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1.
What chart currently looks better than gold? You'll be
hard pressed to find one. Click this gold chart now. KISS that chart. Keep it
simple, and smart. The gold price has now moved almost $100 away from
key HSR (horizontal support & resistance) around $1700, and is chewing at
the $1800 round number price area
2.
Look at the beautiful HSR lines on the chart. Green
lines are for buying, and red lines for selling. It doesn't get much simpler,
does it? I use amber for lines that could soon be in play. The gold market
traffic light system is really what it is!
3.
Price doesn't always rise to these key HSR lines, or
fall to them. Your most intense buying or selling
should come around these key lines, and the more price has moved
before touching one of those lines, the more important that line becomes.
4.
Rather than predicting what the holding or failure of
these lines means for the future of the gold price, focus on using them to
allocate or remove risk capital. I believe virtually all technical
analysts make a horrific error when analysing
support and resistance, by focusing on where price might be going, rather
than professionally responding to what actually happens.
5.
Use support and resistance to place capital
systematically. I invented my "PGEN" (pyramid generator) to
systematically allocate capital on a portion of the price grid, or even
across the entire grid. My suggestion is to fade the focus on where
price is going, and increase the focus on professionally allocating capital.
6.
To answer my own question, "What chart looks
better than gold?", I think I have the answer
you'll enjoy. Please click this gdx chart now.
After falling 25% from the highs hit in early September, GDX has recovered all
it lost.
7.
How is that possible? The price is about $63 now, and
it was near $67 at the high! How can GDX have recovered all it lost? The
marked to "getting you richer" model answer lies in understanding
percentages. If you bought GDX into the $50.50 area, you have gained
about 25%, as of the GDX $63.50 price point.
8.
GDX fell about 25% from $67 to the lows near $50.50, so
the rise is clearly the same percentage move as the fall, regardless of the
dollar prices involved.
9.
What I'm trying to get across to you is the enormous
size of the rally that has just taken place, and the fact that only those who
buy serious weakness will survive, let alone profit in what I believe is the
coming "enormous whipsaw zone".
10.
Gold could easily take a $100 hit here, and one can
only wonder about what that would do to GDX. The "I need to get in on
gold stocks, now!" emails are starting to appear in my inbox, after
this enormous 25% rally and a near $270 "super surge" in the gold
bullion price. That's a warning sign.
11.
Does anyone understand that the near $270 move up in
gold bullion from the $1530 area lows in about a month is a 100% gain, but
only for those who bought into the lows of the gold bear market at around
$250?
12.
The price chasers are back in "official
action" as of this week, and the media is starting to gush
gold-positive news, which is basically urging investors to buy."Chinese gold imports from Hong Kong,
a proxy for the country's overall overseas buying, leapt to a record high in
September, when monthly purchases matched almost half that for the whole of
2010." -Financial Times, Nov 7, 2011
13.
The news that Chinese gold imports may be up sixfold is a great positive event for the long
term bull market, but it is a profit booking signal for traders, not a buy
signal! Don't massage your feelings of greed with this kind of news when
price is rising.
14.
Put this excellent article into a folder called
"Gold Fundamentals", and promise to read it only when the gold
price is tumbling, and you are afraid. Use gold-bullish news professionally,
to stay in the game.
15.
What is a quasi-pro investor? Well, first I'll describe
what they are doing in the market right now, and then I'll define them
for you. The quasi-pros are ringing the cash registers quite aggressively,
here and now, on a portion of what they bought on the price decline into gold
$1530, silver $26, GDX $50, and GDXJ $25.
16.
The quasi-pros have significant profits from the latest
intermediate moves (gold $1530-$1800, silver $26-$35, GDX $50-$63, and GDXJ
$25-$33), and they are booking those profits, while amateurs are foolishly
deploying hard-earned cash now, "before price gets away".
17.
The quasi-pro is somebody who buys significant price
weakness. They don't buy the exact bottom, because they don't know where it
is any more than you do. They sell into significant strength, and are doing
so now.
18.
I've taught many of you to be quasi-pros, and you have
done well. At this particular time, I believe the tactics of the quasi pro
need tweaking, or things could go awry, in a very big way.
19.
Are you nervous about selling gold stocks here, because
price could rocket higher? Are you also wondering how you would handle things
if a surprise crisis event sent gold tumbling, and GDX and GDXJ blew out
their respective lows?
20.
When you sell a stock for a profit, your next move
should be to buy gold with all the proceeds of that transaction.
Holding more gold likely keeps you in the game if gold stocks go higher
against the dollar, and keeps you from freaking out if the juniors and
seniors get smacked by the dollar. Gold is your middle ground.
21.
For most of you, the use of a
ETF or tax-advantaged trust (but watch the premiums before buying some
of these trusts!) is most practical. You can sell GDXJ and buy SGOL with the
proceeds of the transaction, in the same account. Trusts like GTU-nyse and PHYS-nyse could
receive better tax treatment than ETFs, but you should only buy them when the
NAV shows a low premium, or even a discount.
22.
It will be a lot easier to endure missed opportunity on
the upside, and real discomfort on the downside, overall, if you focus on
moving from GDXJ to SGOL, rather than moving from GDXJ to dollars.
Obviously a huge portion of the gold community owns individual juniors, and
can substitute those for GDXJ.
23.
Go back and forth between SGOL and GDXJ (or your
individual juniors), rather than back and forth between dollars and GDXJ. The
odds of you beating the GDXJ-SGOL trade or the GDX-SGOL trade with a
GDXJ-dollars trade are not good for you. Click this key GDXJ chart now. Over the past month, gold
has outperformed the dollar. GDXJ has also outperformed the dollar.
24.
There's a red rising wedge. That's a warning sign. GDXJ
has risen by about 30% from the lows, which is a substantial move. Do you
sell now, sit in dollars, and risk missing the move higher? No. You sell a
little bit, and put that into your favour gold
bullion vehicle. That's what I'm doing, without exception, with every trade I
make!
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Thanks!
Cheers
St
Stewart Thomson
Graceland Updates
Email: stewart@gracelandupdates.com
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