Gold & USD Technicals:
Blips & Shapes
Sep 21, 2010
1. The US dollar. Some amateur chartists see a bull continuation
H&S (head and shoulders) pattern on the weekly chart of the
US dollar. I suspect this analysis comes from the non-stop pounding
I gave the gold community on the existence of a bull continuation
H&S in Gold, between 680-1033. That pattern activated,
and has been the main driver of the move in gold from 970 to
2. Unfortunately, you need to actually read Edwards & Magee,
many times, before announcing to the universe you are now a technical
analysis master. Jim Sinclair calls the US dollar chart, "worse
than Enron." Amateur land calls it a "bull continuation
pattern." My view: amateur land is going to get a very interesting
lesson in technical analysis, and account drawdowns, very very
3. There are many parameters that need to be considered
before drawing a chart, before announcing you have a major market
"all figured out." To give power to a bull continuation
head and shoulders, rule number one is that it must be continuing
a major trend. In the case of the US dollar, the bull continuation
H&S pattern comes after a micro blip upwards. The bottom
4. There is no bull H&S continuation pattern on the USD.
All there is on the chart is an uptrend blip, coupled with an
H&S shape, not an H&S chart pattern. Please throw your
USD bull market fantasies into the waste basket. Thank-you. A
continuation pattern, by definition, continues a trend. It does
not continue a blip.
5. The pattern that does exist on the US dollar is a symmetrical
triangle pattern, with a 66% chance of breaking down side, per
Edwards & Magee, not per the fantasy of a boatload of failed
amateur investors, sitting side by side, by the millions, in
the paper money blast furnace, reading USD cue cards handed to
them by the banksters. The continuation pattern in play is
a downside symmetrical triangle, with a 66% chance of taking
the US dollar down in a move of intermediate trend size.
6. What does that mean for gold? It means that you get richer,
that's what it means.
7. Traders should understand that within the major bear market,
the USD will have many blips up. Unless you are a professional,
don't waste your time trading your gold for US paper, to get
in on these micro up blip plays. Use any temporary US dollar
strength to buy more gold.
8. Here's the US dollar monthly chart, highlighting the USD symmetrical
Dollar BEAR Continuation Pattern.
9. The US
Dollar weekly chart gives a closer look and you can see that
price could easily move up to the 88 area while still remaining
within the confines of the symmetrical triangle, the bear
continuation pattern. Most investors in the gold community trade
far too big, and thus have a tendency to get carried away by
what are really micro moves. Who cares if the USD goes to 88?
10. Who, really, is capable of predicting all the small bull
moves in the USD in a way that you consistently profit from them
over the life of the bear? Likely answer: Nobody. So, if you
try to invest based on the next possible micro move, repeatedly,
guess what happens to you in the market?
11. Answer: Paper
12. Here's a look at the US
Dollar daily chart. I'm the first to admit the oscillators
are oversold and turning up, but notice the red circle on the
chart. That's a small H&S top, and the big picture technically
for the USD is very, very, very negative. I cannot overemphasize
that for most of you, any strength in the US dollar should be
used to buy more gold, not to freak yourself out, dump your gold
and go long the dollar. Don't guess about coming dollar strength.
IF it happens, buy gold. End of story.
13. The big fundamental picture for the USD is "only"
about 10,000 times more negative than the already-horrific technical
14. Would all USD bulls who believe hundreds of trillions in
worthless OTC derivatives marked to model lies garbage
is not a bear USD factor, who believe spend-a-holic & constitution-bashing
governments are desirable, who believe handing the banksters
trillions while electric car infrastructure gets less than pennies,
who have joined the "one more Gulf oil disaster for the
gipper" club would you all please step forwards and take
a bow for the gold community? Thank-you. Now go back to your
chair in the paper money blast furnace, your seat in there, the
one beside your golf ball advisor. Thanks.
15. That takes care of the big picture. What about the now?
16. That's also a concern, and a growing one. As gold tanked
into 1200 from 1266, huge capitulation took place across the
gold community and the fund community. By 1156, the situation
17. Sadly, my partner "gold artist" believes we may
have seen 50% of the gold community on the gold buy since we've
risen over 1240, on this approx. $130 power up swing from 1156
18. If you bought nothing into 1156, my question to you is, "what
in the world are you doing chasing price on the buy at 1285?"
If you are buying now, after selling then, you are essentially
begging the banksters to take you to the woodshed for another
beat-down. Nobody needs to chase price to buy gold. Gold is timeless,
gold is forever. Elmer Fudd Public investor will be dead and
gone long before gold fulfills his wienerhead pipedream that
gold is a "barbaric relic." Fudd is the barbarbic
relic. Not gold.
19. Don't be like Fudd. As I mentioned yesterday, some members
of the public are starting to follow gold's price higher. Why
do you need to chase price? Answer: Because it's an emotional
urge that is part of human nature. When you were a child, your
parents or guardians would smack you if you did something stupid
in the house. Unless you are born into the bankster families,
where the kids are trained (ordered) not to chase price, you
have no "guardian" to keep you in line. The banksters
grew up mean, but professional in the their market actions, because
of that discipline.
20. The markets are similar to business, but not the same. If
gold moves $50 higher and you have to watch it rise, that's what's
called professionalism. Use the pain of being out, to learn from
failing to buy anything into 1156. No pain, no gain. Use that
"longing to be in" to take charge on the next bout
of price weakness. To take charge on the buy.
21. I don't care if gold's price rises $500 higher from here
without one single down day; I do not chase price. I don't chase
it $1 higher, $100 higher, nor $1000 higher. Enjoy the ride with
your core positions, to wherever this intermediate move ends,
but do not chase price!
22. If you find yourself breaking down mentally, overwhelmed
by the price-chasing urge, (and we all have a breaking point),
then commit only the amount of "market sin" required
to kill that urge. You will be very surprised how little gold
you need to buy to kill that price-chasing urge.
23. Fund Manager "Mr. Macro," who advised shorting
the Dow in the spring of 2007, then bought the Dow in March of
2008 in size, sent me an email last night that he's blowing out
a lot of those longs this morning and adding shorts. It's been
a sweet ride for those of us who went long the stock market into
the lows at 6500, as I did. It wasn't sweet on the entry, and
it never is. Gold could be affected negatively if we start to
see some weakness in the general equity markets, and I'll remind
you all that we are not out of the Sep-Oct "stock market
crash season" by any means yet. Mr. Macro expects the Dow
to make a new high by year-end, so this is a tactical play. Not
a "dow to zero, we got it this time" pipedream. Here's
chart. Note the HSR line (horizontal support and resistance)
has been penetrated to the upside. A classic buy signal in technical
analysis. I don't buy breakouts. I sell them. I booked profit
on all my trading positions in the Chinese stock market this
morning, and now hold only core positions. Sell breakouts, sell
strength. Weakness will return, whether now, or from higher levels.
24. Here's the GDX
chart. The gold stocks oscillators are starting to roll over,
and last night I highlighted a number of junior situations where
the 40%-100% moves upside in 4-8 weeks appears to be slowing,
in terms of profit velocity. Those who chased price and bought
over the past 2 weeks, are probably getting nervous. You should
be. Nothing changes in markets when you chase price. Except the
size of the losses that follow such madness. Let's do it right.
Competition with the banksters is the only way to supplant them,
and it all starts with professionalism in the gold market, the
ruler of all markets!
Sep 21, 2010
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