GLD, SLV — The long view

Posted on Apr 10, 2010 by in Letters

2010-04-10-slvwbpSLV.  Notice anything different?

Of course not.

2010-04-10-gldwbpGLD.

What you are not noticing is that these are weekly charts.  The reason you don’t notice anything different is because price behavior is fractal.  Fractal means it is self similar at all scales.

Magee never heard of fractal.  It hadn’t been invented in his time.

We jest, of course.  Of course he had heard of it.  He just didn’t know the word was fractal.  He knew the concept.  It’s like they don’t have length in French.  But they have something like it, as some wit remarked. (longueur) It was probably Malraux.  It was either Malraux or Karnak.

But we digress.  The crucial importance of these charts is that they are crucially important to the long term investor.  Using weekly bars you can operate the Basing Points Procedure, using three bars away and rise above the weekly noise and basically stay long the major waves of the market.

In SLV here the Basing point is 10/26/09 at 15.82.  Stop, 6% filter:  14.87.  This is strained to the breaking point with a low of  14.37 2/1/10.  But since our stops are close only we are not ejected as the week closes at 14.90.  Ergo (or ergot) (donc) this system is telling us that we should be long and should have been long the whole time.

10/26 was also the Basing Point of the gold, but it was not so sorely tested, and the next Basing Point and downwave end was similarly 2/1.

In the end, struggle how you might, the long term investors always win.  It’s the market’s way of teaching us patience.

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