Big Picture from Uncle
From Uncle Jan 13, 2014 Dear Reader, Hello from your retired friend. I’m provoked into writing because of much questionable advice I read, for investors. Especially in the gold mkt, but the principle is the same in stocks/bonds. All advisors mean well & do their best, but the failure by most to truly understand the best tool (charts) is sad.
For example, Steven P @YahooFinance cited the “reasons” why gold rose in 2013 & the “reasons” why it fell. He showed a gold chart as evidence that gold was no longer responding to Fed & global money printing. I fear Mr P is not using charts correctly. A professional chartist doesn’t care about “reasons” for rises/falls. I often play a game of hiding the name of stocks before analyzing the chart. Viz, when U know the chart is for an oil or bank stock, your bias kicks in, blocks your objectivity.
Charts reveal everything, if U listen. It’s also a work in progress as U get better at chart reading every day. Never assume that the millions who “read” charts have equal (or even adequate) understanding. An old saying applies here: “If a donkey looks into a mirror, a donkey looks back.”
But charts work best if U R objective. U’ve got to try not to CARE what the charts seems to tell U. U want chart honesty! When U own the stock behind a chart, U are subconsciously biased.
Yes, several banks & govts collude to cap the gold price. That’s now a proven & admitted fact. They even excuse it by saying it’s for your own good, to stablize mkts & restrict speculation. But their capping efforts were not enough to stop gold from rising for about a decade, 2002-2011. Charts ignored the banksters. Gold overrode & continued to correctly predict with deadly accuracy its true supply/ demand price. Charts gave us a valid top pattern (a descending triangle) which gradually forecast, as the pattern developed, a fall to 1200. I correctly sold some at the time, but not all as the goldbug fever prevented goldbugs (me included) from totally believing the charts. Most ignored the trend change while blaming govts for capping the price.
Yes, govts shorted gold (mostly via Hong Kong, out of sight, via lapdog banks). But govts couldn’t stop the recent gold bull mkt & can’t prevent charts from gradually revealing what is really moving the price & forecasting it, as patterns build, a bit like 3D printers, layer by layer!
Which reminds me, the best way to see those 3D layers build is to supplement daily charts with 360-minute charts, & 90 & 30 min. Even 10 minute when U are actually trading or trying to find the exact price for your order to buy/sell. For perspective U should always backstop with weekly charts. For long-term positions, use monthly charts.
I went thru this before in the 1970’s. I called the 1980 top then & sold & urged my readers month after month after month to sell & go short. It’s all there in print. I didn’t have to be smart, only to believe the charts. I once said at a 1985 seminar that people who aren’t really very smart make the best chartists; as they don’t fight the chart; don’t follow what bright brokers/analysts say. Blind faith pays off in religion & charting J.
Must mention the need of those who would-be better chartists to buy a book on it. I’ve recom for years: Technical Analysis of Stock Trends by Edwards&Magee (I knew Magee), avail via Amazon.com. Study the patterns endlessly. If U think U know all U need, there’s no hope for U. Some newsletter writers have never read Magee, don’t think they need to, & I often find their chart based advice sloppy or wrong.
Chartists have little use for fundamentals & “facts” because guess what, most data comes from govts & corps, with axes to grind & facts to hide/distort. — Yes, fiat money is evil, deeply so. And the debt mountain is historically high/dangerous. Yes, real inflation is 2-7 x higher than stated in most nations. And unemployment is 3x higher than govt says in the US & some other places. And the US$ should collapse next Thursday to reflect its trillion $ deficits. And those ‘immoral’ derivatives are time bombs under many banks, but we’ve waited 10 yrs for them to go off; instead they seem cemented over. In much of society, immorality has become the new normal. Including TV’s live reality shows.
But there is no sell-by date on debt or jobs or flations. So let’s forget the fact-fudgers. Instead of frustrating over those things, spend your time learning how to be a genuine chartist. They open a window for U to every mkt & reflect every human activity! Your own & your mate’s moods can even be charted. For a benefit. J
By the way, deflation is currently overriding inflation. The hyper-inflation all of us in the hard-money camp have been expecting “next month” for the last 10 years may still come, but if U need to know WHEN, follow charts on interest rates & currencies. The answer will be there! If U are a gold bug, graduate to a gold-chart-bug. But first learn the language of charts. Become your own chart advisor. U don’t know how much/little a chartist on TV really knows. Beware of youth. J
Where are mkts going now? Loosely, global stk mkts look firm for next few weeks. Then a strong correction. But in the fall, back up to where it began 2014 +/-. Chart patterns keep revolving, so watch for any change to that. –- Gold? Up for next 2-3 wks. Junior stks best. Bullion to 1260-1280. Unless rises over 1300-1320, the bottom could be retested. Louise Yamada agrees. The 2011 top still says 1120. Maybe 1000 eventually, maybe not this year. This can’t be set in stone obviously, but let’s keep an open mind & help plan when hurdles are jumped or fail. We vet the charts several times a day & look as if seen for the first time.
“Logically” (whatever that means), one should keep a moderate core gold position. But core aside, one should buy for rallies (signaled by chart patterns) & sell &/or sell-short (call it a ‘hedge’ if it makes U feel better) when gold hits chart resistance. •••• Will gold be a flight to safety from equities? Asks Bloomberg. Yes, but not nearly there yet!
And take profits when U can. Don’t wait for champagne tomorrow, take beer today. They don’t run the mkts for your sake; don’t expect favors. A lot of smallish profits is safer than risking some large ones—if U wait. Of course U can use trailing stop orders but they only work once U have a decent profit to work with, as the stop is usually so low they cut gains badly.
Another tip: 2014 is starting badly for most commodities, from oil onward. So, consider a life preserver strategy: short gold, long palladium. Short oil, long copper. Short certain weak gold stks, long certain strong gold stks. Etc.
MISC: Monty Guild reports US Basic Needs Index is up since 2000 by 87%. Govt CPI index says it’s only 39%. Much the same in many nations. Now we see why some govts have lost their credentials. ••••
The IMF has asked Argentina for HONEST statistics re its economy. POW! Dare the IMF ask for the same from UK, US, China? ••••
Some doctors don’t recom vitamin tablets because they weren’t taught vit-therapy in med school. They don’t know that they don’t know. Also, subconsciously, docs resent the ‘competition’ of vit supplements. But they’re right to condemn multi-vitamin tablets, which contain tiny bits of many vits, too few to be useful. •••• Banks need to do banking. Casinos need to do casinos. Not joined at the hip. •••• Ex pres.candidate Pat Buchanan says: “The neo-cons are terrified of peace.” •••• IMO, we should not use microwave ovens at home, nor accept microwave-heated food in restaurants. •••• Oklahoma law passed, 37 to 9 an amendment to place the Ten Commandments on the front entrance to the state capitol. Good. Time to fight back. •••• Next week I vow to wag more, bark less. U too? This could catch on. Woof. J •••• God bless U and yours! –Uncle90.4