Gold and The Big Mkts: Liquidity Flows Rule
Graceland Updates 4am-7am
June 14, 2011
1. Is gold at some kind of top against the dollar, or is it consolidating for a big move higher? Is the horrific action of gold stocks a leading indicator of what is to come for gold, or is gold indicating that stocks are headed higher? These are questions that may or may not be answerable with logic.
2. Click here now to view the current gold chart. Price is moving inside a symmetrical triangle pattern. The odds are 2/3 that price breaks out upside. Use that Edwards and Magee fact as a "positive", but not as a buy signal. Emotional discomfort, like you felt into $1462 (and into yesterday's lows) is your main buy signal.
3. Unlike analysis, emotion is crystal clear all the time. How you feel when you look at the price of anything is not really open to debate. Just as most scientists get caught flat-footed when a game changing discovery is made, so most investors get caught when the markets make a major turn.
4. It happened at gold $250, Dow 6500, and at an endless number of major market turning points throughout history. It will happen many more times for eons to come.
5. Calling a turn appears to be an action of logic. Is it an action of logic, or is calling a turn better defined as an emotional need? "I'm on fire right now, so what I need is either a turn to the upside to relieve the pain, or an acceleration of the current downtrend so I can justify selling now."
6. Right now, there is a great clamour to predict how far gold stocks will slide down against the dollar. I see that as an irrational attempt to deal with emotional pain. Investors need to take practical action rather than make predictions that "this market needs to turn before I burn".
7. At the top of your practical actions list, if you have concerns about price, should be the action of moving core gold stock positions to separate core position accounts. Business owners keep some inventory vaulted or in the back of the store room.
8. You must do the same. I take delivery of physical stock certificates. I don't even care what the price is once those certs go into my core position warehouse. Price is as worrisome as a fly, if you take the correct practical actions.
9. If you insist on fighting emotion with prediction instead of practical action, well, "burn, baby burn" will be the song your fat lady will be singing, particularly if gold stocks enter a period of more serious decline. In 2008, many of you sold me your gold stocks as they tanked, and then I sold them back to you as price soared. Let's not repeat that action in 2011. You bought the stocks to build wealth. Take the actions needed to make that happen.
10. Click here now for a look at the silver "price blob". Gold moved into a sideways pattern after rising. Silver moved into a sideways pattern after falling. Technicians will tend to view the silver action as negative, while the gold action is positive.
11. You need to use choose bull or bear analysis to maintain a positive emotional state more than use it to try to figure out where price is going, but almost no investors understand this all-critical reality.
12. I'm a buyer of silver, every 25 cents down, all the way to zero, so I see the bearish implications of the price blob as a big positive for me. If you are a silver bull and already all-in on silver, then you should be focused on warehousing your silver and focusing on the bullish implications of the gold triangle, because gold tends to "rule" silver in the biggest picture. Do what it takes to stay away from "knowing" where price is going. Instead, use these various market scenarios to strengthen your emotional state.
13. Click here now to view the oversold condition of the Dow. What practical use can you make of this chart. Whipping yourself into a "we're all gonna die, it's gonna crash!" frenzy is not going to build you anything but poverty.
14. Ten more moves like the 1000 point decline on the Dow that just occurred puts the Dow off the board. OK, make that eleven, but the point is that you can either focus on how much lower the Dow can go, or focus on the scenario that the Dow is hinting that gold stocks are poised to rally.
15. Martin Armstrong has (fairly successfully, in my opinion) argued that the business cycle can be divided into 8.6yr increments. Just as you can have cyclical bull markets within a secular bear, you can have economic booms within the larger crisis picture.
16. Some very good analysts and gold people believe the dollar could collapse within a few months. Armstrong makes the case that there will be a "big bang", but it may in fact be many years into the future.
17. Quantitative easing is finished, but dollar devaluation is not. Dr. Ben Bernanke has many ways to skin a dollar cat, and he will do so. Mainstream firms like Morgan Stanley have declared further QE as all but impossible.
18. Morgan Stanley has the greatest track record in the world for calling stock market tops, with their phenomenal "triple sell signal". Ironically, almost every triple sell signal issued by MS has been totally ignored by their own price-chasing clients. Oh well, one more financially dead investor for the gipper.
19. MS sees the current stock market downturn as a "pause" in the uptrend, not a "crash alert". I agree. Team crash will fall harder than the Dow will, and you can write that down.
20. China's property values have started to come under pressure, largely because of a series of interest rate hikes. The Yuan may be set to strengthen and that could cool inflation numbers in China, which is fundamentally gold-positive.
21. Martin Armstrong's prediction made over ten years ago that economic confidence would bottom around June 13, 2011 may be fairly accurate. Consumer confidence is abysmal (a tragedy trumped only by horrific gold stocks confidence).
22. Many technicians have noted the drastically overbought positioning of the MACD oscillator on the monthly price charts of most contra-dollar assets. Just as Ben Bernanke's term "green shoots" did have a powerful effect, the condition of the MACD on many assets looks worrisome.
23. There are some key fundamental similarities, and differences, between the Lehman situation in 2008 and the Greece situation now. There is no question that Greece is just one of a number of catalysts that could implode the financial system or cause "another 2008". Yet, the liquidity flows of the large commercial traders in gold, and more so in silver, indicate they are preparing more for a big rally in the metals than for "Lehman Rides Again". What do they know, that perhaps you don't know?
24. Click here now to view the seasonal action chart for silver during June. Notice the price direction. It is down. The latest COT report showed the commercial traders up to 52,000 longs. That's about the same level they hit at the bottom of the 2008 lows! You may be about to witness the commercials build to an all-time record long position, if price declines per the seasonal norm in June. Are you prepared, to do the same?
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