Graceland Updates 4am-7am

May 13, 2010

1. I spoke recently about “the great accident” in the Dow and the critical importance of staying focused on gold as the ultimate asset, versus naked shorting the Dow as a maniacal top calling gamble.

2. Our own Mr. Macro, endorsed by mega gold investor King Kong as arguably the best investor in New York, noted to me last night, “There’s a rumour in the last 30 minutes of trading in shanghai today that the govt would suspend shanghai A IPO's - this is VERY constructive for the mkt. One other thing, at the first Hong Kong land auction this year, prices were 1/3 less yesterday, than the auction last year. Time for china stocks to rally.” –Mr. Macro, May 12, 2010.

3. I was a buyer of the FXI-nyse, the Xinhua 25 ETF of the 25 largest Chinese companies, into last week’s Dow “accident”. I told Mr. Macro that the Dow chart looks “upside EXPLOSIVE” to me, and he agrees. The Xinhua also looks very powerful right here, right now.

4. Sell in May and Go Away means “take a break”, not “Short it big, I know this is the ultimate top”. I posted a couple of video reports on the website on the Dow and FXI last night. If you joined Team Dow Shorty Pants, and you didn’t book profit after the Dow fell 1000 points, I would suggest that if those charts play out like Mr. Macro and I think they could, you may be in serious hot water very quickly.

5. Here’s a look at the Dow. Dow Industrials Daily Chart

6. Notice I’ve drawn in 6 red gridlines. HSR lines. HSR is horizontal support & resistance. Support is DEMAND. Resistance is SUPPLY. Notice the lower blue demand line. The Dow did NOT break the previous 9800 area low. The Dow Transports look even MORE powerful. During the great “accident”, they never even came close to breaking the low.

7. Dow Transports May 13

8. The Dow Industrials have blasted thru 4 of the 6 resistance bands already, and only now are the oscillators hooking into buy signals. The Dow Bears are correct there is going to be a crash. In my view they are just “slightly” off in their timing.

9. I think the crash likely comes from some point 10,000 to 100,000 Dow points HIGHER than where we are now. The bears are taking on the US dollar printing press AND the gold punisher in their maniacal attempt to correlate the implosion of sovereign debt with the Dow.

10. A number of you are writing in about how to protect your gold profits. While there’s no question that the gold price on the daily chart is overbought, I think these questions are themselves an indication that we may be headed higher, MUCH HIGHER, before a MAJOR sell-off takes place.

11. Mentally, I don’t think most of you have the emotional control to sell out of gold now, watch it rise to 1400-1700, then tank to below where it is now.

12. I think you’d be overwhelmed with the “I’m missing out!” emotion. The greatest protection you can give yourself is to take a LITTLE off the table into strength, systematically via the Pgen.

13. With gold stock, I’m running tight range pgens, but expanded sell target outer core (swing position) settings.

14. That action keeps me IN the game. I’m much less worried about a decline in price than I am about missing out on massive upside now. Remember, I’m a person that was ANTI-JUNIORS until we crossed the neckline at 1033 on the weekly gold chart, ushering in the third phase of the gold bull market. I totally ignored most of your emails about juniors until I saw that neckline taken out.

15. That crossing of the head and shoulders neckline was the gold juniors LIGHTSWITCH, and it was flicked to ON. My advice remains unchanged that you could sell 2-5% of your bullion and gold stock into strength in a pyramid formation on each $50-100 move in the gold price.

16. The head and shoulders pattern is in full force now, so I don’t want to take myself out of the game based on dollar numbers or percentage gains in my POSITIONS.

17. This is the Gold Parabola, and tactics required in a Parabolic move require a little different mindset than during a regular bull move. LOOK AROUND YOU AND LOOK WITHIN YOURSELF. Do YOU feel GREED?

18. YES OR NO? I already know the answer and it is: NO. The gold wiener patrol is not chasing price here, other than to play day trader, which is the stupidest possible tactic during a Parabola. Focus on what you really FEEL, not what you THINK. If you FEEL afraid gold will fall, odds are high that it will NOT.

19. Gold is more likely to begin acting like a sewing machine needle, piercing downwards but rising up just as quickly.

20. I firmly believe the “protection” most need is emotional, not financial.

21. On that front, I want to draw your attention to the Golden Surveyors. Players like T-Rex, King Kong, Mr. Maco, GoldLion and the Brain are HARDORE investors, and are all about PRICE in the market. “I buy here, and I sell here and nobody is going to change my mind”.

22. The pgen is a risk and reward management tool, compartmentalizing risk. As an example, the merkel circus created horrific action in the euro, but using a foundational 70% long 30% pgen, not too much capital has been allocated, profits have been booked on both sides, and probably 5-10% of the pgen’s capital has been allocated.

23. With GOLD, the action is bigger (and better). More capital, MUCH more, is on the line. At least it should be. The odds of the euro really going to zero are small, but vastly higher than the odds of GOLD doing that. What the Golden Surveyors bring to the table is not hardcore advice, but a means of relaxing themselves to handle the Gold Parabola.

24. Regardless of my blatant “subscribe to the surveyors!” push, many of you need to RELAX. “Sewing Machine Down Days” are going to become the NORM in the gold market. You can’t live EVERY day like “it’s all over, now it really is!”, or you’ll NEVER make thru to the other side, to the honey jar, which is when we begin phasing out of gold, and into bonds.

25. We rose to 1247 yesterday, and down to 1235 last night. Was I a buyer into the weakness after selling into the strength yesterday? Yes. Was it a Babe Ruth sized buy like at 905? NO. But gold 1235 is still….

26. GOLD.

Think about that….

Cheers,

Thank-you

Stewart Thomson

Graceland Updates