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GDX and GDXJ: Key Tactics!

Stewart Thomson
May 4, 2010

1. The worst investors I know are, right now, the most terrified that gold stocks are going to crash. The best investors I know are engaged in a huge transfer of assets from booked wins on junior oils, into junior golds.

2. What is the actual reasoning behind a gold stocks meltdown? The clear answer is: None. Many analysts are honed in now on the short term charts, trying to figure out “the next move”. That’s a major error, one that this time may go down in history as one of the great market blunders of all time. The gold market is at least flirting with going parabolic.

3. Use the monthly charts of GDX for your big picture, the weekly charts to plan your buy and sell points, and the daily and 60 minute charts to execute on those points with market action.

4. Here they are: GDX Monthly Chart Big Bull Picture The 55-56 HSR (horizontal support and resistance) area is major, and obviously a zone of enhanced profit booking. NOT a zone for “loss booking, I better bail now because it might crash!” Stoplosses are for professionals, not amateurs. If you bought your gold stocks at prices that correspond with the GDX 55-56 area, the very clear message is: You are NOT a professional investor. The gold bozo patrol will try to “get out at break-even” at 55-56. If you bought much lower in a pyramid formation, obviously that key area is one for enhanced profit booking of your trading and outer core positions. Do NOT sell your inner core.

5. GDX Weekly Strategic Buy and Sell Points Chart Here I’ve drawn in a red HSR line, which was hit yesterday. Obviously we are booking some profit, here and now. What happens if gold begins to decline? Well, again, if you bought an “overload” of gold stocks in 2006 near the May highs and in the winter of 2007 and Spring of 2008, you do NOT “sell now, because it might crash”. You need to fix what’s broken, which is your buy/sell strategy. Find the patience within yourself to wait for price to blast thru 55-56 on the GDX, and then take a BIT off the table into strength at prices well above the 55-56 zone. Then wait for weakness, real weakness, to rebuy, with the 55-56 price zone as your number one buy point.

6. You should take note of the blue horizontal demand lines I’ve drawn in, and use them to enhance your buys IF price descends to those levels. Nobody knows if it will or not, but the difference between the banksters and the gold bozos, is that the banksters WILL buy into those zones if price descends there while the bozos will just liquidate in terror or even go short. I’ve drawn buy points down to 42. Price may continue lower or it may not even go anywhere near 42. Focus on making money, not staring at the 1 second tick chart or the latest mine reports to see if your stock has hit “the big one” so you can start chasing price while the insiders dump.

7. More aggressive traders with gambling money can trade off the HSR zones on the daily chart for gdx. But amateur investors who are stuck holding “the gold bag” from 2006 and 2008 need to exponentially increase your “patience power”, here and now. You WILL be rewarded for your investment in the gold sector, even though your entry timing and tactics were a total failure, provided you step up to the patience and commitment plate and stand tall.

8. Here’s the daily chart for GDX: GDX Daily Chart The indicators and oscillators are to some extent overbought, and the $51 HSR is clearly evident. There is not enough history on the GDXJ to use the monthly or weekly charts properly, but I’ve compressed the daily chart’s entire history here: GDXJ Daily Chart Cash Register In Action

9. I’ve drawn in the two key HSR levels and those are clear as day GDXJ profit booking points. I’ve taken my subscribers on a bizarre journey, a road from amateur bustout investor to professional trader. It’s a road with no ending, but there’s a foundation and time for each part of the journey. Step number one is the pyramid method of buying and selling, preferably all the way to zero in major assets, with gold bullion at the very top of the list. That puts you in the GAME, the banksters’ game of buying weakness and selling strength with your capital professionally allocated, as they themselves do it.

10. Step two is to use average true range, to look at how much gold is really moving around in a given hour, day, week, or month, and place your buy and sell increments accordingly.

11. Step number three is to utilize horizontal support and resistance, the most powerful technical analysis tool in the world, to tweak your buy and sell points, strategically maximizing reward and minimizing risk with that tweaking.

12. Ronald McDonald and Elmer Fudd should know the 29 area on the GDXJ is a profit booking point. Not a “dump it all, it might crash and I’ll lose!” point. Whether we blast above there or start a decline is 100% unknown. All that can be known is how we will respond as price does its own thing. Here’s a 2nd look at the GDXJ, with HSR buy points highlighted in blue.

13. GDXJ Daily Chart. Buy Point Map

14. Gold blasted to $1190 this morning sent my cash registers into machine gun fire mode. We are now up $100 an ounce from the 1085 lows, a point that I identified as it occurred, alone in the gold community, almost to the tick low as a selling climax. I did it by going into the gold community’s MIND.

15. All gold cards are on the table now. We could correct modestly here and now, or we could soar thru 1225 and continue unabated towards 1250-1300.

16. Guessing about the outcome won’t help you. It will burn you quite severely. You may also recall how I bought, almost alone in the gold community, the Dow into the 8000-6500 area lows, and did so while making non-stop weekly trips to the bank to remove cash as I put odds at 50-50 that all the banks in the Western World were on the verge of closing, with most of the world’s civilized populations suddenly left standing in bread lines, with the entire financial system destroyed. Claude Trichet, head of the Euro central bank, stated categorically that the system came within hours of closing at the peak of the crisis.

17. Elmer Fudd Public Investor has put all those skeletons in the closet now and “knows” everything is fixed and is looking forward to the new real estate bull market to make him big money on the investment that he sees each month on his credit card statement’s list of quality purchases. My own view is that right now, Elmer has a 51% chance of ending up on a real bread line within 2-3 years, and he’ll get to watch John “Sir Johnny” Templeton’s prediction of an across the board 90% wipeout in real estate residential home prices fulfilled, including prices on his own home.

18. My view is that the markets crisis is over, but the economic crisis has barely started. Elmer Fudd Public Investor will get to see the crisis in its full glory. The crisis will take down businesses and destroy families, as gold-digger wives and husbands watch the family breadwinner mangled and reduced to pauper status. Dr. Ben Bernanke, head of the US Central Bank, is fighting court battles over the disclosure of bailout recipient banks, disclosure that he also categorically states would cause a panic run on the banks, even today!

19. Sorry to break the bad news to Elmer Fudd and his bustout brigade of useless morons he has for financial advisors, but the system is not fixed and there is no recovery in anything but US corporations. We’re in the “dead zone”, the calm before the sovereign debt clown show implodes and takes center stage, and is met with gold revaluation, which is the next tool in Whirlybird Ben’s toolbox. If that tool fails to work, then Ben opens up the two-key lock on the US dollar printing press, turns that financial nuclear weapons key together with Mr. Geithner, Secretary of the US Treasury.

20. If those keys are turned the gold Super-Parabola is born.

21. My only worry about the coming bread lines is this: There might not be any bread and I’m 100% serious. The 1930s had the dustbowl, while for those of you who never bothered to listen to any stories from Granny and Great Granny, who never spend any time with old people because history is “evolved”, you may want to read a little bit about what a 5000foot high dust storm does to farm crops. It’s called a wipeout.

22. The situation now, is one of most people living in the cities with ZERO food supplies stored. Use now, use today, to take insurance action. What’s coming in cropland could make the Gold Parabola look like a bear market.

23. I’m strategically short the stock market, but if the Dow fell to a price level of ONE point, you would probably come out better by staying long thru that 99.99% wipeout if the coming crop nightmare, fueled by destruction of beehives, the industrial revolution in China, and a potential total power wipeout of all computer systems around 2012 as a monster electric storm on the SUN, if that goes into action. If you are an amateur stock market investor (meaning your track record is a lifetime loser, not a lifetime winner, and, no, claiming you made 50% from the 2008-2009 lows on some of your positions while the Dow leaped 70% is not a “track record”), do NOT waste time playing Dow top caller, get your Dow buys into the market to buy the thing IF it melts, and make sure you have some buys to accommodate the possibility than WhirlyBird Ben starts devaluing the dollar and hyperinflating the stock market earlier than your neatly laid out time-schedule. Most of all, grip your gold bullion ever tighter and remember that the Govts of the world, the Gmen, may have far more sinister plans in store for your assets, to save themselves, down the road. Your gold bullion is yours, not theirs. I hope you all understand what I’m saying. Every single call from the gold community to the Gman to show even the tiniest bit of rational behaviour with their finances has not only been ignored, but ridiculed. So is the Gman, really, somebody you should be trusting, even in good times? During the greatest crisis of all time, I would suggest the answer is clearly: 100% No.

24. As the crisis barrels forward I’d like you to recall the special free report I did on the VIX indicator. The VIX and ATR (ave true range) are 2 indicators you can measure the coming volatility with, and you can actually trade the VIX itself. When I did that report, few listened. The VIX is coming to life but price has not moved that much higher.


May 4, 2010
Stewart Thomson
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