Pipedreams vs Coffins
Aug 2, 2011
- The building blocks of a gold price parabola are slowly being put into place. Today, I want to show you how the stock market plays into the parabola. Both the Dow industrials and the transports have both lost upwards momentum and are on the cusp of crash season (the months of September and October).
- The remaining public stock market investors took an axe chop to the “crisis is over” face, with President Obama’s statements that America’s government stood on the doorstep of default on its debt. While default has been avoided for now, the incident has killed public interest in flowing liquidity into the stock market.
- I want you to take a very hard look at this monthly Dow chart that shows the market action from 1997 to date. Click here now to view what I think is substantial “gold parabola fuel”.
- Note the three blue boxes that I have highlighted. Some of you may recall my Dow 9,000 to 11,500 “shorting PGEN”, where I advised using my pyramid generator as price rose into the 3rd blue box area, on the right side of the chart.
- The reason the 9,000-11,500 area is so important on the Dow chart is not because of any technical lines or oscillators, but because that price box is the zone where the public came into the market in 1999.
- The public didn’t just enter the market in the late 1990s. They engaged in one of the greatest and most lobotomized price chases of all time. Pensioners were blowing out their government bond portfolios to load up on Nortel and Cisco. Mom and Pop were getting loans against their mortgaged home to buy more stock and mutual funds.
- Nobody asked who was selling to the public, or why. As the banksters and insiders unloaded gargantuan amounts of stock onto Elmer Fudd Public Investor, the market began to lose momentum, as is happening now. The public booked losses into the lows of 2002 and 2009, and as the market rallied back to the 2nd Dow 9,500-11,500 box.
- They wanted to “get out near break-even”. There is a still a lot of stock held by the public that was bought in the Dow 9,500–11,500 area. That price box is “home base” for the public. I believe we are at a point in terms of public psyche, where a fall back to that key price zone would cause a sort of “grand throwing of the white towel” event amongst the public.
- There’s only so much time and price in the underwater zone that a public investor can endure. Many are beyond retirement age now, and believe they “can’t take another hit”. Emotionally, I don’t think they can.
- The banksters know how the public investor feels right now. The public has a history of being on the wrong side of all major moves in any market. While anything and everything is possible, I don’t believe the Dow is going to blow out the March 2009 lows around 6,500. I do think it could decline back into the 9,500 – 11,500 zone for a 4th play there, one that would “seal the deal” on the public’s stock market foray.
- The public is already nervous right now. What happens if the market drops thousands of Dow points from here? The answer is that the public would move into cash and perhaps bonds, and they would do it in size. Their stock market “marked to 15-20% gains a year forever model” pipedream would finally be buried in a marked to market coffin, in the Dow 9,500–11,500 zone. Since their own stocks have generally performed much worse than the Dow, that final exit would likely be one of substantial loss booking.
- The US dollar has to be substantially devalued to make even a portion of the OTC derivatives and unfunded liabilities debt manageable. It makes sense that the public would abandon the stock market and go “all-in” on the dollar just in time for a dollar crisis to explode on the world financial stage.
- One company after another is cutting employees and earnings estimates. The 2nd half of 2011 was supposed to bring almost 3% in GDP growth. Prospects for achieving that goal are dimming fast. All signs are pointing towards a bankster move to herd the public into a near 100% cash and bonds positioning.
- At the beginning of the year in 1979, gold was trading around $200. About a year later price had quadrupled to about $800. I expect the price of gold to repeat that type of parabolic action, as unprecedented institutional liquidity flows out of the US dollar begin to occur. My ultimate gold price target of $6000 is about 4 times the current gold price, something to keep in mind.
- Many investors in the gold community have tried to leverage what gold could do, using silver and gold stocks. Because we are in a crisis, assets will be violently bought and sold in size by institutional players using computer algo trading systems. Silver, for example, has already experienced a major bear market within this crisis, when price crashed from about $21 to under $9. That type of price action is not a “correction”. It is a bear market.
- A new bull market was since reborn for both silver and gold stocks, but don’t think you can outperform gold with silver or gold stocks in this OTC derivatives-based crisis….without taking some serious kicks in the financial head on the downside. Focus on enduring those kicks in the head, because you are not going to avoid them, despite what the timers are telling you. At some point, I think silver disconnects from gold and implodes, while gold sits there watching the action with a smile. I think it happens at prices far above $50 an ounce, but I think it happens.
- It’s very important to carry at least 20% cash in your accounts, if you are active in the gold and gold-related markets. The other 80% will make you more than enough profits if the 20% cash position goes off the board.
- If the dollar starts a new leg down, institutions will go into a state of near-panic, and they will be looking towards the major banks, Tim Geithner, and Ben Bernanke for guidance. Institutional liquidity flows stand to become very violent in nature from here on in, and a barrage of price surprises could cause you to panic. You don’t need a lot of gold-related items to make a lot of dollars in a parabolic move, but you need to keep solid levels of cash in your accounts to keep you from feeling “my account is going to zero!”, and selling out, as the markets begin to display huge whipsaws of price action.
- Be very careful about playing master trader with trend channels. Focus on horizontal support and resistance if you want to take “enhanced” liquidity flows action. Click here now to view where a conservative Dow investor would begin a buy program and end it. The black HSR line denotes horizontal support, and that is the where I believe the public enters liquidation mode.
- You want to buy what the public sells, particularly when they do it in size. At minimum, you must avoid taking any action they are taking. Note that the larger buys extend below the support at 9500. The buy pyramid (pgen) ends about 8900-9000, so you catch what is sold by “team stop loss” if support at 9500 fails.
- Gold rises to $1635. GDX rises to $62. Gold declines a bit and GDX tanks. Gold rises back towards $1635 and GDX wallows around $57. Your individual gold stocks in many cases are below the highs of 2006! Between trips to the vomit bag, I want you to understand that there must be no limit to what you can endure on the horrific front lines of this gold stocks battlefield.
- You are in the gold stocks gulag and the winners are the survivors with the most intestinal fortitude. All other schemes to gold stock riches lead to the garbage can, and the only question is, are you onside? Picture yourself tied to a chair while a bankster-financed hedge fund manager tortures you. Why? Because that is the reality of where you are, right here, right now.
- You don’t predict yourself out of the chair, you endure your way out of it.
- Click this key GDX chart now. Notice the 3 big blue HSR lines. Price is gyrating around the first one now, in the $56 area. The next one down sits at about $44. The 3rd one down sits at about $28. I’m not trying to freak you out. Nobody knows where price is going, but the grown-ups can take action at these key support areas, while the kiddies will liquidate. At minimum, don’t liquidate. Do I think price is going to $44? No, but it is possible. Look on the upside. Price could blast up through the $64 area and turn that party pack of a price zone into your key buy area. Gold is $1635 as I send this off. I’m about as worried about the ultimate picture for gold stocks as I am about a dollar fly on a block of gold bullion. Worry less, respond more, so you…get richer!
Aug 2, 2011
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