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Gold Fever

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09/12/2007

I was in our nation's capital last week for the D.C. Money Show. At these events, there usually is a big buzz surrounding one main investment. This buzz changes from show to show as conditions in the market change, so it was no surprise to me, given all of the turmoil in the market of late, that the big buzz at this show was gold.

I've seen this "gold fever" before at the Money Show, but this time it seems as though everyone had been bitten by the gold bug. The falling U.S. dollar, the turmoil in the credit markets, and the volatile stock market are driving many investors to the traditional safe haven of gold.

In the chart below of streetTRACKS Gold (GLD), we can see the big surge in the value of gold since about mid-August. This gold exchange-traded fund (ETF) bounced off its 200-day moving average (red line) in mid-August, and since then GLD has blasted well above its short-term, 50-day moving average (blue line).

If we look at a chart of the Market Vectors Gold Miners (GDX), an ETF that contains gold mining stocks, we see that it has had a much choppier ride of late than GLD. Although GDX is now trading above its 50- and 200-day moving averages, the push higher has come with a lot more volatility, and it hasn't been nearly as strong as GLD.

This lack of confirmation from gold mining stocks with respect to a sustained uptrend in the precious medal is one reason why I am urging you to be very cautious if you now own a gold investment or if you are planning to put gold or gold mining stocks in your portfolio.

If you own GLD, GDX or any gold stocks or mutual funds, I implore you to put a stop loss on those positions to protect yourself from any sharp decline in the sector. In addition to being a traditional safe haven when market seas are rough, gold and gold stocks traditionally are very volatile, so if you aren't protected on the downside you could be in for a lot of pain in a very short time.

My opinion about the current gold fever is that it is a trend to capitalize on, but only if you have a sound plan that allows you to know when to get in, and more importantly, when to get out of this volatile space.

In my Successful Investing advisory service, we have a gold plan that employs our proven trend-following methodology. Our plan lets us know when it's safe to jump into golden waters, and when its time to get out of that gold pool and dry off.

Want to find out how to profit from gold fever? Click here.

HOPE IS NOT A STRATEGY

There's a lot of hope out there on Wall Street that Fed Chairman Ben Bernanke and his merry band of central bankers are going to come to the rescue next week with a 50-basis-point federal funds rate cut.

Many investors are basing their strategy on a sense of hope that the Fed will slash rates and that the market will respond with a big upside surge.

Well, as I've said before, hope is not an investment strategy.

Sure, we could get a 50-basis-point rate cut next Tuesday, and the market could surge higher. But we also may get a 25-basis-point cut or perhaps even no cut in rates. I personally think a cut of some kind is highly likely. The big unknown is the size.

The point here is that you have to be prepared for anything the market throws at you -- not just before the Federal Open Market Committee meets next Tuesday, Sept. 18, but at all times. One way to be prepared for whatever the market gives you is to know where the key turning points are in the market.

In the chart here of the S&P 500 Index, we can observe that since July this broad measure of the market has stayed in a very tight trading range.

I suspect that the market will make a big turn either higher, or lower, depending on what comes out of next Tuesday's Federal Open Market Committee meeting. If the market falters on the Fed news and starts to sell off, the key measure on the S&P 500 is 1,440. If we pierce the 1,440 mark, look out below, since it could mean a sustained move lower that may lead right into the jaws of a new bear market.

If, however, we see the market surge on the Fed's decision, the key number to look at is about 1,485 on the S&P 500. If we can move above this point, and sustain that move higher, it could mean the end to the summer correction and a stampeding of the bulls.

The end of the correction would be a welcome development for investors itching to put their money to work in stocks. I think that if the Fed gives us the all-clear sign, we could be looking at one of the best buying opportunities in years.

In next week's Alert, we'll cover all of the post-Fed market action for you, so stay tuned.

ARIZONA ON MY MIND

There's nothing like a summer trip to Arizona to get you thinking about all of the "hot" opportunities in the stock market. I jest of course, but what I never jest about is the amazing opportunities that currently exist for those investors whose primary goal is income generation.

I know there are many Alert readers residing in Arizona, and I also know that many of you live in the Scottsdale and Phoenix areas. That's why I've decided to come out to you for my next live workshop presentation, Creating Passive Income: How to Manage Your Assets, Cash Flow and Savings to Create the Income You Need to Stop Working and Start Living.

In this unique workshop event, Josh Lewis -- my mortgage and real estate expert -- and I team up to show you the keys to creating the passive income you need to build the life of your dreams.

You will discover:

This seminar will be held tonight, Wednesday, Sept. 12, 6:00 p.m. at the

Scottsdale Hilton Hotel
6333 North Scottsdale Road
Scottsdale, Arizona 85250

Cost for this event is $49.95.

There still is space left, so come on down to the Scottsdale Hilton tonight and join us for what I promise will be a very special event!

BLOGS AWAY: THREE ETFS FOR THE NEXT 12 MONTHS

As I mentioned earlier, I just came back from the D.C. Money Show. At the show, I talked about three sector ETFs that I think will be hugely profitable for investors during the next 12 months. Hey, everybody's got to eat, everybody's got to drink water, and everyone needs power to light up their homes. These three ETFs are well positioned in each of these respective areas.

In this week's audio blog, I talk about these three ETFs, and I give you my reasons why I think each likely will be very good investments during the next year.

To listen to the audio blog, simply click here.

FITNESS TRAINING AND FABIAN COACHING

I am a big fitness buff and I've worked with a personal trainer for many years. But before working with my trainer, I still worked out very hard. I hit the weights often and I went through the motions with a sense of purpose and determination. After about six months of expending a lot of effort, I noticed that I really wasn't making much progress.

Frustrated, I decided to seek the advice of a professional. That's when I met my trainer, who told me that while I was working hard, I wasn't working very smart. After just a few sessions under the tutelage of a real pro, I was able to make the huge progress I was after.

You see, I was doing things wrong in the weight room that I didn't even know I was doing. It took a trained eye with the knowledge and expertise to be able to point out my errors and correct my problems. Once those corrections were made, I was able to take my performance to a whole new level.

I bring up my fitness training story because I think it is nearly perfectly analogous to the way most people manage their investment portfolios. Most people make an effort to buy and sell stocks and mutual funds, but like the novice fitness trainee, most people aren't making the progress they want to achieve.

The reason for that lack of progress is the absence of a professional trainer. At Fabian Wealth Strategies, we like to think of ourselves as your personal portfolio trainers. We can coach you on how to properly manage your assets, and we can help you to get to the new level of performance that you're working so hard to achieve.

If you need some help assessing your portfolio's fitness, Fabian Wealth Strategies can fill the void. All you have to do is call us and schedule your very own coaching session.

For more information on how to schedule your coaching session, call David Fabian at 800.391.1118 or e-mail him.

THOUGHTS ON THE 9/11 ANNIVERSARY

Yesterday, Sept. 11, marked a very sad anniversary for this country. Most of us watched Tuesday's news footage of the many remembrances and perhaps you even participated in one of those memorial events.

Before the feelings associated with yesterday's memorials fade, I want to let you all know about a tremendously heartfelt and beautifully written article on the events of 9/11 from someone who literally watched them unfold right in front of his eyes.

This must-read piece was written by Todd Harrison, founder and CEO of the investing information blog site Minyanville. Rather than trying to describe Todd's masterful article, I would rather you just read it yourself. I warn you, however, that you must prepare yourself for a very emotional experience.

To read Todd's article, click here.

CHURCHILLIAN RESOLVE

"We shall defend our island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender."

—Winston Churchill

There's no denying that our country faces big challenges, both economically and militarily. In my opinion, there are but two ways to face those challenges. We can abdicate our responsibility and surrender to our enemies, or we can defend our island, whatever the cost may be.

Let's hope we take the Churchillian path, and never, ever surrender.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else.

Click here to Ask Doug

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