For the longest time, crude oil and gold prices have dominated the news in terms of bullish commodities. We like to look at the ratio between the Integrated Oil and Gold/Silver Indexes ($XOI:$XAU) for a possible "pairs trade", and every few years we are accorded any opportunity to do so. In fact...that time is now. If we look at the ratio, we find that the 150-week moving average is a very decent "fulcrum point" from which to trade; thus we will be moving into the trade via long positions in the XOI components of Amerada Hess (AHC) and Sunoco (SUN), while moving to a short position in Freeport McMoran (FCX) and Newmont Mining (NEM).
The trade has a well defined stop loss point per a ratio trade to 7.00, where it must trade for two weeks. The target: NEW HIGHS over the next several years.
"Paid-to-Play" Portfolio 2006 YTD Performance: +13.2%
S&P 500 2006 YTD Performance: +3.1%
