Gold and Dow: Liquidity Flows For 2011

By: Stewart Thomson | Tue, Dec 21, 2010
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Graceland Updates 4am-7am

  1. What's in your stocking? It's four days to Christmas! Is it a selection of beautifully wrapped gold bars and gold stocks, or is it a toy US dollar photocopier wrapped in a pig's tail?
  2. Yesterday was another massive day for your Gold Juniors "Golden Popcorn" cash register machine. Many juniors metals stocks soared yesterday, while others drifted.
  3. Here's a look at the gold stocks big picture.
    GDX Chart? No, it's GDX OFF THE CHART!
  4. It's time to get real. Stop letting amateurs scare of you out of your positions. The Gold Stock rocket has been launched and it is just like when bullion launched over 1045. Nobody believed and most missed the whole ride to 1225. You're not missing the gold stock ride. Put your gold stock core positions in a vice and put a lock on the vice and throw the key in the garbage. Thanks. With Gold Stock, this time the ride goes off the chart while your investor competitors may hit the breadline. Are You Prepared?
  5. I have to label Friday morning (Dec 17) as some sort of selling climax, despite gold being barely down from the recent highs.
  6. The level of emotional negativity that occurred Friday morning was identical to that which occurs at significant selling climaxes, and actual capitulation selling in the market was occurring in significant size.
  7. Many stayed quiet about their selling, pretending to themselves (and others) that they were simply taking a break for Christmas. Marking your capitulation to model doesn't change the reality of a booked loss.
  8. Most gold analysts and investors have been caught in a vicious emotional trap in the gold markets (one that is turning from emotionally red to financially red) as they top call themselves out of gold, at a period in time that has the highest probability since the start of the bull market of seeing gold stock go vertical in a true parabolic rise.
  9. Investors were destroyed in 1979 by top calling themselves out of the gold market based on a huge rise in the US dollar that commenced. The more the dollar soared, the more they sold and shorted gold. Total losers.
  10. The dollar soared more, and gold stock went parabolic. My tiny suggestion to you: don't use them as your market heroes. This time, the "booked loss" for the top callers might be a place on the breadline, not just an obliterated (for life) trading account. I see investors doing the exact same thing again right now, that they did in 1979.
  11. Here's a look at the Dow. Notice the RSI from 1995 on this key Twenty Year Dow Monthly Chart. The top callers missed all the upside ride, as their coveted RSI went "massively overbought". They failed to study Dow liquidity flows, and they are failing even worse now in the same way with GOLD liquidity flows. Gold here and now is about central bank liquidity flows, not some 10 second RSI chart that fell out of a top caller's crackerjack box.
  12. The top callers failed to call the real top in the Dow in 1999, and failed again at the 2007 Lehman Top, when Morgan Stanley lit a cigar in the spring of 2007 and said, "Triple Sell Signal". The banksters then marked a snack pack of Lehman OTC derivatives to market, and Elmer Fudd Public Investor learned a whole new meaning of the term, "Wieny Roast".
  13. Almost none of Morgan's own clients have ever listened to Morgan Stanley's epic signals that have an unparalleled record of accuracy in the Dow. Since 1999, Elmer Fudd Public Investor has been reduced to a pathetic growth with safety puppet, afraid to buy even one share of the Dow. The Dow is in a massive consolidation, indicating some sort of quasi-hyperinflation is near at hand. Here's a look at the monster consolidation in play:
    Dow Monster Consolidation Chart.
  14. Forget the Dow. It's far too late for most in the gold community to break the decades-old obsession with shorting the Dow, an obsession which is best compared to a drug addiction. So, let's do what is practically necessary to make you money. Focus on what that Dow consolidation means for Gold Stock. Your gold stock. The bare minimum upside target of the Dow's ten year consolidation is:
  15. Dow 21,000
  16. That's the bare minimum target based on price consolidation, not time consolidation. Even if QE succeeded to end the crisis (it's totally failed to do anything but prolong it), the amount of time in the "7000 to 14,000 point Dow box" makes Dow 30,000 the more likely bare minimum upside target.
  17. What is the ultimate target for GDX? To understand the upside, what you need to understand is what the institutional money managers don't understand, which is that the failure of QE opens the door to gold revaluation. The failure of gold revaluation opens the door to all-out money printing as the stated prime policy of the Fed.
  18. Institutional money managers don't want to hear about gold revaluation, because it means the currency and bond markets are in massive trouble. It means they have to take all their clients' money and put it in the stock market to avoid watching it get hyper-inflated to nothing. So they want to believe that QE is working. The banksters are telling them that it is working, but drop occasional hints that there could be minor negative surprises ahead. If you call mass breadlines a minor negative surprise, I guess you could term the banksters' statements as truthful.
  19. QE is not working. Real estate is still going down, unemployment is still rising, debt is rising, and now rates are starting to rise. Banks are restricting loan qualifications, not easing them. That's not economic recovery fuel. The icing on the QE failure cake is the QE limit numbers that institutions are setting. They feel QE above these limits could start a hyperinflationary spiral.
  20. The problem is that the limits prevent the Govt from devaluing the dollar to the extent needed to effectively default on their debt obligations.
  21. With QE effectively dead now as tool to handle any further worsening of the crisis, the central banks will now look to accelerate their gold buy programs to revalue gold higher, and keep it higher. The point of revaluation is to devalue the amount of debt that is owed by the govt to its citizen creditors.
  22. There is no possible way on this earth that I am going to stand before you 4 days before Christmas as gold revaluation gets underway, and top call myself or you, out of your gold items.
  23. The central bank buy programs are not about accumulating gold as an asset, like you accumulate it as an asset, an investment. They use gold as a control mechanism, and it takes very little gold to control the entire paper money system.
  24. The central banks have no interest in buying gold cheaply or selling it "high". During gold revaluation (now) they want to pay higher and higher prices for gold, to ease their ability to pay their creditors in paper money. What if the monthly chart RSI on gold went overbought for the next five years on Gold, like it did the Dow? What if you sold all your gold now and the central banks re-valued it to $2000 over the Christmas holidays? Would that be a party? Maybe you better put that overbought RSI chart back in the cracker jack box that it fell out of and enjoy your Golden Christmas, which is being brought to you by Central Bank Gold Liquidity Flows!

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Thanks

 


 

Stewart Thomson

Author: Stewart Thomson

Thank-you

Stewart Thomson
Graceland Updates

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Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

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