1. You have just watched the “gold punisher” administer an incredible eleven day beating on the US dollar. From about $1478 to $1610, gold has now risen 11 days in a row.
2. Click this gold chart link now to view the beating, and to view the four buy points you need to be prepared to respond to, if price declines to those areas. In particular, the approx. prices of $1595, $1578, $1560, and $1535 are where you need to be prepared to buy “enhanced” amounts of gold, with US dollars.
3. Use horizontal support to decide when to buy, and all other technical analysis to tweak how much you buy. If you try to use oscillators like RSI & MACD to decide when to buy, you will be financially destroyed over time.
4. Will today be a twelfth up day in a row for gold? I can’t answer that question, but I will say that investors who have tried to “flip trade” their way through this crisis have generally turned their trading accounts into hamburger meat. There will be many more such beatings delivered to the dollar by the gold punisher, yet the mass obsession with calling intermediate rallies in the dollar just won’t die.
5. Those who sold their gold and gold stocks because of coming “seasonal doldrums” now looktotally ridiculous. Can you imagine somebody telling you how they tried to trade the long side of the Dow through the crisis of 1929? In this even larger dollar crisis, if you buy the dollar against gold in size repeatedly, you stand to be financially exterminated. It’s only a matter of time before itreally happens. What does it take for the amateur investor to really learn? Obviously, the answer is… more pain.
6. Speaking of pain, those of you who have endured the gold stocks gulag are starting to see some sunlight! As most of you know, I began adding gold stocks to my anti-dollar weapons stockpile into the 2008 crash, and stepped that up again in the fall of 2009, as the ETF known as GDXJ (gold juniors) was born.
7. My 2008 buy program almost broke me emotionally, but it was “no cigar” on that front for Mr. US Dollar, and now he is the one who is broken! Most investors thought they could make big money in gold stocks, then trade that for the safety of bullion. That was a mistake.
8. Never go for reward before managing risk. Start by managing the lowest risk investments first, and then use profits from those lower risk plays to fund higher risk equity speculations.
9. Click here now to view why I am “amping up” my gold stocks allocation on all price weakness. I believe gold stocks (via GDX) have completed an imperfect head and shoulders bull continuation pattern, and the stocks are now consolidating just above the neckline of that price pattern.
10. What seems to be generally ignored by investors is the depth of this pattern. It is about $40 deep. The pattern engulfs the entire $15 to $55 price area! While the technical target is slightly below $100, I have labelled the target as $100 because that is a significant round number.
11. I believe that price will surge far above $100, but even at that level some individual junior stocks could go “stratospheric”. A substantially higher gold price could send GDX much higher than anyone anticipates. The bottom line is that the gold stock prisoners (you) are about to break out of the gulag and lay one serious beating on the dollar bugs!
12. A move above $64 on GDX could cause the banksters to order the hedge funds to reduce their crazed short positions on gold stocks, or face forced liquidation, and that action could send gold stocks upwards with near-vertical price action. No market moves more violently to the upside than gold stocks fuelled by loss-booking on short positions!
13. Click this shorter term GDX launchpad set-up chart now to view your GDX “buy points at hand”.
14. Remember that 93% of gold analysts were bearish at the recent lows for gold and GDX. They were all wrong. Investors who sold gold stocks into the lows and bought the dollar are now in some serious trouble. The temptation is to try to buy back in, right now, but after this two week surge in price, what could happen is that price then promptly falls, and they (you?) sell at more losses.
15. Don’t let that scenario become one you partake in. You should have bought into the lows of $51 and now be booking small profits as price moves towards $61. Those who totally failed to buy anything on the way down from $64 risk being left clutching a roll of US dollar toilet paper while the rest of us drink gold stocks champagne. Those who sold out for dollars look like beached whales, impaled by massive golden harpoons shot from the punisher’s warship!
16. I’ve personally raised my core position allocation in my gold stocks accounts to an unprecedented 70% level. In plain English, what that means is that 70% of the risk capital I’ve allocated to buy gold stocks is now invested in them, and will not be traded out regardless of what happens to my stocks on the price grid, in the intermediate term.
17. Tactically speaking, should gold stocks decline from here, I will only increase that 70% number, while nothing short of something near the $100 GDX number will see me chop it.
18. A week ago I told the gold community to get with the gold program, and many of you have, but thousands of you unfortunately drank the dollar elixir peddled to you by the banksters. You tried to counter-trend trade your way to wealth, and that can’t work. It didn’t work yesterday. It won’t work today, and it won’t work tomorrow.
19. I mentioned wheat and corn recently taking financial baseball bats to the dollar, following the explicit instructions of the “gold punisher”. Sir Corn and Sir Wheat are back again this morning, taking turns bashing the dollar. Click here now to view the three “buy points at hand” for you in the wheat market. Does anyone really understand just how much more powerful an asset wheat is than the US Dollar? Try not eating for a month, and you will understand the incredible stupidity of the dollar bugs who call wheat “risky” and their photocopied hero a “safe haven”.
20. We just tagged two of those points. One of the reasons I invented my pyramid generator (PGEN) is to manage the price action around HSR (horizontal support/resistance) lines. In an uptrend, price often doesn’t pull back all the way to the HSR line that sits below current price.
21. The PGEN systematically allocates risk capital into these support areas so that if price turns before hitting the HSR point, you still put some capital to work. On the other hand, if price blows through a number of HSR levels on the downside, you have not blown all your cash reserves.
22. As many of you have learned the very hard way, price can stay below your price entry point for years, or even decades. If you can’t be a “player”, you start to break down mentally and emotionally. Financial destruction quickly follows in most cases, in a frenzy of loss-booking.
23. Over time, you learn that the most wealth is built by buying into price areas that you never believed could or would happen. If you focus on trading smaller than you “know” is rational most of the time, the rare occasions when price does decline massively will see you allocating your largest amounts of capital, while most investors are liquidating and booking huge losses. You can’t know predict when those times occur with any consistency, but you can respond to them as aprofessional investor, on the buy.
24. Options players need to be on “gold alert” right now. I like 70% call options and 30% put options on GDX. You may have your own favourite gold stocks vehicles. I’d be looking to go out towards late 2012 (preferably longer) for the calls and late 2011 for the puts. If price declines from here, cover off some of the puts. If GDX goes to $100, well, call the wheelbarrow company!
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Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.