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Gold: Patience Is Fine But...

Stewart Thomson
Aug 18, 2009

1. Patience is fine in theory. In practice? I believe in the "sin a little" theory. What should work in the gold market and what does work are not the same thing. By now you have heard 10,000 reasons why gold is going to break upside from the head and shoulders continuation pattern, and 10,000 more why it will fail.

2. Whether you are a bull or a bear, you have one thing in common: You are waiting and probably getting bored and restless. That's dangerous, because you might act irrationally to get yourself out of boredom. Better to have a pre-set plan of action for such quiet periods than just "wing it".

3. I'm developing a ramped up version of my pyramid trade generator for higher speed trading. Not day trading, but faster position trading. Again, only booking profits, no losses, and with Gold, the ultimate in low risk investment.

4. If you are buying small amounts of gold during the day, not using leverage, not shorting it, and using a tiny portion of risk capital, this strategy could help you maintain your larger longterm positions, ironically.

5. Do anything it takes to maintain your gold bull positions. Sometimes that means doing intense analysis, and sometimes a change of scenery is what works, a touch of excitement.

6. Here's the short term gold chart. It's already generated profits for those who bought yesterday on my short term timing system, buying every $3 down, selling every $9 up.

click to enlarge

7. Pretending you are not bored only works up to a certain point. Sort of like the "power of the mind". Are those changes really permanent, or just a fad?

8. Be afraid of anything that involves you plunking down huge money at one price point, not short term profit booking with a tiny amount of capital. I'm offering a free report today that will cover short term trading and explain the differences between day trading and short term trading. Keep this in mind: I don't trade anything as a gamble. I trade it to win. I have my engineer running 50,000 historical price points thru my trade backtester to see if even shorter time frames, down to 2 minutes, are workable.

9. As an example of why you must simply buy weakness systematically, here's a chart of oil, via the USO-n proxy ETF. Yesterday, many fund managers "knew" oil had topped. They went short and today they are stopped out, demoralized. Oil looked finished to me too. But I bought anyways. Now a head and shoulders continuation pattern has appeared. Who would have guessed that? Here it is. I've already rung the profit bell this morning as oil "impossibly" soared three dollars higher.

click to enlarge

10. What happened to competition? The average citizen has been brainwashed by the bankers into believing that raising prices of the goods you need to live, makes the holder of those goods a winner. You are a winner if those goods rise in price against the US dollar, faster than the dollar falls in price against gold and there is actually a market for your "winning investments" where you can book profit.

11. If your goods fall in price against the dollar, while the dollar itself falls in price against gold, you are not winning. You are losing very badly. A market winner is measured by your consistently rising liquid net worth against gold. In plain English: The amount of ounces of gold your net worth can buy must generally be increasing.

12. The number of ounces of gold you can buy is the top measure of real wealth on a long term basis, not the measure of dollars you can buy. Measure your wealth first in ounces, second in dollars. Both should be increasing, but the top dog measurement is ounces of gold equivalent, which I've coined as: Your GOLDE holdings.

13. Business owners think long and hard before branching out into a new line of business. There is a tremendous amount of risk involved, as capital and/or debt is diverted from the existing winning business, to the new start-up venture. Diversification is something handled with meticulous planning.

14. Not so in the markets. "Today I like gold, the world's lowest investment." "Oh, now it's tomorrow and gold fell down 20 dollars. Shut down my gold factory. Today I'm starting a long Dow and short Gold factory".

15. Not surprisingly, most "investment factories" fail. Business owners need to approach a single major market with the care and precision you approach your business with. If you look back at your failed stock market adventures now, you will probably quickly realize your perceived "diversification" was simply a wild ad hoc attempt to build & operate multiple businesses all at the same time, with no proper management plan, no professional tactics, in place for the first one.

16. You have seen the US foreclosure numbers, the job foreclosure numbers. Well, just as sadly, yesterday a number of "long term gold investor factories" closed down as gold declined in price and the investors' patience ran out.

17. The bankers understand the nature of human emotion better than the rest of the world's investors combined, with a few outsiders also having that quality of understanding. I mentioned one of those people recently, Mr. Paul Tudor Jones.

18. The bankers want you to be staggering from one broker to another, one analyst & media publication to another. The faster you make decisions, the easier you are to pick apart. They designed the entire financial system so you are in a constant state of apprehension, searching for the next "big move". They have convinced most in the gold community that if gold doesn't rise, you won't make any money in it unless you are short.

19. On that note, let's review some key points I've been pushing for the past few weeks, points that are probably more clear now: First off, the gravy money is gone from the stock market for now. The bankers and insiders have it. They went long the stock markets at the October and march lows. They have been sellers to the institutions and retail investors at 50%-300% profits for themselves. Here's the Dow. Notice the 12,26,9 series rolling over. I see that as a sign to begin a solid profit booking program on my short sales. Not a signal to sell the Dow now.

click to enlarge

20. A second point is: Price air pockets. Some air pockets are desirable, others not so desirable. If you buy the Dow now in a price plop, if it falls to near the lows, you have a 3000 point Dow price air pocket. You can't make any money on a consistent basis behaving like that in the market.

21. A number of you have written in to me yesterday evening saying, "Stewart you were right, the Dow is on fire, how can I short it?" My answer has been: Short it? The Dow just fell 200 points, I've started to cover my shorts, although only very very lightly." Most investors' average trade size is about 90% too big. I tell people to cut the size by less than that, because in the real world, lasting improvement in the market comes in stages as a process, not as an event. There is a dollar number you can use to cut your trading size. Find it. If you feel real pain when the market is moving against you, you are definitely trading too big.

22. You want a price air pocket between your next buy and take profit point, and by definition, there has to be a price air pocket, or your buy and take profit points would be identical.

23. Focus on gold first as your trading and investment "factory". Build it well, with a proper foundation. A proper foundation does not mean a giant wad of gold. It means a consistent focus on increasing your GOLDE number, your gold ounces equivalent net worth. Obviously the easiest way to do that is to focus on trading gold itself. Yesterday gold fell in price. I bought of course. I sold US dollar long positions at a profit while Bob Prechter talked of the dollar being a possible "buy". Today gold is trading between where I bought yesterday at 930 and my take profit point of 960.

24. From here, gold can only do 3 things. First, it can sit here between 930-960 without ever touching either point. I'm ok with that, but I think the odds of such a scenario are microscopic. The 2nd and 3rd scenarios are that gold falls to 920 or rises to 960. I'm a spectator between those two price points. I don't care which scenario plays out, which is a hard thing for amateur investors to understand. I'm trying to clarify my "I don't predict price, I respond to it professionally" mantra, one that I'm always repeating. If gold rises to 960, I book some profit. If gold falls to 920, I'm a buyer. That's a $40 air pocket. I buy gold every $10 down and sell every $30 above that buy point. Sometimes I buy every $5 down, and sell every $15 up. In that case, I'm never a spectator for more than a $20 range in the gold price!


Aug 18, 2009
Stewart Thomson
Graceland Updates
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Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

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