"No warning can save people determined to grow suddently rich" - Lord Overstone

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Eating Humble Pie

It's hard to make predictions, especially about the future. At least so the saying goes. When you're wrong, in my opinion, best to admit it and move on. This is what all traders must do if they plan to survive long enough to become the 5% (or less) that can actually do it profitably over the long term.

I thought the big neckline in Gold stocks would hold. My subscribers and I bought the neckline assuming it would. Instead, the neckline failed and we got out immediately with a loss. This is an ominous development for the precious metal (PM) stocks in particular and a warning for the whole PM sector in my opinion. This neckline is no secret and should be respected for what it is trying to tell us. Here's a 5 year chart of the GDX thru this week's close to show you what I mean:

Market vectors Gold Miners

It was a reasonable trade to go long at the neckline in my opinion given lousy PM sector sentiment, oversold momentum readings, low "Gold stocks to Gold" ratio and low "Gold stocks to common stocks" ratio readings. However, once that neckline broke, it was shown to be the wrong trade and out we go, waiting for a better opportunity. That opportunity may come from much lower levels.

Gold stocks are "seeing" trouble up ahead. I suspect Gold stocks are leading global equities into the next cyclical common equity bear market.

BUT IT CAN'T HAPPEN, BECAUSE IT'S AN ELECTION YEAR AND "THEY" WON'T LET MARKETS FALL UNTIL AFTER THE ELECTION.

How'd that work out for you in 2008?

 


If you are looking for advice in navigating and trading through what I believe to be impending market turmoil, consider trying my low cost subscription service - a one month trial is only $15. If not, my longer term advice is free: buy physical Gold, store it outside the banking system, and don't sell it until the Dow to Gold ratio dips below 2 (and we may well go below 1 this cycle).

 

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