Gold and Energy: 70/30 Long Short Tactics

By: Stewart Thomson | Tue, Feb 8, 2011
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Graceland Updates 4am-7am

  1. When you are involved in a roaring bull market, a great number of imaginary views come into existence around you. Great care must be taken so you don't become enveloped in these imaginary dreams, and then find yourself destroyed by nightmares of reality.
  2. For example, Gold ground sideways from the early 1990s to the early 2000s in the $300-400 area generally. A long ten year basing period. It is also the period when the banksters accumulated (and traded) the great yellow metal.
  3. Real and new wealth is built by the richest people, by accumulating during such periods of time and value pricing. When viewed from "outside the accumulation box", the reality of this discomfort and even pain is lost on smaller investors.
  4. A imaginary view that "I can do it all, but do it differently!", begins to assert itself. Most gold bulls today are thinking, "Gold at $5000 with no starving Asians while I make free big money every day, sure we can do it, yes!". This thinking is childish imagination gone over the deep end.
  5. Let's try some adult thinking: At Gold $400, if you were promised Gold $1100 the next day, and got it, you would be ecstatic. In contrast, today, anyone who mentions master analyst Martin Armstrong's current phrase, "Gold $1100", is viewed as a Gold traitor. "Get him, he says paper money might have a rally. If there is one, don't book any profit on paper money. Instead, sell all your gold in a loss-booking panic while price-chasing paper money just in time for it to crash!" - hopefully not you, Feb 8, 2011.
  6. Gold at $1100 was viewed an impossible pipedream in the late 1990s, by the same people who recently bought in the $1100-1400 area in a price chase that their cracker jack box prize told them was instead a "an asset here to stay" play. They created vast imaginary reasons to justify their price-chasing actions. The golf ball advisors and the investors each nodded their heads up and down in unison, getting into the price-chasing rhythm, and once all was in sync, the "buy Gold and book huge losses on dollars" button was pressed. I know many of them personally, and they will all be wiped out in this Gold bull market, long before it ends.
  7. Stay real. As Gold goes higher, you will have to demand ever-larger price weakness to operate your buy programs, or you are setting yourself up to be destroyed by the banksters.
  8. A real wealth-building program is an accumulation of wealth in the trenches program. Real wealth building feels like buying Gold did in the 1990s.
  9. I'm doing it in natural gas and I'd like to remind you of Jim Sinclair's words back around Gold $330: "Rallies need to be sold". While building a major long position, most of you will need a tactical short position in the same asset, to survive. You need some sort of ongoing shorting program on natgas to survive this accumulation program. This wealth-building program.
  10. Will you make more money on a long only program? That's debateable. But what isn't debateable, regardless of how high it eventually goes against paper money, is that you need a shorting program to survive the here and now, both financially and emotionally.
  11. Natural Gas is the world's most volatile commodity and the banksters will break you like a match stick, if you don't come prepared for a very long war. I covered natgas shorts yesterday, ringing the cash register, and added more longs, while most long-only players burned at the bankster stake, some mentally, some financially. Either way, it was a grand wieny roast.
  12. Here's the NatGas Chart. The major markets are not an investment. They are a war. Fighting to the death means buying prepared to buy an asset that has a low chance of going off the board, all the way down, on sale, to the very lowest sale price, so you make the very largest amount of money on your core positions when the bear is finally gored to death by the bull. What time does it take for that action to occur? I have no idea what time the clock says when I get richer, and nor do those who pretend they know.
  13. Think about wealth. Not time. I'm interested accumulating wealth and I just accumulated more wealth in natgas yesterday, while ringing my short side cash register. That sound, for those are wondering, is: "Kachingo!". Meantime, my competitors had a sprint race to price-chase paper money while booking ever-bigger losses in natgas. I enjoyed the show. All hail... Sir Orville Redenbacher?
  14. If you have core positions that exceed $10,000 in natgas, you need to hold that in natgas mini futures with no leverage, not the trading ETFs that fail to track natgas properly. If your core positions exceed $40,000, you need to use the main natgas futures contract for your core. For natgas, I personally use both futures with no leverage and the ETFs, but I only am only long the futures.
  15. Being naked short natgas at current prices for "a quick win" is not wealth building. It's a heroin addict working for minimum wage as a hamburger flipper. Sound good? That's because it isn't good. It is very simple to get fills on the short side on UNG-nyse, as it is so liquid. Use a 70% long, 30% short mantra in all major wealth building programs. To build wealth. To build sanity. Shoot me an Email if you understand natgas as a quality asset, have invested $10,000 or more in natgas core positions, and yet are still frustrated and want to start booking wins instead of wieners. I'll send you my natgas wealth-building video report, my gift to you. Cheers.
  16. Gold! The ultimate asset has allowed paper money to stop losing value temporarily. A break in the lashing. Gold is fixed right in the middle of the $1310-$1430 range box. Here's an updated view of the Multiple H&S Pattern Chart. Failure of the $1344 and $1325 right shoulder lows opens the door to a test of the lows at $1310. The "$1225 Gold on sale for you" door is open if $1310 is taken out decisively.
  17. Still, odds favour the upside, as they have since we went into this $1430-1310 box at $1387 back in October. I've drawn in a rough neckline (the black horizontal line around $1355) but that line could be drawn higher, up around $1460. Regardless, this h&s is a positive pattern, targeting $1400, and those of you who followed me into $1310 on the buy have already booked some profits on this $50 price to $1360.
  18. My focus right now is GDX (gold stock). Gold $1100, if it happens, is seen as a disaster by most. If we go there, I can tell you right now that the amount of Gold-negative news you will be bombarded with will be endless. If you can somehow muster the stomach to face lower prices on the buy while understanding what Gold is, I think you all are going to blown away by what happens to gold stocks, in terms of reward, in the bullion $1400-1700 range.
  19. You just can't join Elmer Fudd Public Investor on the Gold buy in the $1400-1700 range. That action is the horror of horrors. End the price-chasing and loss-booking madness, and focus on getting prepared to sell to Fudd in that area, at massive party pack profits for yourself!
  20. Paper money is just one of the many assets that GDX seems to be setting up to maul. Whether you look at GDX against the dollar, agriculture, uranium, the Dow, bonds, or oil, all roads lead to GDX (gold stock), as the asset to put in play for the intermediate term. I have made a lot of money in wheat and corn with my 70% long and 30% short program, and I've shifting about 40% of that into GDX buy/sell programs. Here's why: I have one buy program buying every 50 cents down, and another buying every 5 cents down, so my paper widgets are being put where my mouth is.
  21. GDXJ (gold juniors ETF or individually) is arguably even better. Here's the GDXJ against GDX Chart. While the short term Stochastics series has moved up, the overall picture for GDXJ is at minimum, very solid.
  22. As you know, I am adamantly against just "gambling" or "betting" in the market, unless it is against an underlying core position with a smaller amount of money. Hedging totally produces no wealth, and in my view is an action based on fear, not logic. Don't short the Dow if you are not net long into Dow 6500. Buy gold stocks instead. In the case of the Dow, is it possible that the ultimate Gold Community dream is about to come true; a falling Dow and soaring gold stock, including Gold Juniors?
  23. Here's a look GDX against the Dow. This is the weekly chart and it looks like that could really happen. Not all the oscillators are flashing buys, but some are.
  24. Here's a shorter term look at the situation, via the daily. GDXJ Against Dow Chart. The power TRIX indicator is flashing a significant buy signal, and the longer term Stochastics is drastically oversold. Go Juniors!!! No promises on who wins, it's David and Goliath, but the fight is on!

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Thanks!
Cheers,
st

 


 

Stewart Thomson

Author: Stewart Thomson

Thank-you

Stewart Thomson
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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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