Stock Trading Game

In the last post about the things going on in the precious metals arena of the stock market games, I talked about the oversold condition of the Gold Bug Index, and that it was so skewed that it had gone beyond the 200 day average, which is usually a good place to consider entering a market. And when it reached the .618 fibonacci retracement, I thought this was the right setup, but it went beyond that to a rarely seen fibonacci retracement of .84 ish, that’s why grandma knows we are going back up again.

The pendulum has swung to far, she’s seen it before. The stock trading game is just history repeating itself over and over. Human nature doesn’t change, its as old as time and grandma.

I wouldn’t bet the farm, but the barn and the chickens are being considered. Below is a weekly plot which usually gets rid of the noise of the day-to-day trading and as you can see we have a fairly orderly plot here, with a long established trendline, as shown in blue. As of Friday, we are just butting up against the trendline, and we probably will bust through next week because 5 out of the 6 indicators below are all flashing buy signals.

The signals from weekly charts carry a lot more weight than signals from daily charts. They are more reliable for trending, because of the filtering that naturally occurs with the passage of trading sessions.

In the text that follows, that I have tried to write two other times, but each time when I went to save it, it was gone. This is number three, thank you Internet Explorer 9, “YOU PIECE OF CRAP”. Anyway, I feel better having said that.

What I was trying to say was, if knowing how the lines of the fibonacci ratios are, 0% and 100% being the boundaries and 50% the mid point, and the ratios .382 and .618( which when played with will blow you away) , laid out on either side, as in the black lines of the chart below. You see the three black lines grouped together, these are the ratios .382, .5 and .618, so just for kicks, I looked for the line of best fit for these three ratios, as you would if this were say scientific data or some study, the line of best fit. The population is big enough, like the whole world, just statistical stuff, right?

So there it is. And the boundaries of this data says that a 100% retracement, if this were in fact true, would be the value 150.27 and the 0% retracement, which would be the maximum for this move, if it were true also, would have a value of 716.30. Cool eh, or huh for you folks to the south.

Just to be clear, a 100% retracement of value means that the value has returned to its starting point and 0% retracement of value means it reached its max value and stayed there.

It has been brought to my attention that people don’t understand the orange line that runs vertically through all the graphs. Because all these plots are over identical timelines, but measuring different aspects of trading for that period, you can draw a line through them to see what a particular value of any of the plots was in relation to one another and price.

But there is something else in this chart. “Do you see it grasshopper”.

“Next post grasshopper I will tell you, when you can read the chart you are ready”. Charts courtesy of stockcharts.com

Grasshopper, I know you would probably forget by next post so I’ll tell you now, because I’ll probably forget too. Have you ever noticed that the spacing for an interval on the value axis (right axis) is greater at the bottom of the price chart than the same interval of value at the top of the price chart. Well, that is what is called a semi-log plot, log meaning logarithm, but we’ll say log. Semi-log plots take a function that is exponential in value and make it into a straight line. So when you see a straight line on semi-log plots, you know it is a curved line, which we call parabolic. This is a parabolic market. So that is why the space in the chart above from 150 to 355 is much larger than the space from 507  to 716. Pretty much the same difference, but look at the proportionality on the chart. Cool eh, it’s all just math.

We don’t really say “eh” after everything.

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When it comes to the stock trading game it is always dangerous to think that you have the market’s number. Just when you get to thinking that way, the market will bite you in the posterior to remind you who is really running the show.

Well I have the teeth marks to prove it. I said that “here we go” in the gold bug index, ($HUI) because it appeared that the full .618 fibonacci retracement had been reached and other indicators were flashing a buy signal. As well, we were below the 200 day moving average.
That has to be a buy. NOT. I was wrong.
There is one more fibonacci retracement that is not talked about much because it rarely happens, it is at about .84 ish. This is how badly they beat this market up.
I also said, watch out because the professionals are going to beat hell out of this market. I was right about them beating hell out of gold and silver, but they did it a little early, I figured after this next move up. This is so typical, they lull you into thinking you have the pattern and then they scoop you. Maybe they’re planning two beatings, wouldn’t put it past them.
So, we hit the .84 retracement and we got way under the 200 day average.
These are one of those times I said that even grandma knows its a steal and true to form, there is heavy buying by governments like China and Iran. The hedge funds are loading up as are the banks and the professionals are covering their shorts that caused it to tank in the first place.

I don’t know if there is going to be a summer pullback or that was it, but it appears we are going higher from here, basically cause it is not likely to get more skewed in to the downside, odds favor a return to the mean at least, but my sense it there is too much momentum to the upside. The indicators are all coming onto buy signals. The Stochastic, William’s and Rate of Change are a “go” and the MACD is a day away. We were interupted by the banksters’ shananagans but they made their play and now it’s over. Shananagans are hard to predict, but I did say they would do it. This is a long established pattern for them. I was just wrong about when or maybe there’s another beating coming after this move.

This is the chart of the commodity Silver (their favorite target) and the thin blue line overlayed on the graph is the $USD (US dollar index their favorite cause) and it is easy to see when it needs support the banksters, hammer the precious metals with their naked short selling of commodity contracts over at the CME, where they don’t actually own the metal they sell, “it’s well we’ll pay you later”, but the thieves get the money for the sale. You’ve heard of “a license to steal”, well this is the daddy of all licenses to steal. Sanctioned by Uncle Sam at the expense of commodity holders in the rest of the world. Do you think the Chinese or Russians are happy their precious metals are being hammered by a bunch of crooked bankers in the USA. They are pissed.
The general stock market is looking sick and this can go either way for commodities. If we get QE3 to save the market again, which seems highly likely, then the $HUI will reach escape velocity, but if we get a liquidity crunch from a market meltdown, then it will suck commodities down as anything of value is sold to cover their derivative plays.
Be careful, be nimble…you are playing with the big dawgs, they are nasty.
I found this article by Jeff Nielson who blogs at www.bullionbullscanada.com written on 22 May 2011. Its long so I condensed it a little, but what he says is what I’ve been saying, only he does it more eloquently and with a thoroughness that is easy to follow. I’ve colored his words “green” to distinquish them from mine.
In my recent review of the bankster assault on the silver market, I alluded to the fact that we knew there was no “bubble” in the silver market, since there had not been the build-up of inventories which must take place before any commodity could ever achieve the status of an asset-bubble. However, the concept is so important, and it is not being forcefully articulated by others within the sector, and so I am devoting an entire commentary to this totally elementary concept.Just as the laws of supply and demand dictate that the price of silver must go much higher. Note that when the CME Group launched its illegitimate manipulation of the silver market with five rapid-fire increases in margin requirements (the last four of them undertaken while the price of silver was falling) that inventories have still been falling.
Thus, not only do we know that $50/oz can’t possibly represent a “bubble” price for silver, we know that it can’t even represent an “equilibrium price”, since it is obviously not high enough to prevent further inventory-destruction. We will know when we begin to approach that equilibrium price because the silver market will give us a very obvious signal: inventories will start to grow again. Until the process of restoring inventories begins, this market must continue to become even more unstable: plunging downward in response to ruthless manipulation, followed by immediately rocketing upward when the tortured laws of supply and demand inevitably reassert themselves.
It is here that I must repeat another previous discussion, since this is another argument which must be made as often and as assertively as possible, and yet to the best of my knowledge I’m alone in doing so: “shorting” destroys markets, while “hoarding” preserves/conserves them. How did the silver market ever get to such a position of totally (and dangerously) depleted global inventories? The simple application of supply and demand.
Decades of ruthless price-manipulation by the banking cabal resulted in silver plunging to a 600-year low in price (in real dollars). Spurred on by these absurd prices, demand exploded – or to be more precise: industrial demand exploded. At the same time, such ridiculously low prices for silver made most recycling economically impractical, since silver is so precious that most of its applications require it in only modest (or even “trace”) amounts.
The laws of supply and demand do what they must do in such a situation: they destroyed global stockpiles, as ultra-low prices stimulated ravenous demand, while silver being so grossly under-priced forced the closure of 90% of the world’s silver mines. This is why market-manipulation such as what has been undertaken by the banksters can never be permanently effective.
One the reasons that the decades-long manipulation by the bullion-banks is so reprehensible is that the further prices are pushed below their real (equilibrium) value, and the longer they are held down there, the more violent the upward pressure when manipulation fails. The 600-year low in silver prices has led to a 600-year low in inventories. It will take decades to rebuild them, as somewhere around 75% of previous global stockpiles are now strewn around junkyards and landfills all over the world, and (as stated earlier) much of that silver is in such tiny concentrations that it would/could never be recovered or recycled.
Similarly, the silver mining industry is still decades away from regaining its former health, even after a tenfold increase in price. Indeed, the most telling statistic that we are light-years away from any “equilibrium” in this sector is that the vast majority of mined silver is still produced as a “byproduct” (or accident) of other mining – most of it from base metals mining.
At $40+/oz, the price of silver was still not high enough to stimulate mine supply to the point where primary silver production can take over in driving global supply. This is an obvious aspect of economic fundamentals which has been brought to the attention of people as early as 2005, by silver commentator Rusty McDougal – and yet it is a concept which not only escapes the entire mainstream media, but even most of the experienced commentators within this sector.
We can never, possibly reach any intermediate “top” in the silver market (let alone a “bubble”) unless/until inventories are rebuilt to healthy, historical levels (somewhere between 3 billion and 6 billion ounces). Current, dangerously depleted inventories are considerably less than 10% of that equilibrium level. Obviously, producing a 1000% increase in silver inventories will require much, much higher prices.
As guidance, if silver were priced today at its historic ratio to gold (approximately 15:1) it would be at $100/oz, not $35/oz. Of course that ratio existed during eras when silver inventories/stockpiles were healthy. The inventory-destruction caused by decades of bankster “shorting” (and other forms of manipulation/fraud) will take decades to remedy – after silver approaches something close to an intermediate equilibrium (at a price ratio considerably below 15:1).
We will get some idea when we are approaching that medium-term equilibrium by watching the silver miners. Unless/until primary silver production once again accounts for a majority of new supply, it is impossible to ever reach that intermediate “top”. Tautologically, when most silver is still produced as a byproduct this means we have not even seen a “supply response” from high prices.
Readers must understand the implications of this dynamic. If we do not see both a market correction in terms of (radically) increased mine-supply and reduced demand, then this means that the “correction” toward equilibrium can only occur through demand-destruction.
Here is where things get “interesting” if you are a silver investor, and highly unpleasant if you’re JP Morgan (the largest silver “short” in the history of the world). As I mentioned previously, a large percentage of silver used industrially is used in very small quantities. In economic terms, this translates into the fact that silver demand is very “inelastic” with respect to price.
Putting this in every-day English, and applying this to the market, it means that relative to virtually any/every other commodity on the planet, the demand for silver changes very little in the face of rising prices. Indeed, we have already seen this proven: after a tenfold rise in the price of silver, demand is still increasing rapidly.
In other words, the combination of highly inelastic demand and totally depleted inventories guarantees that even if silver were priced at a semi-rational price today (i.e. $100/oz), this would still have only a minor impact on demand. In fact, because (distorted) markets tend to “over-shoot” when they snap back toward supply/demand fundamentals, it is uncertain if silver demand would even begin to decline at $100/oz.
Readers must also understand that hard commodities like silver require a very long supply process from discovering more ore to the point of more refined silver reaching the market. Typically, this is somewhere close to ten years. However that would be ten years from the time that prices are high enough to produce sufficient “stimulus” for more mine-supply.
Continued, relentless manipulation by the bullion banks (aided and abetted by corrupt regulators and administrators) has prevented this “ten-year countdown” from even beginning in the silver market (to any major degree). This has many implications for silver mining (and silver investors). Not only is this guaranteed to be a “growth sector” for many years to come, but those miners who have been first to get to market to meet the ravenous demand for silver must inevitably be rewarded by the market – as a lack of competition/alternatives squeezes investors into a tiny number of companies.
Indeed, the tiny silver mining sector doesn’t even equal the market-cap of one multinational oil company. In a world where $10′s of trillions in liquidity is sloshing-around, there is “room” for no more than $10′s of billions of that capital in this (at the moment) microscopic sector. This is yet another reason why we can only laugh at the “Chicken Littles” who keep clucking “bubble”, when we see less than 0.05% percent of global capital invested into one of the world’s most important commodity markets.
The Chicken Littles call silver a “crowded trade”, and in a sense they are right. But the silver sector is not “crowded” because there are too many investors already here. Rather, the tiny silver sector is “crowded” because virtually no one can get in. Of course when the business media (and its world of “high finance”) talk about a sector being crowded, they are referring to institutions and investors controlling $billions.
This means that for us small investors, there is still no problem “squeezing into” this market. Indeed, the latest bankster operation can be thought of as nothing less than “rolling out the red carpet” for people just entering the silver sector today. Handing new investors a “sale price” which they will never see again for the rest of their lives is a pretty good inducement to draw yet more people into the silver sector – and yet more “bad news” for the silver-shorts.

Jeff Nielson

www.bullionbullscanada.com

So stay alert, there is going to be extreme volatility in these markets that make up the $HUI and the big dawgs definitely have their fingers on the pulse of this organism. I say organism because it is the living struggle of greed and wreckless toying with people’s lives that is dying while change is just over the next mountain to climb.

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I know I’ve been harping about the stock trading game in the HUI index, (gold bug Index) but remember I said that we should be heading back up after the cycle low finishes. Wow, right on the very day it turned. The cycle lows are the blue vertical lines. What can I say, is that not precision. These guys are good, and right under most peoples noses. Most people don’t realize how manipulated this really is.

One thing, everyone was getting down on the PMs, that’s one sign the bottom is near. Well, here is the last hurray before summer. I think about 636 is a realistic target. remember, I told you that at the end of this move, the professionals will beat hell out of this market and let it lick its wounds for the rest of summer. In late August they will revive the patient for Indian wedding season. You laugh, but they consume 700 metric tons each year for wedding gifts. That too is part of the cycle. But don’t forget the Chinese, they are a huge factor as well.

Take a look at how these basic indicators line up with past lows. The RSI (relative strength index) is gaining strength nearing 50%, a great entry point for RSI. Then we see the STO (stoichastic) is turning up in oversold territory, looking very positive. Finally, the CCI (channel indicator) is saying we were way out of our normal channel and are heading back to business as usual. You can also see in the graph above that the trading is on the lower limits of the Bollinger band, and it does not stay there for long, it wants to return to the mean. Also, in each low, the 200 day average is approached (the pink line under everything). The 200 day is usually a great entry point.

Here is another view, they are the graphs of GLD (the GOLD ETF) and SLV (the SILVER ETF) showing how the bargain hunters are back buying while the media is poopooing PMs. Notice how the Bollinger bands are at extremes on the cycle low and on cue, everyone loads up for the trip to the bank. Below, I threw in graph of the index with an indicator called the pitchfork, the center line is the trend line and outside lines are the boundaries of the trend. Just to show you this indicator. Snap shot taken a few days ago, before cycle completed its low.

So what is the point of all this graphing and voodoo.

First rule, you pretend you are in a room and the only input you have is, the open, high, low, close and volume of each trading session.

Don’t read the papers or listen to the media, because by the time they get wind of it, its over. Those who listen are the bag holders.

So, given these parameters, anyone no matter where they are, as long as they have the data feed and the TA software, which cost $1/day, can prognosticate with the big boys.

But what is really great about it is, we all come to the same conclusions simultaneously, and a flow of money results in driving markets in the direction of the money flow. There are hundreds of thousands of people around the world who exercise this democracy of money for their own benefit. These are the same signals the turn on the proprietary trading platforms of the banks and hedge funds.

And you can do it too. We live in interesting times.

Sign-up for the free course and I’ll send you examples from time to time so you can learn the language, and as always, may you prosper.

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The stock trading game is full of tradition, crazy sayings, outrageous characters and through all of that the generations have tried and still do try to be the prognosticator of future events. Why is so much energy put into this pursuit?

It’s the money stupid! Get with the program… just kidding, sorry if I hurt your feelings.

It seems that when I write about the dirt I get more response. So I will try to throw in some dirt once in a while.

You see it really isn’t a game to put your savings into something that varies in value. It’s a game to the guys that get you to do that. You know, “money for nothin’ chics for free”, that was the line to a song, back when. Try explaining how you lost the families savings to your spouse as the tears well up in their eyes. Its not a game. It ends marriages, friendships and family. The financial industry wants you to perceive it a game, “it’s fun for you to give us your money”.

Games are supposed to leave you richer in spirit for having played.

Legally do’in a flim-flam on people is not a game, but it has been happening in the markets. The regulators should be ashamed of themselves, but everyone has their price, me too. Getting away with it is so nasty. We have taken the brightest from our universities for years and taught them how to steal, forget their conscience and think of just themselves, doesn’t matter who is ruined. And that same attitude has filtered down to John Q. Public. And now we are in a world of manure. Wow, all that just came out. I am full of contradictions today, but I feel that rant was epic.

First I have to say I am happy that tax season is over, when people wave money at me, the whore in me can’t resist.

What I wanted to finish off was that I noticed the the $HUI is setting up for a final push before summer. I could be wrong, but probability is on my side so the doubters have the low ground. Let’s look at friday’s chart.

charts courtesy of stockcharts.com

I added a cycle for lows to show how cool this tool is.

There is a definite cycle to the gold and silver markets, because the big guys make it that way. They are called the professionals, and you can see their activity in what are called the “Commitment of Traders” report put out by the CFTC which is a group that is supposed to see that there is no concentration of power in any commodity that trades. Many have tried to interpret this document, and there are those that have put a lot of study into their shenanigans and who believe it to be bovine droppings.

Anywho, look at the fibonacci fan lines (the orange lines) off of the trendline (492 thru 609). Is that not cool how it contained the rally, we can now have hope or even confidence that the beast is alive. It was contained at 0.50 the middle fibonacci retracment line, which shows momentum to me. Onward and upward Batman.

There is another thing I noticed. So all the voodoo types out there that think elliott wave is bullshit, stop it. I’m a fan, I won’t have it in my presence. Get off my blog. All others can stay.

Anyway, a rule of elliott wave is called the rule of alternates. ooooh, more voodoo. It says, that if wave 2 is a simple abc, meaning we go down for A and have a sucker rally back for B then the mother of all spankings down for C. Well I did embellish a bit, but C is the spanking.

I digress, if wave 2 is simple then wave 4, the other regression to the overall trend, is a complex wave, sometimes taking more time to resolve itself. The cycle tool says May 9 wave 4 is done.

After all that, what did I notice? Well alrighty then, wave 2 is simple and wave 4 is complex, that’s why I think we are beginning wave 5 soon at the next cycle low, into the last hurrah before summer. One more thing, wave 4′s usually come back to the level of wave 1 top, for a kiss good bye and we had our kiss, and what a kiss it was.

This is the tradition in the Gold and Silver markets because the CFTC says it is necessary for more than 90% of the gold and silver contracts to be in the control of 3 or 4 banks and that there should be limits on everyone else. The commodity is supposed to be trading fairly. There are size limits for everyone else, except these guys, and you can probably guess their names. This was set up to protect the american dollar. Ronald Reagan started it, and this scam has the blessing of the powers that protect the dollar by making precious metals unattractive to hold as an investment. When the value gets too high, they are allowed to sell what they don’t have, real gold and real silver, in your hands known as paper gold & silver and derivatives, and the thieves get the money to boot, you and I would not, it would go into a margin account. They owe so much to the system, that is cannot be paid back, not in real metal. The deal at the commodities exchange when you borrow a commodity and sell it is that you have to come back with that amount of commodity. It’s called selling short, and it is a part of normal business. What is not a part of normal business is not coming back with the goods. That’s what these banks can do and they can defer and defer with more paper, that basically did Leman Bros. in.

Whether that is good or bad, they are loosing their grip, because it is the rest of the world that is on the other side of the trade when it comes to the real stuff.

When this is playing out, at the end of May or mid June, check your greed, don’t let it get the better of your objectives. The dollar is low and metal high, the banksters are waiting to beat hell out of this market.

Be careful…these are heavyweights, be nimble, float like a butterfly, sting like a bee. God bless you Ali.

Take the money and run, may you prosper.

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