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Three Trading Ideas for Bargain Hunters

By Jeff Clark
Thursday, March 14, 2013

Bargain hunters have a tough job right now.
 
With the Dow Jones Industrial Average trading at a new all-time high, there aren't many "cheap" investments available today. But if you look hard enough, you still might be able to find a few items in the bargain bin. Here are some ideas for cheapskates...
 
 Option premiums are cheap. While the S&P 500 is trading at its highest level since 2007, the Volatility Index ("VIX") is as low as it has been in six years...
 
The VIX is as Low As It's Been in Six Years
 
This is bad news for anyone who sells options to generate income. But it's good news for speculators, since it doesn't cost as much to place a bet right now. It's also good news for investors who like to buy put options to insure their stocks against a decline in value.
 
Given what happened to the stock market the last time the VIX was this low, a little insurance might be a smart idea right now.
 
 Gold and platinum are both trading right around $1,600 per ounce. But take a look at this ratio chart that compares the historic relationship between the two metals...
 
Platinum-to-Gold Ratio Over the Last Ten Years
 
Platinum normally trades at a premium to gold. Following the financial market meltdown in 2008, platinum traded at an average premium to gold of about 25%. But prior to 2008, platinum routinely traded at two times the price of gold. Both metals look cheap today. But platinum is the better bargain.
 
 Finally, agricultural commodities are cheap. The PowerShares DB Agriculture Fund (NYSE: DBA) is trading back down to where it bottomed last year – right before a nationwide drought caused a spike in agriculture prices...
 
Agricultural Fund DBA Nears Last Year's Bottom
 
Commodity prices often bottom in the springtime and rally into the summer. If that happens again this year, a small investment in DBA might help offset higher prices at the grocery store.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

On Tuesday, Jeff showed readers three charts that could determine where the financial markets are headed over the short term. Find out what to keep an eye on here: The Three Charts Traders Need to Watch This Week.
 
Resource expert Matt Badiali agrees platinum is a bargain right now. He tells readers his favorite vehicles for buying the metal through the stock market here: The Next Opportunity in China's Commodity Boom.

In The Daily Crux
Market Notes
The euro breaks down to a three-month low.
 
Small-cap stocks are booming... The Russell 2000 Index hits a new all-time high.
 
Uptrend in transportation stocks continues... big transport fund IYT hits a new high.
 
"Virtual bank" Two Harbors soars 53% over the past 12 months, including dividends.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1554.52 -0.1% +11.4%
Oil (USO) 33.19 -0.2% -18.7%
Gold (GLD) 153.66 -0.3% -5.3%
Silver (SLV) 27.94 -0.9% -13.4%
U.S. Dollar 82.91 +0.4% +3.5%
Euro 1.30 -0.4% -0.6%
Volatility (^VIX) 11.83 -3.6% -19.7%
Gold Stocks (^HUI) 347.41 -0.6% -30.3%
10-Year Yield 2.02 -1.9% -4.3%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 155.91 +0.2% +13.8%
Israel (ISL) 14.28 +0.0% +10.7%
Singapore (EWS) 13.64 -0.7% +10.5%
Japan (EWJ) 10.48 +0.6% +6.2%
India (IFN) 21.66 -1.2% +2.9%
Taiwan (EWT) 13.56 +0.3% +1.1%
Canada (EWC) 28.22 -1.2% +0.2%
S. Korea (EWY) 59.78 -0.2% -1.1%
China (FXI) 37.34 -1.7% -4.0%
S. Africa (EZA) 64.00 -1.8% -5.8%
Lat.America (ILF) 43.67 -1.7% -7.7%
Russia (TRF) 15.16 -0.9% -11.2%

Sector ETFs
Symbol Price
Change
52-Wk
Construction (PKB) 19.81 +0.8% +40.0%
Media (PBS) 18.85 +0.6% +26.8%
Health Care (IYH) 94.19 +0.1% +24.9%
Consumer Svcs (IYC) 96.54 +0.5% +22.3%
Water (PHO) 22.88 +0.2% +21.1%
Financials (IYF) 67.94 +0.4% +20.4%
Transportation (IYT) 111.14 +1.5% +19.8%
Insurance (PIC) 19.01 +0.1% +18.3%
Industrials (IYJ) 81.81 +0.5% +16.0%
Biotech (PBE) 25.82 -0.1% +15.6%
Real Estate (IYR) 68.86 +0.0% +15.3%
Defense (PPA) 22.75 +1.0% +15.3%
Software (PSJ) 29.84 +0.4% +11.5%
Telecom (IYZ) 24.29 -0.3% +10.4%
Utilities (XLU) 38.13 +0.5% +10.2%
Retail (PMR) 27.30 +1.2% +9.0%
Big Tech (QQQQ) 68.63 -0.1% +4.9%
Basic Mat (IYM) 71.39 -0.5% +3.0%
Semis (PSI) 15.61 -0.1% +1.9%
Nanotech (PXN) 6.62 -0.3% +0.3%
Alt. Energy (PBW) 4.54 -1.3% -18.0%

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