Archive for February, 2009

The truth and …

Posted on Feb 27, 2009 by .

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We make a practice of reporting all our trades to our readers.  This may not be a good idea as it might encourage foolish behavior on their part.  In our letters we clearly discriminate between trading tactics and investment tactics and recommend that our readers follow investment tactics.  We also — as in our recent letters about “lottery tickets” — identify potentially crazy and nutty ideas.  In line with this practice we scaled out of some GLD and SLV PFE (will someone remind us why we bought this?) doubled down on AIG and checked our Smith and Wesson .38 to see how many cartridges were in the magazine before playing our daily game of Russian roulette.  We are currently reading the popular Russian Fandorin thrillers by  Boris Akunin in which the characters play “American roulette”.  Given the games the Russians are currently playing Russian roulette seems more appropriate.  For your amusement in this vein “French leave”  (abandonment of ship in port) is known as “English leave” in French.  

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Sell signals in gold and silver

Posted on Feb 27, 2009 by .

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Thursday’s gaps in gold and silver are clear sell signals for traders.  Although the trend stops have not been hit the island tops and gaps are sufficiently strong to scale out, if not liquidate positions.  Note that this is a trading technique, not a trend following technique.  Relaxed long term investors will wait out the downwave and increase their positions after the pull back and that is really the smart thing to do.  For our personal accounts we are in a trading mode at the moment.  The pattern is the same in both metals.

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So. The sky is falling, after all…

Posted on Feb 24, 2009 by .

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Frankly only an Obama miracle can stop the sky from falling now.  Monday’s action was so damaging that it raises the very real prospect that the market could fall to the 5800 level.  The previous November low is taken out by sufficient margin that the previous trading range is ended and the broad downtrend reaffirmed.  At this point only issues with strong charts should be held.  Here is the immediate picture:

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The sky is falling. The sky is falling…well, maybe not

Posted on Feb 22, 2009 by .

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Whenever a low as important as the November low is taken out the consequences can be serious.  We looked at the long term chart and determined that the November low, while important, is affected by the 2002 low which we marked here as 7197.49.  The penetration of an important trendline (which these lows are) is always important, but the magnitude of the penetration is equally important.  Traders toy with the lines so generally speaking a filter should be used to determine importance.  Magee used 3%.  So this penetration is not definitive yet.  

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Down and down she goes and where she stops…..

Posted on Feb 18, 2009 by .

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The wisdom of sticking to the trend and not trying to double guess the bottom was vividly illustrated yesterday with the Dow down almost 300 points.  It appears that a test of the November lows will occur and if that fails the yawning chasm awaits.  We read the markets’ recent reactions as a vote against partisanship in Washington and an expression of opinion that the stimulus plan is not big enough.  At the very least it is a vote of no-confidence for Washington.  The hackneyed,  lame battle cry of “tax cuts, tax cuts now, tax cuts tomorrow, tax cuts forever” will be heard as the stern of the Titanic disappears beneath the waves.  What is needed is a tax on financial instrument transfers to require the markets to pay for their drunken spree.  Meantime the virtue of not listening to pundits and watching the chart is once again illustrated.  Many advisors attempted to time the bottom of the market.  Dear readers this is a time when ordinary systems and methods have been blown to bits.  Only a wise and experienced reading of the chart and your own prudent decision making works here.  Fasten your seat belts.  There may be some rough weather ahead.  

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