1. I have some bad news. I woke up a little earlier than usual this morning. I made my way to my office, and realized the thunder was coming out of my own office! It was the deafening thunder of a multitude of Kachingo's ringing from my cash registers of booked profits on oil, gold, Dow, general commodities!
2. Time erases painful memories. Last week's plunge to gold 880, with mass bailing in the gold community, has been quickly forgotten. The hopes and dreams that "this is the big breakout!" are alive again. I try to balance the carrot with the stick. Try. Nobody is 100% successful. If you fail to buy into the lows of any price reaction in gold, the simple fact is you make less money, or actually lose money, when you finally do buy.
3. Professional investors sell into strength. Amateur investors sell into tops. You decide which you want to be.
4. Making the transformation to a professional takes time. If I beat on readers when price is down, "what's the matter, are you a wimp, get in there and buy!", well, there's a fine line between a coach and a power-tripping bully. Nobody needs a bully. Beating on an incapacitated fighter is the act of a bully. The transformation must take place in small stages, suited to the investor's personality.
5. Looking back over the article I posted a week ago, thinking about your mental state at gold 880, I hope you can see why I said some of the things I did. I attempt to draw out the ability to buy a bit of gold on weakness. For many, the first step in the transformation involves simply bailing "less" on weakness. And buying "less" in the price chasing frenzies. One of those frenzies may be near at hand, or we may even be in it now.
6. Sadly, when most chart signals are giving buys, the bankers are offloading what they bought earlier. Bought when the charts were giving sell signals. One of the many professional hats the banker wears is:
7. Chart Painter.
8. Gold is the world's smallest major market. As such, the gold charts are the most easily "painted". The COMEX is not about to blow up because JP Morgan has a hundred thousand gold shorts going. In their world, that's like you blowing up because you have 10 shares short on Barrick gold stock. The bankers, with the world's largest physical position in gold, are not about to lose all their trillions on an upwards move in gold. Especially since the taxpayers just handed them 10 trillion dollars. That's a fantasy of failed gold speculators.
9. Each dollar higher in the price of gold makes the bankers richer. Not poorer.
10. The good news for you, is the bankers want gold higher in price. Vastly higher. If you had to rely on the overleveraged hedge funds to take it higher, well, let's just review what kind of job the funds did for you. In May 2006, they bought gold for you. What happened? It melted. In the spring of 2008, they bought gold for you. What happened? It melted.
11. What else happened when it melted? The bankers bought it.
12. So, who is supporting gold and who is not? I'm saying the same things now I did at 880. The message is appealing now. Simply because price is rising. Talking about buying weakness is one thing. Executing such action is another. There are a lot of emotions at play, an avalanche of negative news at play, when the price of gold is falling. You need specialized tactics to take the same actions in the market that the bankers take. Or you will get a heart attack and liquidate in terror.
13. If you didn't buy gold at 880, but are buying now at 920, that's fine. Just know you are buying from myself, my subscribers, and most importantly, from the bank families. Before pushing the buy button today, ask yourself one question: "WHERE is the gold coming from that I'm buying?" Answer: It's coming from the bankers selling into strength. Booking profits.
14. I use charts all the time. Every day. Charts are quasi-maps. They aren't like a road map, where you know that road A takes you to road B. They indicate possibilities and show past action.
15. Like the strength in gold, oil is also showing strength. I have a TRUCKLOAD of subscribers booking profits by the HOUR in oil right now. Sadly, most oil chartists have not participated in the oil rally. They tried to buy, but were stopped out repeatedly. Here's the oil chart for USO, the main oil ETF. While the short term indicator Stochastics is very overbought, MACD is barely at the zero line on the bulwark 12,26,9 series. Price has broken above the upper keltner supply line. I see oil in a basing formation, but it could turn into a consolidation followed by new lows. Regardless, oil has risen 25% and I am selling into the strength daily, and have for about a week.
16. Many years of experience tells me the answer as to why that happened. I'll put it bluntly: Champagne taste with a beer bottle pocketbook. If you trade too big, you have to keep ultra tight stoplosses. The bankers see all the speculators' positions. It's very easy for them to move the price around enough so you are "eliminated" from the game via your stoplosses.
17. The Dow is perhaps the most interesting game right now. After the chartists watched the Dow fall to 6500, they went short. One retired bank trader friend of mine told me all the hedge fund managers he knows were short the Dow at the time. All of them. He is pretty well connected in the hedge fund community.
18. Now, things are going the other way. The bankers and near-record levels of insider selling are occurring. What the chartists looking at the Dow don't understand is the basics of risk and reward. A number of Dow stocks have rallied 100% in just 2 months.
19. That is ten years of gains for most fund managers. Citigroup leaped 400%. Does anybody know how much money the bankers and insiders just made?
20. For Citigroup to quintuple again, from $5, it has to go to $25. That is a vastly harder job than the $1 to $5 astroblast that just occurred.
21. I'm in touch with a number of top producing brokers on a regular basis. One of them told me that clients at his company were calling HIM yesterday to buy the stock market. Masses of them.
22. These "investors" think everything is fixed. And are now rushing forward in a price chasing frenzy. The banker's motto: "Sell in May and go away" has been translated by the public to:
23. "Price Chase in May and Stay!"
24. I would suggest the public call a repairman to take a look at their translation machine. Not tomorrow. Today.
25. This brings us back to the law of the markets: Sell into strength.
26. Where will the Dow top out? I have no idea. All I know is that every day I am booking 50% to 100% gains on Dow positions I bought at a huge multitude of price points, all on weakness into Dow 6500.
27. How do you make a profit? Answer: You book it.
28. Nobody ever lost money booking a profit. Think about it.
29. I know the monthly chart shows the Dow drastically oversold. TRIX, MACD, Stochastics are all giving "mega" buy signals. Keep this in mind: Markets can CRASH when in that condition. The bottom line is the Dow has rallied a mind boggling two thousand points, and now the public shows up to buy?
30. Not one of the price chasers has stopped to ask themselves, "Hey, who is selling all this stock that I'm buying"?
31. Maybe it's the Tooth Fairy. Bringing free money to all price chasers around the world. If you want to feel good, join them. If you want to make money, don't. In the past the drug LSD caused people to leap off buildings, believing they could fly. In all seriousness, what has caused more suicides, LSD, or Price Chasing?
32. Here's the Dow daily chart. Notice how the RSI and Stochastics are overbougtht and the huge volume on what may turn out to be a sort of key reversal day.
33. Trader Dan Norcini, who I consider one of the world's top chartists, notes that if gold breaks above 925, it could set off a "bonanza of buy stops". If that occurs, the price could blast up like a rocket. If so, my subscribers will be booking profits machine gun style. So should you. There is only one way to take part in such profit booking party. You have to buy into weakness that goes against your own intuition of where the market might go. WILL gold break over 925 on the current run? I have no idea. I know that IF it does, I'll get a stormsurge of letters reporting that you are booking a shockwave of profit. Again, gold could go either way here. Let's not do any price chasing into strength to 925 because we "know" 925 will be taken out. We know what we will DO if it is, and that is all we want to know. What happens if 925 IS taken out upside and YOU haven't bought?
34. "You only have five thousand more chances" -Jim Sinclair, world's largest gold trader.
35. "But I have to buy now, right now!" -Joe Blow. World's smallest gold trader.
36. Here's the gold chart. See the price breakout out of the down wedge? Price has closed above the red supply line. Chartists see this as a "buy". I see it as an indication that price is going higher, perhaps much higher, with 968 for starters. Am I buying now on that indication? No. I'm selling. And I'll sell all the way to 968. Not because I think gold is going down. It takes a certain mindset to sell strength, yet believe gold is going higher. A mindset that you want to make money.
37. There will be a zillion more situations like you see gold here at 925. Patience, not impatience, is the road to Victory.
38. I have sent out the Pyramid Generator (Pgen) screenshots that I promised many of you last week for the gold stock of your choice, and continue to send more out daily. If you haven't got yours yet, it's coming. This is about a 2 week process to get everyone's request completed.
39. Check the "Free Reports" section on my website for the latest gold stock charts from Golden Surveyor (GS). Today. He has made money, consistently, for 14 years in a row without a losing year, doing thousands of trades for his own account. Position trades. Not day flips. His charts give you a crisp picture of where certain gold investments might be going. My Pgen provides the professional tactics to take action on them.
40. Letters are POURING in from subscribers this week as hundreds of former lifetime market losers, are transforming into "mini bankers". Systematically buying into weakness and selling strength! Here's one from this morning. Let's call him Stan. And have a look at Stan's gold plan at 925 this morning:
41. "Hi Stewart. You may as well add me to the parade. 2 Yamana trades in 2 days. One for 12.7% and the one this morning BOOKED at 18%. Followed by 2 SLW trades. One for 14.7% the other at 16.4%. Oh and a AXU trade for 31.7% thrown in for good measure! Again, you're one of the highlights of my day. THANK YOU!!"
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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.
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