I only Eat what I Kill (GDX, XLY, SPY)

Worked for a short time with a Mergers and Acquisitions guy who labored tirelessly to put together his deals. He was a solo operator who had maybe 60 or 70 different projects on the go at any given time, and if he succeeded in matching buyers and sellers at least once a year he was beside-himself elated.

He was a patient man. He was dogged in seeking out new matches, meeting new people, racing across continents to package together all the details and as sure as you’re reading this – failing… again and again.

But he also knew that was part of the game.

Like every good salesman, the rule of 99 strikeouts for every home run was for him a mantra. It was a numbers game, as all salespeople can tell you. It requires patience, patience and more patience. Every rejection is just another step closer to victory. And money.

kill
One morning the old fella sat me down in his office and amid complaints that his wife didn’t understand him (she wanted him to get a ‘real’ job) and his in-laws were tired of lending him cash and his credit cards were all tapped out, and he offered me the following –

“Hugh,” he said, with a little smile. “I wouldn’t have it any other way. This is who I am. I only eat what I kill.”

Collecting a paycheck from an accounting or brokerage firm was, for him, anathema. He preferred the hunt, the thrill, the danger and the necessity of succeeding. That was what motivated him. But, at the same time, he wasn’t all just money and profits.

The following story illustrates the depth of the man. He may have passed it on to me that same morning. It’s been years now. I don’t remember exactly.

This is more or less what he said –

Young hunters go out because they like to shoot.
When they get older, they go out because they like to kill.
But the oldest hunters neither like shooting, nor killing.
They recognize the violence of the bullet and the as yet shapeless character of those youngest trigger-pullers about them.
They recognize, too, the ugliness in the lust for blood in those slightly older.
They see clearly the frustration and anger and outright sadness in these souls that time has yet to condition to patience, that most difficult of virtues to attain.
They see young men who simply haven’t suffered long or deeply enough in this world – the precondition for patience and wisdom – to know any better. But they know, too, that their suffering will come. Time, after all, brings with it perfect suffering, for all of us. No one escapes this world without the full measure of that which he’s capable of bearing.
The oldest hunters know all this, and so they go out purely of necessity, and with a little regret, to guide those younger than they.

A Season of Patience

 

With our families and friends, and even strangers at this time of the year, friends, let’s resolve to show a little patience. Everyone needs a little slack. It won’t hurt you to cool out, lay off the horn, let someone ahead in the checkout line. You’ll be all right.

lighter

Serve it up, Huey! What’re we trading this week?

 

Right! Enough waffling.

We’re going to offer you a new trade directly after we close out an old one.

The trade we’re shutting down is from the 12th of August, from a letter called The Outperformance Game.

There, we urged you to pair the Select Sector SPDR Consumer Discretionary ETF (NYSE:XLY) against the S&P 500, represented by the SPDR S&P 500 ETF (NYSE:SPY).

The trade’s specifics looked like this –

We urged you to purchase the XLY December 69 CALLs for $1.33 and sell the SPY December 205 CALLs for $1.44. Your credit was $0.11 per pair traded.

And what happened?

Two weeks ago, in Short term Profits on an Oil Bounce, we sold the XLY CALLs for $2.30. And at the end of this week the SPYs will almost certainly expire worthless, given where they currently stand and the underlying direction in the market.

But wait, says sharp reader Mike Vogel –

I recall you saying that if the S&P broke 2076, all bets were off, and it did, 2079 to be precise…”

And Mike’s right. We are guilty, guilty, guilty

guilty
Of being unclear.

To be precise, we wrote:

“If the S&P 500 hits new highs, we shut her down.”

Did we mean, as Monsieur Vogel infers, that meant an intraday high? Or was it a closing high we were after?

For fear of sounding pedantic and patronizing, we won’t even attempt to convince you of the latter.

Believe what you will. But there was no closing high that bested our 2076 bailout figure. If that’s the advice you followed, you did very well on the trade. If you went with Mike, you likely closed with a slight loss, depending upon how fast you hit the sell trigger.

And Today?

 

Today we return to the gold fray and examine continuing weakness with the miners.

The following chart of the Market Vectors Gold Miners ETF (NYSE:GDX) shows that despite the latest strength in the precious metals themselves, the miners never believed the move was for real.

gdx

The miners appear hell-bent on setting new lows. RSI and MACD (in blue) failed to break above their respective waterlines, and Monday’s action broke deep below all her moving averages (in red).

GDX now sits less than five percentage points above her bear market bottom, and should we see a break to that level, GLD and SLV will likely follow suit thereafter.
Because the miners lead, friends.

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Options Trader Elite therefore recommends a speculative PUT purchase on GDX. Buy the GDX March 15 PUT for $0.77.

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Options Trader Elite therefore recommends a speculative PUT purchase on GDX. Buy the GDX March 15 PUT for $0.77.

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And be kind to one another out there.

With love of the hunt,

Hugh L. O’Haynew, Senior Analyst, Normandy Research

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