On this day in 1870, President Ulysses S. Grant signed a joint resolution of Congress, creating the U.S. Weather Bureau. Known as the National Weather Service after a name change in 1970, the agency is charged with the forecasting and warning of dangerous weather conditions for the purposes of protections, safety and information. As those of you in the northeast struggle back and forth on your daily commutes in today's snow, raise a cup of coffee to President Grant for realizing that you might want to know that a storm was coming before you venture out, and also to Arthur Cashin who inspired this little walk down history lane.

Store of Wealth

You and I both know what's been hot lately. It serves no industrial purpose. Some call it a barbarous relic, but then treat it as a safe haven asset when they get nervous. Gold has been moving in the right direction of late, even yesterday while the U.S. dollar gained some strength against its competitors. The yellow stuff certainly shares some characteristics that one would associate with money. Gold is known as a store of wealth, is clearly divisible, and has historically been used a medium of exchange. Why now, why the recent surge in gold prices?

Recent Performance

This is not an equity-like story at all. Gold sold off in the wake of the U.S. national election. The story of confidence and optimism that placed great expectations on overall financial markets hoping for growth and rising interest rates was an initial negative for precious metals. Largely that was because those very same expectations gave investors reason to believe that dollar valuations were on the launching pad. Funny thing happened on the way there, though. We have a president that seems likely to pursue a weaker dollar policy, and has no problem talking about it. That policy, at least in theory (no promises here) should be great for the overall commodity complex.

In a high-profile interview earlier this week to Bloomberg, Stanley Druckenmiller announced that he's back in the gold game after taking a well-documented hike ahead of that U.S. election. Is Druckenmiller on to something? Take a look at the Gold Miners ETF (GDX) . That issue has run more than 35% in since mid-September, mirroring the move made by Randgold Resources (GOLD) , which in my opinion remains best in that class. The SPDR ETF (GLD) has performed in less spectacular fashion, only moving about 10% over that time, and provides an excellent way to trade this commodity. but for the investor, I would prefer to own physical gold. Maybe that's just my inner prepper speaking, but you don't want to wish you had access to something valuable that you rightfully own after you no longer have access.

Allocation Story

We are going to again tweak our sample allocation today. We have been lucky in reference to gold here in this note. Those of you who have followed me for some time know that we took Market Recon's sample allocation for gold up from 5% to 7.5% in late December of 2015, when gold was trading at $1065. (We made that call publicly on CNBC's Closing Bell as well). Market Recon cut the allocation back to 5% in October 2016, when the $1305 level was crossed going the wrong way. On Jan. 17 (three weeks ago), we budged that number up to 6%, while also taking bonds from 12.5% to 14% (taking from available cash), while gold bounced around $1215. Today, we are taking that share back up to 7.5% from 6%, and we'll also take our allocation toward bonds up to 15% from 14%.

We are going to draw our equity allocation down to 57.5% from 60%, and leave cash at 20%. How you carve your equity portfolio is up to you. I have taken partial profits in several of my "Trump Agenda" names. Those would be Disney (DIS) , Bank of America (BAC) , JPMorgan (JPM) , Citigroup (C) , and KeyCorp (KEY) . Now, key here, I remain long all of those names, just less long. (20% cash seems appropriate to me for folks who buy groceries, and get leaks in their basements, but this is a share of any portfolio that must be sorted out on a case by case basis.)

As for debt securities, I have told you in the past to spread the wealth fairly evenly around sovereign, municipal and corporate spaces, and to avoid junk. Well, I still don't like paper of poor quality, but I really don't like corporates at this time all that much either. Depending on how tax reform shakes out, you may end up paying something unexpected for that extra yield. Take that into account. As always, kids ... I just tell you what I'm doing, or what I'm thinking of doing. Your investment decisions are yours, and yours alone.


08:30 - Initial Jobless Claims (Weekly): Expected 249,000, Last Week 245,000. How is this for a complete lack of mayhem? The entire range of consensus opinion on this week's print falls between 245,000, and 250,000. On top of that, the four-week moving average now stands at 248,000. Heck, the 10-week moving average is just 254,700. No, this item is not likely to surprise, and is not likely to move the markets upon release.

09:10 - Fed Speaker: St. Louis Fed Pres. James Bullard is set to speak on monetary policy from St. Louis, Missouri. Bullard is not a voting member of the FOMC this year, removing a certain level of unpredictability from policy outcomes, but probably not from the spoken word. A Q&A session at the conclusion this speech will be open to the media as well as the audience. St. Louis regains its vote in 2019.

10:00 - Wholesale Inventories (December-f): Flashed 1.0% m/m. This item preliminarily showed a 1.0% month over month increase for December, same as it did for November. Ultimately, this series is combined with manufacturing inventories and retail inventories to produce the headline series known as Business Inventories. You'll get a look at that number on what turns out to be a very busy day in our macro world: next Wednesday. You will be swamped that day with data on inflation, manufacturing, production, retail sales, and, oh yeah -- Janet Yellen testifies before the House Financial Services Committee. Other than that, it should be fairly quiet.

10:30 - Natural Gas Inventories (Weekly): Expecting -123 billion, Last Week -87 billion cubic feet. Supplies of natural gas appear to be headed for an inventory draw for the 12th consecutive week. The $3.15 level has been a tough nut to crack for nat gas; it will need to be turned into support if this commodity is going to make a run at $3.20 -- a level not touched since January.

13:00 - 30-Year Bond Auction: Expecting $15 billion, January $12 billion worth. On Jan 12, the U.S. Treasury auctioned off $12 billion worth of 30-year bonds at an awarded yield of 2.91%, down from December, but in line with November. Bid to cover for that auction registered at 2.32, which can be considered on trend, as indirect bidders took down about 67% of the issue. Keep in mind that yesterday's auctioning of the 10-year went off as a little weak, but retained those foreign accounts as the source of what strength (65.1%) there was for demand.

13:10 - Fed Speakers: Chicago Fed Pres. Charles Evans, and Atlanta Fed Pres. Dennis Lockhart will speak on the economy, and on monetary policy. They will take questions from the audience jointly, and then Evans will go on after that with the media. Lockhart, previously a hawk, has been more dovish in tone of late. Not that he will be around to influence the next policy decision, as he is scheduled to retire at the end of this month. Evans is the big fish here. Chicago has a vote this year, and Evans has long been a leading voice for dovishness at the Fed. I never thought that I would agree with Charles Evans, and my inner trader still wants to see another rate hike soon, but I have functioned as an economist at several Wall Street firms as well, and my economist side thinks we should probably hold off for a little while.

Sarge's Trading Levels

These are my levels to watch today for where I think that the S&P 500, and the Russell 2000 might either pause or turn.

SPX: 2323, 2312, 2299, 2294, 2283, 2272

RUT: 1375, 1371, 1362, 1355, 1349, 1342

Thursday's Earnings Highlights (Consensus EPS Expectations)

Before the Open: (BZH) (-$0.02), (BWA) ($0.84), (KO) ($0.37), (CMI) ($2.00), (CVS) ($1.67), (DTE) ($0.88), (GCI) ($0.42), (K) ($0.85), (MAS) ($0.34), (OXY) (-$0.02), (ROP) ($1.84), (SEE) ($0.74), (SON) ($0.63), (TWTR) ($0.12), (VIAB) ($0.84), (YUM) ($0.73)

After the Close: (ATVI) ($0.75), (ELLI) ($0.48), (EXPE) ($1.37), (MHK) ($3.22), (NCR) ($1.04), (NWSA) ($0.19), (NVDA) ($0.98), (P) (-$0.24), (VRSN) ($0.88), (WU) ($0.43), (YELP) ($0.26), (ZNGA) ($0.01)

At the time of publication, Stephen Guilfoyle was long KO, TWTR, DIS, JPM, C, BAC, KEY and short TWTR call options, although positions may change at any time.

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