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"Golden Gridlines. Are You A Player?"

Stewart Thomson
Apr 27, 2010

1. The Bugs Bunny Show continues to take comedy to new levels, surpassed only by the Angela “Euro to Zero” Merkel show. How she manages to keep a straight face while mauling the currency of her citizens, while they give her a standing ovation, is beyond my understanding. If I was in her place, I’d be on the floor screeching with laughter at the stupidity of my citizens while I ruined their currency, if I had her character. After handing the commercial banksters a $500 billion blank check after 8 hours of supposed “deliberation”, she has engaged in endless weeks of rants about why the Greek govt can’t get 1/100th of that amt, unless they agree to an equally endless list of supposed demands to ensure austerity.

2. Where were the demands on the commercial banksters? The real number is probably much larger than $500 billion. Only the saga of General Motors being read the riot act while on its knees in front of the US govt to get $15 billion, while the banksters were grabbing that as a weekly, daily, and sometimes hourly blank check, only that 20 trillion dollar “super-comedy” surpasses the current Merkel Euro to Zero clownshow. Manufacturing companies and taxpayers are left to burn, while the world’s banksters get trillions to recapitalize their trading programs, not to lend.

3. The govts might as well have written legislation that orders the banks NOT to lend a prerequisite to getting the bailout money, and using it only to buy govt bonds and trade with the taxpayer money, because that is exactly what is transpiring. The IMF has stated they don’t expect the average citizen to benefit at all from any of the current or future “solutions” being implemented by Western Govts.

4. The banksters are running a dual propaganda game right now, and doing it very successfully. On the one hand they are convincing the world’s hedge funds and gold community people (GCP’s) that naked shorting the stock market is the same as buying an asset, assembling a portfolio. They are at the same time running a media campaign for the average investor, which is, “buy now, you’ve missed the 70% upmove in the stock market, it might jump another 70% and you’ll miss that too, buy now, just do it!” The banksters have both ends of the investor stick covered to the maximum, and I believe they have chosen the tactic of massively increased volatility as their tool of choice, to transfer wealth from both investor groups to themselves. The average person thinks volatility is ancient history, when the reality is a volatility explosion sits just around the corner.

5. It’s critical that any attempt to short the stock market be against a larger long position. If you don’t have that larger long position established at much lower prices, preferably at least some of it around the Dow 6500-8000, I would not waste time playing Dow shorter, let alone Dow top caller. It’s a big risk/reward play. Buy Gold instead. Buy an asset, buy the ultimate asset, but do so professionally on weakness.

6. Technical Analysis and Technical Action are your tactical weapons to manage your fundamental understanding of the major markets. There is no major fundamental case to be made for shorting the stock market here. It’s a tactical play, and I’m doing it. If you want to face one way on a trade, you better be sure that trade is an asset, or at minimum has massive fundamental logic behind that trade. Thirdly, the risk to reward has to be massively skewed in your favour, using unleveraged investment products that have no limits in time. Only then should consider acting in the market.

7. At some point the Gmen of the world are going to pay heavily for their hundred year campaign rob your freedom and steal your money, 100 years of ultimate greed that earns my moniker of “bizarre and surreal” when looking big of what the Gman has morphed into, a horrific monster that is beyond out of control. It will be then that the door of possibility opens to a death spiral in the major markets. Falling US dollar, falling govt bond markets, falling stock markets. It will be then that a massive shorting opportunity will present itself with underling fundamental logic present. Present in time and place. Don’t pretend that future is today, however, and bet money on what is nothing more than a small money play. Gold is the lowest risk investment in the world. Don’t then make the jump to “since gold is ultra low risk, therefore everything else that is riskier, is now about to fall down in price, so I better short it now!”

8. As people get older, they want to feel safe, and it that transition from “young buck” to senior citizen that the banksters have used to manipulate the Gman into replacing the word “freedom” with “safety”. We rarely go a week without another freedom being removed for the sake of “safety”. Here in Canada, the freedom for safety mega trade is in full swing. A campaign is underway to begin sex education by the Gman for 6 year olds in the classroom. What happened to playing ball at recess? I guess that is replaced with quality Gman programs like “Condom selection for tykes”. The Gman has gone INSANE and he’s billing us all real money to execute his utterly insane actions. Then he wonders why fundamentalist terrorists go berserko and want him killed.

9. The Gold Punisher will send the Gman to meet his maker, but the time is not yet here. The Chinese endured decades of agony under Chairman “kill ‘em all” Mao. Americans, and the entire Western World, need to achieve and maintain a similar level of calm and patience, and think big. Gold and technology will make the Gman into a clown, literally make him obsolete, at least on planet Earth. Perhaps he’ll play Space Gman, but his role of power on Earth is in the later stages, I believe. I would guess the Gman has about 100, maybe 200 years left before technology, including medical technology, makes him about as useful as the horse and buggy and rotary phone. He’s not going down without a fight, but the point will come when all he sees 24-7 in the mirror is a ridiculous clown that produces nothing, and at that point, some Gmen will begin to go, literally, insane. Your great great grandchildren will likely watch the Gman elephant become…The Fly.

10. The banksters care only about money, and as technology reduces the need for the Gman, the banksters will move their focus away as well. The shrinking of the Gman will be swifter and bigger than a lot of people think, and I firmly believe the coming boom in medical technology is what will be eventually be viewed as the beginning of the end for the Gman. He’ll shrink back to providing basic law and order.

11. The interim period could see the Gman behave very irrationally, unfortunately. While I don’t believe there will be any gold confiscation in the coming paper money devaluation, I should mention that I have my chocolate filled gold tinfoil wrapped coins ready to hand over to the Gman, doing my part as an obedient citizen, and I suggest you do the same if it comes to that, do your part to help the Gman.

12. Technicals. When a market begins to rise, whether at a minor level (trend is a few days to 3 weeks max), intermediate (a month to many months trend in the same direction) or primary level (generally a year or more in the same direction), very very quickly a pattern of higher highs and lower lows makes itself apparent. The same is true on intraday charts.

13. Most amateur technicians zoom in on “uptrend” and “downtrend” lines. This is a major error. What matters is horizontal support and resistance (HSR), which are price levels, like powerful gridlines on a football field. Horizontal support and resistance points are constructed simply by drawing horizontal lines across areas where price halts and reverses, or halts and consolidates. Those are either price points or price zones. For example, gold rose to about 1170 recently and then reversed down. That’s a horizontal resistance point now, because price is now below that point of reversal.

14. Over the past month, the gold price has traded between aprox 1125 and 1170 and that entire area could be labelled a HSR zone, if viewed on a long term chart. The greatest traders are able to often judge how far into a HSR zone price will penetrate, but that’s not necessary for you to make money. Keep it simple is how to keep it profitable. Keep it simple, and keep it GOLD, because gold itself is a stronger risk management tool than any takeloss you can tactically place (ok some use the term “stoploss”, but I’m not here to quibble on semantics, but you decide which term better describes what happens to your money when engaging that tool). In all seriousness, I consider selling gold bullion at a loss, the same act as burning paper money in your fireplace.

15. There is a place for stoplosses, and it is in the hands of professional money managers. Amateurs need to concentrate on quality assets and booking wins. Move away from the fireplace, there’s no profits to be had by working the fireplace strategy. 99 times out of 100, you will be better served by adding money to quality assets like bullion, food crops, oil/gas, and major market indexes on price weakness, than trying to employ complicated market analysis to handle investments that have a relatively high possibility of going to zero.

16. This morning you are witnessing the fight for Gold 1150. That is the HSR gridline in play, right here, right now. On the topside, 1160 is the next HSR gridline, and there’s a minor “concern” that we’re coming into that area following a pattern of lower lows and lower highs in place since Sunday night. A failure of 1150 opens requires us to look further “down the ladder”, but only one rung lower.

17. Never look further down the ladder than one price rung, one HSR gridline. Those of you using my pyramid generator should use HSR to tweak what the Pgen does, not to replace it. You can increase the size of your buys in the areas where more substantial HSR gridlines exist, like increasing the the size of the buys in the area of MACD crosses near the “floor” on the range of that oscillator.

18. Also, for all GCP’s (gold community people), even if you are not an active trader, you should keep an eye on the gold price ball, in terms of where it is on the playing field, what gridline it is at. The long term investor can pretend they are not influenced by shorter term action in the market, but the reality is they are very influenced by such action, and it is a mental battle to maintain your positions. Most long term investors actually buy high and sell low after a long time in the red, learning there is no pot of gold at the end of their fantasy price rainbow, only huge loss booking or the bankruptcy of their superstocks like Enron, GM, Nortel, and a zillion other historical examples. The most successful investors who do buy low, still understand the mental battles that take place to maintain their positioning when price moves hard against you.

19. Knowing where you are on the playing field is critically important component to maintaining your composure under fire, and the HSR tool compartmentalizes “where you are” into simple gridlines on the gold playing field. A smaller risk is always easier to deal with that an all-encompassing one, and usually the latter one is a mirage, not a massive risk at all.

20. What separates HSR from other technical analysis tools is that it is best described as something PRISTINE.

21. You are the boss. You choose how much capital to allocate to each gridline. Lunatics allocate giant gobs of capital to a single trade and then freak out when price descends a few rungs down the HSR ladder. I’ve lived that as a broker, as clients insist on investing gargantuan sums at single gridline points, after massive strength, buying as the banksters unload, then they become comatose or superblamers, when price declines below their entry point. Show up to war with one big bullet, then scream “why am I getting killed, it’s not my fault!”, as you are gunned down like a fish in a barrel by the opposing forces, well, there’s a solid definition of insanity.

22. The HSR gridlines allow you to build a sense of control, a plan of action. You determine the amount of capital you allocate to each gridline, and the number of gridlines you will employ.

23. You are not guessing where the market is going, but responding with pre-set action at the gridlines. As an example, the silly food investors were burning the wheat market fields yesterday, and wheat actually fell from $5 a bushel to $4.50 at one point. Of course I walked into the insane asylum and bought as the madmen liquidated in terror. If you put a human in a corner and beat on them, they either give up and die, or start to fight back. If you beat on the price of gold enough, it starts to fight back and it’s a lot tougher than you are.

24. The wheat market is going to fight back, just as gold did at $250. Wheat is not a human being; it is the most critical food crop of the Western world. The Gman may be lying about crop numbers to make inflation appear benign. Institutions will sell wheat if they are given fake crop report numbers that indicate a supply glut, but constantly pressing down on the price pushes farmers into an “enough is enough” point, and they start cutting back on planting. Translation: They start producing less for YOU to EAT. The Gman is playing a dangerous game with the world’s food supplies at a critical time, one that Eric “The Gold Maverick” Sprott has detailed as a time of catastrophic risk, and I believe there is a real and growing possibility that major paper currencies IMPLODE, ironically just after Joe Blow lined up in the pawn shop trading all his gold for that very Gman toilet paper that is now floating in a tank of gasoline. There is extreme danger that the crisis is so big that it dominoes into the food markets, creating massive food shortages, that could morph into new pockets of the global population experiencing actual starvation. If gold goes to $5000 in a short period of time, and I think it will (and that is the great danger, not how high gold goes, but the rate of change in price in time), what do you think the price of food will be, and what do you think will have happened to the standard of living? Perhaps in a few years, MadMax will become the lead commentator on CNBC, and that isn’t meant to be funny.


Apr 27, 2010
Stewart Thomson

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