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Jan 26, 2011

1. Open Interest. What is it? Open interest defines the number of futures contracts outstanding in a given market. In the GOLD market, Trader Dan Norcini notes a huge drop of about 80,000 contracts occurred on Monday.

2. In a futures trade, for each contract that is long (bets that gold rises against paper money), by definition, there is one contract that is short (bet gold falls against paper money).

3. At least, that is how the buyers and sellers see it. But really, there is just one contract, and there are two parts to that contract, the short side, and the long side.

4. So, if there are 800,000 shorts and 800,000 longs, the open interest is 800,000, not 1.6 million contracts.

5. And it turns out that 800,000 was the approx. open interest number as of last week's COT report. The 80,000 contract drop that Trader Dan is talking about translates basically, and sadly, into a 40,000 loss booking show on longs by the funds, and 40,000 shorts of booked profits by the banksters.

6. Yesterday featured more loss booking by the funds and the gold community, and more profit booking by the banksters. Goldman Sachs has joined the "End of QE coming in June, gold's run is over!" party.

7. It's not that much of a party for Institutional land right now. They were loaded up on leveraged gold longs, and now officially are in forced liquidation and monster-loss booking mode, at the hands of the banksters. One day the fund and gold community ants are smoking bankster cigars, the next day they sit dead on display in bankster jars. Nice rhyme. Not so nice... truth.

8. Speaker of truth, I've faded off mention of Elmer Fudd Public Investor, because he's really becoming a non-factor in markets for 2011. His ongoing impoverishment is removing him as a bankster target slowly but surely. The bond market is his final goodbye arena. Goldman Sachs promises him a slow death there, not a crash. We'll see.

9. A number of Fudds did come into gold in the $1000-1400 area with super plops of paper money, booking gargantuan losses on that paper money as they did so, and are probably now racing to their golf ball advisors with the Goldman Sachs and other institutional "It's all over for QE, it's all over for gold, it's all over for Fudd" reports clutched in their broken price-chasing hands, demanding to know why their golf ball advisors didn't see this coming. They are considering booking a new monster set of losses now, on gold, and have begun begging the giant paper money photocopier (which chapter one of the bizarre and surreal handbook tells them is God), to allow them back on their knees at their old spot in front of it. End of Fudd report.

10. After really really making a top against the dollar, then super really making it, wheat once again went to another new high (top) last night, for this run. All top callers with no core wheat positions to your name, but a closet full of Enron skeletons, please report for duty tonight, for your 5000^th wheat top call against paper money. My long term target for wheat remains: $20 a bushel. If wheat CRASHED right now, price would likely be ABOVE where the first top callers started screaming at you to sell. That's why core positions are never touched, never pretended to be trading positions, "to get them back cheaper after selling now". You'll get poor, not cheaper wheat, with that approach.

11. If America went to an across the board 100% taxation rate, the Federal Govt deficit for the year could not be paid, but institutional land tells us that a 3-4% growth rate in the economy against the backdrop of oil back on the road to $147, then $200, is going to fix everything. You decide if everything is fixed, or institutional land simply wants everything to be fixed.

12. SanGold was a gold community darling. I added it to my Flying Five portfolio onwww.gracelandjuniors.com and warned that you need to be prepared to PGEN it to zero, not wave a "the directors are my heroes" flag. If you want to MAKE MONEY on it. Price on the monster head and shoulders pattern slipped below the $3.00 neckline waves a couple of days ago, and then yesterday the tidal wave of paper money blood arrived.

13. I had my own wave arrive, too. My wave of BUY ORDERS. I told you I put my paper money where my gold mouth is, and in the case of SANGOLD that is the $3 to zero pgen discomfort zone, not the directors fan club zone. Never mind the big mine reports, right now the stock is trading like THERE IS NO MINE. Which is why I'm on the buy, all the way to zero.

14. All juniors stocks have to be bought to zero. These are not blocks of gold bullion, regardless of whether they have millions of ounces of bullion in the ground. They are high risk entities and the banksters are working the stocks in the market all day long. GoldLion can testify to thousands of missed and rigged fills. That's life on the juniors highway. The banksters don't care if the companies have millions of ounces, not in the intermediate term. They care about winning in the market.

15. With bullion, if you get caught in a dollars per ounce air pocket zone, where you can't be a buyer because you bottomed called it and failed, it's disappointing, but not FATAL. Gold is still money, and it will rise against all paper currency over time as all paper currency goes to ZERO against gold over time. With juniors, the volatility is too big and issues like dilution and the short life spans of all human beings that are the company directors, are huge factors. You can find yourself, like with SanGold, in a sort of "new reality" zone. Where all that was "impossible", is suddenly the NORM.

16. Sometimes the banksters pass properties amongst themselves for DECADES before developing them, ruining various groups of shareholders as they do so. You really need to limit the risk capital you lay into individual juniors in any given price zone, so you have capital to bring it forwards when everyone else is liquidating. As they are now in most juniors situations.

17. Trader Dan Norcini is the best technical analyst in the gold community. Gold Lion is the best juniors trader in the gold community, and the world. GoldLion feels we are a situation like at 1156, at least with juniors stocks. You may recall that he was an enormous buyer of juniors from around 1180 down to 1156, as he has been now from around 1350 down to 1323. The 1156 zone, in my opinion, featured greater fear than we saw yesterday, but the fear in the gold STOCKS arena now, definitely rivals the fear there, at 1156.

18. Dan Norcini is concerned we could drop into the $1200s. That would open the door to another superb technician's forecast of $1260, Morris Hubbartt. $1260 only recently seemed an eternity away. Now it suddenly is "doable". Trader Dan notes that some severe damage could be done to gold's bullish chart if we drop into the 1200s. I agree, as a substantial up trend line would be broken. Do I care? No.

19. What is my view? Well, incredibly, today is today, not some imagined day, and we are STILL trading within the $1315-1430 BLOB or BOX as I term it. There is no question that a plethora of gold stocks charts have vicious top patterns on them and most have blown thru the "1315 equivalent" pricing on their charts. Perhaps the power of bullion is telling you that all is not as well in the world as the banksters are telling institutional land that it is.

20. I saw huge top patterns on gold stocks in 2008, and bought those all the way down to zero (never got to my lowest buys, but I can't complain), so my tactics and advice to you remains: You have to book profit on paper money, NOW, as it rallies against gold. Don't focus on avoiding a rally in paper money with your gold. Focus on booking profit on your paper. Learning to do that takes years, not 15 minutes. Let's start...TODAY.

21. Think 3 things whenever you move your hand towards the buy/sell button: Profit booking, profit booking, and, yes, profit booking. If you aren't booking profits when you press the TRADE button in the market, you are making an ERROR in the market. An ERROR means you are booking LOSSES. Don't do that. This is a MAJOR call to business owners out there with cash flow. You have INCOMING paper money assets that are SKYROCKETING in VALUE against a number of other assets in the gold space. Don't think that will continue forever, or you'll end up booking a LOSS on your paper against gold, like many did into $1400, and a mountain of loss bookers were prepared to do at $1450-$1700.

22. It's the Gman mouth operating the greatest bankster scam that makes you think the paper currency asset is MONEY. I mentioned that I respect paper currency more than most think. That's true. I respect it as an asset. Not as MONEY. When Fudd and Fundsters talk about govt paper credits as money, that's when I say to them,

23. You are a TOILET PAPER expert. Congratulations on your excellence in your chosen field of expertise.

24. Paper currency credit is an ASSET, and a decent one. It is not MONEY. Gold is money and nothing else. My TOILET PAPER moniker for paper currency as money is not only accurate, but really that is an overly generous description of item that has a 100% perfect record of going to zero in every single case of govt paper money, thru all of world history.

25. When people speak of their "house going up in value", they need to stop and think. Really think. How much of that rise against paper money is related to the supply and demand factors around housing, and how much came thru the decline in the price of paper money against housing thru supply and demand factors surrounding paper money? In some cases, the rise in price due to housing supply/demand factors is substantial. In others, NO.

26. If your house was $50,000 fifty years ago and a car was $1000, and your house is now $500,000 and a car is $50,000, are YOU any RICHER? Most key, did you make a PROFIT? When every single item in the traded universe rose by the same percentage amount as your house did (or more), the reality is that paper money's DECLINE is the underlying reality of what happened. And you are NOT any RICHER and you have NO PROFITS.

27. In fact, when you run after house prices at $500,000 with DOLLARS YOU GOT FROM YOUR BUSINESS WHEN HOUSES WERE $400,000, WHAT YOU ARE DOING IS BOOKING LOSSES ON THOSE DOLLARS WHEN YOU BUY THAT HOUSE.

28. As you may have guessed, I HATE booking losses. And I LOVE booking profits. It takes YEARS to learn the mindset to buy weakness and buy [sell?] strength, although my PGEN speeds up that process for most of you at LIGHT SPEED, as vast numbers of you have proven, and proved again yesterday with your emails of PGEN action.

29. Learning to understand paper money as an ASSET, not MONEY, is my twin theme of 2011, along with gold's VOLATILITY (any questions there after recent action?), and it's going to take time in the "learning zone" for most of you to get fully into the vibe where you separate yourselves from most in the gold community by having a HIGH RESPECT for paper money, but only as an ASSET. As MONEY, paper currency is TOILET PAPER. As MONEY, it's a failed 50,000 ounces to 700 ounces loss of wealth and poverty building mechanism.

30. The fact that the definition of RICH has dropped from 50,000 ounces to 700 ounces as we approach the 100 year anniversary of the non-stop operation world's largest photocopier machine, the United States Central Bank, is PROOF that paper money measurement of wealth is a poverty-building mechanism, not a wealth building mechanism. Gold is money, and ounces of gold measures your wealth.

31. There's unlikely to be any gold confiscation because only 2% of the population owns any gold. There's no need to confiscate anything. It's a devaluation turkey shoot. A paper money fish the barrel shotgun party, for those with the gold, for those who make the RULES. The govt hasn't even MENTIONED gold for YEARS. Why bother. It's like it doesn't exist, and that's how they like it. 98% of the population is in the blast furnace. Confiscation is the LAST thing needed to devalue billions of paper money wienerheads.

32. I'll leave you with this question as I get ready to attempt to "burst thru" the US border at Miami airport for the next next 3 days for a hedge fund conference and to see a diamond dealer. If you book profit on items like DBA [Powershares DB Agriculture Fund], corn, wheat, etc here, and Uranium more recently, on your trading positions, you are doing the right thing. If you sell your core positions at DBA $33 to get 'em cheaper, are you selling them at DBA 33...or at what is better termed, "gold $400"?

33. The reality is that most gold top callers today have no gold held from $300, nor $400, nor $500, nor $600, nor $700. In fact, they've built no wealth, no ounces. They haven't even built any paper money profits on paper. They are treading water at best, and gurgling. The banksters are offering them gold bullion to buy now, but they can't buy an ounce, and the banksters know it. Don't let that be YOU years from now, in wheat, corn, uranium, dba, and natgas.

34. "Facing your core" is not an easy task. When price is rising, it is too small. When price is falling, it is too big. There's going to be errors made building it. At times you will have it too small, and it other times it's too big. In gold, taking delivery is your number one mechanism to prevent yourself from liquidating. Even Sad Sack still has all his physical bullion. That's about ALL he remains with after being MANGLED by this BULL market in gold, despite his attempts to be LONG.

35. The things you need to think about in gold right now are: The current possibility that we are at some sort of bottom. The possibility there is substantially more downside. The current bull market in gold. The bear market that will follow the current bull market. And...

36. What gold IS.

37. You decide which of those things you are best to focus on right here, right now.

Grid time.

Thanks!

Cheers,