Stock Markets and Gold - Tactical Update
Graceland Updates 4am-7am
May 27, 2010
- Those sure that Tuesday's Dow action marked the bottom, (the "hammer" on the candle charts) were shocked 24hrs later, as the Dow posted a mirror image reversal day to the downside. This morning the Dow is once again surging, stunning the bears.
- This is classic whipsaw action, a saw operated by the banksters, cleaning both shorts and longs off the stock market souvlaki stick. It is also only example number 800 billion, of why you must allocate your capital in a pyramid formation, not a huge price plop.
- I have noted the danger of obsession in the market, and the greatest obsession in the gold community is: shorting the Dow. 1987, 1990, 1998, 2000, and 2007 are the 5 major shorting opportunities that have occurred since the great secular bull of the 1980s began, and has since been replaced by the secular bear in 2000.
- Click here now to see my analysis of the Dow daily and 60min charts for up to the minute action on the situation: High Noon For The Dow Bears Charts
- Morgan Stanley's incredible "Triple Sell Signals" have caught the bulk of these massive declines. My view is similar to theirs, but not identical; that a cyclical bull market began in the crisis lows of Oct 2008-March 2009. The current maniacal obsession with shorting the Dow here and now, is to me a PEANUT PLAY, one that has almost NONE of the characteristics of the 5 major Dow short plays of the past.
- The secular bear has a Dow ceiling in the 14,000 area and a floor in the 7000 area, and has been ongoing since y2000. IF the euro crisis morphs into "Lehman 2" (I doubt it, but possible), the Dow could decline to the 7000 area again.
- But IF it did, my question to you is: Are you going to use that opportunity to buy the Dow, or to repeat what you did last time at Dow 6500, and engage in a crazed shorting program into the lows while taking no money out of the financial system? A fall to Dow 7000 is a GIFT. Be prepared now, to accept that gift, with longside buys, if it is presented to you. Has anyone in the gold community actually set up a plan to buy the Dow IF it fell to 7000? The Horrific Answer: NO.
- Where I differ, slightly, from Morgan Stanley, is I think there's a realistic possibility that QE, quantitative easing (aka socialism) FAILS, and, no, that doesn't mean the Dow goes to zero and team shorty pants makes unlimited money on their put options. What is means is the Fed is forced to bring out the bigger weapons to battle the ongoing asset price destruction steamroller, one they refer to using the wet noodle term of "deflation". The bigger weapons are the dollar devaluation bunker busting conventional bomb, and money printing, which is effectively the Fed's nuclear weapons arsenal. Both weapons require two men to turn the switch, as with real nuclear weapons. The US Treasury must be involved in any decision to devalue the dollar or print money to a point that it is a deliberate policy of dollar devaluation.
- Why would QE fail? Answer: Because the marked the model scam may or may not work, to manage the 1 quadrillion dollar OTC derivatives nightmare. How many assets must REALLY be bought to end the crisis, and how much money is available to pull it off? How many trillions in OTCD's have really failed?
- If I had to project a QE failure point, in time and price, I don't think I could do that, because of the unknowns with the euro/lehman2 situation, the secrecy of the Fed, and marking to model. I will say that the failure point, if it comes, is likely to be several thousand Dow points higher or lower from here. I don't care about "calling the QE failure point". I care about making money out of it, and there's only one way to do that: Respond to price as it occurs as a buyer on the downside, and a seller on the upside, consistently, all the way to zero.
- If QE is successful, I would agree with Morgan that the now ten year old secular bear market in stocks could end, in a year or two. The recovery would become real, and inflationary pressures would become the theme. If QE fails, then we are facing a situation where the stock market could rise tens of thousands of points higher, as dollar devaluation and money printing become the Feds "tools of choice" in the battle against deflation. At that point, or in advance of it, an institutional panic out of paper money and into the stock market as a safe haven, is a real possibility.
- I do NOT subscribe to the gold community's perma-bear "short the Dow and do it now, it's all over this time, I promise!" ideology. This obsession is burning up vast amounts of capital that could be used to BUY GOLD. Claims that "after I short the Dow into the ground I'll be able to buy more gold!" are in my mind, nonsensical. Buy gold, and use a BIT of profit from that SOLID FOUNDATION to play Dow gambler. No gold profits means no gambling chips go on your Dow shorty pants roulette wheel. The worst investors always take the most risk, never forget that fact. They are "rewardaholics".
- The best investors focus on mass production lines. Repetition of what works in a modest way, consistently. Repetition of: Tactical Excellence.
- Buying gold on weakness and selling a portion of it into strength works to build wealth. Wealth measured in ounces, kilos, and tons. Pot shotting as a Dow top caller in the leveraged futures and options markets is not wealth building. It's a crazed & nonsensical gamble, and therefore by definition must be carried out with nothing but total gambling money.
- Eric Sprott is a stock market bear. Where is his money? Shorting the Dow? No. It's in GOLD. Richard Russell is a bear. Is his money spent shorting the Dow? No. The smaller the investor you are, the MORE you need to follow these gold MAVERICKS in ACTION. Shorting the Dow in the gold community is an ADDICTION. It's time for rehab. The rehab medicine is GOLD OWNERSHIP.
- Gold is the world's lowest risk investment. Being obsessed with owning the world's lowest risk asset is an addiction and obsession that's HEALTHY. Like being addicted to fresh fruit. Being obsessed with shorting the Dow is like being hooked on food you find at the garbage dump. Every now and then, you find some food that's not rotten, but mostly, it's a booked losses disaster.
- All things are possible in the gold market. There appear to be 2 schools of thought right now. (Pre?)School number 1 thinks gold is going to $800 or lower "any day now". They have confused asset destruction with asset destruction fighting. The market already knows deflation is the force de jour; the question is the fed fighting it, yes or no? The answer is yes. The market looks ahead, and asks what will be the effects of that battle. School number 2 thinks gold makes a new high, then tanks. I lean, slightly, towards school number 2, but it's also possible that gold begins to go parabolic after making a new high, and I would give that possibility almost equal weighting in terms of probability.
- I want you all to think very hard about all the Dow bear analysis you have read in the gold community since the lows of 2008. The Dow is a GRID. We're at the 10,000 area gridline right now. Picture price as the ball in a football game. Your end of the field has a goal line. Dow Zero. This is better than football, because unless the Dow goes to zero, you're a player, provided you've allocated your capital correctly.
- We've currently come from Dow 11,200 to Dow 10,000. It's time to BUY. "But what if price goes to a lower gridline, I'm finished!" -typical gold writer. Elmer Fudd Public Investor finished HIMSELF. Why? He blames the banksters for his losses. All those hours spent watching TV, how many were spent reading about past Empires, about the Asian mentality of buying gold into weakness? Answer: None. The Dow only has 9 gridlines below this one, using 1000 pt increments.
- Likewise, gold has 11 increments of $100 each below the current $1200 marker. Keep it simple. I posted something on the website about the Sprott "phys" fund. If you plopped a huge wad of capital into the fund when it was trading at a 30% premium to bullion, you're going to see a haircut when institutions come in, because those institutions are not going to want to pay that full premium. If you buy in a pyramid formation, you are HAPPY to see that decline in price. The same thing happened to the Central Gold Trust (GTU) before. At times, these imperfect gold funds will outperform gold, and at others they will underperform. Correct tactics will see that YOUR gold fund ship is not rammed onto the rocks by greed or fear. Overall, I don't see the premiums as anything but a minor issue. Use them to your advantage, tweaking your buys as the premiums are low (or even negative to NAV), so you buy more at those times. Likewise, when the premiums are high, sell a bit more into your profit points.
- This week's theme is the Dow and Bonds, as they relate to gold. More specifically, how they are affecting, and should affect, your actions in the GOLD market.
- When you look at major assets as a grid, and forcefully delegate ANALYSIS to playing 2nd fiddle, you are operating in a winning mindset, one that is: Fresh. Crisp. Clean. Most analysts go on and on (and on and on) about the Dow, about how it "could fall to 8500" or it could do this or that, and they are reliving their failures of 2008, and want you to do the same, like a broken record. There was no shorting in advance of 1987, 1990, 1998, 2000, or 2007, other than the usual "blob" approach that "this thing has to go down, it's way overvalued!" That's a sort of "Gman" (govt) style of thinking, like the BLOB.
- As I look out my market window this morning, I look at my ASSETS GRID.
I hold some euros. I'm not holding an overleveraged forex trade that has
me comatose. Hundreds of millions of Europeans use the Euro everyday for
all their transactions. That's not ending. It's an asset, and my gridlines
on that asset that I own in LIMITED SIZE, are: Fresh. Crisp. Clean. I own
Australian Dollars. A national currency. I own forex, yes, but I don't answer
to the margin man. I own an asset with ultra-low buy/sell commission and
the tightest bid/ask spreads. Try going to the bank, and see what the spreads
are compared to the forex markets. I own US dollars. That's an asset. There
are my gridlines, my Pgen buy and sell points. The playing field (financial
system) likely isn't going anywhere. The BALL might move, but not the field. If
the FIELD moves, well that's why you have physical gold IN YOUR HAND, but
for the other 99.99% of recorded history's time, the field is not blowing
up. I own wheat on a gridline. What a fabulous asset. Corn. If these
items fall 50cents a bushel, the picture out of my eyes is the wheat and
corn price ball moving down the field to my next gridline and I step up to
that gridline on the buy, accumulating that asset. I feel GOOD. I glance
into the crowd from the field, and there's Elmer Fudd and Team Overlevered
screaming, "but what if wheat goes to zero, you're finished, sell now before
you lose everything!" Chill out bud, you're annoying me here in Zenland.
Asset Accumulationland. Energy (oil and gas). Another phenomenal asset. Oil
is today up $6 from the low point that I clear advised subs to buy into just
days ago. I own part of the greatest industrial revolution in world history,
via the Chinese stk mkt (FXI). What a great field that is, with 37 dollar
gridlines to my goal line. Here's a detailed look. Obviously I was a buyer
into the lows and urged readers to do the same.
FXI (Xinhua Proxy) Chart Update Silver is another great asset. It has 18 gridlines, with a dollar an ounce markings. One of the world's greatest assets, silver is timeless wealth.
- Most of all, I own GOLD. The ultimate playing field. With the ultimate asset, you want the ULTIMATE MINDSET.
- If you overlever yourself, you are POISONING YOUR MIND. Stress causes cancer, and gold should be the least stressful investment to own, by definition. The worst investors, of course, own NONE. Many of them will commit suicide before this crisis ends. Clean, crisp, and fresh? Sadly, no. More like the Demented Blob in action.
- I think there's a 51% chance we take out 1250 as opposed to a 49% chance that 1166 fails first. Are you getting the VIBE? Hope so, because that's the Pgen Gridlines Vibe. No worries about 1166 failing, no worries about missing out on gold blasting thru 1250. Clean, crisp, fresh RESPONSE with ACTION whatever happens! Maintain a clean, crisp, and fresh outlook, with respect to your gold holdings. We feathered out gold items on the sell side into 1250, and feathered back in on the buy into 1166. That's clean. That's crisp. And that's fresh!
- Special Offer for website readers. Send me an Email to email@example.com and I'll rush you my free "Precious or Industrial Metals Now" report! Learn how to use gold and palladium as a proxy for shorting the Dow by moving assets back and forth between the two. I'll show you the best ratios to use so you maximize the reward potential of the Dow, yet manage the risk end of things when it tanks, without ever buying a share of the Dow itself, and staying long the metals!