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Weekly Digger - July 10 to 16, 2005


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Last week I had the landscape littered with corpses and no one asked me who were the corpses. I assume everyone thought I meant us gold kooks or spec longs or bullion infestors and in a way I did. I did and I didn't. This week's title is The Flight to Safety and what will happen if you board the wrong plane at the wrong time.

 

The Stock Market - Flight of The Bull

 

The bulls think they have it made now. Forget the Dow, forget the S&P, forget the Nasdaq, forget growth stocks now it's all value stocks, mid-caps and small-caps. Bear Market? There's no stinking bear market. And the super-cyclicals (SOX) are coming back anyway. Oil has peaked, doesn't matter anyway as high oil price is bullish. All bullish all the time. Terror, war, famine all bullish. Conditioned to buy the dip. The Greenspan put. Inflation/deflation it's all bullish. Only one way this can end.

 

The Stock Market II - Flight of The Bear

 

Here is one plane which has already crash landed but somehow there were still many survivors and they continue to fly even though they should know by now that the Bear is not a creature of The Air. They will be right eventually but so few will survive the many crash landings before that the survivors will be the legends of the future.

 

The Almighty Dollar - Flight of The Fiat

 

Here is The Hindenberg Revisited. The Flight of the Dollar is a lighter than air craft held aloft by little more than hot air and could soon be the victim of rapid decompression. The passengers know the risks but see the risks as at least temporarily more favourable than other Fiat Air model crafts such as the Euro or the Yen. Should the Yawn ever reach active service people may want to test its airworthiness.

 

The Hedge Fund - Flight of The Hog

 

This is the believe that genius can save one from injury. GM showed that it can not as if LTCM hadn't proven that years ago. Doesn't matter how smart the pilot is if he's flying out of fuel in bad weather.

 

The Bond Market - Flight of The Debt

 

We seem them now streaming to the US long bonds taking the price skyward. This is truly a Flight to Safty, a flight to protect capital. Yet this flight is fraught with turbulence. The easy money is gone and capital could soon be chewed up when the 25 year bull market finally turns. This plane is very old and filled to overcapacity. Fuel is now very expensive and in short supply. I'm afraid the flight can not stay aloft much longer.

 

The Housing Market - The Land of Oz

 

Well outside of Oz (and Kansas) houses can not fly and I guess people will realize this only when they like the Wicked Witch of The East have one land on their heads.

 

All these people being so Safety Conscious. And you can hear the comments in the terminal. Stocks are the best investment in the long term, stick with value, buy the strong sectors, go with momentum, the next big thing, Dover Sole, good management, you can't go wrong, housing prices always go up .....

 

The PMS Express:

 

Anyway, this is why I go by train and it is leaving the station soon. Plenty of seats left and the tickets are so cheap they are a joke. No waiting in line at the station either, although you may get a shave and a haircut before the train pulls out. Get a silver ticket and go by coach, get a gold one and go first class. You might even treat yourself to the luxury of a platinum seat. Take the Express Miner and get where you're going at high speed or relax, sit back and enjoy the ride with Bullion milk run. It's all up to you. You will love the ride and especially the rhythm ---

 

KOO KOOK KOO KOOK WHoo WHoo!!!

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Funny, I agree with everything you said Thor.

 

But mostly, I just think we're going higher in everything gold and silver.

 

Other than an occasional put option on an index, I don't even bother to short anymore except for the occasional scalp. The market is not allowed to fall for a sustained period of time for any reason. Liquidity is massive, there doesn't seem to be any logic in anything. A month ago silver was breaking out of a triangle to the upside, now it's bounced off the bottom of its' trading range. Charts are painted regularly to give the illusion of an implied direction.

 

I thought this article made alot of sense.

 

http://www.gold-eagle.com/gold_digest_05/droke070705.html

 

I suspect we break one way or the other next week, but I think we definitely move up in silver.

 

Feel free to throw this prediction in my face on Friday if I'm wrong. B)

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Thanks OH. Hopefully we are both right. :D

 

Okay there are few givens in this world but one thing that has come along every year this millenium is the July spike down in PMS shares. This may be the spike to buy for those not already committed. Look at the charts. Every year from the middle to the end of July has held a little PMS weak hand shakeout. I would like to remind every one of this event and to be prepared for it. Don't let it catch you offside.

My guess is we are looking at a short shallow shock this year. We start out this week with a few low range but not encouraging days. Thursday July 14 is the smackdown and the Hooey drops more than 10 points closing near its LOD. Friday the 15th puts in the intraday low just above 185 but closes off the low. Then we go up and up and up.

If I'm wrong about this I'm going to hand in my Mahendra Decoder Ring and Ass for my money back. :P

 

TA

 

... sorry that should have been axe for my money back. Sorry! :unsure:

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SI

 

I posted the above link which I gleaned from that other PMS forum because it puts into words what I noticed during my extensive PMS stock review this weekend.

One thing I did was scan for all PMS shares from $1 to $10 and vol over 200000 shares per day average. Then I checked for which were bullish. Only 1 wasn't NXG. All the rest of the 22 stocks were green. This surprised me as I'm only showing gold stocks to be about 55% bullish. And these are the exact same stocks I've been saying to buy.

If we get the spike lower these will be the ones to buy but you'll have to be quick because I don't think they'll be on sale for long. Beyond maybe the juniors will jump even higher.

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SI

 

I posted the above link which I gleaned from that other PMS forum because it puts into words what I noticed during my extensive PMS stock review this weekend.

One thing I did was scan for all PMS shares from $1 to $10 and vol over 200000 shares per day average. Then I checked for which were bullish. Only 1 wasn't NXG. All the rest of the 22 stocks were green. This surprised me as I'm only showing gold stocks to be about 55% bullish. And these are the exact same stocks I've been saying to buy.

If we get the spike lower these will be the ones to buy but you'll have to be quick because I don't think they'll be on sale for long. Beyond maybe the juniors will jump even higher.

 

John trending123 is bearish on gold!!??

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SI

 

I posted the above link which I gleaned from that other PMS forum because it puts into words what I noticed during my extensive PMS stock review this weekend.

One thing I did was scan for all PMS shares from $1 to $10 and vol over 200000 shares per day average. Then I checked for which were bullish. Only 1 wasn't NXG. All the rest of the 22 stocks were green. This surprised me as I'm only showing gold stocks to be about 55% bullish. And these are the exact same stocks I've been saying to buy.

If we get the spike lower these will be the ones to buy but you'll have to be quick because I don't think they'll be on sale for long. Beyond maybe the juniors will jump even higher.

 

John trending123 is bearish on gold!!??

 

Of course! And he will be bearish until the rally has begun in earnest.

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BEARVEST - Concerning your post:

 

"Although I'm inclined to think that the XAU may be "capped" in the short run, your chart and analysis is superb. Props to you, my friend.

 

If we break 95, it's a moonshot thereafter according to the P&F."

_______________________________________________________

 

Thank you for your comments & P&F chart - so far we have been "capped" as you predicted. We're definitely getting ready for a another big move here, and of course I'm leveraged for an "up move." HUI has narrowed to a coiled spring in the 194-204 range with tightening BBs.

 

The dollar is getting very toppy with manic 20,000 plus speculator net long positions and 22,000-plus commercial net short positions. Clock is ticking . . .

 

And then you read various reports such as Japan planning to reduce dollar holdings in forex reserves:

 

http://www.forbes.com/markets/feeds/afx/20...afx2111385.html

 

TIANJIN, China, (AFX) - Japan hopes to rebalance its foreign exchange reserves with less US dollars when the dollar regains enough strength to withstand such a reform . . .

 

The Swiss Franc COTs as well as others also indicate a turn is due for the dollar.

 

A few Gold-Friendly Fun-For-Mentals Facts: Central banks outpacing their 500-ton Washington Accord Sales limit (Need to slow sales dramatically over the next several months), TIC falling below US Trade deficit numbers, Pressure on China to revalue the Yuan, Gold to new highs in major currencies, Oil/Gold ratio at historic highs, Explosion in debt, High derivitive risk to world debt markets, Strong and growing Asian gold demand (Indian monsoon season rainfall back to normal), Historical gold demand picks up in Aug/Sept, Falling world mining production, Bearish sentiment percentages, etc.

 

Charts Attached:

 

GOOBER [email protected]#$#%^& :)

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GOLD and the DOLLAR:

 

This is an Elliottician's quagmire.

 

Both are in very short term 4's or 5's on the daily, but the count one subdivision above is totally at odds.

 

The Gold chart shows a clear 5 wave pattern down followed by an equally clear 3 wave correction. The action thereafter seems to be an impulse down, as expected.

So we could be in wave 3 or C, of one degree of higher trend than the red count. Either way, from an Elliott viewpoint, it's bearish.

 

The Dollar charts seem to indicate that the Dollar is peaking. There's little doubt to my mind that we're near the top of an ABC correction of real significance.

 

So the counts say, for the next few months, Dollar down and likely Gold down.

 

Go figure.

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.. and who knows Bear your Elliottocity may be right. But merging that with the seasonality and cross-referencing other markets it seems more sensible to me to relabel the gold chart showing the first 5 wave move down as A and thus C was in May and we moved up to 1 in June and are correcting back to 2 in the mid to late July spike low. Then it's 3 of 3 here we come.

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Well I just bought some more gold so I guess I overpaid. :lol:

 

Guess how much I paid!

 

WRONG!

It was 135,000 Indonesian Rupiah per Gram.

 

And while you're wondering what a Rupiah is worth consider the fact that I just told you. Then consider what the paper neatly folded in your pocket is worth. It is worth exactly how much gold it will buy.

 

So by this calculation the 100000 note in my billfold is worth 3/4 of a gram of gold.

For today anyway.

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Joe F. Rocks:

 

I thought Joe's analysis was very good this Sunday.

 

http://news.goldseek.com/JoeFRocks/1121090400.php

 

I don't think his reliance on the COT as a near term indicator is always sound and his dabbling in Elliott reminds one of Pope's admonition about "... a little learning..."

 

http://www.bartleby.com/59/3/littlelearni.html

 

What scares me is NEM. He and I share the belief that NEM, the darling of the institutions, will lead.

 

Without NEM showing a leadership role and institutional support in any advance, I suspect the PMS have the potential to tank.

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.. and who knows Bear your Elliottocity may be right. But merging that with the seasonality and cross-referencing other markets it seems more sensible to me to relabel the gold chart showing the first 5 wave move down as A and thus C was in May and we moved up to 1 in June and are correcting back to 2 in the mid to late July spike low. Then it's 3 of 3 here we come.

 

Thor:

 

Here's why, in my opinion. The total ovelap and the extent of the Fib retracement seem too extreme. I've also relied on Doc's analysis, as far a Gold is concerned, as I can't get volume oscillators and intra-day charts to look at minor subdivisions.

 

Your talents and experience are far too important to turn this board into a dialogue between us on Elliott. I'd be happy to respond to p-mails so we don't clutter up the board.

 

If you feel that a difference between us is important enough to be aired on this board, that's fine with me.

 

But I certainly don't want to distract you and the others who watch and contribute to this board from the tremendous analysis that you so willing share with us.

 

Your unflagging dedication to this board (and that of Charmin's, of course) has been an inspiration to me.

 

I'm happy to show you the way in my little universe. But, I have so much to learn from you.

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.. and who knows Bear your Elliottocity may be right. But merging that with the seasonality and cross-referencing other markets it seems more sensible to me to relabel the gold chart showing the first 5 wave move down as A and thus C was in May and we moved up to 1 in June and are correcting back to 2 in the mid to late July spike low. Then it's 3 of 3 here we come.

 

Thor:

 

Here's why, in my opinion. The total ovelap and the extent of the Fib retracement seem too extreme. I've also relied on Doc's analysis, as far a Gold is concerned, as I can't get volume oscillators and intra-day charts to look at minor subdivisions.

 

Your talents and experience are far too important to turn this board into a dialogue between us on Elliott. I'd be happy to respond to p-mails so we don't clutter up the board.

 

If you feel that a difference between us is important enough to be aired on this board, that's fine with me.

 

But I certainly don't want to distract you and the others who watch and contribute to this board from the tremendous analysis that you so willing share with us.

 

Your unflagging dedication to this board (and that of Charmin's, of course) has been an inspiration to me.

 

I'm happy to show you the way in my little universe. But, I have so much to learn from you.

 

Oh don't worry about that. I acquiesce to you on all things Elliott. I figured it was going to have something to do with overlaps. Just trying to get the Elliott count on board with everything else I see.

Let me try another tack: What could turn you bullish in the next 2 weeks short of a new high (recent) in the POG? The July spike low is so convincing I just can't ignore it. Of course if it doesn't happen like in previous summers it would leave one wondering if things have indeed turned for the worse.

 

One thing that helps me deal with the manipulation in the PMS market is to view the commercials in the same way I would view pirates, brigands, and coastal raiders. Here's why:

 

The raiders have limited resources but if they use their maximum force combined with the element of surprise against a weakened and unprepared foe they will win.

Raiders will attack in the early hours after a celebration feast while the guards are sleeping off too much mead. They will attack after the harvest is in and purses jangle with coin.

The commercials are no different. They wait until their foe have gorged themselves on longs then bounce the day before a holiday when their opponents are few. As far as I'm concerned the only thing lacking is the elephant of surprise. Heck, what surprise?

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Would you guys please quit cluttering up this board? After all, you make up a full third of the posters. :D

 

I would like to see a new review of silver, especially after all the dire warnings of a pending collapse that were bandied about all over the internet.

 

Back up to the top of the trading range?

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