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Stewart Thomson

Stewart Thomson

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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Learn To Kiss Gold

Graceland Updates 4am-7am
Oct 18, 2011

  1. How many hours? In October of 2008, Bank of England Governor Merv King said that the financial system came within hours of shutting down.

  2. The Dow is trading at around 11,300 now. The marked to model financial system has been hit hard by the accelerating crisis in Europe. There is a debate about whether China has a hard landing, or a soft one. Meantime, America teeters on the edge of a new recession.

  3. The question at hand is clearly, "what is the Dow number that sees the financial system 'hours away' from closing down, now?"

  4. Is it 6500? Maybe it is 7500. Maybe it is 8500. You saw Dexia destroyed soon after supposedly rigorous stress tests "proved" it was in excellent condition. How many other major banks are the next Dexia accidents, lined up, waiting to happen?

  5. Operating a toy divining rod on the 1 minute gold chart all day long is not going to get you through this crisis. Instead, I'll ask you to "kis" this epic financial crisis. Keep it simple.

  6. Click here now to "kis" the gold chart. The crisis isn't about the next move for gold. It's about reacting to the next move, professionally.

  7. I urged those bought into previous points of general discomfort and capitulation to reduce the amount of short term trading, so your focus is on the accelerating nature of the crisis, rather than flip trading your way to a non-existent pot of dollars at the end of a non-existent rainbow.

  8. The blue HSR lines (horizontal support & resistance) that lie below where we are now are all you should be reacting to, on the buy side of things.

  9. Generally speaking, when price approaches HSR, volatility tends to increase, as previous market "soldiers of size" have acted in these areas before. Their actions cause gold to whipsaw against the dollar, providing opportunity for those who buy into these HSR areas.

  10. Some short term profits can be booked, as price tends to bounce higher from some point around the main HSR. You can't know where that bottom point will be, so you need to buy into the HSR lines with my PGEN (risk capital allocator).

  11. Given the fact that the financial system is weaker now than it was in 2008 at Dow 11,300, or at least revealed as weaker, should your focus really be on selling your gold because, "it might fall down"?

  12. Or, should your focus be on the fact that if the financial system closes down, there is a strong possibility that central banks increase their purchases of gold on a massive scale, causing the price of gold to skyrocket violently?

  13. Fear of drawdowns in the price of gold against the dollar, and fear of failing to call gold's next intermediate move, are fears that have gotten the gold community into a large amount of financial trouble.

  14. When such fears dominate the mind of an investor, the accelerating nature of the crisis is put on the backburner, and demands to know the next $50 gold price move are clutched with maniacal hands, on the front burner. That is a catastrophic tactical error.

  15. Sell or hold your gold at red HSR lines of size, and buy or hold at blue HSR lines of size. There is nothing else to do in this crisis, and nothing else to think about.

  16. Click here now to "kis" the silver chart. There are more complex interpretations of this chart that can be done, but the question you need to ask yourself is, what is such obsession with detailed chart analysis doing to make you any richer in this crisis, let alone to take you through it with your silver holdings intact?

  17. The bottom line is that silver is a buy at $31. What's the price now? The answer is that the price is about $31. So, what is your reaction? Your reaction must be to buy in the $31 area.

  18. The next buy area for silver is approx. $22.50. Don't rip open 20 crackerjack boxes to see if price is going there or not. Walk over to your risk capital allocator, and prepare now to take action, if it happens.

  19. Stop selling gold, silver, and metals stock for dollars because, "they might fall down". Focus on holding and buying in blue HSR zones, and holding and selling (a bit) in red HSR zones.

  20. Why hold in red HSR zones? Hold the amount of core position you need at all times in this crisis, because the crisis could go on for decades, and the system could shut down many times before the crisis ends.

  21. If you are playing ball on a football field, and the ball comes to you at a certain gridline, do you run off the field screaming, "the other team might score, everybody run off the field, the other team might score!". Does your whole team run off the field screaming, "we're ruined, the other team just crossed a gridline on the field!" On the gold field, when the price comes to a blue HSR line, you either buy or stand there. You don't sell your silver at $28 because, "it might fall to $22!".

  22. Hold your ground and learn that a drawdown is a drawdown. It's not an axe murderer at your house threatening your family. You don't need to run out of your house screaming, "we're all going to die if $1530 breaks on gold!", when Mr. Drawdown comes for dinner. He's there for a little food, wine, conversation, and to offer you some gold on sale. He's not there to murder your family. The man knocks at your door to offer you gold and silver on sale, and you think he's an axe murderer? Does that make any sense? In India, he gets the red carpet treatment. In America, he gets lynched. Let's roll out the red carpet for every gold sale, not just the ones predicted by the ultra-leveraged flip traders. Gold is not burning today. It's on sale.

  23. Click here now to "kis" the GDX chart. I don't see any "danger" on this chart. All I see are a series of crystal clear HSR price-reaction points. The crisis isn't going away, and staring at the quote machine 500 times a day is not going to move the price of your gold stocks to those HSR lines in the next 35 seconds, so the question you need to ask yourself is, why are you staring into the screen when price is nowhere near the next point to take hard core action? It's not a reason that you are staring into the quote machine, but an error.

  24. Few understand. Few get richer. GDXJ does not have the long chart history that is available for GDX. For gold juniors you need to key off the GDX and off the HSR lines on the individual juniors. The richest business owners work smarter than they word "hard". Do the same in the market as investor. Work harder, at smarter points of market play!

Special Offer For Website Readers: Send me an email to stewart@gracelandupdates.com with your top 3 investments in play, and I'll rush you the top HSR lines in play for those 3 stocks, today! Thanks!

St out


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