1. Kachingo! Gold just hit 950! Those of you who acted on my very lonely "just say no to gold price chasing drugs" article 2 weeks ago, and bought gold into 905. Well, you are ringing the cash register this morning. Congratulations! Every time gold falls $10, I'm a real buyer. Not a pretend one. Every time gold rises $30, I'm a seller. Of some of what I bought. Not in a plastic tower telling you to do it while I hide under my desk clutching a bag of worthless gold put options. Sometimes I buy every $5 down as well. Selling every $15 up. I don't care what my charts say, they could say gold is going to Zero, if gold falls $10, I'm a buyer. All the time. If it's up $30, I'm a seller. I don't sell all I buy, but I am a seller without fail into every $30 upmove. The move from 910 to 940 was $30. Which means I was a seller at 940. Booking profit. Gold hit 905 at the low. I was a buyer at 910. I sold into 940 last week and a portion what we bought at 920, my subscribers and myself sold into 950 this morning. I have no idea whether we go higher or lower from here. But I know - precisely - what actions I'll be taking wherever we go. Sadly, when I wrote my "just say no to price chasing drugs" article last week as price moved to 905, most were too busy - bailing - to listen. Have I got your attention now as we blast into 953? Hope so. I was truly horrified at the actions of the gold community last week. Almost without exception, every single analyst and writer between 905-913 was screaming how gold was going to 880 and many much lower, while I screamed buy. Look at all the bears as gold careened into 905. The articles are all there to see. They were either bears or in HIDING. I faced 905 ALONE. Look at what I wrote and did in the market at 905. Who won? I won. They lost. They said yes to sell into weakness drugs. And now they are buying while I book profits non-stop into this strength. What a party. They booked margin calls and losses into 905 while I bought. Just think back to how you FELT last week as gold melted into 905. Many went short. And today? They are fried to a crisp while I put more gold pucks in the net. My subscribers have bought tons of dollars of gold into the weakness at 905. When we buy, we support YOUR gold in PRICE. When we sold at 940, did you see your gold go down in value? NO. That's how a professional acts in the market.
Gold is the world's smallest market. Those who beat on a falling gold price are: gold bullies. I don't care if you send gold down to 300. I'm a buyer all the way down. Do YOU care if gold goes to 300? Sure you do. By selling chunks of your gold into weakness with the fantasy you will "get back in cheaper later" you are creating the very weakness you are afraid of. And damaging the major portion of your gold portfolio. Sell strength. Buy weakness. If you want to be a market winner. Gold fell to 905 on loss-taking actions by the gold community. The bankers took your gold. How does that feel now? Stop selling gold into weakness because if you break the head and shoulders pattern you could bring a pain on yourself you cannot possibly imagine.
2. Take the pyramid method of buying and selling seriously. This is how the bankers operate in the market. Don't waste your market life guessing where the market is going, while the bankers are taking money out of the market. The money they are taking is YOURS as you sell to them, getting your instructions from freaked-out chartists and analysts who are bailing themselves.
3. Hands up everyone who rang the Natural Gas profit bell on Friday. I did. Several of you emailed me that you did too. I rang the oil bell as well as it "broke out" upside. Those of you in the Dow were hitting the profit bell last week with a sledgehammer.
4. If you have $20 million liquid or more, you can probably start your market buy programs with futures contracts, using mini contracts like wheat, corn. Oil is $30,000 a pop. A hundred contracts is $3 million. My suggestion for the average investor is to start with equity items that trade on the securities markets, not the futures markets.
5. If you are buying and selling mini gold futures contracts, those are also $30,000 a pop. If gold falls to $650, will you still be buying? I doubt it. Can you really buy in increasing size as price falls? If not, you are trading way too big for your market britches, sorry to say. And the bankers love that. They like nothing more than to see investors trade big. They love stoking the egos of investors. If you are trading gold futures, and worth less than $20 million, try cutting back to $10,000 "bullets" using a gold ETF. That's a first step in beating the oversized trade addiction. 99% of investors are trading vastly too large in size on 99% of their trades. Remember that the zillionaire bankers will buy even one contract on weakness if it is offered on weakness. No trade is too small for them. Can you say the same?
6. Pyramid buy programs involve increasing the size of the buys as price falls. Those of you who bought natural gas futures are likely gone from that market. I doubt you lasted more than a few days. If you had used something like UNG-n in a pyramid, or even a leveraged etf, you would not only be alive, but you would have rung the cash register last week. I did.
7. There's a lot of talk going on about the leveraged Natural Gas ETFs not being able to buy any more gas. Some investors panicked and bailed into the recent price meltdown. Big mistake. All the limits mean is the fund effectively becomes a closed end fund. So premiums and discounts to the gas price will develop. If you continue to buy weakness and sell strength, the premiums don't matter. What matters is that the fund stays in business.
8. Futures markets are arguably technically safer than securities markets, from a system meltdown point of view. Trades are cleared at the end of the day they are bought, not 3 days later. That means the money you made is transferred from the player holding the other side of your trade each day into your account. If the market falls, that money is physically transferred into their account. But your biggest risk investing is not the system blowing up. Your biggest risk is: You. Some of you have MONSTER money, but you are trading too big out of ego. You'll be surprised how fast you increase the size of your trades as you start putting pucks in the net consistently working with less risk capital per trade. You'll find the sweet spot amount of risk capital to use fairly fast.
9. Bottom Line: Pot Shot Or Sweet Spot, you decide. I suggest the latter. Working in their sweet spot of risk and reward, the bankers' biggest problem is: counting all the profits they book every day.
10. Trader Dan Norcini is arguably the top technical analyst in the gold community. He's certainly one of them. He has noted the symmetrical triangle that gold is trading in now. Basically a pattern of higher lows and lower highs. These patterns have a 67% chance of breaking out in the direction price was going before entering the pattern. Which is up in this case. That pattern is small compared to the MASSIVE head and shouldering action, also viewed as a cup and handle. The H&S is now over a year in time. That is massive.
11. Leaving aside the arguments over the specifics of the chart pattern, the fact is gold has been in a range of 680 to 1030 for a year. At some point, likely soon, it is going to start moving, up or down. I say up. But I'm only 51% sure of that. My bank trader friend says down. And he's only 51% sure. He thinks gold will fall to 650-700 and then explode straight to 1400 leaving the entire gold community wiped out, and basically ALL their holdings in the hands of the bankers. I like my view better, but this is the markets. Anything can happen!
12. Prepare for all possibilities. Don't be fully invested, ever. But don't sell your gold for pennies profit because you "know" gold is going lower.
13. Nobody knows where the next move for gold is, up or down. There are probabilities and possibilities, and nothing more.
14. Bloomberg reports that the gold community's comic book superheros, the Chinese communist govt, well, their bond auction just failed. They couldn't even get buyers to cover all the garbage debt they wanted to issue! And this is the third failed auction in just 2 weeks! Meantime, demand for US federal govt debt was about double supply at the last auction. And that's in the middle of the greatest financial crisis since 1929!
15. China WILL become the dominant economic superpower in the world. But that's years away. The Chinese economy now is the 10 year old kid who IS the star of his team, and he will become the greatest football player in history. But he's not ready to play in the superbowl today. Sorry.
16. I operate pyramids of buys and sells on the Chinese stock market. I was a buyer while most Chinese citizens liquidated in total failure as the market tanked. I've been a seller all thru this strength. Via FXI-n. The Chinese equivalent of the Dow. I think buying the Chinese market today is like buying the Dow in 1900. In 50 years, prices will be up thousands of percent. But please don't confuse me with the those waving Chinese communist govt cheerleading flags. I couldn't care less about the Chinese Gman. He's no different from any other Gman. His mission in life is to take what his citizens have. End of story. He's sitting on $2 trillion he ripped off from his citizens. If he's so pro gold, where are the gold BUYS into this price weakness? Answer: There are none and there won't be any. His buys have been and will continue to be: US dollars. Because the last thing he wants is his paper Yuan to appreciate and give his own citizens real wealth, real power. Like 99% of the world's Gmen, he's a liar and a thief. And those are his good points!
17. Here's a chart of the FXI-n. If you want to be pro-China in action, not talk, learn to invest in China. Help the Chinese citizens build wealth by buying their stock market into weakness, selling into strength. And make yourself a pile of money doing it!
18. I'm setting up a section on my website for short term trades. This is what gets a lot of investors excited. If you focus your trading on items that have a low risk of going bankrupt, on the long side, you will reduce your workload. Look at the market as a chessboard. At different price levels, you have different players. Each player is a piece of risk capital. The key to winning at short term trading is the same as winning at longer term trading: Deep Pockets. Just because a trade moves against you, doesn't mean you are going to lose money. Move to another piece on the chessboard. Don't throw any of them in the garbage.
19. If you don't have large risk capital, you have to find a way to duplicate those who do. One of the greatest misconceptions in the market is that deep pockets means you are ultra rich. What it means is you have the ability to keep buying as price moves against your position. You determine the depth of your pockets by your ability to continuously allocate capital professionally.
20. Look back up at that chart of the FXI. It's about $40. That's an index of the largest corporations in China. Like the Dow. If you approach the FXI with deep pockets, there's a lot of money to be made. Now look at the Chinese Gman cheerleading flag some of the gold analysts handed you. Is that thing making you any money? No. And it never will, so throw it away. The weekly chart shows the FXI getting overbought. By the time the daily chart gets overbot, I'm guessing we may be entering early August. The August-Oct period is stock market hurricane season. I'm guessing a massive stock market buy opportunity will come between now and oct. Personally, I'm not interested in trying to pick the best point to buy. My suggestion: Just allocate your money into a pyramid formation of buys on FXI and sit back and relax and wait for the fish to bite your buy hook orders. Picture a ladder with 40 rungs. That's the FXI. How would you like to climb up a ladder and find a huge gap with no rungs. That's the investor who blows the money in his pockets on one price rung. Worse is the investor who climbs down the ladder and finds the ladder has a 35 rung gap to the floor. His ladder only has the top 5 rungs on it. THAT is the picture of 99% of the world's investors. In ALL markets. Instead of ringing the cash register, this is the sound they make: SPLAT.
21. [Editor's note: parts of this public article were written last week, so the Friday referred to is LAST Friday] Friday is option expiry day for US stock market futures options. It represents "climb in your coffin" day for most hedge funds and speculators. Their dream team of put options expires worthless today. If you want to play the market from the short side, I posted a short term chart of the Dow on Thursday on the site. Showing it overbought. Then the Dow jumped another hundred points. What you need to do, if you are a gambler who wants to play, is look at the market when it is overbot on the 60 minute chart, start shorting it with a limited risk bear ETF, and KEEP shorting it every 50 or 100 points higher. In ever-increasing size. Keeping a "tight stop" and trying to pick the top is not smart money management to me. It's money on fire. Picture standing on the ladder with no rungs below you. While a banker shoots a flame thrower at you. That is the picture of the average speculator who shorted the Dow, right now.
22. Gold [Editor's note: written last Friday, 17th July] appears to be setting up for a charge thru the highs around 940. Which means: All hands report the cash register deck with earmuffs in place! Today the gold COT report comes out. I'm expecting some major action on the part of the bankers. We'll see. I'll go over it in tomorrow morning's update.
23. And so another week begins. You must achieve VICTORY each day in the market. Meaning you buy only weakness and sell only strength. Regardless of what the lifetime losers wearing expert costumes tell you. The week ended July 10 was a tough one. I had the stick out. Last week I held a giant gold carrot. This week is starting the same way. Nothing like banked profits to finish a week! Two weeks ago, victory was measured in ounces gained, shares accumulated. Last week Victory was measured by profits booked into strength, money moved from your brokerage account to your bank account and/or increased trade size on the buy with those profits.
24. I don't know what type of victory this week brings, but I know it will be victory and nothing else. Will it be ounces gained or profits booked? It's starting out as profits booked. I think gold will soar. Will I bet money on that? No. And if it soars, I'm a seller. Of SOME. Next station stops for me on the gold profit train are 955, 960, 965, 970. Maybe the bankers, who drive the train, will take the train to those stations this week, maybe not. I enjoyed the stop at 950. Maybe they'll throw it in reverse, and we'll all pick up some more gold passengers at lower prices. Don't try to drive the gold train. You're not that good, and nor am I. Just act professionally at each price station. Train goes backwards, you pick up some passengers. Train goes forwards, offload a few. Have a super week. Cheers.
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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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