Graceland Updates 4am-7am

Dec 17, 2009

1. From 1110 the gold market leaped to 1143 last night. And close to those levels during the day.

2. A number of you reported kachingos in oil and gold on yesterday’s upmove.

3. The daily range of a market-traded item is simply the difference between the high and low price for the day. Average True Range is a technical indicator based on some math calculations that attempt to get a 14 day average and that “truer” than the simple high minus low.

4. Goldflower has run backtests on gold, and it depends on the type of market you are in as to whether ATR or the simple high/low generates more profits. Leaving all those details aside in his capable hands, not mine, here’s the bottom line:

5. Today gold is down $23 from the highs at 1143 hit last night. The average true range for gold is aprox $24 right now. Here’s this morning’s gold chart: gold dec 17

6. Gold is trading in a rectangle formation. A rectangle has a 67% chance of breaking out in the direction price was going in when it entered the rectangle. In this case that is down. The target is around 1080.

7. Running a pgen that buys gold every $7 down and sells every $21 up makes common sense in the current market. If you are a bear, it would be shorting gold every $7 up and covering every $21 down. I mention $21 so you are operating WITHIN the ATR for gold. Personally, I would never allocate more than 30% of my gold risk capital to shorting gold. I’m not the Brain.

8. Some say, “a bull market forgives misktakes, so running a long gold pgen in a bull market forgives errors.” I would say that the fact gold is a timeless asset is far more “forgiving” of your errors than whether this is a bull market or not.

9. So we’re close to the range here this morning, with a $23 move. And this is the BENEFIT of keeping an EYE (not an obsessed one, however) on ATR. To give yourself some CALMNESS when you get up and see gold $23 “in the tank”.

10. The reality is: It’s not doing anything outside of the normal range this morning…

11. In fact, it is near the extreme of the average daily downside, so you can put away the adrenaline rush and replace it with “ho hum, another day.” Another day on the gold BUY.

12. And in fact price has indeed stabilized at the 1122 level.

13. Attention gold PLAYERS. YOU need to look at the average true range for the WEEKLY or MONTHLY chart. Leave the ATR of the 1 microsecond chart to the golden eggs frying in the banksters’ frypans.

14. The weekly chart shows a current ATR of about $40 while the monthly sits at about $100.

15. I have mentioned the “Eleven Points of Clarity”, meaning looking at gold as a pyramid of 11 stories high, $100 each storey.

16. A $100 range in the gold price is the NORMAL range. There is nothing to freak out about. And obviously if a $100 range is NORMAL, you want to be a normal BUYER of $100 price weakness.

17. Do you want to be NORMAL or a gold WEIRDO? A weirdo engages in actions far outside of the NORMS.

18. I was at a café last night with KingKong and a friend of his. Talking markets. His friend mentioned that there seemed to be “suprising strength” underpinning gold into the 1110 area. I mentioned the physical market. But more importantly than that, it is just the NORMAL range for gold for the month. So when we reach the lower end of than norm, and we have, it is normal to expect stability.

19. Again, Monday saw EXTREME fear in the gold market into 1110. The gold bulls are talking “the bottom is in” with the move to 1143. I was a seller into 1140. Not a bottom caller.

20. When I talked about buying gold into 1110, my “thundering” really related to both one of the eleven price points of gold clarity (Gold 1100) and the reality that we were stretching the normal low end of the gold range price for the month.

21. When you are dealing with the world’s lowest risk investment, gold, and it falls $115 during the month, you are pushing the extreme low end of the normal range. If you are a buyer at that point, you are normal.

22. If you are a bailer, by definition, you are a gold weirdo. You decide you who want to be. I’ve made my decision. I’m gold normal.

23. IF you have REAL FEAR about a US dollar rally that could harm gold, my suggestion is you run a buy pgen on the dollar. Selling all or a huge whack of your gold because the dollar might rally, in my view, is stupid. At the same time, you are not Jim Sinclair or the Brain. You can’t operate in the market like riding a bike. When discomfort becomes real fear, you need to ACT to manage that fear or you WILL act in the market, and do so STUPIDLY.

24. An ounce of prevention is worth a zillion pounds of cure. Know your REAL emotional greed and fear zones and do NOT operate IN those zones. Do what it takes to maintain a state of mild confusion, mild “wanting” rather than greed on price strength. And mild discomfort, not “terror” or “fear” on price weakness.

25. The UUP-nyse is an etf based on the usd index. It moves about 20 cents a day in range, and is $22 or so now. So the trading portion needs to be set to buying about every 20 cents down. And selling every 60 cents higher. The US dollar isn’t a penny stock. The daily range, the volatility in essence, is what it is.

26. King Kong mentioned that he spends a lot of time reading various analysts and writers, doing research on gold. I don’t see that as necessarily as efficient as it seems. I like to “force” people who are highly successful in a particular field, to direct that energy into the market. Focusing that brilliance and energy into the operation of a single “market tool”. I don’t mean a single technical indicator. I believe those who try to do that are doomed to fail.

27. Jim Sinclair and The Brain are not market “analysts”. They are: Fighters. It’s very important to approach economics the same way. That is why I’m setting up marketfight.com with our resident golden bear. The chat rooms that exist now are not STRUCTURED for FIGHTING. When you are thrown a topic and forced to do battle on that topic, it becomes TRAINING versus EXERCISE. King Kong has shown me some tremendous thought process, but I think his time is being diluted by reading analysis writers with good ideas, but not necessarily ideas that translate into consistent winning in the market.

28. When you hear economists talk on TV and in their letters, there is a certain “respected” MOOD they convey. I’m not interested in “HappyVille”. This is the MARKET. It’s a war, a fight.

29. So, yes there is a planned Graceland “chat room” for the New Year. STRUCTURED into FIGHT RINGS. With time limits. ROUNDS. Those rounds would be SCORED by the chat room audience. A winner declared and a loser. Do you have thoughts and analysis about gold? Let’s take those ideas and thoughts from the realm of hobby time to: COMPETITION.

30. The End goal is of course: Clarity for All. What I envision is King Kong and GoldBear as Graceland Chat Room “Overlords”. This could develop into a GoldBear ARMY doing battle against a GoldBull ARMY. I’d like to invite various writers into the fray. I’m also looking at building marketfights.com as a sister site to marketfight.com. With a focus on technical analysis battles. KingKong’s dinner mate last night may want to think about that…

31. I suspect many of YOU are in the same “goldboat”. Scanning thru many gold writings and analysis attempting to figure out what is going on. When you take economics and market analysis into competition mode, you increase your time efficiency drastically. It becomes ORGANIZED. Together we can probably take most of what is written daily on the gold sites, toss it into the fight ring, and find out what is practical and effective in the market, and what is irrelevant.

32. On my end, the Pgen WORKS. Many of you felt too “light” as we went into $1225. WAY too light. Still feel that way now? No. We’re on the gold buy while the rest of gold land wonders if it’s all over. It is all over. For them. Feeling light into strength is how you are SUPPOSED to feel, as a professional. Don’t fight that feeling. Embrace it.

Cheers,