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Our current position on precious metals

Jack Chan
Oct 12, 2006

Many readers of my work have commented that perhaps the PM sector has bottomed, because...

#1 - many reputable analysts are seeing their indicators at previous major bottoms
#2 - sentiment is very negative, which is a contrarians play.

As always, I have the utmost respect for my colleagues and although I don't always agree with them, my task is not to prove that I'm correct and they are wrong. My only focus as an analyst and active trader is profits, being right or wrong matters little to me. Regarding sentiment, this is an area many are confused. This is how I view sentiment...

Positive sentiment amid positive price action is natural, embrace it.
Negative sentiment amid positive price action is a contrarian's play, buy it.
Negative sentiment amid negative price action is natural, let it be.
Positive sentiment amid negative price action is a contrarian's play, sell it.

Times like this could be very confusing for the gold and silver investors, as the natural force of greed and fear are equally at odds with each other. Feeling greedy because we don't want to miss the next golden rocket to the moon; feeling fearful because most investors will be seeing their September statements down 20 to 30% from previous months. Uncertainty is the biggest obstacle and challenge to an average investor.

My job as a market timer is to remove those uncertainties. I am either long, short, or in cash. If I'm positioned long or short, I manage risk by having planned exit points if my positions are proven incorrect. If I'm in cash, I enjoy the down time by going, you guessed it, fishing. I do not go into the long and winded debates on the economy, and all the fundamental issues surrounding it. I'm simply not smart enough.

Here are our current trading models and positions...

We are on a long term sell signal, therefore, we are in a trading environment and no core positions should be held until we have a long term buy signal again. Investors should be in cash while traders can swing trade the short term on signals and set ups.

GDX - currently on a sell signal, traders should be short or in cash.

XGD.TO - Canadian traders are also on a sell signal, therefore, you should be either short or in cash.

GLD - this gold ETF is on a sell signal, traders should be short or in cash.

SLV - the silver ETF is on a sell signal, traders should be short or in cash.


Our weekend update on 9/30 alerted subscribers to close all core positions on Oct 2. Aggressive traders who are currently short should maintain a tight stop and ready to reverse positions if we have a buy signal and set up. Those in cash shall wait for the next signal and set up, whatever it may be.

If enough people are convinced that we have a major bottom, let's wait for them to throw their money at the market first. If indeed they vote with their pocket books and not just their hands, the market can be reversed and a new uptrend will be established. That is when we will join them. Until then, we are happy with our hard earned profits this year, and if nothing happen between now and Christmas, I'll be content to call it a year, another good year.

End of report

Oct 11, 2006
Jack Chan
email: jack@simplyprofits.org
website: www.simplyprofits.org

321gold Inc