Oct 26, 2010

1. There is a battle going on in the silver market for the $25 level. A lot of silver investors that bought silver on the rebound after the 1980 collapse saw price stopped dead in its tracks at $25. Now, decades later, they want out at break-even. That is 99% of the reason why silver halted at $25.
2. The difference between the amateur and the professional investor can be summed up in one sentence by each group.
3. "We'll see what happens". - Amateur Investor.
4. "We'll respond to what happens" - Professional Investor.
5. As you know, I don't respond to statements such as, "price is getting away, buy now!", "you are missing out, buy now!", "China likes gold, buy now!", "price is going parabolic, buy now!", or "this time is different, buy now!".
6. I respond to Gold price weakness with the cold execution of buy orders. I respond to price strength with the same cold execution of sell orders, all in a pyramid formation that can reach dozens, or even hundreds of orders, at a myriad of price levels.
7. That's not just what I do; it's what I am.
8. As gold's price rose towards Gold $1387 and Silver $25, I continued to execute on my profit-booking sell orders, and urged you to do the same. I took a lot of "flak emails" for not chasing price. Many never understood that somebody who bought the sell-offs into the lows of $1156, $1045, $905, $860, and $680, particularly with Gold Stock, and urged you to do the same, is not really interested in paying $1380 in a price chase, for what he already bought at all those lower prices. Higher Gold & Silver prices are not getting away from me. They are making me money.
9. Most did not notice the loss of price momentum that began in the metals over 6 weeks ago as I continued to say, "Do not buy. Sell.". As a rule of thumb, and I suggest you read this next sentence 100 times, I like to add to my positions with 1-2% of my risk capital on every $50 fall in price, and sell approx. the same way on strength.
10. So, when I am selling into strength of $200 an ounce, like we just had from $1156, I am booking profit on a total of maybe 4-8% of my metals position holdings. There are no wild "sell everything!" or "back up the truck and buy!" statements or actions.
11. In terms of my Gold market actions, and hopefully yours, think fine wine sipping, not...cocaine snorting. One activity builds financial life. The other destroys it.
12. Now, everyone notices "the correction". Analysts and investors are lined up now that price has fallen (below their latest buy prices) to predict, "you are going to experience a correction".
13. I say, you just did. More importantly, you are experiencing, in the Gold market, the difference between seeing what happens, and responding as a professional with buy and sell Gold & Silver market orders.
14. Here's the bottom line: There may or may not be further price weakness from these levels.
15. All those who urged you to keep selling into Gold $1156 (and all the other low points, but to buy into 1387), are now urging you to stand aside for "the correction". You should already be on the buy, not calling for higher or lower prices. Telling me your prediction of where price is going is a total waste of my time, and a much bigger waste of your time.
16. Tell me whether you bought anything Gold or Gold-related on this sell off. Right here, right now. That is all that matters. You had your chance to bomb me with emails as to why I had to chase price at Gold $1380. Now it's my turn. My turn to ask the question, "Are you on the buy here and now? Yes or No?" What did you buy into 1320? Nothing? Prediction of what others will buy to carry your price-chased positions higher, is nothing more than a pipedream. Specific buy action, specific price response action here and now into current weakness, by you, is for winners.
17. Here's the Daily Silver Chart. That chart shows, at least so far, what I would term a majestic correction in Silver. It is not a flag pattern, because price has not risen vertically before going into the correction, but it is flag-like. It is a drifting minor rectangle, and the possibility exists of an astro-blast through the $25 area, and on to prices as high as $28, or even $33.
18. If you are a silver player, and bought silver at $24-25 on the way up, but no silver on the two dollar an ounce correction that has already occurred, my strongest suggestion is that you drive to the nearest grocery store, find the nearest old lady buying groceries on sale, and give her full power of attorney to manage all your investments. In fact, make an arrangement that the grocery store owner puts silver in the store and I guarantee you that when it goes on sale, like it just did, Granny will be on the buy.
19. For all practical intents and purposes, all the world's Grannies just bought some Silver at $23 an ounce and some Gold at $1320. Who cares about Granny. The question is: Did you buy, yes or no?
20. Here's a closer look at the Silver chart, clearly showing the drifting rectangle supply and demand line borders in detail. Through The Looking Glass. Silver.
21. You can see that price has broken out, upside, from the supply line border, and has done so, ironically, as the price-chasers now "assume the position" for a rest in the Silver market. Sorry, but the rest already happened. There could be further weakness in Silver, yes. The rectangle could blow up. Price could take out the $23 area lows and begin a more severe correction. If it happens, those of you who are Silver market investors, will not waste time analyzing the situation. What you will do, is buy Silver in greater size than you did into $23, alongside Granny, as she does the same, at the Silver Grocery Market. We can't know if Silver is going to have a further correction or burst upside, but we can, and will, respond professionally to what does happen.
22. Let's move on to GOLD. In the Gold market, we are witnessing the "battle of the head and shoulders patterns". Here's the chart with those patterns highlighted in detail. Gold Bullion Chart.
23. Notice there is a small head and shoulders top formation contained in a bigger one. The bigger one lacks symmetry, thus it doesn't carry the "weight" that it could. The two bear h&s tops are doing battle with the highly symmetrical h&s bottom on the right side of the screen.
24. Here's a 2nd chart. Gold Bull Wedge Breakout This chart shows the breakout. Notice the correct method of drawing a down wedge. The wedge, in a down move, must be started from a supply point high, not a demand point low. The bull wedge and the bull h&s bottom are locked in a battle against the bear h&s tops, and, sadly, against the total failure of the gold community to buy any of this weakness. Let's change that action. The odds are probably 50-50 that we rise to the $1450 area or fall to the $1265 area, but whatever the odds are is irrelevant. What is totally relevant is how you will respond to price at either of those points. You know the answer. Do what must be done, one ounce and one share at a time. Subscribers were buyers of $1320 Gold and sellers of a portion of what was bought into $1350 yesterday. As I send this off, we are back at $1330 and Granny is back on the buy. Are you? A week ago I asked readers if you were prepared to buy as price fell. Most of course, had just finished chasing price in size into $1387 and couldn't buy anything. Now a feeling of confusion is beginning to permeate the golden air. "Why has gold stopped rising?" is the question. My suggestion: Forget the questions, and get on the buy. I'm buying gold every $3 down with each buy order bigger than the previous. Join me! See you out there. On the Golden Gridlines!

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