Monthly Digger - August 2009

[dharma]

A correction is sure to happen ; but not likely 10% or more

This is the first time our work disagrees in timing

 

7 sent me that triangle Bearvest is showing with a red arrow straight up after the wave down and called it a 3.3.3.3.3 structure

i hope that you guys are correct! i bought 50%long in my trading account today.

dharma

[Gold Majestic]

GM

Maybe you did not notice but all those horn blaring drum beating traders of yonderyears are gone with assmaster of the open stockcharts leading the broke and bleeding I guess

I know a score of buy and trade it on margin guys from germany that lost millions and are now using lawyers instead of investing . Even Jickiss of the general is no longer blaring acres of diamonds .

__________________________________________________________

 

Hello Ageka,

 

I'm not familiar with any of the above posters you're referring to. Guess that was before my time here. I'm referring, in general, to the scores of "Fundamentals Are Useless / Charts Tell All" traders that populate today's stock trading sites that lack any experience, appreciation or discipline for researching the all important market/sector/company fundamentals. "Charts Tell All" "Get Rich Quick" Trading systems are being advertised on television/internet to scores of gullible viewers with no understanding or appreciation of the fundamentals (and history of such) that shape our financial destinies. I find it sad because most of these people who can least afford it will eventually have their pockets picked clean by the market professionals that prey upon such lemmings.

 

Highly successful investors such as Warren Buffet, Peter Lynch, Benjamin Graham, Phillip Fisher, Bernard Baruch, Sir John Templeton, George Soros, etc., are a testament to the importance of understanding company fundamentals. Although I admire these "Bottom Up" investors that conduct extensive research on individual companies (quality of earnings, relative asset value, enterprise value, debt level, quality of management, cash flow, etc.), I find it equally important to understand the macroeconomics, "Top Down" (economic trends, industry/sector fundamentals) affecting one's investments BEFORE buying companies in that particular sector.

 

I first attempt to scout "the entire forest" BEFORE researching a "specific tree." I attempt to identify the "main market theme" BEFORE choosing an individual company. Because when the economic conditions are right for the market/industry/sector AND the fundamentals of a particular company(ies) are strong, one's probability for success rises proportionately.

 

Take the October/November/December '08 "Back Up the Truck" opportunity of a Decade for Gold/Silver Stocks as an example. The market fundamentals had become even MORE BULLISH for Gold and PM stocks and yet "market consensus" that the "Fundamentals Are Useless" TA crowd tout as that which determines "relative value" at any given point in time, was pricing Richmont, just one of many examples, at under $8 per oz of Gold! Now a rational and reasonable investor would realize this claim to be not only ludicrous, but that the believers/touters of such complete nonsense to be financially dangerous not only to themselves but to any naive fool that would listen. The charts at the '08 bottom looked absolutely horrible and the "Charts Tell All" were projecting much lower lows! But anyone with an appreciation for stock market history could look back over the long term market data and charts to tell you (like I did) that the probability for a significant low at that time was close to 99%. That when a check of the fundamentals told one the "derivatives" (mining sector) of Gold were being valued at historically ridiculous levels, some as low as US$6-8oz in the ground, that it was the time to accumulate all the "quality" companies that you could.

 

In fact, an experienced, successful "Bottom Up" investor would explain to such a "Fundamentals Are Useless" misguided fool that an extremely over-sold company (such as the many $8/oz Gold and lower PM stocks late last year) with EXTREMELY BULLISH FUNDAMENTALS in an economy/market/industry/sector with INCREDIBLY BULLISH FUNDAMENTALS presents an investor (as opposed to trader) with an EXTRAORDINARY MARGIN OF SAFETY to buy the stock of such company at such an extremely depressed level taking advantage of the extreme price distortion and then to proceed to ride the stock up for tremendous gains (see Nova Gold reco in Dec for one of many such examples).

_________________________________________________

 

I am an harcore holder ; I was down 90% on Echo Bay and recovered 100% and gained by the take over by Kinross . But in euroland my best investment is still pure gold since the goldmines are only just now entering the recognition phase. I do not think there is going to be any meaningfull correction anymore ( that is 20 % or greater ) So I am fully invested and liquidating intrest bearing funds to invest more . You took large risks with capital you had and won . But for every success story there are 100 disaster stories .

You should stop to believe that everybody has access to the information you have .

I got an MBA and I know how easily the paper information can hide a company that will be bankrupt in 6 months . They tried to make a predictor of companies going bankrupt and the predictor failed miserably . So what I am saying is that if you have concrete advise give it for evaluation ; but do not expect anybody to sieve thru 100 would be survivor would be miners .

Anyway thank you for keeping posting and congrats on all your wins"

______________________________________________

 

True, but I would disagree that for "every success there are a hundred disasters" applies to all market participants. I've learned that if you do the research correctly (sometimes we get it wrong), that one's odds for success improve dramatically, especially if you're an investor with patience and a longer-term perspective as opposed to a trader flipping in and out. And yes, you're correct that all too often unethical companies can hide exposure to debt liabilities and losses as we've been witnessing in unbelievable fashion in the Banking/Financial, etc. industries over the past couple years. But that danger only emboldens the importance of understanding the market/sector/company fundamentals, knowing the track record and quality of management, and waiting for significantly over-sold opportunities before investing your hard to come by savings.

 

Lastly, I'll continue to clarify that I also value chart analysis (especially longer-term), as an important tool for CONFIRMING the all-important fundamentals of a particular market sector/company/commodity, etc and an excellent way to communicate to one another where we think a particular sector/stock has been or where one thinks it's headed based on market fundamentals.

[Gold Majestic]

gm-thanks for the in depth analysis of ric.

i am sure the 6 of us or so, who survived last years drubbing, consider all that each of us has to say!

ageka- i do think that last years low was the bottom of the 9yr and 4.5 yr low. i think the rally off of that, as a possibility was 1of 3 w/2 of 3 to be played out, my stuff shows oct /nov. so, while i do think the lows are in. i do think a good correction is possible.

then i see a run to 1300 by march. just my 2c

dharma

 

dharma,

 

"6 of us or so" sounds about right.

 

The nice thing about backing up the truck on the lows and gaining free shares is that when the inevitable cyclical tops occur, one can look forward to the subsequent bottoms, and if significant enough, accumulate more shares, balancing out the portfolio with the cash proceeds from sales to recover the initial capital and also to reinvest cash in shares bought out in take overs.

 

Knowledge and patience are key. I'm in no hurry here. Just doing my best to enjoy the ride.

[Gold Majestic]

We’ve seen this movie before (recently).

Once again, sets the stage for the Fed to potentially surprise the market with a similar move. (throw foreign bag holders under bus).

 

Perhaps even force the hand of the Chinese, you suppose?

 

BOE Extends Bond Purchases After Recession Deepened (Update3)

 

Aug. 6 (Bloomberg) -- The Bank of England expanded its bond purchase program beyond its original limit in an effort to spur lending and fight a recession that’s deeper than previously anticipated.

 

http://www.bloomberg.com/apps/news?pid=new...id=a4aYFAQngM6w

 

More of the same acknowledgment of “Rock & Hard” place situation.

(eventually Mount Vesuvius is gonna blow fossilizing the unsuspecting deep forest dwellers):

 

China Warns Developed Nations of Inflation, Currency Threats

 

Aug. 6 (Bloomberg) -- China’s central bank warned that monetary easing by developed nations threatens to cause “severe” inflation and currency volatility.

 

“Central banks in major developed nations face a difficult choice between keeping government bond yields relatively low to promote economic recovery and maintaining currency stability.”

 

http://www.bloomberg.com/apps/news?pid=206...id=ayJCDeDDcSaY

_______________________________________________________________

 

Well, it’s no surprise as out-sized “Investment Demand” for Gold caught those focusing on “Seasonal” demand with their pants down around their ankles. But don’t be fooled, it’s investment demand that’s important now.

 

Asia Gold-Indians defy high price as festive season starts

 

MUMBAI/SINGAPORE, Aug 5 (Reuters) - Indians have started buying gold jewellery and wholesalers are stocking up against anticipated price rises as the busy season gets under way in the world's largest bullion consumer, dealers said on Wednesday.

 

India, which accounted for more than 20 percent of global demand for gold jewellery in 2008, celebrates the Hindu festivals of Raksha Bandhan, Janmasthami and Ganesh Chaturthi in August, when demand for bullion usually picks up.

 

http://in.reuters.com/article/domesticNews...0090805?sp=true

[Gold Majestic]

Meanwhile, back at the ranch, this Friday’s jobs report to show more of the same . . . deterioration in the US jobs market.

 

Which would continue to drive home to the market consensus morons that the Fed will be forced to continue loose and easy.

 

Which would continue to underscore that the FED, regardless of their "strong dollar" pablum, remains unable to combat inflation even as the economies of the rest of the world (read Asia) potentially improve.

 

Which would continue to clang the bell, "Ding Dong . . Ding-ALing! . . . Dong! for a lower US Peso and hence, a rally in gold.

 

Could it be asking too much that yesterday's slide in the USD on the back of the weak ISM may even be the first hint that the market consensus ignoramuses are beginning to experience an epiphany of sorts?

 

Well, eventually it will happen, but let's not give these morons (that determine "relative value" ) too much credit just yet.

 

Hopefully, we'll continue climbing the wall of worry allowing us yet more opportunities to accumulate over-sold shares of PM stocks.

 

But even the "logic challenged" market consensus price determiners could begin to detect that the US Peso, after having broken down to a new 10-month low, is in deep, deep poopoo after its failure to bounce whatsoever? Perhaps?

 

That such poor behavior suggests the increased likely hood of a potential downside acceleration in the very near future?

 

Is this expecting too much from the market consensus "geniuses?" Yah think?

[Gold Majestic]

As many who follow the Bond market are concerned, how will the FOMC react next week if it continues plunging?

As some inquiring minds would agree, the R&HP FED can't raise rates, can’t drain liquidity and left only with its weapon of last resort, OMP. Yes, but what good would Open Mouth Policy be at this point, goobers wanna know? sigh . . .

 

Well, guess M.C.I. will finally arrive kicking and screaming to the Recognition Phase we've been addressing for several years now, the recognition that the Deflationists had "it" all wrong, the "tree blinded" forest crowd, clueless, didn't even have "it" to begin with to have "it" wrong, and the few who had "it" right, those of us correctly explaining the Fed's actions on interest rate policy, that without a doubt it would print money and debase the dollar in response to the (coming) housing bust (that we correctly warned of in advance), the same easily anticipated response that the FED used to combat every other financial problem of the past 15 years, that Money Printing would be LESS stimulative to the US economy (as before) and instead MORE stimulative to (price) inflation, (which is the opposite of that which occurred after '97's Asian currency crisis, '98’s LTCM fiasco, after the early 2000s’ stock bubble implosion, when the Fed responded in a likewise manner to those problems by printing more money.) Oh what a surprise . . not. sigh . . .

 

And that the difference would be that unlike after '97, '98 or early 2000s, there would be no more asset bubbles to blow in order to support the massively distorted and asset-price dependent US economy. sigh . . .

 

That the culmination of all the money printing would simply produce a sharply weaker dollar and promote CPI-type price inflation (hence sharply higher Gold/Commodities prices).

 

More recently, those of us who understood the all important fundamentals knew back in Oct/Dec '08 that nothing had changed to deserve the huge sell-off in Gold stocks/Commodities, that a tremendous opportunity of a decade was being offered to us.

 

In fact, since, we witnessed big increases in Commodity prices, a falling US Peso, and a lack of any meaningful recovery in the US jobs market despite the Fed's actions to set the FED Funds rate at zero and monetizing over a Trillion dollars of Treasury Bonds, MBS and agency debt. sigh . . .

 

Meanwhile, contrary to our resident CI's protestations, turns out that yes indeed, many overseas economies are indeed recovering as predicted would be the case last Fall, even though the US still shows no real signs of economic recovery other than “stabilization”, which our slow witted forest denizens will eventually come to the recognition as S T A G F L A T I O N ! ! !. chuckle . . .

[Charmin]

NGD goes for a break of prior high

http://www.StockSharePublishing.com/ChartL..._1249610884.png

 

but you can see others fighting with prior high's or resistance to spreading their wings

[Charmin]

NXG is on the canslim.net leaders list

http://premium.canslim.net/Screener/vw_Scr...asp?order=PRICE

[Surfer Dood Doo]

<No, we're probably ready for a consolidation/correction here. I follow a range of "RATIO CHARTS" that have been unparalleled in confirming the fundamentals that lead to tops/bottoms of varying degrees. Also I follow a number of Liquidity charts that accomplish the same.>

 

gm - thanks for your reply. i bought ngd as you suggested and held of buying the others for now. think ill wait until the market settles down and the correction in gold stocks is done. realy like your stock analysis. gives me an idea of what to look for an evaluate a gold producer. like that richmont is a producer rather than a explorer. can you recommend any others? trying to build a portfolio. heard on cnbc that the recesion was over now that unemployment is much better. guess the dollar will rally now as the economy recovers. guess the government will start raising interest rates. anyone know how gold will do in this new environment? still strong? tnx chuck

[bearvest]

XAU:

 

Over the past several months, I've tried to understand Candlestick trading. As I have a day job, I can't watch the markets closely intra-day. Candlesticks give a very clear picture of the daily action, based on the shape, size, and price location of the body of the candle and the size of the wicks and tails.

 

Ichimoku charts add a cloud to show support/resistance as a moving area--not a static line in the sand.

 

XAU is now in a downtrend but static.

 

If you look back 8 days, you'll see that the downtrend was arrested right at the red line and the base of the cloud. What followed was a pattern of huge white candles akin to a 3 white soldiers pattern.

 

Early this week, the candles showed indecision. the bodies of the candles were very small while the tails and wicks were large.

 

I'm not that familiar with the construction of the cloud, but it's turning point seems to correspond with seasonality in Gold which tend to bottom in August.

 

On XAU, the indecision was busted. The close of Friday's big red candle took out all of the tails of the preceeding candles. That's a likely bearish signal. Please note that this did not occur on HUI's chart.

 

We are trading above the cloud and both lines, so on a moving average basis, the intermediate trend is positive--but this is a lagging indicator.

 

Note that the market is, nonetheless, in equilibrium. The red line, the blue line and the top of the cloud are all flat. Flat lines tend to attract price, however. So the attraction--the very short tem trend is down.

 

Looking at the wicks and tails of the candles, we have a first timeframe downtrend. From Tuesday's high, there is a pattern of lower highs and lower lows.

 

The red and blue lines are constructed using the same criteria as MACD--the blue line being the trend indicator and the red line serving as a signal line.

 

I've found this very beneficial to my MACD and Stochastic analysis to assist in my Elliott wave counts, as I tend to trade short term trends of 10 to 30 days--based on 55 and 21 day cycles.

[Whadda I Do Whadda I Do]

Rising interest rates would create a panic in the markets. The interest rates now are being kept artificially low to avoid such an event. The economy is fragile to say the least. Any liquidity is being horded. The markets are being propped up by the Treasury via the Federal Reserve as securities are being bought or exchanged for worthless derivatives that are warehoused (hidden) until such time their market price (zero) can be absorbed (never).

 

Basically the US consumer is not consuming, it's a waiting game for recovery. China deciding not to report power usage tells me not to look in that direction for a world economy recovery either. Countries just trying to tread water using internal consumption is not growth or a world emerging market(s).

 

The charts (miners) tells me they are in a large consolidation area with volatility (tradeable), up trending long none the less.

 

Unless Russia and/or China can step in and feed the world (never gonna happen without US soil) the US$ is here to stay even recreated in some form or fashion.

 

When Sinclair shares the opposing view opined by Harry Schultz whereas Sinclair expects more electronic debt creation as needed on a continuing basis (forever?) to keep banking afloat versus Schultz warning of a banking holiday as confidence in the dollar with its attached debt can no longer continue, gives two scenarios, neither of which are promising.

 

Be prepared, at anytime, to go to all cash (physical) maybe prepared to go all in with the miners maybe 50/50 to be half right.

 

Wouldn't surprise me to see the forum name changed to 'Psych Ward' soon.

[crafate]

"The economy is fragile to say the least. Any liquidity is being horded.

 

Basically the US consumer is not consuming, it's a waiting game for recovery.

Be prepared, at anytime, to go to all cash (physical) maybe prepared to go all in with the miners maybe 50/50 to be half right.

 

Wouldn't surprise me to see the forum name changed to 'Psych Ward' soon."

 

My business is legally advising the entrepenurial world in Houston, Texas. What Im now seeing is companies with little to no debt are surviving but holding off on new expenses, including hiring, while they wait to see what happens in the US economy. Big oil is laying off the senior managers and the little o/g folks have hoarded their cash but wont buy until field prices move seriously lower. Talent can be picked up cheaply now if you can find an opening. service industries appear to be doing things at cost just to keep the doors open. Landlords are working with tenants to keep some rent flow going rather than just lock the doors, as there is no new tenant asking for space.

I expect the vulture funds will be calling me in six months anticipating lowball prices based on 30 days close for cash.

 

Gold majestic, Im with you on gold long term and dont pay too much attention to day to day noise in the markets. However, as Im too weenie to go all in on stocks, Ive got a wad of cash/physical too in case the stocks go kawblooie.

[quanta]

XAU:

 

Over the past several months, I've tried to understand Candlestick trading. As I have a day job, I can't watch the markets closely intra-day. Candlesticks give a very clear picture of the daily action, based on the shape, size, and price location of the body of the candle and the size of the wicks and tails.

 

Ichimoku charts add a cloud to show support/resistance as a moving area--not a static line in the sand.

 

I've found this very beneficial to my MACD and Stochastic analysis to assist in my Elliott wave counts, as I tend to trade short term trends of 10 to 30 days--based on 55 and 21 day cycles.

 

Bearvest-San

 

Arigatou gozaimasu

 

Very enlightening.

[Charmin]

My Jim Willie fix:

 

The Dollar.

"The powerful reversal pattern evident since last October has finally begun to break down. It is in the stage #1, confirmed by numerous sources who note growing panic, growing dismantlement of support pillars, and growing expectation of a major currency event. The cyclicals are all negative and weak. The crossover of the 20-week moving average below the more stable 50-week MA is a strong bearish signal. The momentous pile-on is to follow. The breakdown in progress is sufficient to take the gold price over the elusive 1000 level once and for all. Some veteran sources report that the gold price breakout move might be extraordinarily powerful, far stronger than even the gold community expects."

http://www.financialsense.com/fsu/editoria.../2009/0806.html

 

GLD consolidating and ready

http://www.StockSharePublishing.com/ChartL..._1249786797.png

[Ageka]

Day 68 and counting

In the meantime I am buying all numismatical gold at melt as fast as I can find any

 

1990 Children running from coast to coast into the future with their new flag

Little did they now that 2010 might be the end of the future