Energy Dow and Gold: Technicals and Tactics
Graceland Updates 4am-7am
June 10, 2010
- Energy. A subscriber sent me a note a couple of days after the oil leak started. Some engineers were saying the only way to close the gulf oil leak might be with a nuclear bomb. We wondered if that was extreme or not....
- Now major energy analyst Matt Simmons agrees, says there's another leak, and wonders what happens in hurricane season. We're way overdue for a major hurricane. What happens to the coastline in a hurricane? Answer: "Paint it black" - Mick Jagger, Rolling Stones.
- The long natgas/short oil trade has been a big winner over the past couple of months. Profits must be booked into strength. Short term, natgas could move lower and oil higher. Yesterday that happened. Look at your finest items in your home. Then go to the workshop, and come back with an axe and chop them up. No? OK, well don't chop up your natgas core positions with a sell button axe. We had a great move up in price over the past month, but that's a blip on the screen of what is coming. Sell trading positions into strength, not inner core wealth positions.
- We can't know if this is "the bottom" for oil. But you must be buyers into weakness, and you were. Oil Daily Chart
- Now oil's price is banging into $75, which is both HSR (horizontal support/resistance) AND the 38% fibonacci retracement line of the fall from $90 to $65. Price has risen $10 while goldland stands in the audience watching. Where price might go, and what action you should take, are related concepts, but nowhere near identical.
- Oil to Gas Ratio Daily Chart While oil looks set to outperform gas in the short term, that does not mean you should sell your inner core gas positions to buy oil now.
- Click here now to view the Oil to Gas Ratio Weekly Chart. It does not look so enticing. The reality is that you should have bought some oil into the $25 meltdown. Both gas and oil are assets. No ratio trade is a reason to change the overall principle of buying substantial price weakness to accumulate both as assets. The ratios should be used to tweak what you are doing with your buy/sell programs relatively, not absolutely. Ratios are tweak tools, and playing the ratio trade by buying one and shorting the other, is just that, a PLAY for your gambling money. That is ALL. I'm not interested in being naked short either asset, but I do want to own relatively more of one than the other at various bands of time.
- Here's the wheat chart. Wheat 3 year chart I'm holding a funeral for those of you who decided that leverage is a tool, not a drug, and tried to play hamburger flipper with one of the greatest assets in the history of the world. Wheat. Here's a tip: Buy wheat with NO LEVERAGE until you have built a large core position. Then after some TIME has passed, a lot of time, and price is vastly higher than your lowest price core positions, you can use a BIT of leverage that is PAID FOR by the MARKET, not by you.
- In the zero to $6 range on the wheat price, I don't see any use for leverage for TRADERS. Personally, I prefer to use leverage on the SHORT side, which is something that subscriber supertraders GoldLion and the BRAIN do, and what the banksters do. Really, there is no leverage, if you short against a larger long position. For now, the focus is on wheat accumulation. Looking at a price chart of what price MIGHT DO, and building wealth in the wheat market are NOT the same thing. Those who showed up for the wheat WAR with a hamburger flipper as your nuclear weapon, well, you may want to consider revamping your weaponry. The banksters are on the wheat BUY. Here and Now.
- Still, they carry wheat short positions. Rather than trying to call the bottom for wheat (Ever see Warren Buffet or John Templeton try and call the bottom?), carry SOME short positions as you BUILD your core of longs, so the banksters don't turn you, emotionally, into wheat FLOUR. Over hundreds of years of market history, there is yet to be a better cure for market depression than RINGING THE REGISTER.
- June is a weak month for gold, or so the seasonal charts forecast it will be. My view? Who knows, who cares. Respond to price on the buy if it IS weak, respond on the sell if June is strong. My suggestion is that you stay calm first, play seasonal price prediction machine second.
- In a lock limit UP situation for gold, price gaps higher at the opening of New York trading and stays at that price, as the exchange forbids any higher pricing. The "minor problem" is that there can be NO SELLERS at that pricing. That situation can go on for many days. I don't see being naked short gold going into the current G20 meeting as the strategy of a rational individual, but many in the gold community seem to feel they are up to the task based on their "knowledge" that price will be weak in June. Up in smoke is a real possibility for these over-leveraged speculators.
- Check the website for my view of what is a longshot possibility at this G20 meet, one that would send team leveraged gold short to the Bread Line, well ahead of schedule.
- If gold falls, and it already HAS, from 1255 to 1225, you want to be a gold BUYER. I'm a gold buyer. Not a top caller. GoldLion is buying every $7 down to 1045.
- Canadian business owners are now afraid. Many saw Bank of Montreal's "get out of the market, now!" rant this week, and they don't really know what to do. Like a production line that's gone bad for ten years, there comes a point where enough stock market blood is enough. "Maybe I should just get out of the market, I might only get 1% on a bond, but at least I'm not losing!" That "thought" (it's actually an emotion, not a thought) is the main theme pounding thru the public investor's head & body right now. The pubic is right on the edge of mass capitulation and the banksters know it, because they designed it.
- Here's a look at the Dow. Dow Daily Chart. The main issue here, for the gold community, is: OVERTRADING. After blowing the short at Dow 6500 thru Dow 9500, team Dow short got TWO big WINS.
- They got the top at 11,200, which was followed by a meltdown to the 9700 zone, and the banksters called it an "accident". Some players, but not many, managed to get big profits. The Dow then rallied fast, back up to HSR at 10,900. In a picture-perfect bear play, the Dow then tanked AGAIN to the 9700 area. Big profits were booked for sure by many Dow shorts.
- What now? Successful PLAYERS know they need to be FLAT in the market most of the TIME. A player is not an investor. An investor needs to buy the lowest possible weakness. A player is looking for a maximum amount of price movement in a minimum amount of time. Amateur players (and leverage drug addicts) have an URGE to be in the market all the time, always looking for a play that doesn't exist. Most of the time charts don't really work well, so by definition most of the time the PLAYER should not be "at work" either, in the market.
- Anything could happen in the Dow market now. It's oversold, and I've been a buyer of the market into the lows. There's a lot of "rally talk". Technically, the stk mkts "should" rally. In my view they could also crash. The Industrials broke their Feb lows.
- The transports did not. Dow Trannies. Daily Chart.
- The low that matters in Dow Theory is the Feb low. What we have now is, yes, a non-confirmation. What does that mean? Answer: NOTHING. It means there is no CONFIRMATION. You want to see CONFIRMATION before assuming you've got a renewed bear on your hands. "I ain't got time to wait for that turtle act, I gotta make beeg mowney today!" - Typical hotshot futures trader. Think WEALTH. Not pot shots and hamburger flips. The worst investors in the stock market NEVER look at the transports.
- The GDXJ, and gold juniors in general, look fine to me. Considering it's June, considering the stock market has been hit hard, considering the general lean towards negativity in the gold stocks community, I don't see anything in the current price action that is a concern. Strength in trading positions must be sold, and weakness bought, regardless of what the news headlines say.
- Here's a look at the GDXJ. GDXJ Daily Some of the oscillators are actually generating BUY signals. When I look at the various GOLD-NEGATIVE factors that are in play right now, then look at how the GDXJ, and gold itself, are doing, I think gold and gold stocks are outperforming expectations.
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