Gold: Rushing The Line!
July 13, 2010
1. First, my subscribers are probably the largest group of GDXJ
shareholders. If I told everyone last week that "it's gonna
crash, it's 2008, sell everything!" I probably could have
tanked the GDXJ down to the $15 area, maybe even to $10. Of course,
I didn't say that. I said buy.
2. I termed July 1st 2010 "Black Thursday". Tuesday,
July 6th was another black day. Those two days were marked by
massive selling across the board, in both the gold and fund communities.
I was inundated with various email "analysis" showing
me why gold was going down and how wrong I was to buy as it fell.
Question: How important does that analysis seem this morning,
how wrong am I now?
3. This situation reminds me greatly of past bottoms in the market.
Putting in a final low is a process, not an event. The level
of negativity last week was extreme. The COT
report released on Friday July 9th did not cover the comex
gold market trading for July 7th. The report ended July 6th,
and July 7th was the 1185 low.
4. As it was, the banksters booked profit on about 35,000 gold
contract shorts, and went long another 10,000, while the funds
and gold community bailed on about 37,000 longs, an act of madness,
and added about 10,000 shorts into the lows. Again, the gold-bailing
and shorting actions of the gold and fund community into that
sell-off must be defined as Madness.
5. We'll never know exactly what transpired on July 7th, because
the COT reports are a weekly report, not a daily report. Regardless,
I'm only 99.9999% sure that the banksters bought even more longs
into 1185, as I did, and covered even more shorts, while the
gold and fund communities booked more losses and added huge fresh
short positions at the exact bottom.
6. I made a "herculean" effort to keep my people on
the gold buy, and I urged everyone in the gold community to do
the same. Money flows talk, and bullcrap walks. The reality of
what was done can't be talked away. Broken parabola dreams were
front and centre in the gold items bonfire. The selling of gold
ends when those doing it stop, and not before.
7. A picture speaks a thousand words. The story of gold in the
short term is the story on this chart. Gold
8. This is a chart covering the past 2 weeks of gold trading
action, and there is a head and shoulders bottom with a double
head. You want to be a seller of gold if it rises thru 1215,
and a buyer if the pattern implodes and 1185 is taken out. Everything
else is meaningless. Throw all analysis in the garbage as price
either rises above 1215 or falls under 1185, and simply act professionally
with your buy and sell orders.
9. It's not a question of IF price moves above 1215 or below
1185, it's a question of when, and time is drawing closer. Have
your garbage can very close to your gold buy and sell buttons,
so as the crackerjack box analysis pours out to chase price as
it moves past either 1215 or 1185, you equally quickly throw
all that analysis in the garbage can, and take professional gold
soldier action in the market, either buying weakness or selling
strength, without exception.
10. This is 2010. Not 2008. Not 1929. 2010 is about the success
or failure of QE, quantitative easing. I believe the year ends
with the failure of QE, and by definition Dr. Ben Bernanke then
opens his toolbox and pulls out his gold revaluation tool.
11. The question you need to ask yourself is whether you think
ramped up QE can solve a major currency crisis, a crisis that
could involve multiple major currencies. What assets, specifically,
will be bought to pump liquidity into the system, and to what
end? Does buying some more Fannie Mae stock solve such a currency
crisis? Maybe the Enron and Nortel caskets can be opened up,
and "QE Enron/Nortel" solves a global currency crisis,
or maybe not.
12. Let me elaborate further: Banks don't want to lend money,
and solid businesses don't want to borrow anything, despite record
low interest rates. Flooding the system with liquidity won't
raise asset prices if there is no pickup in the velocity of money.
13. The mission of the Fed and the US Treasury is to raise asset
prices and devalue the dollar. If QE can't do it, do you think
that means prices have to fall? No. It's like the mother who
says to the child who won't eat their vegetables, "look
I offered you candy if you would eat the vegetable. Now the games
are over, now I'm just going to make you eat it." Mother
then grabs you by the hair and sticks your face in your plate
and forces you to eat your vegetables. [Editor's note: Hmmmmmm, reminds me of my 'babies,'
Tamsin & Samara - yikes, almost four decades ago - and their
14. Likewise, if the QE carrot won't entice banks and businesses
to raise home prices thru a spend and lend scheme (although Dr.
Bernanke never does elaborate on exactly how we get house prices
to the sky while other prices fall), then Dr. Ben together with
another leading member of the Pinocchio family, Tim Geithner,
will MAKE those prices higher with an accounting move called
gold revaluation. The other name for it is dollar devaluation.
It mechanically makes prices higher, and impoverishes creditors
and team paper money, but that's a minor side effect in the eyes
of the banksters.
15. Who says the gold swapped into the BIS is gold price negative?
What if that pile of gold is used to revalue gold higher against
a major paper money currency? Is that gold-negative? Is this
like when the central bank managers sold the taxpayers' gold
to the banksters in the 1990s, and everyone said the selling
was gold-negative? What happened then?
16. Answer: The taxpayers were roasted while the banksters made
billions, as gold soared after the selling was completed. Those
billions could become trillions, depending on the amount of paper
money that needs to be devalued to reverse the asset price destruction
17. With a quadrillion dollars of paper money in OTC derivatives
outstanding (with approx $300-$500 trillion of it likely worthless
and hidden), I would suggest there's a "fair bit" of
paper money devaluation required, a fair bit of gold price revaluation
required. There are two sides to every trade. The one you're
told about 500 times a day by the media, and the other side,
the winning side. In this case there's the swapper and the swappee,
so to speak. Are you sure those with the gold are on the losing
side of the trade?
18. Attention stock market wedge fans: Remember when so many
stock market bears said there was an upwedge on the Dow last
year? I said there was no wedge, only some wedging action within
a parallel up channel. The Dow soared. Now there is another wedge
forming. A downwedge, which is bullish. Dow
19. The Dow could take out the recent lows by falling away from
"around now", and that would actually increase the
size and power of the downwedge, provided price didn't blow below
the blue demand line by a big margin. A wedge is defined simply,
by converging supply and demand lines drawn across highs and
lows. Never draw a downwedge starting with a low point from the
previous uptrend, nor an upwedge starting with a high point from
the previous downtrend.
20. That is the error the Dow upwedge people made, a technical
one, and they then watched in horror as the Dow soared THOUSANDS
of points higher, blowing their wedge trades out of the water.
This year stock market hurricane season looks to be less dramatic
than usual, but wouldn't bet money on my view. I personally like
to stand aside during the aug-sep-oct period, provided I'm exiting
my positions at a profit. Core positions can be held, and are
by me right now, with an eye to accumulating Dow trading positions
on any aug-sep-oct price weakness.
21. The Dow has been up about 6 days in a row. The major markets
tend to move somewhat in sync, in time, if not in direction.
SuperStats man Mark Hulbert reports that the average Dow timer
is currently net short the dow, not long! The bankster game to
move "Elmer Fudd" Public Investor into 100% cash, into
their paper money devaluation blast furnace as stated by Ben
Bernanke in writing, is proceeding at a rocket pace, probably
even better than they expected! I don't think the average investor
understands what is about to happen to them. Paper money is a
safe haven from equity market volatility, NOT a safe haven from
financial system risk. The move to cash is a knee-jerk panic,
not a rational decision. There is one safe haven from system
22. Let's take a look at the USD
Monthly Chart I don't want to beat on the USD paperbugs.
I don't believe it's fair beating on a downed opponent. Still,
what is sitting there on that chart is a massive symmetrical
triangle. Notice the transition from 92 to 70 to 89 to 74 to
88. Symmetrical triangles have a 2/3 chance of confirming the
trend; if the trend was down going into the triangle (it was),
then the odds are 66% that the price battle is resolved to the
23. I'll add that an argument can be made that the high in the
92 zone is not a valid part of the triangle; the low at 70 is
the start of it. That's debatable, and doesn't negate the existence
of the triangle. On the bull side, the recent high at 88 could
be taken out with a rally from the current oversold position
on the short term daily chart.
24. Personally, I don't buy breakouts. I sell them. If the US
dollar leaps over the supply line and/or the highs at the 90
area, you want to be booking profits on any USD longs, adding
shorts, and buying gold, not signing up for a stint in the papermoney
Rushes The Line!
July 13, 2010
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