Gold, Silver and Other PMs

Top 512. Feb 28, 2005 10:13 AM

» Normxxx - SKI Gold Stock Prediction

SKI Gold Stock Prediction

Jeffrey M. Kern, Ph.D. | Monday February 28th

Therefore, no true [gold] bull market: A long and large rise is expected but then we'll go through yet another lengthy extensive correction to form yet another higher yearly low.

To tame this bullish feeling inside of me (and in the indices), I can say that prices have not yet exceeded last Tuesday's high of 8.25. If USERX prices fall below 7.77 this week, this will be a signal to stop out the trade. Or in another week, if prices fall much below 8.10. The gold stocks are short-term very overbought (but that's what everyone always says when their buy signals come after a rise, on the way up, as a caveat or a hedge statement). But even if the gold stocks do go down 5%, there will be no sell signal.

There is another buy signal approaching. The very long-term 218-222 index will buy on this coming Wednesday's close. Hopefully prices won't go straight down now to indicate that I just bought another high (the last one being that 1% loss "fiasco" of buying the 8.23 high in the last week of December and selling three days later). Perhaps it can just be a time to sit back and relax?

[Normxxx Here: Currently, all of my Gold signals are on buy. But keep your fingers crossed, it could be a "bull trap." However, more realistically, this should mark an IT up move to be followed by another teeth grinding (temporary) plunge down. ]

The content of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 513. Feb 28, 2005 6:20 PM

» axolotl - Re: SKI Gold Stock Prediction

Templeton does not like gold. Even at 92, he should be listened to in a careful and thoughtful way.

-- posted by axolotl

Top 514. Feb 28, 2005 7:04 PM

» Normxxx - Re: Re: SKI Gold Stock Prediction

In response to Re: SKI Gold Stock Prediction posted by axolotl:

I definitely agree with him, as an investment. But for ST and IT, you can make money trading and timing Gold. And it's an insurance policy against dollar devaluation, though I concur that a "basket" of sound currencies may be better. The problem is, if we crash-- the whole world crashes with us! There's no place left to hide.

Anyway, for EMT or DMT, gold is an excellent asset class, since it correlates poorly with everything else but cash (to which it has a negative correlation).

Gold will never be a serious currency (or backing) ever again-- there's simply not enough of it at any price. In order for economies not to suffer periodic severe contractions, the money supply must increase at a rate many times that of new gold coming into circulation.

But, while I believe that debt can grow as the economy grows, it cannot grow without limit! Someday we will have a collapse, and the denouement will likely be far worse than the optimists anticipate, far better then the pessimists suppose, and in any case completely unexpected.

-- posted by Normxxx

http://www.hsletter.com/HSLnewslet.htm

Top 515. Apr 9, 2005 5:32 PM

» Normxxx - The Harry Schultz Letter

Welcome to GCRU #155 on April 6, 2005.

•It was a wonderful time to have a week’s break! The gold mkt did absolutely nothing. My associate said “I should have stayed in Morocco another week!” The mkt reminded me of the nursery rhyme: He marched the soldiers up to the top of the hill & he marched them down again. Some gold stocks rose & fell back to unchanged on a week ago. Some fell & then rallied back to aprox unchanged. The gold indexes fell, rose, & fell. They did a dead-rat bounce. Bellwether Newmont is the same price as last GCRU. But the Schultz Gold Stock Advance/Decline Line only fell. Had lead boots. That was/is a bad sign. It means there is no base to build on, yet, for the group as a whole. Our ML-Black Box says the legs-down scenario has part of a leg down yet to come. If valid, that’s not much to worry about. In fact it’s something to cheer about—as it means we should get out our buying net to catch the fruit as it drops from the trees.

••Of course, some gold stks have probably completed their corrections & are awaiting a shove to move to new highs, like Teck Cominco’s chart.

•The best of all stocks to trade, Agnico Eagle, shows a mini potential H&S with a target only 1.90 points lower (at 12.30), which would tempt folks like me to buy there. But a rise now to 14.75 would cancel the H&S & become a buy cue. AEM has given almost ideal buy&sell signals for many years, a trader’s dream. We published its weekly chart in GCRU a yr ago or so, to prove it.

•••Our Spinner indicator is negative on most gold charts, will take time to bottom out & rise over the zero lines. Could happen fast or slow, but is worth monitoring.

•••Our below-mkt buy recom in last GCRU looked a bit wild then, but now look very reasonable; no need to change them.

••My password lastime, Raisecash, proved prophetic, & I hope U did. Our passwords are sometimes a 1-2 word summary of all there is to say. Today’s password, gluestuck, tells U what’s happening with gold shares & until we unstick them from the glue, we wait. But with our nets handy, as some of the final stage will probably not wait long for us to get on board.

•••If we go look in back of Alice’s Looking Glass, we see the US$ has gained ground but not dramatically & not evenly vs all currencies. Indeed the bulk of the US$ move has been against the yen. Japan’s govt lost the yen to support the yen. I once discussed this policy with their Finance Minister Fukuda in Tokyo, decades ago, but that’s a story for another day. The other currencies are correcting in very different measures. The SwFr is the 2nd weakest at the moment. £ & C$ & A$ the strongest. NZ$ fell to triangle apex support.

•••STOPRESS: As I write this section, on Tuesday, gold stks are behaving oddly. 6 are down BIG, 5 are up BIG. It could be a bottoming- out, turning-around stage, as mentioned above, but I thought it was some days ahead. Maybe not. Maybe it’s happening now, or beginning to happen. See the PS below, which will be written Wed morning early with the benefit of Tues closing prices & charts. That old saying: it was the worst of times; it was the best of times, may apply here. Bottoming out gets rid of the downdraft & introduces the updraft. Each stock obviously is at its own stage of unfoldment. In the under-charts comments U’ll see our thoughts on how each one stands. Be ready for what may be an early Spring flowering. Nets at the ready!

•••Oz govt expected to raise interest rates to 5.75%. Hope U took my advice over the last 1-2yrs to buy A$ & NZ$, even if U never heard of the countries. These currencies have been rising for a very long time & these interest rates are mouth watering. They may correct a bit more but they pay U for waiting.

•••Re CRB index: I expect a bit more correction, maybe back to breakout of Sym/Tri, especially in industrial commods.

•••Re ECB: no rate increase expected due to low European growth.

••Bullish Consensus svc has gold at 66%, US$ at 36%, not much changed. They say gold neither overbought or oversold; outlook: neutral/bearish, as of 4/4. I agree.

•••For HSL subscribers: I forgot to give the date of next HSL in last issue. It will be May 22-23. Next FMU (Mkt update): Apr 24-25.

•••Mkts getting hyper-active. Stand by to abandon perch. --And byebye for the moment from your Polish Predictor, Uncle Harry

PS: In my Stopress above, I noted the extremes of BIG ups & BIG downs in some gold stks on Tuesday. Those extremes were whittled down as the hours went by. That means the stocks with big DOWN moves moved up from them (hinting a poss bottom for those stocks), & the big UP moves were trimmed back (hinting that the overall climate isn’t ready for too much upside all in one day, not yet). This moderation is probably a good thing. We need time to rebuild the Spinner indicator—which portrays stock/mkt strength or weakness. Spinner has been hesitant. Overall, the bubbling share action on Tuesday appeared moderately bullish to me. But then I looked at the Spinner action at the Tues close; still weak, no pulse. And the A/D line showed no pickup.

••I haven’t mentioned the potential worse case for the present gold bullion chart pattern. It’s probably 420 +/-. That isn’t much lower than today’s price. So, we’re approx there. In theory it could make an intraday break to 415 but I doubt that. Unless the US$ moves up & over 85.20 & holds there, in which case 415 would be certain. Unfortunately, The $’s Spinner is bullish (& a bit negative on gold) so tread lightly. If $ Index dips under 83.50, that threat would subside.

••Also, bear in mind that gold shares sometimes bottom 1-2 days ahead of bullion. We’ll see soon enough. Meanwhile, watch daily price action of the $ Index & your favourite stocks, plus bullion, & they’ll tell U when the trade winds are blowing your way.

••Gold opening in Europe Wed AM up $1.00.

Uncle Harry Schultz

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 516. Apr 11, 2005 10:18 AM

» Normxxx - Harry Schultz Life Strategies

Harry Schultz Life Strategies
~ For THINKING humanoids ~ (in 80 nations)
An awful time to be writing about it [gold]

By Harry Schultz | 11 April 2005
extracted from HSL #646 March 27, 2005 - DJIA 10,443

Gold is a barometer. That's one of the reasons politicians always talk it down, badmouth it & try to limit its rises. They often make it illegal to own (eg, Nazi Germany & the USA under FDR & until the 1970's). But the barometer continued to function, despite Hitler & FDR. It has ever been thus & always will be. Gold measures the world's economic, monetary & political climate. So an article about gold should concern itself mainly with those factors, not just gold itself. Fortunately, the charts of various mkts tell us much of what we need to know. Currency charts speak volumes! The US$ took over the lead role from the £ when UK gave up gold as backing & the US adopted it. But US politicians, loving power & hating control mechanisms (like gold or spending limits imposed by legislatures), gradually removed the gold backing - defying the US Constitution (which they pledge to uphold but rarely do).

So the US$ was left without backing, but was by that time already the world's main reserve currency. The system enable[s]the US to free-load off the world. Washington wasn't content with owning a dishonest roulette wheel; they had to exceed all rational limits on govt spending, & have amassed debts & deficits beyond records by any nation. Result: Asian nations want to exit the US$. That's easier spoken than actioned. Yet, it's slowly happening, via buying fewer US bonds & selling a few here & there when DC isn't looking. As economist Stephan Roach says: "The standard US response borders on arrogance: 'What choice do they have?' The presumption is US has Asia over a barrel -- unwilling to accept a drop in export competitiveness that currency appreciation might bring.

"This misses a key cost-benefit trade-off -- weighing a hit to exports against a portfolio loss in US$ assets. The bigger the build-up of $ reserves, the more this trade-off is likely to tip toward $ diversification -- spelling the end of US cut-rate foreign financing." Our currency charts reflect this. All non-US$ currency charts are long-term bullish. US$ will have sharp rallies (like today), which are often achieved through intervention or oversold conditions & short covering, but the longterm trendlines are clear. The $ remains a sell, which means gold remains in a bull mkt. $-rallies will be gold corrections, usually tradable. Other charts that affect gold: bonds, interest rates, oil, CRB, all of which are long-term favourable to gold.

•• As I said in GC, avoid the term gold bugs; it's belittling. Instead say: gold bulls or gold advocates.

•• Chris Powell rightly says: "The World Gold Council exists to make sure there is no real world gold council. It is a straw man, set up to prevent any realistic effort to help the gold cause."

••• Charts show gold at critical shorterm make/break point, an awful time to be writing about it. If gold moves up from 3/24 low of 427, (basis June futures) it's headed for 448-450 area, for a test; a break above that will test Dec 462 peak. But if gold breaks 427 now it could head for test of Sept 04 uptrend at 417. Breaking that could dip to apex of massive triangle at 404. But even that is still well above the long-term uptrend line.

•••• Am off for the Alps now. Snowlong!

From my wigwam to your wigwam.
Heap big good wishes.
Uncle Harry D (for Deflation-Doubting) Schultz

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 517. Apr 11, 2005 11:11 AM

» Bill_Duffy - Re: Harry Schultz Life Strategies

.
If this is true, Result: Asian nations want to exit the US$. That's easier spoken than actioned. Yet, it's slowly happening, via buying fewer US bonds & selling a few here & there when DC isn't looking.

Wouldn't the dollar fall? But it has been going up in '05

-- posted by Bill_Duffy

Top 518. Apr 11, 2005 4:04 PM

» Normxxx - Re: Re: Harry Schultz Life Strategies

In response to Re: Harry Schultz Life Strategies posted by Bill_Duffy:

Remember always: the sole thing controlling the value of the dollar is its scarcity/desireability. Money (or at least the reserve currency) acts like any other commodity, its value goes up as it becomes increasingly scarce, and its value goes down as it becomes more plentiful. The Chinese and Japanese are currently just warning of future changes; so far they have done nothing concrete. Plus, up until quite recently, international trade has gone up (requiring more dollars) as the world economy has sped up; this may change after this year.

-- posted by Normxxx

Top 519. Apr 18, 2005 10:18 AM

» Normxxx - The boys in the boiler room

Contrary Indications: The boys in the boiler room

By Gary Tanashian | 18 April 2005

Toward the end of 2004, I began receiving a lot of phone calls from brokers who wanted to "put me into euros" or help me "take advantage of the weak dollar." To one of these do-gooders (who only had my best interests in mind I am sure), I replied "why would you want me to buy the top?," but the click on the other end of the line gave me the answer. It was time to offload the weak dollar trade to Ma 'n Pa.

Thanks in part to the boys in the boiler room, I was well prepared for the current dollar rebound, and in fact, until the end of this past week, held a total of zero gold stocks (excluding Central Fund of Canada and the gold ETFs) as the mining sector headed toward a short term capitulation. So, thanks boys!

Goldbugs bugged

It appears that a recent article of mine was an irritant to some perma-bull goldbugs. It read, in part "Gold related investments should not be treated as religion. In so far as one may want to preserve wealth during times of declining faith in a fiat currency regime, gold should be strongly considered. But to place it on a pedestal above all other assets known to man is to be blinded by its mystique, its lore and its legend. It is a tool to be used for economic survival or prosperity, and if you're reading more into it than that, you may well be setting yourself up to be on the wrong side of the trade one day." In fairness, it is more the gold mining stocks that I view with suspicion, as the metal is truly timeless and deserves a place in a balanced and sensible portfolio. Still, the response to this sentiment, combined with the perma-bullishness observed in many quarters, gave a good indication of what was to follow. Namely, a painful correction was visited upon a sector that has actually been consolidating its gains since late 2003. Bullishness needs to be wrung out and a lot of the come-lately "bugs" need to be flushed and sent back to their tech stock speculations or whatever flavor of the day is next. Could it be that a sizable amount of the "Go Gold!" crowd is made up of miners-only bugs? Meanwhile, those who hold physical metal are probably not losing much sleep and I would guess, have been doing much less cheering all along.

It is time to watch for capitulation in the mining sector. Judging by last week's action, it seems the process has begun.

The Professionals

It amazes me how generous the pros are in providing the signposts a contrarian needs to get on the right side of the trade. Goldman-Sachs' loudly trumpeted call of "oil to $105" was a gift for anyone looking for a near term top in that market. Another gift was the input I received from an investment professional three weeks ago, after I warned of a deflationary "whiff" in the air. His words were [paraphrased] that "commodity bull markets usually run for 20 years and China is a huge engine for growth." After that, I was no longer content just sitting out the coming gold stock and commodity massacre, and in fact bought puts on the XAU and Newmont Mining (since closed out). For what it's worth, I believe both of these calls are valid for the longer term. It's just that I hate sitting through gut wrenching corrections when it is far more pleasant sensing their onset and stepping aside, waiting for the bargains to show up.

Financial Media

I truly regret that by the time I am able to tune in to CNBC, the financial channel's programming has shifted to comedy, news magazines and reality shows. All the best contrary indicators ply their trade earlier in the day. I miss Larry Kudlow. A strong dollar tout from him always seemed to set the stage for another leg down in the buck's bear market.

A few months ago, a well known Smart Money analyst wrote an article espousing the virtues of owning gold in a dollar inflation environment. I posted the article on my newsletter's News & Analysis page along with a tagline that read "okay goldbugs, here comes the mainstream." What I meant was, tread carefully, the boat is getting kind of full on one side.

By the end of 2004, virtually every major financial media outlet was trumpeting the decline of the dollar and highlighting Warren Buffett's dollar consternation and dollar-contrary positions. They will ultimately be right of course, but you can't get the boat more loaded on one side than this. A huge counter-party for a short term strong dollar trade was created. This is the essence of the saying "if everybody knows something to be true, chances are it's wrong," at least in the short term.

Ma 'n Pa

I was hearing entirely too much of these words in local daily life: "Dollar," "Inflation," "Energy" and "China." To me it sounded like fade, fade, fade and FADE! It is sad that all too often, Ma 'n Pa will become aware of and take action on a story just in time to be chewed up by its first major negative adjustment. Fundamentally of course, it certainly looks like Ma 'n Pa will be right if they can just hang in long enough, with deflation once again providing a nice carpet for future liquidity bombs.

Da Bears

These guys are on top of the world right now. Most markets are getting croaked and it looks like all the lumps they have taken over the last two years can be left in the past. One should watch for signs of overconfidence, as well as accelerated hedge fund shorting activity, and of course, the dreaded bear on the cover of Business Week. Here are two charts that show sentiment is changing from blindly bullish to bearish on a short term basis:

Sentiment is eroding quickly. Can pervasive "The Bear Is Back!" type headlines be far behind? Late last week I took small initial bullish positions in gold stocks, alternative energy and the Dow. This may have been a bit early, but it was time to grit my teeth and begin to buy the fear. The news is mostly bad with corporate America showing stress fractures, talk of a crash and depression, Ma 'n Pa worried about the economy and Joe Six Pack calling the top in the Dow. As you may know, my newsletter has not sported the most rosy outlook for the big picture, so I will have to allow for the possibility that this is indeed the endgame. But I will also allow for the possibility that the Fed will stick to Dr. Bernanke's vow to never let IT happen here. So I remain open to positioning for a hyper-liquidity scenario. In this scenario, perma-bears may be an endangered species.

Me, Myself and I

I reserve the right to fade myself. My own greed impulse clouded my judgment in one particular stock speculation that "blew me up" beyond what I would normally allow. It happened because I felt quite sure of its prospects. The trade is currently ongoing and may indeed pan out. But the pain it has caused to this point is a lesson that is worth heeding. There is always another side to the trade and it is worth one's while to thoroughly explore all angles from a contrarian viewpoint.

"Always on the outside of whatever side there was" -Bob Dylan

It is not natural to be constantly on the other side of the accepted mass viewpoint. It takes work, as human instinct is to herd. In the herd there is comfort, reinforcement and belonging. Success in the financial markets demands that you take uncomfortable positions at those times when the public mindset claims that you are most wrong. It's a crazy business at which many people are simply not wired to succeed. That is why they seek out investment professionals to manage their finances for them. It is a scary situation when you consider that one of the most reliable contrary signposts is indeed the professional mainstream money manager community. Still, it does my heart a world of good every time I receive an email from a certain CFA who puts great thought into his clients' well-being, into capital preservation first. He understands that there is indeed a counter-party to every investment and sometimes that counter-party may be right.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 520. Apr 21, 2005 3:35 PM

» Normxxx - Trends Dominate Market

Dollar Seasonal Trends Dominate Market

by Jes Black, Black Flag Capital Partners | 21 April 2005

Our use of intermarket analysis has kept us on the right side of the changing trends of 2005. In our weekly report on March 13, 2005 we wrote: “The topping process in stocks may have ended this week as surging yields drained liquidity from the system. The dollar continued to selloff, but we view this simply as a “test” of the lows before the greenback rallies above its January highs, causing pain to stock market bulls.”

In fact, it is our work with the dollar and gold stocks that led us to believe that stocks would put in a major top in the first quarter of 2005. The ebb and flow of liquidity (as measured by gold stocks) has been an excellent indicator for the stock market as a whole.

Below is a chart of the XAU Gold and Silver Index that we originally published for readers of FxMoneyTrends.com on February 5, 2005. We said that if gold stocks represent “liquidity expectations,” then the XAU must rally to new highs with the broader stock market to confirm a continuation of the "reflation trade." If it does not, then we should expect a MAJOR top in both the XAU and the S&P 500.

As you can see, we forecasted a countertrend move in the XAU six weeks prior to the stock market top indicating that if the XAU failed to rally past its December highs it would not confirm new highs in the S&P500. In turn this would indicate to us it was finally safe to get short the stock market which we did do later that week.

As we now know, stocks have sold off sharply while the XAU has broken below rising trendline support from the July 2002 lows. The structure of the decline has also conformed perfectly to our forecast of an “ABC” decline by rallying strongly in “wave B” in February to our target level of 100 and then falling sharply on its way to our target of 75 which should be reached over the coming months.

We view the current rally as nothing more than a correction towards the underside of broken trendline support now crossing at 90. Any rally past here should only carry to 95 or so before the next sharp decline carries prices towards our longstanding target of 75 which we think will provide the next excellent buying opportunity in gold and silver stocks..

Dollar Seasonality the Key to Market Trends in 2005

To further corroborate our view that the dollar index has put in an important low and that gold stocks will continue to decline over the near term, we will next show a study of the stock market bottom of 2002-03 and the dollar index bottoming process of 2004-05.

The chart below is from the same March 13, 2005 report we alluded to at the beginning where we called for a major top in both the XAU and the broader stock market. As you can see, because we knew in advance that the dollar has seasonal strength in the month of March and we were looking for a rally. We will get to that part later. Here is what we said in the March 13 report:

“Below we have labeled the “three tests” of the dollar and S&P 500 lows. Recall that the 775 level in the S&P 500 marked the exact 61.8% retracement of the rally from the 1991 recession lows of 285 to the 2000 mania top at 1565. As such, this provided the springboard for a bottom. Also note that prices are now topping out near the exact 61.8% retracement of the 1565 highs to the 775 lows at 1263 at 1230. The S&P 500 has come to within one percent of these highs last week and may therefore have topped out already.”

“Similarly, the dollar index bottomed three previous times around the 80 level and a break below here would likely spell the end of dollar hegemony. We do not buy that argument – yet – and we therefore see the 80 level acting as a similar springboard for the dollar as the 775 level did for the S&P 500. Also recall just how bearish people were in late 2002 on the stock market. The bears were in control then but paid the price by staying short the market. We feel the same is in store for dollar bears in 2005.”

The reason we feel so confident about our outlook on gold stocks and thus the broader equity market is because our primary focus is the currency market and how it affects stocks, interest rates and commodities.

Readers of our free daily reports on the dollar index know that the dollar is now declining from the 85.25 level just as we said it would three weeks ago. We are well on the way to our target of 83.50/82.50 where we think traders will want to start building up an aggressive long dollar position with risk limited to below the 81.20 lows for a move towards 88/90 over the coming weeks. This is a great setup that should be very profitable to those who execute it correctly.

Of course, many will ask how we can be so confident about an upcoming move in the currency market? To answer that we have updated a study of the dollar index’s seasonality that we first showed four months ago to say that January was the best month of the year to get long. We then warned during the dollar’s sharp January rally to take profits the first week of February and to watch for a 50% correction of those gains.

The dollar index retraced in February and rallied again in March -exactly in line with its seasonal trends. Now it is falling hard in April, just as seasonal patterns suggested it would. Truly amazing!

If past trends continue to hold sway we expect to see further weakness into the end of April followed by the next great surge in the dollar between May and June. In the bottom chart we have attached the seasonal pattern to the current price action in the USD index.

If the dollar were to follow its seasonal trend exactly, we should see a relief rally in USD this week followed by a renewed decline to 82.50. Our Elliott Wave outlook confirms this view as one should expect an “ABC” type decline from the 85.25 highs targeting the 83.50/82.50 level over the coming days to weeks.

At this level we will accumulate dollar longs and warn buyers of gold stocks to watch out for a renewed decline if the dollar’s seasonal pattern holds true.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx