Year End Yawn

"Success breeds complacency.  Complacency breeds failure.  Only the paranoid survive." - Andy Grove

"There is no place for arrogance or complacency in racing because you are up there one minute and on your backside the next." - Tony McCoy

Year end is rapidly approaching and with the holidays it seems that there is a lot of complacency in the market.  This is understandable given the wild ride it has been in 2014 but as the first statement above shows complacency is often followed by failure.

Looking at the market the VIX (an index that tracks market volatility) is close to an all time low, gold stocks have continued their downward spiral and the stock market ticks higher daily.  It appears as if all market participants have finished their turkey, yawned and are nodding off.  January seems like a decade away but for those of you still awake you should remember this past January when the market was roiled almost 10% and it appeared that there was no end to the downward spiral.  Fast forward to today and outside of October the market has been pretty much a straight line up putting investors into a daze akin to autopilot with the subliminal message repeating in their ears from the Federal Reserve; "just buy the dips, just buy the dips, just buy the dips ...".

While I am certainly not predicting that 2015 will be the year of the bear, at this time in the year there is still the opportunity to exit positions using losses to offset profits.  Furthermore it could be a good time to readjust your investments to ensure that you either take advantage of the coming volatility or that your portfolio is protected.  For short term trades there are the volatility indices TVIX or on the gold side JNUG or NUGT while for longer term protection you can always look to long term put options on key positions if you do not want to exit the position itself.

From a technical standpoint it certainly appears as if gold and silver have one last hurdle to clear before breaking out to the upside and with all the short term negativity against the metals it appears that 2015 may be their day in the sun.  If that is the case I would expect a massive upside gain as they have been beaten down for the past 3 years to the tune of more than 70%.

The reason I bring this up is that with the end of year coming it may be time to look outside of technology and at industries that have been beaten down as these will be the ones that will produce the largest returns in 2015 plus they will provide downside protection.  Furthermore with quantitative easing over and the weakness that is being shown by the international community it seems likely that 2015 will be filled with volatility and all of the above positions will take advantage of this.  Just a thought before you let the sandman take control of your senses as waking up with a jolt in 2015 would be no fun at all.