Gold Bulls vs The Penguin
1. I'm in Chicago today on business. Home of the Chicago Bears. A great football team franchise. Then there is the Chicago Bulls basketball team. Another great franchise! Both teams have had great success.
2. In the GOLD market, however, the Gold Bears haven't been so successful. Whether they are from Chicago or from anywhere. Despite the best efforts of these idiots to destroy gold and gold's investors, we're still here. The bears' clown act of a track record is 5000yrs of complete and total failure. The current roster of the gold bear team is a group of economists fired from an elvis clam-bake movie set, and their front line is billions of price-chaser investors holding a toilet paper foundation of approximately 1/3 real estate, 1/3 junk bond type "income" type investments, and 1/3 mutual funds. All of it price chased, with the junkbonds being the most recent "addition" to their "portfolios," bought as Citibank and Morgan Stanley's lead analysts call an end to the world's 30-year bond bull market.
3. The gold bull lineup is lead by gold bullion itself, the world's lowest risk investment. So when you buy it, you know your odds are microscopic and arguably physically impossible that it is reverse-split or delisted. On the front line of the gold bull team are the Central Banksters of the world, lead by the Asian central banks with a stated ten-year Gold Buy Program that has just started, and by Ben Bernanke, whose 5 point plan to fight deflation includes revaluing gold higher, and running his world's largest photocopier in hyperdrive to tank the US dollar. Again, these are stated, written policies of the central banksters of the world. All ignored by the gold bears.
4. I covered the fall into 1075 and stood alone in goldland calling that the exact bottom of the decline from 1225. I made that call by watching the fundsters and gold price chasers bail with a mentality that was eerily similar to that at 905 and 930, when I sent gold traitors like Dennis "the gold market" menace" Gartman to the woodshed, along with the rest of the pretend gold bulls, who called gold "way overvalued" in the 905-930 area. While I screamed: Buy. I won. They lost. Most of my readers are Americans. While wet noodles have taken over large tracts of America, most American business owners and hardcore Americans care only about the gold scoreboard. You can have what appears to be the best analysis, but if you don't make your people money consistently with your stories, if that analysis fails to play out, the bottom line is you're a bustout and you're soon fired. I don't play to lose and I face the scoreboard every single day at 4am. The hundreds of thousands of winning trades booked by my subscribers as a group is a scoreboard event that is undeniable. My message to the gold bears for 2010 is: Look at the scoreboard. You're a bunch of bustouts. And your pain is only just starting.
5. But what about: Today? Well, Gold has rallied up from 1075 to touch 1160. That is an $85 move, and strength must be sold, just as weakness must be bought, to take risk capital off the risk table. Yesterday was a great Kachingo day, in euro, gold stock, gold bullion, aussie dollars, oil, and the Dow.
6. This next point is very very important. In an uptrend in a major bull run, what happens to technical traders is they lose sight of the fact that the definition of an uptrend is a series of higher lows and higher highs.
7. Amateur technicians (and gold bear morons) look at indicators like stochastics and MACD and see them reaching "overbought" levels (high on the chart) or giving "sell signals" (a crossover of the lines). So they sell their entire trading position. A ghastly error. Here's a chart of the Australian Dollar.
8. What you can see is that the stochastics indicator rose to a "sell" point multiple times, then declined to a buy, also multiple times. But the amount of price movement to the upside was much greater than to the downside.
9. Looking at tactics, the trader must keep a core position, and be prepared to rebuy what was sold at higher prices than where it was sold. While price is gyrating up and down, do not expect to be able to "reload" your buy pyramids with trading positions at your initial buy price. When the technicals generate a new buy signal, you are generally going to be entering the trade at a higher price than where you entered the last time, and likely even at a higher price than where you booked profit! The minor lows are often higher than the high area where you sold!
10. It is relatively easy and simple to look at a chart and call something "way overbought". But what are the price consequences of that technical overbought condition? More often than not, the price decline is very shallow.
11. Intermediate declines in price don't happen too frequently in a bull market, particularly in a bull market in currencies. The banksters know gold is the ultimate currency, and really in the end it controls the US dollar and all paper currencies, not the other way round. But by keeping the holdings of the gold currency in a "tight float." price can be moved sharply. Gold can have high short term price volatility because of the banksters' success at keeping it tightly held. Tightly held mainly by the banksters themselves. They use the volatility they themselves created to tell the world's price chasers, "see, look how volatile gold is, don't buy gold. You'll lose all your money." And the public follows the banksters' instructions.
12. I mentioned to you not to fall in love with the Chinese Gman. Peng Junming is an analyst at China Investment Corp, China's $300 sovereign wealth fund. He is quoted this morning as saying the US dollar has bottomed and is a buy. Then he backtracked and it was just his personal views, not an official statement. I suspect he's been involved in building a long USD position for the fund, and he's trying to talk his positions higher... positions that may be in danger of going underwater. He may already be underwater.
13. UBS bank notes that it is American institutional firms that ultimately determine the value of the US dollar, as their combined size totally dwarfs all central bank and sovereign fund assets. In their world, Mr. Peng (or is it Mr. Penguin?) isn't very worrisome. And since the fundsters just busted out of their long USD trade, I suspect they are not too keen to re-enter it based on Mr. Penguin's gold-bashing statements. Statements that clash with those of the Chinese Central Bank, that they seek to increase their gold reserves by 800%, buying steadily over the next ten years.
14. I have been emphatic to subscribers that 2010 is the year the banksters push institutions into gold and a dollar crisis, not a new bull market, is the more likely event. Here's a statement from the man the gold community hailed as a friend. Peng Junming: "China should have the right attitude about investing in gold. There is no urgent need for China to increase gold buying for now, because prices are high." My message to the Chinese Gold Market Menace, Mr. Peng: You're going down, bud, Gold Bullion is going to clean your clock. Cover out your failed USD positions before you drown your investors.
15. The banksters are pounding the "buy gold now" gong to their institutions now, as the new year is underway. I mentioned a few weeks ago about Morgan Stanley calling "sovereign default risk" and "inflation" two key themes for 2010. With money printing the solution to the default risk problem. Translation: Higher Gold Prices. Citibank is even more clear. Their top technical analysts have a $2100 minimum target for gold, and a $6000 max target (which is mine as well). They state the US Paper Buck could face a further 25%-30% meltorama before its horrific bear market comes to an end.
16. Further, Citibank's statements about the USdollar are aggressive and ridiculing to the USD bulls. Their actions to kick off 2010 come just days after my prediction that 2010 sees gold on the Major Offensive.
17. The public, and Citibank's own clients, will likely look for a zillion reasons why their personal portfolio of "safety with growth" junk bonds and income distrusts can't fall down, why nothing can go wrong for them personally. It all boils down to a fear of change. And the golf ball advisors will tell them what they want to hear. When all that is left are ashes, the golf ball advisors will again be there for them. Handholding them as the losers liquidate it all in failure and rationalizing their actions.
18. One thing that the Penguin got correct is that China is likely to start raising rates before the US does. Remember all the "tough guy" talk from China about how they would keep the Yuan down against the dollar? What happened to that? Gone. What do you think rising rates in China will do to their stock markets, their economy, to the Chinese real estate party? After the carnage begins there, will it spill over to America? Of course it will.
19. Citibank's top technicians envision a situation where the US stock markets slop around in 2010, but end the year 2013 (hello, earth to Joe Public Idiot Investor, are [you?] listening?) around 40% (!) lower than where they are now! They see the euro at 1.80 and gold between $2000 and $6000. When Citibank talks, thousands of institutional money managers listen. When the gold-bashing Penguin talks, well, let's see who listens besides Joe Public Investor. We all know what he'll do after reading the Penguin's gold scare story: Race straight to the garbage can and throw all his gold in there. Inside the garbage the banksters wait with open arms. I'm in there too with my arms open. Are you?
20. As I prepare to send this off oil has begun to sell off. That's fine. We've had a $14 rally and the daily chart is flashing sells and overbought conditions. What you need to ask yourself is do you want to make serious money in oil? If so, use any weakness to build your core position. When indicators go to this type of "sell", what typically happens is a "scalp trade" presents itself. Where you can go short with small money as all the technicians pile on. But the bigger money is in staying long and strong oil for most investors. Here's the Daily Oil Chart.
21. Meantime, one of Iran's atomic scientists was killed in a bomb blast. The situation there is getting worse, not better. And the monthly chart for oil backs up my view that small corrections in oil need to be bought with confidence, and big selloffs need to be bought in size. Here's the monthly chart. Oil Monthly Chart.
22. So, we complete our Tuesday morning battle with the bears by dispatching with the "The Penguin," preparing to buy oil, and booking a solid load of profits yesterday in the major markets. What will tomorrow bring? Are You Prepared?
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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am. The newsletter is attractively priced and the format is a unique numbered point form; giving clarity to each point and saving valuable reading time.
Are You Prepared?