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Stewart Thomson

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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is…

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Commodity Markets: Your Next Ports Of Technical Call

Graceland Updates 4am-7am
June 28, 2011

1. Over the past year I've switched the bulk of my core energy holdings from oil to natural gas. Few people in the gold community have been as adamant as I have that natural gas will ultimately outperform oil.

2. I've argued that the natural gas bears will be destroyed by rising price. The banksters have spent years accumulating a massive long position in natural gas, with the leveraged funds on the other (short) side of this trade.

3. Click here now to view the latest liquidity flows (cot) report for natural gas. The commercials are carrying a big long position. The leveraged funds are wildly short.

4. I find it incomprehensible to believe that any solid wealth is built, let alone maintained, by shorting an asset like natural gas after it has fallen 70% in price. Your wealth when you buy natural gas is the gas itself, but few understand.

5. Click here now to view the monthly natural gas chart. Pay very careful attention to the main price points of $4, $3, $2, and $1 that sit below the current price for natural gas. Those price points are not your enemy. You are not a "loser" if price goes there.

6. "Your friend is your enemy, and your enemy is your friend". That mantra is one of the most important building blocks for the successful investor. It is high price that is your real enemy.

7. Entering natural gas at high prices and thinking you will be able to trade your way to profits in the world's most volatile commodity is just plain absurd.

8. There have been ongoing rumours that the "here to stay" shale-based glut of natural gas is more hype than reality. Click here now to view an excerpt from a shocking story printed just days ago by the New York Times. This shocker opens the door of possibility to the idea that the entire shale glut is part Ponzi scheme!

9. Click here to access the entire story directly from the New York Times website, for as long as they keep the link active.

10. I told you that the banksters were up to something with natural gas. Look at the number of "heavyweight" people in this NYT article who are voicing serious concerns about how the shale story has been presented.

11. Do you really think that if the leveraged funds tried to exit all their short natural gas positions now that the banksters would take those positions? You might be living one of the greatest bear traps in the history of markets.

12. I told you that the shale story was likely the only bubble in natural gas. Now you have highly credible economists and industry insiders stating my views even more vociferously, with some of them calling the over-bullish statements made about the shale story "possibly illegal".

13. Moderation is always the best road. Are there some great shale success stories? Absolutely. Are there some all-out frauds? Probably. In the end, it is you, alone, on the price grid. Your only real friends are the price points where you buy and sell.

14. Natural gas is low in price, but it can go a lot lower, and for a lot more time, than most investors might believe possible. Focus on natural gas as an asset, not as a dollar flipping machine. Those trying to trade their way to wealth in natural gas have the highest likelihood of failing totally. The lower the price goes, the more of this asset you want to have. The shale story is not a buy signal. It is an emotional "positive" for natural gas asset accumulators.

15. I'd like to see you apply the lessons of the natural gas market to gold. One of the greatest investment errors made by investors in the gold community is attempting to trade your way through this crisis, by calling all the intermediate turns. Gold market items are really never at "turn points" or "crash points". They are really just on sale, or not on sale. Don't be afraid of price sales or try to predict some grand super sale on a special date in time.

16. I just completed a pretty substantial buy program on GDX. You may choose to focus more on individual issues, but the fact is that gold stock is on sale. Click here now to view the two key HSR (horizontal support/resistance) lines in play near the current price.

17. My investors try to analyze HSR lines, and decide whether a support line has "failed" or not. Try to make the HSR lines represent "gold on sale" flyers from the golden grocery, rather than points of turn or impending crash. Make them ports of call, with your risk capital cruise ship! I don't believe the $56 line has failed any more than I believe that coffee on sale in the grocery store has "failed" because it is now on sale for a price lower than it was last week.

18. Turn down the adrenaline a few notches as you watch the movement of your items on the price grid. If you have enough of an item, and it goes more on sale, that doesn't mean you are "losing" or that you "must buy more". This is a massive crisis that has the highest probability of lasting for decades and sending most of your quality gold items to the stratosphere.

19. I've completed this stage of my gold stock buy program and am now focusing my "buy fills attention" on silver bullion. Click here now to view the monthly silver chart. Could price make a "port of call" at $21? Of course it could. Silver is more volatile than gold.

20. If you are highly concerned that silver could go on sale for $21 in this crisis, then you should consider exiting the silver market, permanently. There is not a "problem" with silver going on sale at $21, but there is a problem with any investor who can't handle that drawdown.

21. In a crisis you need to accept vastly bigger drawdowns than are conceivable in normal times. The road to the end of this crisis is one of endless surprises, and therefore endless drawdowns.

22. The attempt to avoid drawdowns with stoplosses (takelosses) will only produce endless loss booking in the coming years. Once you accept the higher drawdowns as part of the crisis journey, you are going to be in a much better emotional state, and therefore able to make better financial decisions.

23. Wheat, corn, sugar, natural gas, oil, gold, and silver are physical commodities, but more importantly, they are assets. They are not piles of dollars that change in size to benefit or punish you. That's a part of what an asset is, but not the whole picture or story by any means.

24. There's an old saying, "you don't know what you've got, until it's gone!". What the gold community has, and I mean the assets that you hold, should have you in a state of great calm. Once you understand that a block of gold is not defined by dollars, but by a scale, you begin to appreciate sales in the dollar price, so you can build more of the asset. Just because you bought the asset with dollars doesn't mean the asset is solely or even mostly defined by the dollar price of the asset, but how many investors can grasp that concept, one that is all-critical to understanding risk? Once you fall into the trap of viewing these mightiest of assets simply as piles of dollars that change in price, you are disrespecting the nature of the asset itself. Make dollars work for you to build your inventory of the highest quality assets!

Special Offer for Website Readers: Send me an email to freereports4@gracelandupdates.com and I'll rush you my "Top Ten HSR Buy Points" report! I'll show you how to use HSR lines to get into the calm rational mindset of the sale buyer and kill the emotional extremes of the turn caller. Watch HSR lines maul oscillators like MACD in the battle to build inventory of the greatest assets!



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