Trading Thoughts

By: Ned W. Schmidt | Tue, Mar 9, 2004
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TRADING THOUGHTS is about what the name in implies. The purpose of this publication is to promote timely and profitable trading of precious metals. We do not believe every turn in the market can be called. Our goal is that our recommendations should be profitable. These goals are not the same. Profits are the goal. Trades are not the goal. DO NOT EXPECT ALL RECOMMENDATIONS TO BE PROFITABLE. No system can achieve that lofty goal. TRADING THOUGHTS is not intended to be a lengthy news letter filled with witty comments. The goal is simply to state whether conditions in the precious metal's market are favorable or not.

Traders are advised that unless they have exceptional experience not to trade against the basic trend. Those trades against the market trend will not be expected to be as productive as those with the trend.

Basic Trends:

Gold: Up  Investors should focus on Buy signals. Silver: Up  Investors should focus on Buy signals. Investors should add to positions on Buy signals. The only reason we put the Do Not Buy signals in is that we have had requests for "sells" by those that trade. That said, most investors should not sell in a Bull market.

I was all set to write Friday morning as the indicators on Gold were giving some extremely positive signs. Then the employment numbers came out and all went straight up, as the dollar went back down. The economic gurus missed the employment number by a mile. At least this month they got the sign right. The same group is also forecasting a wonderful U.S. economy, no problems with the U.S. deficits and that the dollar's correction will be moderate and painless.

The ECB did not raise rates last week, as we suggested would be the case. Problem with the dollar is not that the European interest rates are too high. The dollar's problem is that U.S. interest rates are too low. Greenspan's words are trying to prepare people for a rate increase. If you listen to him, a subtle shift has taken place in his words when compared to a year ago.

Gold gave multiple buy signals this past week, as shown in the charts. One reader asked if we would indicate the date of the last signal and that is done in the chart. I hope to be able to remember to do so in the future.

Gold can certainly be bought on any days that the price is down. Waiting to catch a "break out" will likely be expensive, and nearly impossible to do. Early on we talked about this Gold correction creating multiple buy signals before it is complete. I would expect one more. The latest buy signal was at a price below the previous, and the next should be at a higher price than this last signal. That may be the completion of an abc correction in Elliott terms, but I do not follow that methodology that closely. Any of you that do might let the rest of us know.

What can one say about Silver? Somebody loves the stuff and the price acts like a hot NASDAQ stock. Continues to be a baffling experience.

The chart is showing an increasingly erratic pattern. That development might suggest some differences in opinion between buyers and sellers. That strong move on Friday on the job number suggests how "popular" Silver has become. Indeed, it might be too popular at the moment.

Both indicators suggest too much optimism in the Silver market, but I have been saying that for quite a while. Silver buyers probably should wait for the next buy signal on the intermediate indicator, which is shown in the bottom chart.

Recommendation: Add to Gold positions on any down days this week. I would still wait on Silver till the next buy signal.

Your Eternal Optimist;


 

Author: Ned W. Schmidt

Ned W. Schmidt,CFA,CEBS
The Value View Gold Report

Ned W. Schmidt,CFA,CEBS is publisher of THE VALUE VIEW GOLD REPORT and author of "$1,265 GOLD", published in 2003. A weekly message, TRADING THOUGHTS, is also available to electronic subscribers. You can obtain a copy of the last issue of THE VALUE VIEW GOLD REPORT at The Value View Gold Report. Ned welcomes your comments and questions, and tries to answer most all. His mission in life is to rescue investors from the abyss of financial assets and the coming collapse of the U.S. dollar. He can be contacted at ned@valueviewgoldreport.com

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