"Gold Stock Tactics: The GDX Sanity Chart"
Oct 19, 2010
1. Do you want to make serious money in the gold market? The large money in gold over the next 12 months is going to be made in gold stocks.
2. Gold bullion at $1000 back in 2008 on the first touching of that key plateau was not the same “gold stock rocket fuel” that it is now.
3. The world view of Gold has changed since 2008. Many of the mining companies have moved forward with their projects, advancing them roughly on target.
4. September/October is not only Indian Jewellery demand season; it is drill results season. It has been a magnificent August and September for Gold Junior stocks.
5. If you have difficultly differentiating between gold stock core positions and gold stock trading positions, I urge you to consider using multiple brokerage accounts to create a clear segregation of those items. Send me an email to firstname.lastname@example.org if you require further explanation of the difference between a trading position and a core position.
6. This, the ultimate Gold Stocks bull market, is too important to see any one of you take yourself with inadequate market tactics, particularly at this critical point in time.
7. Click here now to view the GDX Lucky 13 Daily Chart. Note the 13 corrections within the power up move from the late July lows. I’ve clearly highlighted each of those with a blue line. Thirteen opportunities to buy, thirteen opportunities to establish core and trading positions in the gold stocks market. Thirteen opportunities to get richer. Who says thirteen isn’t lucky?
8. I was a buyer into yesterday’s GDX lows, buying approx. every 40 cents down. Did I get the exact bottom of 56.51? No. I have zero interest in plopping vast sums of capital into a fool’s gold lotto ticket. My lowest fills were in the 56.80 area.
9. How much risk capital should be allocated to gold stocks tactical buying? If you look at each correction from the July lows, you’ll notice that the average correction is about 2-4%. The Gold Stocks Group are declining, on average, by about 2 to 4%, then rising to a new high.
10. A 1% allocation of total risk capital is reasonable on that amount of weakness.
11. What almost nobody in the gold community understands is my concept of pyramid buying. While I’ve been a buyer of these sell-offs, the monster money is made in responding with a pyramid formation of buying into monster weakness.
12. At some point, the GDX is going to sell off more deeply. When it does, those who are now throwing vast sums of capital into the gold stocks on these 2% corrections, and I’m talking about allocated numbers vastly beyond 1% of risk capital, are going to find yourself on fire again, just as you did at 1156, 1045, 905, 860, 680, and the myriad of previous gold market corrections.
13. Worse, most are not even buying any of these 2-4% “snack packs”, but, horrifically, are actually buying the peak of each 4-6% rise.
14. You are burning money if you are engaging in those tactical actions. Look again at that GDX Chart. Here’s a magnification of the later portion of the chart, using 60 minute bars. GDX 60 Minute Chart. Look closely at each peak. Now look at each trough. In terms of both time and size of the move, you are costing yourself substantial money and piling on risk, by chasing price and buying these peaks; many of the peaks are only barely above the previous one, while they are 4-6% above the previous low.
15. The reality is there was almost a loss of sanity that occurred into the lows of 1156, as there was at every previous correction. You have to buy your personal loss of sanity in the gold stocks market, rather than listen to that insane voice telling you to stand aside or liquidate.
16. Another type of sanity loss occurs on dramatic price strength. That time is now. Or should I say…it just occurred over the past 4 weeks. As many of you begin to grasp the ramifications of what I am telling you, you will realize you have just made a number of severe tactical errors, with percentage of risk capital allocation into gold bullion and gold stock buying at the very top of your error list.
17. Remember my words: Just Say No To Drugs. When price soars, or feels like it is soaring, investors begin to think like drug addicts, drugged into a stupor of crazed action, hooked on the price chasing drug, the ego drug. Here’s a look at the GDX Sanity Chart.
18. This GDX Sanity Chart is the most important chart in the world right now, because it provides a crystal clear picture of the Dr. Jeckyll and Mr. Hyde conundrum that dominates the personality of every gold market investor, and every investor in every market. The GDX peaked around May 11 at a price of $54.63. More than five long months have passed, yet yesterday the GDX traded at $56.51, a microscopic gain of $1.91, which is only 3%!
19. If you bought each 1% decline in price in the GDX using a pyramid formation of buy orders, you are sitting on substantial gains on your core positions, and substantial booked profits on your trading positions. Almost all of the 13 corrections in price from the July lows have produced solid gains, just within the ensuing days following those lows. Almost all of those individual moves produced greater gains than the entire Gold Stocks move over five months, from May to the present date in time!
20. If you bought into the lows of the selloffs in May and July, you are sitting on gains of over 20% on the GDX alone, never mind the GDXJ where you have gains of 50% from the lows you bought. Should I mention the individual junior situations, where those you followed me on the buy in July have gains of 50%, 100% and 200%?
21. Look very hard at the GDX chart. Notice the point I labelled “Gold Community Loses Sanity Here”. It is now 4-6 weeks since the “loss of sanity buy frenzy” began. 4-6 weeks since the gold bullion and gold stock investors “lost it” and began to chase price with tactics devoid of logic, devoid of reason. Four to six weeks since gold market investors became price chasing drug addicts. Worst of all, 4-6 weeks of making peanuts (or nothing) is the payoff for taking all those drugs.
22. If you have unknowingly allowed yourself to become a price chasing drug addict in the gold bullion and gold stocks market, you need to look at how bad your personal situation might be. The key lies in your ability to withstand draw downs. If you sold into past weakness, odds are high you will do so again, particularly if you are now carrying extremely low or even negative cash balances in your gold market accounts, and chased any price in the rise since May.
23. If that is you, and you are now coming down from the price chasing high slightly as you look out your price chasing window this morning and see 20 banksters in financial battle tanks aiming their main unlimited liquidity guns directly at you, you need to understand the reason you are coming down from the emotional high, is because price has stopped going up. The chemicals inside your brain and body are responding to that loss of upwards momentum, and fading in power as well. First the high fades, then a blistering hangover sets in. Are You Prepared?
24. As you think about the 1% of risk capital that I have allocated into Gold Stocks on the current sell-off, and you look at the 50%, 100%, and even 1000% numbers that many of you have allocated on nothing more than a drug addicted price chase, you will soon learn your next gold market lesson; the banksters of China are no different than the American or European banksters. They are part of the global bankster cartel with unlimited money and you are the very last person who will benefit from their actions. The Chinese banksters are not your friend. They look at you as dogmeat. The Chinese Gman is sitting on 2 trillion in cash, while millions of the people he stole it from are in a state of desperate poverty. The Gman and the banksters do not exist for your benefit. They exist to rob you. Regain your sanity. Gold is tanking down to $1352 basis December futures this morning. The GDX will likely blow thru my next buy orders in the 56.50 and 56 area. My buy orders are larger at each pre-set buy point going down, but if you fell victim to the gold market’s price chasing Siren On The Rocks, you are now a helpless cork floating helpless to act, in a state of acute nervousness, unable to respond professionally on the buy to price weakness that threatens to turn into a global bankster-engineered price rout, with them taking all you price-chased. That nervousness could become terror, if the banksters put down their cigars and start pumping the market with ask orders of size. I told you to be patient, but you had to buy, had to shoot up on price chasing heroin again. Now the banksters are coming to unleash The Rain of Pain on all price chasers and the question is:
Are You Prepared?
Are You Prepared To Buy?
Oct 19, 2010
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