Gold Correction Tactics Part 2:
June 22, 2010
1. As the massive head and shoulders pattern on the gold bullion weekly chart was formed, price moved to 1225, then fell to 1045, then hit another in the latest series of new highs on Sunday night, at 1266. From 1033 to now, your “gold boat” has sailed in relatively calm waters, under the protection of the near-at-hand head H&S pattern battleship.
2. The last jobs report, I believe, signalled the start of the theme of gold volatility. Yesterday’s action saw price hammered from 1266 to 1232 in a near-vertical drop.
3. Write this down and paste it to your computer: The further away from the gold 1033 neckline that the gold price moves on the upside, the further away from that “protection” the gold price is. You are on your own, like a gold cork in the ocean away from the mother ship. Monumental volatility is coming. My prediction is the next 12 months will see more leveraged gold traders wiped out in the gold market than all the wipeouts since the gold bull market began, combined! For all practical purposes, gold is on the verge of becoming untradeable for leveraged traders. Are you prepared?
4. Remember, the banksters make the rules in the paper markets. They can change those rules. Those naked shorting gold against no physical core position are taking unimaginable risks. All the traders I know engaging in such activity here and now are lifetime losers in the market and there are a boat load of these top calling wieners in action right now. Think very carefully about what I’m saying before joining the wiener patrol. In the 1970’s, many members of team gold shorty pants seriously considered suicide, after their gold shorting master play blew up in their face as gold went limit up, “impossibly”, day after day as the US dollar rose. Don’t think limits and margin rules currently in force can’t be changed with no notice. They can, and likely will be. This time, if the banksters change the paper gold rules in a surprise move, team gold shorty pants is going to be in a far worse position than they were in the 1970s. Of course, the gold shorts “know” this time is different, they are much smarter now, much smarter than gold bullion.
5. Combine the growing volatility with the risk that real hyperinflation rears its mighty head as the paper money crisis moves to Japan, the UK, and America, and those with no physical bullion may meet the same fate at the hands of the gold punisher that poor Bob Prechter did, trying to surf a gold bullion tidal wave with a cardboard surfboard made for the paddle pool.
6. The battle is on! The battle of the “confirmationists” versus the “non-confirmationists” (Team NC). There are many non-confirmations on the gold daily charts, and have been for awhile as gold has moved to 1266. Volume, RSI, MACD, etc have all hinted gold could sell off, and now the bears have got their $30 sell-off. I’m a believer in confirmations, not non-confirmations. Think bigger, not smaller, or get wiped off the map. I believe that Gold has actually led all the risk markets, not followed them, and they will all confirm gold’s mighty bull move action. The microscopic picture is a gold price non-confirmation that is producing microscopic weakness that must be bought, and buying occurring now by hardcore professionals, as gold is transferred from weak hands to strong, should cause a ballistic surge in the price of silver, gold stocks, the Dow, and general commodities, as they all confirm the new high made by Gold, the new all-time high.
7. There are huge consolidation patterns on the gold stock charts going back to 2006. Some of the stocks have obscene upside price targets.
8. You tell me: How many people are heavy buyers of gold and gold stock here and now? They are all terrified this is 2006 or 2008. They bought nothing yesterday. If gold falls today, they’ll buy nothing again.
9. My firm view is that the next few weeks represent the end of the line for most gold traders who have taken themselves out of the gold market. They’ll make nothing in gold and risk being obliterated by hyperinflation. The gold stocks are already surging, with one after another making new highs, confirming the action in bullion that has already occurred when gold moved over the 1033 high. So, what’s the bottom line?
10. The bottom line is My pgen (pyramid generator) sold into the 1266 area highs, and bought into the lows of yesterday.
11. All I know is that for the various Pgen buy programs I run, my lowest fill yesterday was 1033 for aug gold futures, I bought SGOL-nyse every 20 cents down in a cascade of buy fills, with my lowest fill being 122.80, and I bought GTU-nyse at $48. At $11.50 I’m a buyer of PHYS-nyse. That’s my bottom line, and that’s what I call a wealth-building machine, an ounces-building machine.
12. Are you still running a cash register? That’s the rotary phone. Get an an ounces register and say hello to the IPhone4. Predicting a sell-off in gold with a series of non-confirmations is interesting. Responding to price when it happens is a lot more interesting, and defines the difference between the amateur and the professional.
13. Use the technicals to get a hint of where the gold price might go and tweak what you are doing at various gridline points on the gold price battlefield. Don’t leave the battlefield for 100% paper money as you play flip trader, because if you do, you risk being devalued off the board if real hyperinflation appears, if you have survived the volatility minefield, which is unlikely. How would you like the G20 to announce the USA is bankrupt, so they have decided to save you by devaluing the dollar 10 to 1 against gold, while YOU are 100% in the dollar, with zero in gold? How would that feel to you? What if that was just the first of a series of such devaluations? That possibility was not real before the OTC derivatives crisis. It is real now, and hundreds of trillions in OTC losses are being hidden from you. Those who think hyperinflation is impossible are taking infinite risks with their wealth. I’m not predicting full hyperinflation, I’m saying it is now a real risk that needs to be managed, and only physical gold ownership manages the hyperinflation risk. If the banksters, on the winning side of those hidden hundreds of trillions in OTCD trades, can’t collect their winnings in paper money, they’ll take it by devaluing your paper money against their GOLD. They’ll devalue you and revalue themselves. The only solution to the crisis is breadlines, so of course there really is no solution, there are only those on the banksters’ side of the trade, the winning side, the long gold side, and those betting against them, the wienerhead side, which is the long paper money trade. Which side are you on?
14. Those who treated gold bullion like a high risk penny stock are finding it is they who are the penny stock. Not gold. Other than food and land, most of the world’s assets are penny stocks when compared to gold, in terms of the risk of going to zero value.
15. While naked shorting major assets is madness when paper currencies are at real risk of inflating, shorting into strength against a larger core long position is not madness, and may help keep you sane during periods of tremendous price volatility. Provided you follow the rules. Here’s a look at the wheat chart.
Wheat 70% Accumulation Chart In this first view, you can see the big downtrend. Let’s say you accumulate 100,000,000 bushels, or 100,000, or whatever, into that price weakness.
16. Now here’s a much shorter time frame over a few days recently. Wheat 30% Distribution Chart Over the past week you saw a lot of bullish news for wheat and price soared. Let’s say you accumulated 100,000 bushels of wheat into weakness. You have pre-set sell orders into strength, and/or pre-set shorting orders. If you look at the banksters’ positions in most major markets in the CFTC COT Report, you can see they are both long and short.
17. If you shorted 5,000 or 10,000 bushels of wheat into the recent rally against your long position, you may be in a better position, mentally and emotionally (and therefore financially) to handle a sell-off that is “impossible” in your mind right now.
18. It feels like the wheat price has bottomed, and seasonally it tends to do so around now. Maybe it has, maybe it hasn’t. There is a subtle mental edge to being currently short SOME positions that are smaller than your long positions, versus having sold off the equivalent amount of your long position. If you had 100,000 bushels, and sold 10,000 into last week’s price strength, you would have 90,000 now. You might mentally breakdown, however, if price were to keep falling. You could even panic and sell those 90,000. If you short 10,000 bushels at the same point where you planned to sell 10,000, your financial position is almost exactly the same as the long-only trader, but your mental position can be quite different. Your position is 100k long, and 10 short.
19. Here’s why: If price goes “impossibly lower” than what you and your gurus “knew” was possible, are you realistically going to be a buyer at that point? On the other hand, if I said, “Hey, superstar, how does it feel to be sitting on a massive profit on your short position, feel like booking that!?”… You are going to be highly agreeable to ringing the cash register, the wealth register, the more bushels for you register! Click here now to see how you feel when you use the short position strategy of ringing the bushels register to add to your long position. Video
20. When you book profit on the 10k short position, you are then long 100,000 bushels! You just bought wheat! With GOLD, you can do the same thing, and with gold stock. Generally speaking, larger traders should use futures for the strategy, and smaller traders should use ETF-type funds.
21. Notice that I refer to a 70% accumulation and 30% distribution strategy. You should not exceed a 30% allocation to the short side of the strategy for a major asset or you are diluting the ability of the asset to work for you, and replacing it with your belief that you are smarter than the asset. In the case of gold or food, that’s not the smartest type of thinking, to put it mildly, to believe you can outsmart the fundamental power of these assets by timing their every move. If you are using leverage in your gold trading, you need to time your moves. You can’t try to trade EVERY move. You will fail. Pick your spots.
22. Most importantly for leveraged traders, when you are out, don’t go to 100% cash. That’s the ultimate in stupidity and you now risk being hyperinflated off the map by the gold punisher. If you are using 10 to 1 leverage, or more, then go to GOLD. Go to zero leverage but stay IN gold. The same applies to SILVER traders. Don’t go to cash when you think silver is a sell; rather, go to GOLD. That way, if you are wrong and silver keeps rising, gold is likely to rise. If you are correct, gold is likely to fall less than silver. Think ounces of wealth, not rolls of burning government toilet paper money, and do so for the next 12 months.
23. It’s too late to short gold now. The time was into strength on the move up from 1045 to 1066. Not now. Now the banksters are booking profit on their shorts. If you want to buy the banksters’ short positions like the fundsters did all day yesterday, go ahead and good luck to you, because luck is the only thing you’ll have on your side on that trade. If you can’t stand the pain if gold sells off, then short the minimum amount required to get rid of you urge to “sell everything”. Short that amount, and not one ounce more. It’s still a market “sin”. A little sin is better than a big sin, and it is sometimes the little sin itself, that is the actual mechanism of avoiding a big one.
24. Here’s this morning’s gold update video.
Gold Correction Tactics Video Video Notice that step 1, as always, is to identify the major HSR gridlines so you effectively compartmentalize your risk. Those are Pgen tweaking areas. You want to do what it takes to maintain a rational mindset. Focus on executing your buy orders on gold, not executing yourself in terror!
June 22, 2010
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