end funds like the Global Gold, Natural Resource & Income Trust (GGN), or Natural Resource, Gold & Income Trust (GNT) you can get the best of both worlds.

Each fund is currently providing a 10% annual dividend paid out in monthly distributions. The Fund’s investment objective is to provide a high level of current income. The Fund’s secondary investment objective is to seek capital appreciation consistent with the Fund’s strategy and primary objective. Under normal market conditions, the Fund will attempt to achieve its objectives by investing 80% of its assets in equity securities of companies principally engaged in natural resource and gold industries, and by writing covered call options on the underlying equity securities.

If you don’t know what covered calls – Explained Below:

A “covered call” is an income-producing strategy where you sell, or “write”, call options against shares of stock you already own. Typically, you will sell one contract for every 100 shares of gold or oil stock. In exchange for selling the call options, you collect an option premium.

With the US stock market slowly nearing a bull market top and with commodities trading at multiyear lows we should eventually see a shift in money flows out of stocks and into commodities. With rising commodity prices resource base stocks should start a new bull market that will send these funds dramatically higher in value while still paying a juicy dividend income.

In conclusion, if you want to invest in precious metals long-term I think owning an income strategy based around that investment is a great way to add diversification and income to your portfolio. Learn more about trading ETFs, funds and copy every trade I place with my own money at www.TheGoldAndOilGuy.com

Chris Vermeulen
Disclaimer: I currently own shares of GGN

This week I would like to share with you the strategy that I am deploying to my own investment portfolio. As the US stock market nears completion of a major topping pattern I expect a multiyear decline in the price of equities.

During the past month my focus has been on big picture analysis. Because what I believe is about to unfold will have a dramatic life-changing affect on your financial situation and it is crucial that you realize what is very likely going to happen.

The worst case scenario is that you give back come gains generated during this  year bull market, and best case is that you not only avoid the bear market but profit substantially from it.

Let’s talk about the masses for a moment. Unfortunately most traders and investors are extremely bullish on stocks right now and for good reason. Over the past six years you virtually had to just throw a dart at the board and over time you would have generated substantial gains. But because of this luck/success most investors have become overly bullish and continue to buy stocks at an alarming rate even though evaluations are high and warning signs of the stock market top is near.

Simply put there is a time in the market when you should be accumulating shares. And there is also a time when you should sell your equity positions and exit the equity market.

According to my analysis and experience I feel investors should exit positions in equities and focus on a large cash position and/or moving thier money into bonds and other asset classes.

Looking forward 8 to 24 months to protect your portfolio and continue to grow its value will be in Canadian bonds (not US Bonds), precious metals, and in the commodity market as a whole.

Let me explain my thought process behind these ideas briefly:

Canadian Bonds: unlike the US Canadian rates continued to decline. As rates fall we tend to see the price of bonds rise. And when fear hits the overall stock market in both Canada and the USA money will naturally flow out of equities and into bonds as a safe haven. This double flow of money will send the price of bonds dramatically higher.

Precious Metals: precious metals will act as a safe haven, a hedge against currency devaluation which is a huge concern in the future. Small speculative traders are finally not interested in this sector which can been seen by reviewing the COT report on gold. Speculative traders (small average Joe) are now net short gold.

Commodities: resources tend to perform well during late stage bull markets and bear markets. With several of the main commodities trading at long-term support levels and have formed basing pattern we should expect strength in commodities over the next 12 months.

The Plan Conclusion:

Last week I started liquidating a large portion of my equity positions in my long-term investment account. I am currently sitting heavily in cash and will be liquidating more of my equities and rotating money into bonds, precious metals and commodities.

My recent investment purchased was precious metals (gold and silver). This accounts for roughly 2.8% of my portfolio. I intend to build my precious metals holding to be roughly 10% of my portfolio over the next few months. I do have a potential downside target for gold to reach $815 per ounce before bottoming and rocketing higher. Because this is a long-term investment looking forward one to five years I will be scaling into this precious metals position each week as I see fit.

The commodity portion of my portfolio is 3.4% of commodity related investments with a plan to build it to 5%.

After six years of gains in my long-term portfolio I am very comfortable holding 75% Canadian bonds, 10% precious metals, 5% commodities basket, and 10% equities.

Until we get a bear market correction or new analysis points to substantially higher prices for equities I will be playing defense to preserve capital so I have lots of gun powder to re-enter the equities market when valuations, dividends, and higher share prices are in favor.

If you want to avoid the next bear market and possibly generate oversize gains from falling equity prices then join my newsletter today!

Chris Vermeulen
www.GoldAndOilGuy.com