MontyHigh, www.worldofwallstreet.us
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Recent Posts
- Peak Oil Mitigation: Cars With 70+ Miles Per Gallon Available Globally But Not In The USA
- Worse Than 2008? A Chorus Of Voices
- Off-Topic? Mainstream Journalism - Something Is Definitely Wrong
- "Silver Resource Corp" (GORO) NI43-101 Report
- Gold Price Manipulated Down By Bankster-Controlled Corporate Media
- Bernanke Speaks: The Stick That Beats Gold Down
- What To Do If S&P 500 April Is A Down Month?
- Peak Oil Trade: Suncor vs S&P500 Ratio
- Gold Stocks Ready For A Pop?
- Off-Topic Politics: High-Gas Prices Aren't Obama's Fault? Time To Accept Responsibility
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March 26, 2012
Best Of The Boards: DanStraightman's Chart
There's nothing I can add to this.
MontyHigh, www.worldofwallstreet.us
"i keep posting this chart because it really does tell the tale...
until the fundamentals change...i see this chart continuing to the upper right hand corner of the page...
they stop printing and expanding the debt and i will rethink but for now it is hold some..tade some...but never sell out of your core physical positions...
this ain't texas hold'em folks...
peace"
March 25, 2012
Best Of The Blogs: Saturday Harvey Organ "Most Bullish Scenario I Have Ever Witnessed"
I'm guessing you are already following Harvey Organ's free-as-in-beer web site if you've stumbled across my puny site. The saturday post is usually particularly valuable. Here's an excerpt that caught my eye from yesterday's post:
When Harvey Organ says "This is the most bullish scenario I have ever witnessed in gold", I pay attention.
MontyHigh, www.worldofwallstreet.us
Gold: Recent Work Revisited With Updated Charts
My recent analysis of the price of gold has been based on looking for situations earlier in the current gold bull market that parallel the current situation. This analysis has indicated that we are at or near an intermediate bottom presuming the bull market is intact. I think the analysis has some value and is on track. Leave me a comment if you think I'm off-base. I particularly enjoy creative, personal insults [NOT].
This piece provides a link to the previous post along with the updated key chart and accompanying text (in "quoted italics") with a BOLD PRINT UNDERLINE summary of whether the historical parallels remain on track. I'll be starting with the most recent analysis and working backwards.
March 18, 2012
Let The Charts Talk...
Here's the updates from the above post (now a week old).
"Now we look at gold comparing the 30-year treasury recovery from the 2008 panic lows to the current recovery from 2011 panic lows. Here's some observations:
- In both cases gold consolidationed mostly above the panic treasury lows up until treasuries closed above the envelope (the return to normalcy) [see GREEN arrow].
- This return to normalcy happened in March in both 2009 and 2012.
- In 2009 this was followed by two more weeks of gold weakness as the treasuries continued to march higher. So, we could see another couple of weeks of gold weakness if the pattern holds.
- The move from the return to normalcy to the end of the year was from almost 900 to almost 1100. That's a 22% move targeting $2025 for the end of 2012 year close for gold if the pattern repeats.
- Stocks moved higher along with gold while the USD fell throughout the remainder of 2009. This could also happen this year if things start smelling better in Europe (stronger Euro/weaker USD) and they continue to ladel out monetary liquidity to keep in power the powers that be in France, Germany and the US (all of which have elections this year)."
THIS PARALLEL REMAINS ON TRACK, THE SUMMARY OUTLOOK IS UNDERLINED ABOVE.GOING OFF-TOPIC, I CONSIDER MITT ROMNEY GETTING ELECTED TO BE AN EXAMPLE OF "KEEP IN POWER THE POWERS THAT BE".
"The chart above shows each case in the current gold bull market where the weekly RSI touched 50 from above.In just about all cases (except 2008), such a touch was close to a short-term bottom in both weeks and percentage of price.
Green lines show cases that are similar to the current situation where a few months earlier gold significantly penetrated the 50 RSI, bounced back above 50 significantly (to around 60 but without touching 70) and again touched the RSI 50 from above. In four out of those five occurrances (Mar 05 being the exception), gold was with a couple weeks of a low price that has not been revisited since. This is just another reasonably independent anlysis of the current bull market showing that, if the gold bull market is in-tact, the price of gold is probably very near a bottom and about to significantly turn up. In the exceptional case of Mar 2005, the low that was never revisited was a couple of months in the future and only a couple of percent below the touch RSI 50 from above price."
SEEMS ON-TRACK WITH ANOTHER COUPLE WEEKS OF GOLD PRICE WEAKNESS TO GO. EXAMINING THE CHART MORE CAREFULLY I HAVE IDENTIFIED ANOTHER GREEN LINE (9/2006). A RESTATMENT OF THE OUTLOOK IS NOW: IN FIVE OF SIX CASES GOLD WAS WITHIN A MONTH OF A LOW PRICE THAT HAS NOT BEEN REVISITED SINCE. IN SIX OF SIX CASES GOLD WAS WITHIN 4% OF A LOW PRICE THAT HAS NOT BEEN REVISITED SINCE. THIS PUTS MY SHORT TERM GOLD OUTLOOK HAVING A LOW THAT IS NO LOWER THAN THE DEC 2011 LOW.
"What was happenning to Gold and what followed after a significant overbought spike in the S&P500 to commodities ratio (say RSI > 77)? There were four such situations, in each case:
- Gold was consolidating an bull market (multi-year or all time) high.
- Gold was within a month of a low price never to be revisited.
Another independent analysis indicating the end of the gold correction is probably near (or here) provided the Gold bull market remains intact."
THE ABOVE REVISED CHART HAS THE GREEN LINES LINED UP WITH THE PEAK RSI VALUE (EQUIVALENT TO A WEEK AGO). I THINK THIS LEAVES US VERY CLOSE TO THE NEVER TO BE REVISITED INTERMEDIATE LOW WEEKLY CLOSE PRICE OF GOLD.
March 11, 2012
Gold: Where Have I Seen This Before?
"We see an overbought advance ending last summer and a wave pattern of consolidation since then. Here's the wave structure:
- Steep rise from near the lower bollinger band to above (outside) the upper bollinger band.
- A steep fall to below the 55 day moving average, but not to the lower bollinger band.
- A rise above the 55 day moving average but not to the upper bollinger band.
- A drop back to the lower bollinger band.
- A rise back above the 55-day moving average but without forming a higher high than wave 3 and not touching the upper bollinger band.
- A drop back to the 55-day moving average but not forming a lower low or getting near the lower band."
THIS WAVE STRUCTURE REMAINS INTACT ALTHOUGH WAVE 6 HAS CONTINUED DOWN THRU THE 55-DAY MOVING AVERAGE BUT WITHOUT FORMING A LOWER LOW OR NEARING THE LOWER BOLLINGER BAND.
"The move starting in Jun 2009 follows the pattern perfectly and even matches the current situation in terms of the month of the year of wave 6 (but is compressed in time overall compared to the current situation). The result having the head and shoulders perfectly meet its target in two months time. If this worked out for the current situation we'd see $1925 in mid-may 2012."
THE CURRENT SITUATION NOW EVEN MORE CLOSELY FOLLOWS THE 2009 PATTERN. THE UNDERLINED ITALICS TARGET REMAINS ON-TRACK.
"The 2006 price action matches well with the current pattern. In addition to the wave pattern matching well, the extremity of the preceding up move (wave 1) in 2006 matches the up move during the summer of 2011. If 2012 is like 2006 we would see one more little downmove in wave 6 prior to forming the final bottom. I think this a real possibility for the next two weeks (with a target of $1650 or even $1630). The resulting action after the bottom was in was a quick 2month rise to about the size of the right shoulder above the neckline and then 8 months (without a lower low than the right shoulder of the head-and-shoulders target. If 2012 follows this pattern we should see $1875 by mid-may and $1925 near the end of the year."
WE GOT THE ANTICIPATED ONE MORE LITTLE DOWNMOVE (SEE UNDERLINED ITALICS ABOVE) AND NOW THE PATTERN EVEN MORE CLOSELY FOLLOWS THE 2006 PATTERN. THE SECOND UNDERLINED ITALICS ABOVE TARGET OF $1875 BY MID-MAY REMAINS ON TRACK.
March 08, 2012
The Primary Trend... There's Nothing Like Gold
"Last week's little correction is hardly noticeable when you consider the big picture. I know of nothing that comes close to gold as far as being in a safe, consistent primary up-trend. I think I'll stick with gold and gold-investment vehicles as my primary investment theme at least as long as that 75 week average holds."
THE ADDITIONAL TWO WEEKS OF MINOR WEAKNESS DOES NOTHING TO CHANGE THE ABOVE BIG PICTURE. I REITERATE MY ABOVE ITALICS UNDERLINED ASSESSMENT: I know of nothing that comes close to gold as far as being in a safe, consistent primary up-trend.
March 01, 2012
Gold: Longer-Term After One-Day Hit... What If The Bull Market Is Intact?
THIS ANALYSIS REMAINS ON TRACK WITH AN AVERAGE 6-MONTH (END OF AUGUST 2012) TARGET GOLD PRICE OF $1896/oz.
February 29, 2012
Gold: What Next After A 4% Or Bigger One-Day Hit
EVEN THIS SHORT-TERM CALL WORKED OUT REASONABLY WELL WITH THE FIVE-DAY MOVE BEING -.4% WHICH MATCHED EXACTLY THE AVERAGE FOR SIMILAR EVENTS. THE EXPECTED FOLLOW-ON LOW WAS NOT REACHED SO NO TRADE ENTRY WAS TRIGGERED.
What think ye? I'm happy to be leveraged up a bit with gold mining stocks and dec 2012 $1500 gold futures call options with a core holding of physical metals in vaults. Of course, anything can happen including a downward plunge that does not rhyme at all with the gold price action of the last 10 years. This is not investing advice and I don't recommend that you trade like I trade.
MontyHigh, www.worldofwallstreet.us
March 19, 2012
Uranium Mass Psychology Trade
Ok, PBS (and others I presume) have had their Frontline and Nova documentaries covering the Fukushima nuclear meltdown anniversary. How's the price of Uranium handled it?
I think it has served up a nice spike down in mass psychology nuclear power revulsion selling. That's a fall from roughly $6.10 to $5.60 or roughly 9%. I'm going in long with a smallish trade with an exit of either 6% up or 6% down just to test the mass psychology expecting that the price will creep back up now tht the revulsion selling is over.
Woulda, coulda, shoulda been short on the assumption that the anniversary would trigger this kind of revulsion. If I were smart enough I could have seen it coming.
MontyHigh, www.worldofwallstreet.us
March 18, 2012
Let The Charts Talk...
Here's my view of the interesting charts this week. I would say the work on gold has the most merit (see bold underlined text and the charts above that text). Comments follow each charts.
S&P 500 has broken out above resistance, next resistance is another 6% higher at the all time highs. That will be a third attempt on those highs and third attempts usually make it thru. If you are smarter than me, just hold on tight. Its too late for those who missed the bus to get on-board.
Banking stocks (a leading indicator) are doing even better than the general market and are overbought relative to the general market. What to do should this ratio change is significant, but for further study. Try the XLF:SPY ratio for a longer history.
Semiconductors (another leading indicator) and transportation stocks have not confirmed the S&P breakout above post-crash highs. Is this an inflation / paper rally?
30-year treasuries are now back in the normal range (crisis over) between the ema lower envelope and the ema 100.
Woulda, coulda, shoulda followed my own trading system and been long the S&P 500 since early October.
Now we look at gold comparing the 30-year treasury recovery from the 2008 panic lows to the current recovery from 2011 panic lows. Here's some observations:
- In both cases gold consolidationed mostly above the panic treasury lows up until treasuries closed above the envelope (the return to normalcy) [see GREEN arrow].
- This return to normalcy happened in March in both 2009 and 2012.
- In 2009 this was followed by two more weeks of gold weakness as the treasuries continued to march higher. So, we could see another couple of weeks of gold weakness if the pattern holds.
- The move from the return to normalcy to the end of the year was from almost 900 to almost 1100. That's a 22% move targeting $2025 for the end of 2012 year close for gold if the pattern repeats.
- Stocks moved higher along with gold while the USD fell throughout the remainder of 2009. This could also happen this year if things start smelling better in Europe (stronger Euro/weaker USD) and they continue to ladel out monetary liquidity to keep in power the powers that be in France, Germany and the US (all of which have elections this year).
The US dollar struggling with serious resistance around 81 while the previous two times it sliced thru that resistance. This coupled with Rickard's Currency War analysis (where he claims the US will intentionally debase the dollar to help unemployment) indicates that the scenario in the previous $TYX and $GOLD chart may work out as the USD dollar is intentionally kept weak.
The chart above shows each case in the current gold bull market where the weekly RSI touched 50 from above.In just about all cases (except 2008), such a touch was close to a short-term bottom in both weeks and percentage of price.
Green lines show cases that are similar to the current situation where a few months earlier gold significantly penetrated the 50 RSI, bounced back above 50 significantly (to around 60 but without touching 70) and again touched the RSI 50 from above. In four out of those five occurrances (Mar 05 being the exception), gold was with a couple weeks of a low price that has not been revisited since. This is just another reasonably independent anlysis of the current bull market showing that, if the gold bull market is in-tact, the price of gold is probably very near a bottom and about to significantly turn up. In the exceptional case of Mar 2005, the low that was never revisited was a couple of months in the future and only a couple of percent below the touch RSI 50 from above price.
Well, that's what I'm seeing tonight, except for the S&P 500 to Commodities (CCI) ratio which is quite overbought in both the weekly and daily charts. Here's the chart I think is relevant to how I'm currently positioned:
What was happenning to Gold and what followed after a significant overbought spike in the S&P500 to commodities ratio (say RSI > 77)? There were four such situations, in each case:
- Gold was consolidating an bull market (multi-year or all time) high.
- Gold was within a month of a low price never to be revisited.
Another independent analysis indicating the end of the gold correction is probably near (or here) provided the Gold bull market remains intact.
When I started looking at charts this evening I was feeling some real trepidation about my gold options and gold mining positions. Now, after some decent analysis, I'm thinking that my positions are good ones and am feeling confident.
MontyHigh, www.worldofwallstreet.us
March 12, 2012
Gary Biiwii Technical Analysis Of My Top Stock Holding GORO
http://www.biiwii.blogspot.com/2012/03/weekly-chart-of-goro.html
I think its a fair assessment. I'm holding a tonne of Gold Resource Corp (GORO) for the long term because I think management is stockholder friendly and the rocks are significantly above average and in a politically safe place and I think there are a lot more good rocks to be found. I don't know of any comparable stock, although I admit that Rubicon (RBY, RMX.TO) has some really good rocks.
I don't mind if the stock price goes nowhere within a +/- 20% range for the next six months provided production keeps relatively on track with no big downside surprises (strikes, mine flooding, etc.).
What is your favorite gold and miner and what do you like about it? I'm short term cautious (but holding) on GORO because I think the overall stock market is overbought and I'm fearful there won't be enough oz in the upcoming NI43-101.
Here's what I think of Gary's newsletter service (and other services I'm subscribing to):
Gary Biiwii's Notes From The Rabbit Hole - a weekly commentary that uses technical analysis (with a lot of ratio charts) to create a macro view of the overall markets and individual markets. Often ends up with a summary of "I'm not sure what's going on". I think I've learned a lot (and continue to learn a lot) from Gary, but I do not closely follow his individual calls. However, if I'd paid more attention to him last year I would have had a much better year because he correctly perceived that Gold was way, way overbought last August and I didn't. So, I'm still hanging around learning.
MontyHigh, www.worldofwallstreet.us
March 11, 2012
Peak Oil Breakthru: 600 Miles To The Gallon
Per passenger that is. That's 8 passengers at 75 mpg. Great piece by Chris Nelder on oil demand if you click thru the photo. Scariest Peak Oil piece I've read in more than a year.
By the way, I'm seeing more 50cc scooters here in the USA. I expect I'll be seeing 150 mpg in the USA pretty soon.
MontyHigh, www.worldofwallstreet.us
Gold: Where Have I Seen This Before?
Hat top to KevinT for some inspiration for this post. Its time for a little more of my preferred form of gold technical analysis: pattern matching within the current gold bull market. I like this because:
- It seems to mostly "work".
- It isn't very popular.
- It has a fundamental basis - that gold is in a long-term bull market but that its advance is manipulated by the Gold Cartel. The aim of the manipulation is not to stop the long-term trend, but rather to:
- manage perceptions keeping attention away from gold and what it is saying about their monetary debasement-supported preservation of their elite status and theft of middle-class wealth.
- harvest some money from the weak hands and traditional momentum and technical based traders, especially momentum traders who enter on "breakouts" with fixed size "stops". The manipulators love to run those stops.
So, here's the current gold chart.
We see an overbought advance ending last summer and a wave pattern of consolidation since then. Here's the wave structure:
- Steep rise from near the lower bollinger band to above (outside) the upper bollinger band.
- A steep fall to below the 55 day moving average, but not to the lower bollinger band.
- A rise above the 55 day moving average but not to the upper bollinger band.
- A drop back to the lower bollinger band.
- A rise back above the 55-day moving average but without forming a higher high than wave 3 and not touching the upper bollinger band.
- A drop back to the 55-day moving average but not forming a lower low or getting near the lower band.
Finally, waves 2, 3, 4, 5 and 6 form an uncompleted reverse head-and-shoulders reversal pattern.
Has this kind of thing happened before? The chart that follows provides a 10-year view of the gold bull market identifying potentially similar situations.
Going backwards in time I see a similar pattern beginning in June 2009.
The move starting in Jun 2009 follows the pattern perfectly and even matches the current situation in terms of the month of the year of wave 6 (but is compressed in time overall compared to the current situation). The result having the head and shoulders perfectly meet its target in two months time. If this worked out for the current situation we'd see $1925 in mid-may 2012.
2008 looks similar to the pattern but wave 5 (red line) did not rise enough to form a decent head and shoulder's neckline. From where we are to the equivalent of now, the 2008 action move quickly to the top of the bollinger band. For this year, that would be a quick move to $1800. After that the great 2008 financial crisis dragged gold down hard. Do you think 2012 will be similar to 2008? I don't it will because it is still too fresh on everyone's mind. Still something like 2008 could happen. The Greek default could be similar to Bear-Sterns. If I start feeling real fear in the next month or two then my estimate of probability of a 2008-like experience will also probably rise.
The 2006 price action matches well with the current pattern. In addition to the wave pattern matching well, the extremity of the preceding up move (wave 1) in 2006 matches the up move during the summer of 2011. If 2012 is like 2006 we would see one more little downmove in wave 6 prior to forming the final bottom. I think this a real possibility for the next two weeks (with a target of $1650 or even $1630). The resulting action after the bottom was in was a quick 2month rise to about the size of the right shoulder above the neckline and then 8 months (without a lower low than the right shoulder of the head-and-shoulders target. If 2012 follows this pattern we should see $1875 by mid-may and $1925 near the end of the year.
The gold price peak of 2005 follows the pattern but not perfectly (see red lines). Wave 3 rises too high (to the top bollinger) and wave 4 does not form a lower low (a head). Still the result of the turn from where we are now is a two-month run to the height of the right shoulder above the neckline and with the price going higher thereafter. That gives us a mid-may target for 2012 of around $1875.
The gold price peak at the beginning of 2004 does not follow the pattern perfectly (see red lines). The difference is that wave 5 achieves a new multi-year high and wave 6 plunges directly to the lower bollinger band. Besides warning us that these patterns don't have to be followed, I don't think there is much to learn from this example.
The last example is the price peak of January 2003. It does not perfectly follow the pattern (red lines) in that wave 2 doesn't fall far enough, wave 3 is pretty small and wave 5 rises too far (to the upper bollinger band and much higher than the wave 3 top). Still have the wave 6 fall below the 55-day moving average is complete the bottom is just about in and a quick and sustained rise begins.
The table above summarizes the results. Here's some comments:
- The outcomes from the two best matches 2006 and 2009 are quite favorable and indicate that either a bottom is in or soon will be and then within two months a very nice rise ensues with a good outlook for the end of the year.
- The outcome from 2009 matches this year's seasonality and is the closest match.
- There are no disasters in the cards, even with the situations that don't match closely provided you have the guts (and margin if you use margin which I generally avoid) to hold to the end of the year. Of course, for 2008 there was a tremenduous amount of guts required.
- My sense is that it takes two hard down moves to really shake out the weak hands and that explains the six-wave pattern. I must say I was pretty uncomfortable myself (not so much with gold as with the global economic situation) at the end of the wave 4 down (end of 2011). Wave 6 doesn't seem to shake out too many people who made it thru wave 4.
Of course, there is no telling the future and the current analysis is based on the idea that the gold bull market is intact and that this kind of pattern matching holds water. I think the bull market is in-tact and I think the pattern matching has value.
I like where my gold investments are positioned. I used the manipulated downward price action Friday to add about 10% to my Dec $1500 gold options and I'm about as leveraged up as I expect I'll get (roughly 2 to 1 with one part gold stocks with no margin in my retirement account and one part those gold options in my trading account). My risk tolerance seems way greater than most and I'm not providing investment advice.
Still, I hope you find some value in this analysis.
MontyHigh, www.worldofwallstreet.us
March 08, 2012
The Primary Trend... There's Nothing Like Gold
Here's one explanation for why I'm so fixated on gold and gold investing. Look at this chart:
Rising consistently for a decade with just a minor downturn for the "global financial crisis". The 75 week EMA barely turned down during the crisis. There's nothing else like it.
Not the general stock market.
Not emerging markets.
Not long-term US bonds.
Not crude oil, even with the Peak Oil idea, although its more consistent that stocks and bonds.
Not copper.
Not silver, though better than anything but gold.
Not the US dollar.
Commodities in general are the closest to gold as far as being in a consistent primary trend goes.
Last week's little correction is hardly noticeable when you consider the big picture. I know of nothing that comes close to gold as far as being in a safe, consistent primary up-trend. I think I'll stick with gold and gold-investment vehicles as my primary investment theme at least as long as that 75 week average holds.
MontyHigh, www.worldofwallstreet.us
P.S., Special thanks to Catherine Austin Fitts from whom I got the idea of "following the primary trend".
March 07, 2012
How To Hold Gold: Put 2 And 2 Together
Here's a pair of situations to consider:
- MF Global - its been four months and its becoming pretty clear that the money is not coming back. Doesn't look like anyone is going to jail either.
- ISDA And Greek CDS - forget about collecting from the bankster on that insurance you bought on those Greek bonds.
Both situations demonstrate that the banksters cheat to win and their legal-language wrapped paper promises aren't worth anything if its really going to cost them.
Now consider the two most popular gold investment vehicles:
- GLD (SPDR Gold Trust) ETF
- COMEX Gold Futures And Options
Both are created and operated by the banksters and wrapped in an impenetrable shroud of legal paper, the kind of legal paper that was supposedly there to protect MF customer funds from MF management theft and supposedly there to protect Greek credit-default swap holders.
Put 2 and 2 together. If its ever going to really cost the Banksters, what do you think you'll really get from GLD and COMEX Gold holdings? CONCLUSION: That kind of gold is not going to protect you from systemic problems, even relatively mild ones.
My "real gold" systemic insurance is outside of the Bankster system. I've got some goldmoney.com, some Sprott PHYS and some coins in a vault outside my home. Where do you have yours?
MontyHigh, www.worldofwallstreet.us
March 01, 2012
Gold: Longer-Term After One-Day Hit... What If The Bull Market Is Intact?
Let's look at prior one-day gold price hits and this time look at what happens to the price of gold 3, 6 and 9 months afterwards. These should provide a guide to what will happen next for gold this time presuming, as I do, that the gold bull market is intact.
I offer a graph with the percentage change for each event:
I offer a table with the extrapolated price based on the yesterday's closing price and the percentage changes.
I offer these observations:
- Yellow Bars On Graph - Looking out 9 months, in every case but two (85% of the time), the price moves up enough to wash away the one-day hit. Even the two exceptions were not so bad. The two exceptions were after the way-overbought 2006 multi-decade high parabola.
- Blue Bars On Graph - Looking just three months out the results are dicier. Even look just three months out things are hopeful. 7 out of 13 results were insufficient to overcome the one-day hit.
- 2/27/2007 Most Similar - 2007 had a strong end of year, but not much upside 3 and 6 months out.
- Yellow Bars On Graph - The best bar is just above 25%. Nobody got rich quick on gold without some-kind of leverage. The types of leverage available are: Futures (unlimited downside), Call Options (limited down-side but expensive), Gold-Mining Stocks (how good/lucky are you)? Be careful out there.
Finally, as a caution I offer this table showing how much further the price of gold dropped over the 9 months following the one-day hit. Do you have the mental toughness (and margin in your accounts if you are leveraged) to handle a gold price drop into the $1400s or even touching the $1300s? Half of those table entries have a 13, 14 or 15 handle and all go into the 1600s at least. To get to those 9 month out higher prices you have to withstand the lows in this table. Brace yourself (or get out now). Gold does not go straight up.
Best wishes,
MontyHigh, www.worldofwallstreet.us
February 29, 2012
Gold: What Next After A 4% Or Bigger One-Day Hit
What to do after a day like today? Well, dump the GLD historical data from Yahoo into a spreadsheet and see if there are any parallels. The chart and table that follow show all days with a 4% or larger drop.
Here's some observations:
- Blue Squares In Chart - every one of them, at least for a moment, had a point where the price was higher than the close of the one-day hit day sometime in the next 5 days. I don't consider this to be tradeable because I wouldn't know where to place the stop.
- Orange Diamonds In Chart (and Column J) - every one of them except one had a low that was lower than the close in the next five days. I used this to exit my short-term trading positions this evening.
- 2008 Crash - a bunch of these were associated with the 2008 crash. I don't think we are in such a crash so I discount those data points.
- Yellow Triangles And Table Average 5 Days Later (rows 16 and 17) - a little lower than today. So, there isn't a need to panic out of longer-term positions. The worst of the yellow triangles (except 2008 crash triangles) was "only" down another 3.9%.
- Another 3.5% Lower Than Today's Close (that would be $1632) - Every such non-2008 panic case, if bought this far further down from Today's close, results in a gain at the end of the 5-day window (that is, next Wed). I expect I'll be buying for a short-term trade if we get at least 3% more downward movement.
- Feb 27, 2007 - by far the most similar day to today, both in time of year (to the day almost), and the RSI and general chart pattern (see below). It continued to fall another 4.3% (targeting $1617 for this year) and then quickly recovered everything and then some.
This scatter chart has the size of the one-day-drop as the X-axis and the percentage price change from the one-day-drop close over the next five days on the Y-axis.
Here's the table summarizing each big one-day-drop event.
Here's the current gold price chart:
Here's the 2007 gold price chart. Check out the end of February and what follows. This is the event most similar to today's event:
Here's the spreadsheet in .ods format: Download 20120229gld
MontyHigh, www.worldofwallstreet.us
February 26, 2012
US Dollar Right At Head-And-Shoulders Support
Thhe US Dollar is right at head-and-shoulders support:
Technically, if the pattern completes we are talking about several weeks more (at least) of the "inflation on" trade. That's:
- Another 120$/oz (7%) higher for gold targeting $1900/oz.
- Another 4$/oz (11%) higher for silver targeting 39$/oz
- Another 6% higher for the S&P 500 (not shown)
- Another 7% higher for copper (not shown)
- Another 10% higher for $WTIC crude oil (not shown)
if they react to the dollar's fall the they did from the top of the head to the neckline. If that pattern holds then silver is just about the best "inflation" trade there is. I don't have much, but I expect I'll crank that up (and dump my inflation trade "jig is up" hedge: S&P 500 puts) if the dollar closes with a 77 handle.
MontyHigh, www.worldofwallstreet.us
For Debbi:
Off Topic: Age, Wealth And Dick's Sporting Goods
Now that I can buy anything I want, there's nothing I want. Its not just Dick's.
MontyHigh, www.worldofwallstreet.us
P.S., Hat tip to my son for rec'ing this song. Its rare, but occasionally it fits.
February 19, 2012
Off-Topic Best Of The Podcasts: Here's What I've Liked Lately
I don't know if these are tradeable, but I found them entertaining:
Nice bit of conspiracy theory regarding the media and big pharmaceuticals: KMO and the C-Realm Podcast, 297: The Temple of Biological Mysticism. I don't think I buy the whole anti-modern medicine thinking.
Turd Ferguson interviews Gozolo Lira. The beginning is about the Europe Debt situation but things get interesting when talk of war with Iran gets going.
MontyHigh, www.worldofwallstreet.us
Post-Crash S&P500 Overbought Comparables
Today we find the daily RSI for the S&P 500 being overbought (above 70 and then not falling below 60) for a month. What's the likelihood for a correction and how big might that correction be? The chart below looks at all of the comparable situations since the 2008 crash.
There are three such comparable situations. The gray boxes over the comparable situations are of the same width as how far we have gotten through the current situation. What happens beyond (rightward) of the gray boxes shows what happened in the comparable situations beyond where we are now in the current situation.
The three situations are as follows:
- March 2010 - the S&P 500 continued to advance about a couple weeks further and around 3.5% higher and then went into the "flash crash" correction with an good initial bottom 14% down from the high about a month further out. If memory serves, emotions were quite high up until the flash crash. THIS SEEMS LIKE A GOOD POSSIBLE PATTERN FOR THE CURRENT SITUATION.
- October 2010 - the S&P 500 barely achieved a post-crash high false break-out and then corrected around 4.5%. By the way, comparable situations in Dec 2004 and Oct 2006 are somewhat similar to this one. In the current situation we just exceeded the July high and are almost to the post-crash high. THIS SEEMS LIKE A GOOD POSSIBLE PATTERN FOR THE CURRENT SITUATION.
- December 2010 - the S&P 500 continued from the post-October 2010 correction and hesitated around the equivalent of where we are now now and then continued up another 5 weeks and another 5% higher prior to correcting 7% from the high to below the equivalent of where we are now a month later. THIS SEEMS LIKE A DEFINITE POSSIBILITY FOR THE CURRENT SITUATION IF THE RISK-ON TRADE STAYS ON.
I'm currently protecting my January gains in gold mining stocks with a S&P 500 put options position. I expect I'll hold that position and exit using one of the following criteria:
- STOP LOSS - no correction for at least 6 weeks. If this occurs none of the prior three situations parallels the current one.
- STOP LOSS - no correction and another 6% S&P 500 rise to $1443.If this occurs none of the prior three situations parallels the current one.
- EXPECTED EXIT - a correction begins without a sustained $1370 breakout and the correction falls at least 4%. If this occurs the Oct 2010 comparable pattern is being followed.
- EXPECTED EXIT - a correction begins after a $1370 sustained breakout and the correction falls at least 6%. If this occurs either the Mar 2010 or the Dec 2010 comparable pattern is being followed.
We'll see what happens.
MontyHigh, www.worldofwallstreet.us
For Debbi:
Waxing And Waning: A Review Of Subscription Investing Services
I thought it might be of use to you to hear which subscription investing services seem of value to me and why. Please take a moment and leave me (and your fellows) a recommendation for a service you find valuable and why its valuable. I'm particularly looking for a service which does asset class allocation based macro-economic fundamentals (e.g. leading economic indicators). I'm also looking for an energy sector (Peak Oil) stock-picking service.
Here, in order of greatest interest first, are the subscription investing services I am subscribed to or have recently subscribed to:
Highly Rely Upon:
- Stockcharts.com - pretty valuable way of doing technical analysis and maintaining dozens of charts. Not very expensive.
- Stewart Thomson's GracelandUpdates.com - very nice daily service with a strong viewpoint on how to invest called the pyramid generator (steadily buy into real assets as they decline to successively lower points of support, sell lightly as they rise to successively higher points of resistance). Comes with a daily commentary written in a darkly funny voice and pretty cool video of charts with voice-over. This is the service I am most learning from now. Not very expensive.
- Bob Hoye's Institutional Advisor - a written weekly commentary giving Bob's market outlook which is mainly based on the idea that we are going thru a repeat of the 1870s and 1930s great depressions. That part is entertaining and seemingly insightful, but is not directly actionable. The way you make money is from the work of Bob's partner, Ross Clark. His analysis of individual situations (e.g. gold, crude oil, S&P500) comes out intermittently and is based on his historic parallels method of technical analysis. Ross' work is the inspiration for the best work I've put on this blog. I carefully consider a trade based on each of Ross's reports. Quite expensive, but worth at least 1% of portfolio value, I think.
- John Doody's Gold Stock Analyst Top Ten - I subscribed to this simply as a low-effort way of stock-picking gold miners. I'm using this simply to replace my GDX holdings with a portfolio containing a subset of Doody's top-ten. Its too early to tell whether this subscription will really make me money.
Still Follow Closely:
- Gary Biiwii's Notes From The Rabbit Hole - a weekly commentary that uses technical analysis (with a lot of ratio charts) to create a macro view of the overall markets and individual markets. Often ends up with a summary of "I'm not sure what's going on". I think I've learned a lot from Gary, but I do not closely follow his individual calls. However, if I'd paid more attention to him last year I would have had a much better year because he correctly perceived that Gold was way, way overbought last August and I didn't. So, I'm still hanging around learning.
- Otto Rock's Inca Kola News (IKN) - excellent micro-market cap Latin America mining stock picking. Most of his picks are too small for me to trade now, but his top pick of Rio Alta Mining (RIO.V) made way more money for me last year than the subscription cost or time spent reading it. If I wasn't still playing high-tech with my day job, I'd be doing a lot more of this kind of stock picking.
Still Follow:
- Bill Murphy's LeMetropole Cafe - provides a daily summary and commentary on the precious metals markets from the GATA conspiracy viewpoint. My best short-term trading setup was inspired by his commentary. Murphy is a perma-bull, so you won't get any trading signals from him. I have trouble finding ways to backtest and trade his "They Always Hit The Metals When...". The main value that I get from his posts is the ability to quickly scan (and dig into) the set of precious-metals related headlines.
Discontinuing When Subscription Expires:
- James Dines The Dines Letter - have learned some significant things from Mr. Dines, but have never made any money with his news letter. I should have made money on his Rare Earths call, but somehow missed the boat. His most lasting contribution that I have gleaned is his insight that investing must be based on four factors: Fundamentals, Technicals, Mass Psychology and Personal Psychology.
- Metal Augmentor - I subscribed to this as another mining stock picking service, but never found the time to make use of the service.
Recently Discontinued Services:
- John Williams Shadowstats - I think John Williams is making a valuable contribution with his review and analysis of government economic statistics, but after subscribing to his service I failed to find a way to utilize it to make investing decisions.
Not So Recently Discontinued Services:
- David Morgan Silver-Investor - I was a subscriber during the 2008 panic. He did not provide a way of dodging that situation. His silver stock picks took huge down moves during that episode.
- Ted Butler - Never got enough value as far as using his material to make money trading to continue the subscrption.
Hope you found this useful. Please take a moment and leave me a rec for something I should try.
MontyHigh, www.worldofwallstreet.us
Off Topic: The Latest With Monty
You haven't seen much posting from me lately. I haven't had much to say lately and have not been concentrating much on the investing world:
- Just bought a house and moved in.
- Lots of wheeling and dealing with contractors to get the old house ready to sell.
- The high-tech product I'm developing at my day-job is taking a lot of time and mental energy.
- I had quite a nice January investing and I've more than enough money so my emphasis is more on preserving prior gains rather than making the next killing.
- Overall things are quite good, thank the Lord.
Hope you are doing well yourself,
MontyHigh, www.worldofwallstreet.us
February 12, 2012
Gold Correction Historical Parallels
As you can see in the above chart, we've got a little correction started with the price of gold. In this posts and I'm going to look at similar corrections where a similar correction has:
- The RSI rising above 70 from below 50 where it was above 70 for less than 2 weeks without revisiting 60.
- The RSI falling to at least 60.
I'm looking for similar cases and seeing what happens to the RSI. Does it fall below 50 or rise back above 70? I'm calling either of those outcomes the RSI destination. What happens to the price in terms of percent fall from the top to the destination. Here's my results.
Looks like its a high probability of a continued correction until at least RSI 50 which isn't that far away. I expect, I'm going to reduce my long exposure as soon as I post this and will reevaluate when the RSI hits either 50 or 70.
MontyHigh, www.worldofwallstreet.us
February 02, 2012
Elgin Mining (ELG.V) Buyout Of Gold Ore Resouces (GOZ.TO)
Elgin Mining (ELG.V) made an offer to buy out Gold Ore Resources (GOZ.TO) in an all stock transaction nominally at a premium of 66% to GOZ.TO's recent closing price. As of 9:40AM GOZ.TO is trading up 25% relative to yesterday's closing price.
Here's my take on the situation:
- GOZ.TO is a small (44K oz/year), high-cost gold producer with a mine in Sweden that is making a lot of money at current gold prices, but which has no growth prospects.
- ELG.V is a mine reopener of a high-grade mine in the middle of nowhere (see any towns, roads, cities anywhere near the mine in the map below?) in the Northwest Territories of Canada. The mine closed in 2005 due to low gold prices. They have at least one big-name executive (founder of Kinross Gold is the Chairman).
- I hate mine reopeners as I lost a tonne of money in 2007 on base metal mine reopeners. The mines look like money makers at current metal prices and then they are un-economic and "go to zero" when the price declines.
- But, I remain bullish on the price of gold.
I've decided to sell all my GOZ.TO even though it looks on the surface like the mine reopener will work. Here's why it looks like the mine reopener will work:
- The cash cost of that ELG.V mine has got to be entirely driven by the price of fuel since there are no roads. Transporting fuel and equipment and people, etc. in and out has got to be the primary cost driver for that remote mine.
- So, whether that mine reopener remains profitable depends primarily on the ratio of the price of gold to the price of fuel (see chart below).
- The price of gold relative to oil now is approximately twice what is was in 2005 and is trending higher and has been consistently higher ever since 2009. This seems very promising.
- As long as this remains the case the mine reopener will probably "work",
However, in the light of my reasoned conclusion that Peak Oil is "real" and "significant", I just don't want to touch anything that completely depends on the price of oil staying low relative to any other thing including gold. I don't like high-cash cost gold producers that use diesel either for power generation or for open-pit mining. I'M OUT.
MontyHigh, www.worldofwallstreet.us
P.S., I kind of suspected GOZ.TO was a value-trap when I bought. There wasn't any kind of catalyst for revaluing the company. They had:
- No growth prospects, no chance of increasing production above that 100K oz/year level that seems to cause gold miners to get a decent valuation.
- No commitment to returning profits to stockholders with either share buy-backs or with dividends.
Next time I buy into a gold-miner value play there has got to be an exit strategy.
January 29, 2012
Gold Reserves Now A National Security Issue For The World's Governments
I've been feeling that the "India buys Iran's oil with gold" story (e.g. click here) was quite important for understanding the world geopolitical situation and for gold investing, but I wasn't sure exactly how. Just last night the reasoning to support the feeling came to me.
Let's review the major, recent geopolitical gold-related news stories:
- Libya's Ghadafi pays his mercenaries with gold as he attempts to fend off the Bankster Empire attack masquerading as an Air Campaign to protect citizens from slaughter.
- Venezuela's Chaves demands the return of Venezuela's gold from London. He realizes that Venezuela is definitely on the Bankster's list of "regimes that need changing".
- Iran relies on gold to maintain international trade using gold as the Bankster Empire cuts it off from the dollar system and escalates its increasingly violent (bombs, assinations, etc.) campaign for regime change.
- India relies on gold to maintain its supply of Iranian oil.
- China and Russian, still not under the control of the Bankster Empire, eschew dollars for gold, beefing up their gold reserves as fast as they can without driving the price of gold too high, too fast.
Gold is what a nation (regime) relies on should the Bankster Empire turn against that nation.
The first thing the Bankster Empire does when its turning the screws on a regime is to freeze its assets. After that comes the kind of things happening to Iran (funding and supplying internal opponents, preventing them from doing trade by locking them out of the banking system, assinations, bombings, etc.). Throughout, gold reserves held within that nation allow the nation to continue to function and trade with other nations.
So, to any nation that is not fully integrated into the Bankster Empire (a non-aligned nation), gold reserves aren't a nice investment, they are an integral part of National Security (survival). As we know in the USA, national security trumps all other political priorities.
Here's my quick estimate of those nations which constitute the core of the Bankster Empire (dark green) and those nations that are clearly either close allies or vassals of the Empire (light green). Dark yellow constitutes those nations which are clearly outside of the control of the Bankster Empire with light yellow nations constituting those that I deem to be mostly outside of Bankster Empire control. Countries which are white are countries that I just don't know enough about to categorize. Please leave me a comment if you think I have a country misclassified.
As a result of the pattern formed from the Libya, Venezuela, Iran, China, Russia (all non-aligned), I'm expecting that every nation in the world (beginning with the non-aligned nations, but continuing to fully aligned nations like Germany) are going to making the accumulation a significant, no-kidding physical gold bullion reserve located on their own soil as a matter of national security, a top priority.
This major geopolitical shift is an unexpected consequence of the Banker Empire's squeezing of the Iranians that has enormous long-term bullish implications for the price of gold.
It seems Saddam Hussein's decision to sell oil in something other than the US dollar (Euros) was the final straw that drove the Bankster Empire to attack Iraq. I think that the Bankster Empire is not at all amused by the Iranian Gold For Oil deal and that they will be escalating their attack on Iran. Jim Rickards and Ron Paul are right. In my view, sanctions are a prelude to war and war with Iran is already underway and that will become more apparent as time goes by. That seems bullish for oil and gold for the short and medium-term.
MontyHigh, www.worldofwallstreet.us
January 28, 2012
Off-Topic: My New Specialize Blog...
Here's a link to my new, rather specialized, blog: (My Ubuntu Evil Empire Escape). The real purpose of this post is to give the search engines a link to the blog. This is probably not of interest to the typical World-Of-Wallstreet reader.
MontyHigh, www.worldofwallstreet.us
January 23, 2012
Toyota Must Be Getting Really Desparate
There are no magnet known to man comparable to those using rare-earths. A discovery of a comparable material would be a major scientific break-thru of the Nobel Prize winning variety. Heard about that lately.
Toyota must be really desparate as far as Rare-Earth supply goes that they are trying to bluff the Chinese like this. I flat out missed the first big run in Rare-Earths. Maybe its time to buy some neodymium-rich near-term producers for a Toyota-inspired takeover play.
MontyHigh, www.worldofwallstreet.us
January 19, 2012
Gold Interventional Outlook
There's a quite a pile of Interventionals coming up. Here's the outlook for Gold Interventionals for the next week plus:
- Tuesday 1/24 - Turd's "Happy Tuesday" (click here) - where the Evil Empire attempts to cover some gold and silver shorts to make the commitment of traders (COT) report look good. I expect we'll get some positive action thru the close here so that the Evil Empire will have plenty of ammunition for the Interventions that should follow.
- Wednesday 1/25 - FOMC Meeting Announcement w/Chairman Press Conference - gold will be driven down so that it doesn't make the Almighty Fed and its Chairman Bernanke look bad.
- Thursday 1/26 - Durable Goods Orders and New Home Sales - not a big interventional but we need to keep gold looking bad for the big ones which are Friday and Monday the 30th.
- COMEX Gold And Silver Options Expiration - which influences the next day, Friday.
- Friday 1/27 - Q4 GDP which will, of course, be "better than expected" with gold being taken down to help form the impression that "we're saved!".
- Friday 1/27 - Day after COMEX Gold And Silver Options Expiration - gold is forced down so that anyone who exercised their call options is motivated sell their futures and not take delivery of the physical gold / silver. The close on Friday should be a good entry point.
- Monday 1/30 - After the retail gold bugs are whipped up by cheerleading over the weekend, they typically bid up the price of gold stocks for the Monday open. Gold stocks typically fall throughout Monday to demoralize those new buyers.
Well, that's my short-term trading outlook based on the Interventionals. I expect I'll hedge some of my Gold call options beginning sometime Tuesday (probably near the 4PM close) and exit on Friday at the close with a little more short-term trading as things go along.
Gold has had a good 10%ish ($150ish) run from the lows around $1525 to nearly $1570 in just a couple of weeks and a few day pullback seems like something to prepare for. Got any dry powder?
MontyHigh, www.worldofwallstreet.us
January 15, 2012
Don't Believe Everything You Hear, Even From Jim Rickards + Revised 2012 Estimated Closing Gold Price
I have great respect for Jim Rickards, Sr. Managing Director for Tangent Capital, and I find that his latest King World News podcasts (click here) has a lot of valuable information. But, you can't believe everything you think you hear even from someone you genuinely admire.
Allow me to be a little bit picky. Here's a quote from the interview beginning at 18:23 sec mark: "By the way, in the last eleven years gold has hit the annual high in the first half of the year, I believe, ten out of eleven times. Check that. I'm highly certain its almost every time."
Well, that sounded interesting and tradeable to me, so I decided to check it out. I dumped the daily historical data for GLD into a spreadsheet (click Download 20120115gldhighofyear) and produced the graph that follows:
The graph provides the price of gold (using GLD as a proxy) and, the high of the that year. As you can see, the high for the year (which I presume is the same as Rickard's "annual high") occurred in the first half of the year only twice out of seven times. So, it seems that Rickards (at least as I understand him), is flat out wrong on this one. I'll be happy to retract this statement in all humility if I got it wrong or misinterpreted his statement.
The lesson I take away from this is "It's worth your time to check out as much of what an expert says as you can prior to using his analysis as the basis for an investment or trade."
Actually the above graph seems very bullish to me and here's why:
Every year for the last six years the Gold's high of the year has exceeded the previous year's high. That means we should see an all time high for Gold in 2012 (1911$+) provided the trend continues. This trend probably continues back at least a decade, but the data set I'm using only goes back to 2005.
Here's another graph inspired by Rickards' getting me thinking about annual highs:
We see that in each of the previous six years we convenient have data for that Gold ended the year higher than the annual high of the preceding year. This analysis suggests, again assuming the previous trend remains intact, that my previous forecast (click here) for the 2012 price of gold closing price of "a little over $1800" was too conservative. In the graph above, the only year where the closing price of gold was even close to the prior year's high was 2008. So, if we think (as I do) that 2012 will not have a 2008 type financial crisis and the gold bull market remains intact, then the forecast closing price for 2012 should be substantially above $1900.
The graph that follows looks at the percentage gain of the high of one year relative to the high of the prior year and the percentage gain of the close of one year relative to the high of the previous year.
Using the above graph we can estimate the high of 2012 will be between 18% and 35% higher than this year's high price giving a 2012 high price target of between $2255 and $2580. Seems high, doesn't it?
Using the above graph we can estimate the closing price of 2012 will be between 4% and 20% higher than 2011's high price with the higher likelihood of the closing price being 18% or higher (4 out of 6 years). Those prices are $1987, $2293 and $2255/oz respectively.
With this post I increase my estimated closing price of gold for 2012 to $2255/oz. It will be interesting to test this estimate with the results from 2002, 2003 and 2005. I may follow up this post with another completing the analysis.
I hope you find this discussion useful.
MontyHigh, www.worldofwallstreet.us
yfcsvfix.rb, A Ruby Script To "Fix" finance.yahoo.com Historical CSV Downloads
I found that finance.yahoo.com historical downloads (e.g. http://finance.yahoo.com/q/hp?s=GLD&a=00&b=1&c=2005&d=00&e=15&f=2012&g=d) came with the date formatted as YYYY-MM-DD, (e.g. 2012-01-14) and that my preferred spreadsheet program, LibreOffice Calc, couldn't parse that date format.
So, I wrote a little Ruby programming language script to do it (click Download yfcsvfix.rb to download the script). Of course, you'll need the Ruby interpreter on your PC to run the script (click here to go to the Ruby Download page).
Running the ycsvfix.rb with no command line parameters provides the documentation for the program. Here's that documentation:
yfcsvfix <inpath> <outpath>
yfcsvfix takes a finance.yahoo.com historical price csv download
and changes the format of the first field from YYYY-MM-DD to MM/DD/YYYY.
When <outpath> is not provided the file at <inpath> is overwritten.
yfcsvfix also changes the order that CSV records appear outputting them
with the oldest records first.
I'm publishing this simple program into the public domain. No guarantees are made of its correctness or absence of bugs.
Here's the source code:
puts "yfcsvfix <inpath> <outpath>"
puts " yfcsvfix takes a finance.yahoo.com historical price csv download"
puts "and changes the format of the first field from YYYY-MM-DD to MM/DD/YYYY."
puts "When <outpath> is not provided the file at <inpath> is overwritten."
puts "yfcsvfix also changes the order that CSV records appear outputting them "
puts "with the oldest records first."
if (ARGV[0])
# Read the file in ar
hdr = nil
ar = Array.new
File.open(ARGV[0], "r") do |fin|
while line = fin.gets
if (hdr)
ar << line
else
hdr = line
end
end
end
ar = ar.sort
outpath = ARGV[0]
if ARGV.length > 1
outpath = ARGV[1]
end
puts "outpath=" + outpath
File.open(outpath, "w") do |fout|
fout.puts hdr
ar.each do |line|
sp = line.split(',')
dsp = sp[0].split('-')
odsp = dsp[1] + '/' + dsp[2] + '/' + dsp[0]
oln = odsp + ',' + sp[1] + ',' + sp[2] + ',' + sp[3] + ',' + sp[4] + ',' + sp[5] + ',' + sp[6]
fout.puts oln
end
end
end
Hope someone finds this useful. Leave me a comment if you do as it will encourage me to keep sharing what I make.
MontyHigh, www.worldofwallstreet.us
January 14, 2012
Best Of The Podcasts: Pento On Inflation And Deflation
This King World News with Michael Pento (click here) is one I can recommend.
The really interesting part starts are around 7 minutes in. The really interesting idea is his proposal for a simple way to trade the current markets. He proposes:
- Having two portfolios, an inflation portfolio and a deflation portfolio.
- Switching between them depending on the action in the US dollar.
- When the dollar is falling you switch to the inflation portfolio.
- When the dollar is rising you switch to the deflation portfolio.
Anybody who has been paying attention is aware that either the risk trade is ON or the risk trade is OFF, so Pento's proposal is not exactly new. The cool part about the proposal, from my perspective, is having two default portfolios set up and ready to go ahead of time. With the portfolios prepared ahead of time you can take plenty of time to get them right and then focus on getting the timing right on when to use them.
So, here's my challenge. Help me work out the following:
- If you are managing with an IRA account and can't go short or trade leveraged futures or do anything but covered call options:
What goes in the inflation portfolio?
What goes in the deflation portfolio?
Are there any core positions?
- Same questions if you have a trading account where everything is possible.
Leave me a comment with your thoughts. If I get the time I'll put my own thoughts on this up in a separate post.
MontyHigh, www.worldofwallstreet.us
January 04, 2012
Hussman's 2012 Outlook And Mainstream Retirement Planning Alternatives
Here's a dressed up version of an email I just sent out to my two brothers and sister. I'm running about 40% of my 80-something mother's retirement money (the part not locked up in trusts):
"Here's a good piece by the best of the mainstream investment columnists: http://www.hussman.net/wmc/wmc120103.htm. Being mainstream, Hussman does not take into account out of the mainstream risks, including.:
- risks to the whole system from the fraudulent fiat-currency system,
- risks to the middle-class from the "banksters" (the banking, corporate, government elite running the system) or
- Peak Oil.
The key fact in this piece is that the best you can expect from passive, 100% invested in the stock-market investing for the next decade is 4.9% returns minus management fees and taxes compounded annually. I believe Hussman is talking about real returns computed by deflating with the bogus government manipulated CPI numbers, but I'm not sure.
There are a few takeaways from this article:
- The best estimate of what to expect from the investing of our dear mother's retirement money is 2.4% (i.e. 4.9% minus say 1.5% for management expenses minus another 1% for taxes) for the next 10 years. If she lives on what she expects to spend (around $50K/year) and actually gets this return then she should be able to make it to around 100 without running out of money, but without leaving much behind when split four ways.
- The best estimate of what to expect from your own retirement savings (401K or IRA) is 3.4% (4.9% minus something like 1.5% for management expenses).
- Bruce, with his US Post Office pension, should compare what the pension fund is expecting to the article's 4.9% to evaluate the likelihood of his retirement payouts taking a hair-cut.
- If this article seems like boring, complete gobbledy-gook then you should ask yourself how best to take responsibility for your retirement planning. There are no low-risk approaches unless you already have saved way more than you'll need. You can either:
- save retirement money in tax-protected accounts (IRAs and 401Ks) and live frugally enough to get by on:
- the gains (losses) from the passive, globally diversified approach (ETFs or Mutual Funds), probably around 3.4%. The risk here is that situation is worse than the best mainstream guy's estimate and "THEY" are going to plunder those tax-deferred savings accounts.
- the gains (losses) from a top-gun who can play to win with your money without risking it all and who has enough integrity or personal connection to you to actually look out for your interests and save enough. Finding such a guy is harder than it sounds. There's a big straight jacket on your guy if what he's running is in a tax-deferred account. The risk here is either that he plunders your money (e.g. Madoff) or that he isn't really a top-gun and he loses a bunch of your money or "THEY" are going to plunder the tax-deferred savings.
- spend a few thousand hours spinning up to become a top-gun yourself and retire on your "winnings" from your own savings. The risk here is that you don't actually become a top-gun and don't have "winnings" to retire on or that the investing system is so rigged that small-time top-guns can't make real money.
- save in the form of physical gold enough and live frugally enough to get by on a fixed number of oz of gold per year. The risk here is that the physical gold is stolen, taxed to death or confiscated by the government or that it doesn't hold its value over the long-term.
- plan on working as long as your are able and depending on family thereafter.
- some other thing that doesn't occur to me right now.
- save retirement money in tax-protected accounts (IRAs and 401Ks) and live frugally enough to get by on:
MontyHigh, www.worldofwallstreet.us
December 29, 2011
Follow Up: $USD And 2012 Gold Outlook Based On The 10-Year Historical Trend
Here's a follow up round on this recent post:2012 Gold Outlook Based On The 10-Year Historical Trend
2b (a remarkable micro-cap stock picker) responds: "My only question would be how gold has correlated to the U.S. dollar and what effect a strong dollar might have on your future price prediction."
Good question. Best gold type podcast I've heard in a while was Sinclair is linked from here: http://www.jsmineset.com/2011/12/26/a-modest-1700-2100-gold-price-in-2012/
He claims Pierre Lassonde (King World News) is expecting gold between $1500 and $1800 in 2012 and that is based on strong dollar. Sinclair's call ($1700 to $2100) is based on the dollar not being as strong as expected.
But here's a chart of the dollar action for the four big corrections. I find for the three previous corrections:
(a) The dollar rises up until the end of the correction.
(b) What the dollar does after the gold bottom varies from one correction to another.
So, if the dollar keeps rising at this point, I expect that the bottom is not yet in for this correction. I guess you are expecting further dollar strength as Europe continues to look risky. The "Japan is next" buzz is starting to get thicker also. Japan right now seems to be like Italy was when all eyes were on Greece. The smart guys were talking about Italy. Now the smart guys (Kyle Bass...) seem to be talking about Japan.
MontyHigh
Are The Banksters Net Short Gold And Silver? Will The Banksters "Blow Up" Anytime Soon?
I hear many different voices in the gold community discuss the idea that the "Banksters" are manipulating the price of gold. There is an interesting difference of opinion regarding the end-game of this manipulation.
Some voices, Bill Murphy being one of them, claim that the Banksters are leveraged short the price of gold (and silver) and that eventually (e.g. when they've sold all their physical as part of the price suppression scheme) the price of gold will shoot to the moon with the Banksters in ruins.
Other voices, including Jim Sinclair, Catherine Austin Fitts, Stewart Thompson claim that the Banksters, while managing the price of gold, are firmly in control and aren't going to lose control anytime soon. Instead they manage the price to produce extra volatility to take the leveraged trader's money. Sinclair and Thompson claim that nobody is going to make more money from the gold bull market than the Banksters and Thompson in particular mocks the idea that the Banksters a net short gold and silver.
Thompson in particular is trying to buy when the Banksters buy (that would be now) and sell when the Banksters sold (that would be above $1800 this fall).
I've recently come around to the Sinclair, Fitts, Thompson view. We may see various financial institutions go bankrupt and governments lose power and/or default on debt, but I don't expect to see the mainstream powers-that-be behind the scenes (let's call them the banksters) fundamentally lose their grip or their wealth.
How about you? Do you think "THEY" are losing it soon?
MontyHigh, www.worldofwallstreet.us
2012 Gold Outlook Based On The 10-Year Historical Trend
NOTE: This piece was written during the Christmas holiday. As I publish it on Dec 29 after three hard down days, I see that the lows I was calling for January or February are happening right now.
Its that time of year and so I'll take a twirl with my own 2012 outlook focusing on where my money is: Gold. I'm writing this as I do my analysis so you'll be seeing my thinking as it takes shape. The basis for my thinking is three key ideas:
- The 10-year gold bull market is intact. I don't think any of the fundamentals driving the rise in the price of gold are fixed (the unstable and unsustainable exponentially-increasing debt-based financial system). Perhaps more controversially, I don't think the Banksters will, this year, lose their ability to manage the world economy and the price of gold. I think we are in for more of the same, but at an accelerated pace.
- August/September 2011 the price of gold got ahead of itself and is now in a significant correction. My failure to see how overextended Gold had become was my biggest trading failure this year. Gary Biiwii was right on top of this, but I didn't listen to him. Woulda, coulda, shoulda.
- The best way to estimate the current correction is to look at comparable corrections from earlier in the gold bull market.
The above chart summarizes my view of the 20xx Gold Bull Market to date:
- (GREEN LINES) Most of the time Gold has been trending higher. The underlying trend as been accelerating as the bull market has proceded (each green line is slanted a little higher than the previous one).
- (RED LINES) Four times (culminating in 2006, 2008, 2009 and 2011) gold has gotten ahead of itself in an unsustainable above-trend run. The triggers for these above-trend runs were, in my view:
- 2006 - accelerating inflation of all commodity prices.
- 2008 - accelerating inflation of all commodity prices.
- 2009 - an overhang of central bank intervention to end the 2008 collapse.
- 2011 - an overhang from central bank intervention in the form of QE2 money-printing.
- (BLACK LINES) Each of those unsustainable runs has been followed by an extended, multimonth correction.That's where gold is right now.
The above chart shows how I identified the four above-trend runs. The above-trend runs all culminate with a rise to more than 20% above the 150-day moving average (top red line). Its worth noting that apart from above-trend run corrections the price of gold has fallen no more than 8% below the moving average throughout the bull market (lower green line).
The charts I'm looking at today are all logarithmic scale. That means we can compare percentage price changes by comparing the height of rectangles on the chart. The chart above has for each of the prior corrections a rectangle giving the price change from top to bottom. It also has a rectangle that can be used to estimate the end of 2012 price of gold. This rectangle gives the price change from the high a little more than a year and a quarter out. That's how long it will be from the 2011 high to the end of 2012. I've made a copy of each of these rectangles and moved them to start at the 2011 high. This allows us to see what will happen if the 2011 correction follows one of the earlier corrections. For the 2006 and 2008 corrections this price is less than the previous high. The correction we're having now lasted at least that long prior achieving all-time highs in 2006 and 2008, but not in 2009.
The above chart gives a closer look at the three prior corrections and what they would mean for the current correction. The table that follows gives the numbers.
The above table suggests that the bottom may not be in for the current correction especially if the current correction is like 2008.
Let's look at the 2008 correction a little more closely. The low price of gold, prior to the Lehman brother's bankrucpy was 21% down from the high, a value very close to the 2006 drop. I would argue that the powers-that-be lost control for a few months during the 2008 crisis starting with the Lehman Brothers bankrupcy. I don't expect them to lose control in 2012, but who really knows.
Here's the previous table with the assumption that the Aug 2008 lows were the lows for 2008 (that is, without the post-Lehman brothers collapse). Now the 2008 correction looks a lot like the 2006 correction.
The 2006 and 2008-without-Lehman scenarios are the pattern for my best guess outlook for the price of gold for 2012:
- I expect a low around $1500 in January or February.
- I expect gold to end up around a little over $1800 at the end of 2012.
Well, that's my outlook with the reasoning behind it. I wouldn't call it bearish, but its certainly not as bullish as many of the predictions I expect you are hearing. I heard one analyst call for $2500 gold in 2012. I'm not the only analyst within the gold-bug community with modest expectations for gold 2012. Even the ever-cheer-leading Eric King could not elicit a bullish-sounding outlook from Pierre Lassonde who is expecting the average price of gold for 2012 end up below the average price for 2011 (click here). I believe Martin Armstrong expects further weakness in early 2011 as well.
The next couple of months are quite strategic. In fact, I think that next Monday, January 2, is very strategic, but the reasoning behind that is for another post. The annual percentage gain from the trend line of the first graph in this post is around 23%/year. If gold can regain and hold the recent uptrend from the first chart in this graph (see above) the target price for the end of 2012 becomes $2020/oz. If it rises above the trend line by some amount (say $75) the target rises accordingly.
It hasn't regained that trend line yet so I'm sticking with my earlier prection. My best guess outlook for the price of gold for 2012:
- I expect a low around $1500 in January or February. If the system really starts coming unglued the target price is significantly lower (e.g. $1324).
- I expect gold to end up around a little over $1800 at the end of 2012.
While I don't need links to predictions without any substantial reasoning / analysis behind it, I'd be obliged if you'd leave a comment with a link to any other analysts who both provide a quantitative outlook and the reasoning behind it.
MontyHigh, www.worldofwallstreet.us
December 26, 2011
Does Credit Have To Expand Over Time To Prevent Monetary System Collapse?
How often do you watch a youtube multiple times? Especially an educational one? This is one I watched once and it had enough important information that I had to watch it multiple times to see if it really made sense.
Michael Maloney explains in this long tube (click here) how the fiat, fractional-reserve monetary system works. This is the system used by the USA and virtually the whole world. Maloney claims thats that credit has to continuously expand or the system collapses. Can you help me figure out if he's right?
There's four segments that need to be considered. The first two are gimmees and definitely accurate. The key idea of the third and fourth segments are what you can help me figure out.
Starting at 20:55 and continuing to 22:15 he provides an explanation of how a non-fractional-reserve gold-standard money system used to work. This is good background material, but not particularly relevant as its been a hundred years since any country used that system.
From 22:15 to 28:06 he provides an excellent introduction to how a fiat, fractional-reserve money system works. This is something that is hard to understand, hard to believe but true and quite important. Do you get it? I accept that this explanation is accurate and reasonably complete. He doesn't mention that it is the threat of force (police and military) that is the reason why this system must be accepted by the population.
From 29:59 to 32:12 he claims that because interest is required on all of the money borrowed into existence money that the total amount of debt has to increase every month or the system starts to collapse.
From 45:09 to 46:34 explains why he thinks the total amount of debt has to increase and why this is unsustainable and must end in a debt collapse. This is because there is more money owed (amount borrowed plus interest) than is created by borrowing (the amount borrowed) and as the debt comes due (debt plus interest) and is paid or rolled over the relative amount of debt to currency in existence increases. This animation is the thing I couldn't stop thinking about and brought me back to this youtube and caused me to write this post.
Ok, so that is the background to the claim and here is the claim under consideration (starting at 31:56) verbatim: "This system requires that we go deeper into debt every month than we were the previous month; we have to always borrow more currency into existence than we are extinguishing every single month or the whole things starts to collapse". That is an exact quote. Here it is abbreviated with fixed up syntax: "This system requires that we go deeper into debt every month ... or the whole things starts to collapse".
Help me here. Is that claim true? And does "the whole thing starts to collapse" imply that the whole thing must collapse or merely that ongoing intervention is required to keep it from collapsing and that continued intervention is inherent in the system.
It seems to me that:
- the total amount of debt in the system can be reduced by default or debt forgiveness. For example, what happens to someone's debt when they die? It will never be paid back. Whoever the debt is owed to must write the debt off and thus the total debt in the system is reduced.
- the debt, including interest, owed by the US treasury to the Federal Reserve is in a different category from other debt in that nothing bad seems to happen if the US treasury defaults on that debt. So, let's call total effective debt the total amount of debt minus the amount owed by the US treasury to the Federal Reserve.
- the amount of money relative to the total effective debt can be expanded by having the Federal Reserve print money (buy US treasury debt) and having the US treasury hand the money out as it sees fit (ordinarily directly to its pals especially to the war industry).
So it seems to me that the system is not unsustainable in that it must end. It seems me that the system is economically inefficient in that economic distortions take place when the US treasury spends money (hands out money) to its pals where that money is wasted rather then invested in more productive activities that a free market select. Should we call that handing out of money to pals malinvestment or looting? In either case it sounds like stagflation to me, not a deflationary collapse and not a hyperinflationary collapse.
So, help me. Am I wrong and is the system inherently destined for deflationary or hyperinflationary collapse or is a "slow burn" (to use Catherine Austin Fitts terminology) ongoing fall in the middle-class standard of living another alternative that can be sustained for years or decades? What is it about the system's operation that I don't get that means that a collapse MUST happen?
MontyHigh, www.worldofwallstreet.us
December 20, 2011
Trading Wisdom: Why The Pop Today On No Good News?
Here's something I've learned thru the school of hard knocks.
Fearful Bearish Sentiment + Absence Of New Bad News => Relief Rally.
So, when things are really scary (as they have been recently with all the Euro news), the market does not need good news to pop. Nothing need be fixed. The mere absence of scary headlines is enough for a significant market pop.
That's why we got the pop today in things like the stock market, commodities, etc. Gold is pretty heavily manipulated so it doesn't perfectly follow this rule, but I think that it too is popping because of the absence of bad news plus a really scared gold community.
MontyHigh, www.worldofwallstreet.us
For Debbi:
Good Bye $1605 Resistance: Christmas Bounce A-Coming
Gold is now free to move up to the next resistance around $1670.
MontyHigh, www.worldofwallstreet.us
December 18, 2011
Chart Survey
Here's what I'm seeing in the charts. I guess I'll publish it.
The 30-Year treasury bond yield, which has turned down again, seems to be signaling a bigger, scarier market event than 2008. 2008 was a single spike down with an immediate sustained recovery back into the moving average channel. The current situation has a similar spike down that is not returning and is instead signaling more danger. Here's some observations:
- In 2008, gold's low occurred immediately prior to the spike down. This time gold is only now falling hard suggesting perhaps another fear-induced spike down in 30-year interest rates.
- Sometime soon a "short the long-term US treasury trade entry should appear" when the crisis fear peaks.
- A US stock market collapse has yet to accompany the spike down. It has been foreign stock markets collapsing this time. In 2008, the depths of the US stock market panic arrived after 30-year treasury rates had recovered. The US stock market is not out of the woods yet.
The US dollar looks really strong although it seems short term likely to go thru a week or two long consolidation (see other RSI 70 touches/excursions).
The VIX isn't sensing the same fear that the 30-year treasury is signaling. Its pattern seems similar to 2010 and where a return to the 40-week moving average indicated a bottom in the stock market and anticipated the Bernanke Jackson-hole speech that hinted at QE2. It also looks like Apr/May 2009 where is signaled the end of the 2008 panic.
I'm surprised, but real-estate looks short-term bullish. Is it benefiting from those low interest rates? Still it has stopped trending up from the 2009 bottom and is basically range trading.
Commodities look weak to lousy across the board. The above chart shows industrial metals threatening to break down. Going short big miners with a stop if they don't break down in two weeks might be worth looking into as a hedge that the crisis has not peaked.
If you have read this far, the following three gold charts should reward you.
Gold took a little excursion outside the 55-day bollinger bands this week. This is ordinarily a good entry point. The RSI also took a little excursion under 30 this week (also a good entry) point. Gold found stupport at the May 2011 (previous to the most recent) all time high. Also a good place for support. If this is not 2008 all over again, then Thursday was probably a good entry point.
This chart shows that 55-day bollinger band excursions are good entry points, generally (blue arrows) and that RSI 30 touches or excursions are also often good entry points. Holding until an upper bollinger-band touch or near-touch looks good on this chart after such an entry except for some of the 2008 entries.
Here's a close up of the 2008 crisis. As you can see, even in that extreme situation, returns from 55-day bollinger band excursions and returns from sub-30 RSI excursions all had short term pops with all but one having a return to (or close to the upper bollinger band. A trading system of:
- Enter on a return from such an excursion.
- Exit on an upper bollinger touch or near touch.
- With a generous downside stop of at least stops of 12% percent below the entry price.
Would produce very nice positive results on all of the entries in that chart. That's what I'm holding out for currently. By the way, the current situation looks most like the Nov 2008 situation as far as the MACD goes . I wonder if we'll see a few weeks of choppy consolidation like we saw then.
In retrospect, the first chart and the last three seem most significant. They seem to be saying that we are in a serious situation like 2008, but that most of the damage to gold is done. Furthermore, the VIX chart and the real-estate chart suggest that the worst is over for the rest of the markets including the US stock market.
MontyHigh, www.worldofwallstreet.us
End Of Year Gold Trading
Well, we are now at that point I was planning for in an earlier post (click here). We are at the point discussed in the post, two weeks before the end of the year. Here's the current gold chart:
Its been a painful week and a half with my account being leveraged long in gold options. My Feb 2012 $1700 options are pretty close to "going to zero". I bought a few more options this Thursday close to the bottom. I still have enough gold bullion to retire on a mercenary general's pay plus a bunch more other assets. Still, I'm pretty sure that if I weren't keeping my "basically a hobby" day-job that my trading would be a lot more lucrative.
So, what's the outlook from here. Let's do a little pattern matching. We are looking for years with:
- a hard drop
- thru significant support (and moving averages)
- down into RSI over sold conditions
around mid-December. There aren't any years in the last decode record with an oversold RSI in Dec.
Here's a quick eval of several years in terms of the above criteria (1, 2, 3);
- 2004 - (1), (3 only to 42 RSI): +.7% from low close to end of year close.
- 2005 - (1), (3 only 45 RSI): +4.8% from low close to end of year close.
- 2006 - (1), (2), (3 only to 40): +3.2% from low close to end of year close.
- 2007 - none.
- 2008 - (1 early in month), (3 only to 45): +16% from low close to end of year close.
- 2009 - (1 bottom later in month), (3 only to 38): +.9% from low close to end of year close.
- 2010 - (1): +3.6% from low close to end of year close.
So, the year that is closest is 2006. It went on to have a nice run into the end of the year, a really scary start of the year followed by a great run into late spring.
Finally, if the low is in for December (big if) there is some winnings to be made to the end of year all those years.
I expect I will stay leveraged until the end of the year. I expect that I will try to get unleveraged on the last day of the year, wait for what happens of the first day of the year to decide what comes next.
In general I find the work from the earlier post (click here) to be useful for trading gold thru the New Year. You might want to take another peek. Longer term (say between now and the end of 2012) I'm quite bullish on gold as I think that nothing has changed, interest rates are still negative and the desire for gold as an inflation hedge and a safe haven against systemic risk is likely to accelerate as the financial system's problems are increasingly understood.
MontyHigh, www.worldofwallstreet.us
December 06, 2011
Best Of The Web: Gregor.us - The End of Growth in the United States
Gregor McDonald is among the best on Peak Oil and its implications. He brings the data and the analysis. He is not long-winded. I'm currently wondering whether his monthly piece with Chris Martenson is is worth enough by iteself to get me to try out Martenson's subscription service.
His latest (click here) really puts last week's unemployment numbers in perspective. I'll put a chart in here, but I rec you click thru to read the piece.
MontyHigh, www.worldofwallstreet.us
December 04, 2011
Gold-Bug Mythbusters: Need To Back-Test Those "Observations"...
One idea I've heard repeatedly in the gold community is that having the gold mining stocks go down while the general stock market and gold itself are not down is an imminent warning of a "gold take down". This is alot like the idea that "THEY" always do a gold takedown when the unemployment report goes out. Another one (click here) is "They always take the price of gold down for options expiration). All three of them anecdotally seem to be true, but none seem to hold up when I actually analyse the data.
Here's how I did my analysis of the "stocks down signals gold take down" idea:
- Throw the historical daily price data for GDX (gold stocks), SPY (S&P 500) and GLD (price of gold itself) into a spreadsheet with the dates lined up.
- Look for a day when, relative to the previous close, GDX is down more than 1% while SPY and GLD are either up or down by less than .2%.
- Look at what happens to the price of gold and the price of GDX one thru five days thereafter (close to close).
Here's the results:
The result is that for every duration and for both gold and gold stocks the price goes up (on average) for all those durations. This is particularly surprising given that the average includes that "outlier" bad results from the crash of 2008.
By the way, I don't despise those making this kind of observation. I appreciate their experience and these kinds of observations have to led me to significantl profitable short-term trade setups based directly and indirectly on those "THEY ARE MANIPULATING THE PRICE OF GOLD" thoughts. So, keep em coming and I'll just follow St Paul's advice from 1 Thess 5:21: "Examine everything carefully. Hold fast to that which is good".
Best wishes and let me know if I've got my analysis wrong or overlooked something. It won't be the first time.
MontyHigh, www.worldofwallstreet.us
December 01, 2011
Retire On A Mercenary General's Pay
Xenophon (Ancient Greek Ξενοφῶν, Xenophōn; c. 430 – 354 BC)
Here's an interesting bit from "The Exploits Of Xenophon" written by Xenophon himself (loosely translated for children by Geoffrey Household) regarding what happened to him around 400 BC. A Thracian Prince named Seuthes II offered Xenophon's mercenary army: "one gold piece a month to the men, two to the officers and four to the generals".
Two observations:
- Compared to an ancient Greek mercenary army, the USA does have gross income inequality with CEO's making way more than 4 times the average worker (see http://www.stateofworkingamerica.org/charts/view/17) for the background on the picture that follows: Ratio of average CEO total direct compensation to average production worker compensation, 1965-2009
- To retire on a mercenary general's pay (say with a life expectancy of thirty years) save up 1440 (30 * 12 * 4) gold pieces and spend four a month. Assuming a gold piece is an ounce in weight and at the current price of gold ($1725 when this was written), you need roughly 2.5 million dollars worth of gold and you'll be living on four oz of gold per month, that is, initially $6900 a month or $82,800 per year. You'll be living on the same wage as a Mercenary General for those thirty years.
This second point illustrates the idea that gold is a long-term store of wealth even across a span of 2,400 years.
UPDATE: 1/4/2011, The best estimate of Xenophon's pay is four Persian Daric's per month (click here). A Persian Daric gold coin weighed 125.5 grains (click here) or 8.1 grams (click here) or .26 troy oz (click here). So my best estimate of a Greek Mercenary General's pay is 1 oz/month (not the 4 oz/month given above). This a lot less than what it would take to live a middle-class retirement on.
MontyHigh, www.worldofwallstreet.us
November 30, 2011
Nicely Said Stockaphobe
Nice short post by Stockaphobe from the Investor Village precious metals board:
"Re: Central Bank Event
Cute!
Gold up and steady over night, then wham, banged down to 1700 ish from around 1 am in Asia. Look like someone knew something was coming so they cleaned out all the stops first, then bang at 6 am off we went.
Glad to see the markets are not subject to inside info or manipulation."
November 29, 2011
Thinking Ahead... End Of Year Gold Trading
I'm starting to think ahead to how I'm going to trade the end of the year and then the new year. My seat of the pants recollection (prior to an in-depth analysis) is that the end of the year tends to be good, but the new year can be quite treacherous.
Following this post are the charts this analysis is based on. Here's the tabular results:
The trades I find attractive are as follows:
- Column B: Go long the second to last Friday before the end of the year. Exit at the end of the year. REASONING: The relatively high percentage of winners and the relative small size of the losers makes this attractive.
- Column G: Watch what happens on the first trading day of the year. If its not at least up .5% from the end of the year close there is no momentum supporting gold... Go short. Otherwise, gold has good momentum... Go long. Exit at the close of the second Friday following the entrance. REASONING: This smells like curve fitting, but I like it because I think that Cartel manipulation of the price of gold is significant. If they can keep gold soft the first day, they attempt to set the tone for the whole year by pushing the price down right at the beginning of the year. If they can't push it down at the beginning of the year, then gold is too strong and can keep going.
- Column H: Skip the new year's opening uncertainty. Go long at the close of the first Friday following the first trading day of the year. Exist at the close of the following Friday. REASONING: Avoids the manipulation and drama of the beginning of the year.
MontyHigh, www.worldofwallstreet.us
November 27, 2011
My Best Gold Chart
I've been leveraged long and wrong for about a week and a half now. The leverage is around 3 to 1 via Gold Futures options which at least have limited downside. Its been quite painful.
I've been feeling quite bamboozled not knowing what to do about it for a few days because I don't want to sell out right at the low. After pondering things here's my best gold chart:
The obvious feature on the graph is the consistenly rising price within the three year channel. The price of gold is now nearing the bottom of the channel which means longer term its probably getting very close to probably a good time to buy (and its probably not the time to close out losing positions). The price has also been supported by the 30-week simple moving average with only one isolated weekly close below that average.
The green area is the 30-year US treasury-bond yield. The yield has been down there near the 2008 crisis lows for more than a month. Unlike 2008, which was a single V shaped crisis, the yield is going down back down again indicating another surge of great fear. The price of gold bottomed early in the 2008 crisis and climbed thruout the 30-year treasury yield's V-bottom. The big rise in gold in the summer of 2009 was a fear episode like 2008's. The next leg down in the 30-year treasury yield that started in mid-oct 2011 was accompanied by a gold price rise just like 2008. I consider the last two weeks of price weakness that accompanied the falling treasury yield to be the result of Gold Cartel manipulating the December options expiration. If so, the price of gold may soon jump backup as the options expiration period has passed.
The blue arrows identify situations where the price of gold fell from the top of the channel to the bottom of the channel, bounced to the middle of the channel and then started falling again. In both of the previous two cases the price fell all the way to the bottom of the channel. In 2009 it took 6 weeks (four more beyond where we are now in 2011) to get to the bottom of the channel. In 2010 it took 4 weeks (two more beyond where we are now in 2011) to get to the bottom on the channel. Those bottoms, in both cases where multi-month bottoms
Putting this all together, my favored scenario is for gold to fall back to the bottom of the channel and put in a multi-month bottom. That target, if it hit immediately is around $1640 or another 2.5% down.
Of course, it could also immediately bounce (the Euro rumors of a "plan" are back) and either never hit the bottom of the channel or take a few weeks to get there which would relieve my current discomfort.
Falling out of the bottom would mean that the current phase of the gold bull market (as bounded by the rising channel) is over. If that kind of penetration occurs it will probably be quite dramatic as speculators watching the same trendline either dump long positions or jump into short positions.
So, I'm expecting 2.5% more leveraged pain with but with a downside of another 5% or so if the support is lost. I may turn some of my call options into synthetic put options to limit the downside risk. A call is turned into a synthetic put holding the options and then shorting a futures contract.
How low do you think the current gold correction will go?
MontyHigh, www.worldofwallstreet.us
Gold: Managing An Underwater Trade
WARNING: This may not be my greatest post and may not be worth your time.
As explained in a prior post (click here), I'm now long gold with a fairly large position because I was expecting a pre-Thanksgiving bounce (WRONG). Here's the table that was the basis for that expectation:
Instead, gold has dipped pretty hard. So, how does one manage such a trade? I'm going to reexamine mine entry criteria and then compare what has happened with previous such calendar-based trades.
Here's the charts for gold for the last 8 years where green arrows represent the calendar-based entry equivalent to this trade (at the close of the Wed one week before the Wed before Thanksgiving).
The first thing I see is that the 2007 trade looks most like this year's trade and, contrary to what was in the table, was actually a loser. Going back and looking at the numbers I see that I made a mistake constructing the table, ARGHH!.
The next thing I see is that several years had decent gold price dips like this current one: 2007, 2010, 2008, 2006. It looks to me, based on the 2007, 2010, 2008 and 2006 charts, that a four or five day pop is about due. I expect I'll manage this trade by waiting for a four or five day pop to exit.
MontyHigh, www.worldofwallstreet.us
November 20, 2011
Euro Crisis: Its Different This Time
I'm hardly an expert, but it seems to me that something significant has changed as far as the Euro crisis is concerned. In the past, the media buzz would be about the Merkel and Sarkozy team. Sarkozy and Merkel would always be meeting, talking, preparing for important meetings, having plans to come up with plans with racy, hopeful headlines coming out every few days. I just don't hear any such buzz.
I think Merkel has dug in her heals and said "No More" to German financed bail outs while everyone else, including Sarkozy, are asking for more. Is this just a negotiating standstill of some kind? Or, is everyone off trying to figure out how their country handles what comes next by themselves? I think the danger of a "Lehman" moment for the Euro crisis is now higher than it ever has been.
What do you think?
MontyHigh, www.worldofwallstreet.us
November 16, 2011
Good Odds: Go Long Gold At Close Today (Wed), Exit At Close Before Thanksgiving
I like to look for historical patterns around days where the manipulation may be rampant and last night I looked at Thanksgiving. I was expecting to see a pattern of using the lightly traded Friday session to turn the price down. I didn't see much of a pattern there. I did see a nice pattern on the week leading up to Thanksgiving.
So, to be methodical, here's a dead-simple trading system:
- Buy gold at the stock market close during the week before Thanksgiving.
- Exit at the stock market close of the Wed before Thanksgiving.
Here's the results (one row for each of the different entry days):
Its pretty rare to see something like rows 33, 34, 35 and 36 where for each of six years in a row you get a tradeable bump up where all the trades are decent winners.
I also see that something extraordinary happened on Friday before Thanksgiving 2008 with gold rising 8% in one day. Looking back at the charts I see that was the short-term pop off a bottom during the 2008 panic. The S&P500 jumped something like 15% during those days. I've excluded 2008 from the average results because its such an out-lier.
This kind of trade looks pretty attractive to me. I have already opened a position for just this short-term trade.
By the way, the results for the S&P 500 are also attractive (but not as attractive as for Gold) either in average returns or percentage winners. Silver's results are attractive but without the consistency of gold and without a higher average return. So, gold is the place for me for this short-term trade. I have taken all my protective shorts off (copper and S&P500). I expect I'll revert to a smaller long-gold/short copper trade next week, but until them this long gold is the only short-term trade for me.
Of course, past results are no sure predictor of what will happen so everyone thinking about this has to do their own due diligence and manage their risk appropriately.
MontyHigh, www.worldofwallstreet.us
November 14, 2011
They're Baaack: Super Committee Reentering Mass Psychology
Its time to reprise this post from a Sept 24 as I'm starting hear a little buzz about this Super Committee in the mainstream media. Seems like if there ever was a trade the rumor situation, this is it. Here's how its going to go (I expect):
- The looming, incomprehensible, dark and painful US debt situation creeps back into the mass psychology with lots of scary stories about "No Deal" and the end of the world as we know it (closing national parks, kids without school teachers, social security checks not mailed...) - short the dollar, short the US stock market.
- Culminating right up to that first dead-line (right before Thanksgiving) - cover before Thanksgiving go long US bank stocks in the face of great fear.
- Deal gets announced the weekend after Thanksgiving - dollar up, US stock market up (especially bank stocks).
- Go back to number 1 for the lead up to the next deadline (Christmas).
A Look Ahead To Year End: That Debt Ceiling Super Committee Thing's Timetable...
Here's a link to a newspaper article covering the Debt Ceiling supercommittee timetable. Looks like things start really getting hot around Thanksgiving. For me, the rich part is that even if they don't agree on cuts the automatic cuts don't start until Jan 2013 (after the election). I guess that's why they call them "politicians".
Here's some highlights from the article:
Nov. 23: Deadline for the committee to vote on a plan with $1.5 trillion in deficit reduction.
Dec. 2: Deadline for the committee to submit report and legislative language to the president and Congress.
Dec. 23: Deadline for both houses to vote on the committee bill.
Jan. 15, 2012: Date that the "trigger" leading to $1.2 trillion of future spending cuts goes into effect, if the committee's legislation has not been enacted.
If you are trading you may want to keep this timetable in mind.
MontyHigh, www.worldofwallstreet.us
November 12, 2011
Let The Charts Talk: End Of A Relief Rally Or Party On Til New Years?
Last weekend around this time I felt completely bamboozled after looking at the charts. This week I feel like I'm seeing some things. This posts puts a few of the things I see up with comments. Click thru to see the charts in their full resolution.
First oil:
Oil is rising hard and fast. We know that when it gets too high it crashes the world economy.
The more representative $BRENT crude oil has put in a higher low and broken out of that downtrending channel.
Brent is also now rising faster than commodities in general. The world economy cannot grow in the face of a strong, sustained real rise in the price of oil, IMHO.
Gold and the US dollar are rising at the same time. That indicates real fear.
Commodities in general look bearish to me having failed to close the gap at the 2008 highs and remaining under the moving averages.
Copper looks bearish to me also.
China has bounced off a bottom but is at resistance.
The US stock market has bounced up off a double-bottom and is fighting with significant resistance at the head and shoulders neckline which is also the 61.8 fibonacci line.
My overall conclusion is that we are in a relief rally that has about run out of gas, but that this week will put it to the test. If China, the S&P500 and copper move up this week then the rally probably continuesthru the end of the year following the usual seasonals. I guess its possible for the S&P500 to continue higher for a while despite everything else falling as money seeks out a US safe haven from Europe (and Asia).
Gold seems strong against the S&P500, copper and commodities (not shown) and seems to be accelerating out of the above 3 year channel. I'm bullish because I think its different from earlier in the bull market. If it were business as usual it would take a lot longer for gold to recover from the August overbought condition.
I've been dubious about silver, but this chart shows that when silver bounces off the bottom bollinger band that it typically goes up to the top bollinger band and runs for a while (with the 20-day moving average as an exit signal). I guess I have to get me some silver, especially if the S&P 500 goes up this week.
At this point I'm long gold futures options, long gold stocks, have one silver stock, am long gold/short copper futures and short the S&P500 (as deflation insurance). Based on this look at the charts I expect I'll jettison the S&P 500 if it breaks thru the resistance and holds it and will find some way to buy a good chunk of silver if it doesn't.
Of course, everyone has to take responsibility for their own investing and this is not a recommendation.
MontyHigh, www.worldofwallstreet.us
November 10, 2011
Chart Of The Day: Want Some 2008 Crash Insurance?
My savings took a giant hit (~70%) from my top in 2007 to the bottom 2008. That was before I started using technical analysis. That can happen when you depend just on fundamental analysis and your analysis is WRONG. I don't ever want to have that happen again.
The above chart shows that there was something I could have done to profit from the big crash in 2008. Go long gold and short copper. Gold as a store of value in times of fear and uncertainty. Copper as a commodity whose price is sure to get hit hard in a major economic slow down. The chart shows that ratio making a continuous move that could more than double what you have at risk, supported the whole way by a very tight 20-day moving average.
The fundamental buzz around copper concerns the almost certainty of a significant recession in Europe (China's biggest export market) along with scary anecdotal stories out of China itself regarding a potential housing bust.
I've already long and strong (but not heavily leveraged) gold with various kinds paper and physical gold. I expect I'm going to play that 20 day moving average on the long gold short copper trade with a decent sized percentage of my networth at risk via the futures market as both a big economic/market hit insurance trade with an expectation of profit. A decent size position, but not anything that could blow me up.
Of course, I'm not recommending any such thing for anyone else, this post is merely pointing out an interesting looking chart that shows you want to look for if another major downleg in this Great Recession resumes.
MontyHigh, www.worldofwallstreet.us
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