May 3, 2011

1.   The maintenance margin to trade silver [futures] with leverage is now $15,000. [Silver prices are continuing to fall this morning after the CME Group (CME) said that initial margin requirements for silver contracts are going up for a third time in a just over a week. Ref 4,250 (a year ago), ...., 10,750, 12,000, 14,513, 16,200 (now) per contract of 5,000 oz.] If you bought at $4 an ounce, the cost to buy 5000 ounces, fully paid for, would have been $20,000.  The value of 5000 fully paid ounces of silver is now almost $250,000.    

2.   I believe leveraged trading of silver will end before the silver bull market ends. Silver fell $7 an ounce on Sunday night.  That's a $35,000 move per contract, and more than double the margin put up by the average leveraged player.   

3.  The bottom line is trade smaller, chop the leverage, or it will be lights out for you.  The volatility in silver has only just started to grow.  I believe that before the bull mkt is over, silver will move $20 in one day.

4.    Where price is going, and what you need to do about it, are two very different matters.  Use up and down trend lines to show where price might go. 

5.   Use horizontal trend lines to take action. [If you are trading silver at all during this bull run.]

6.   Click here now to view what can only be described as the mighty & magnificent one year gold chart.  We all likely only live once, and that chart paints one of life's greatest pictures, agreed?  Notice that I've used the colour green for the supply line. 

7.   Red is the traditional colour for the supply line, but it carries a negative connotation.  It can cause you to panic as price bumps into the supply line.

8.   The very last thing any of you should be doing right now in the gold market is panicking!  I've labelled the $1570 area the "work zone".   There is a strong possibility that rather than reversing, price actually consolidates here and then blasts upside through the green supply line, ushering in an even more powerful move higher in the price of gold for you!

9.   To do so, some work is needed.  A launch pad needs to be built, through the emotions of investors. The more negative and afraid that investors become, the more likely it is that price blasts through that green line, to $1600 and higher!  

10.           There is absolutely no greed in the gold market right now, and the public is standing there ignoring the action, so at the very least, a vertical blast higher is very possible.

11.           With the trend defined, click here now to view the tactical action points for you chart.  A minor trend is 1-3 weeks in length.  At each minor high in the uptrend, you draw in a horizontal (HSR) trend line.   

12.           You buy as price falls to the area of the horizontal lines.  In a potentially parabolic move, you can't waste your time playing with oscillators because they simply don't work.  Just as a gasoline engine blows up if you put the accelerator to the floor for too long, the regular time frame technical oscillators stop working in a parabolic move. 

13.           They go into the overbought zone, lock there, and you sell out thinking price must reverse "soon". The only thing that reverses when you do that is the value of your account.

14.           Click here now to view a 3 month tactical look at the gold chart.  Note that the top 2 HSR lines are in green.  To buy at those prices, the price of gold must rise above those prices and then fall back to the price at those green lines.

15.           Now, please take a look at this 1 month gold chart.  There are several items of interest here. 

16.           First, the good news, which is that gold's price declined to both the $1540 "on sale for you" price, and to the $1520 "on bigger sale for you" price.

17.           Now for the bad news.  Both of those declines happened after the US stock markets closed.  So most investors (you) sat helpless, unable to buy anything, and then had to watch price leap higher to fantastic profit booking points! 

18.           The first move came Sunday night, as price fell from $1577 to the $1540 area, and then skyrocketed during the day on Monday, to about $1575.  Frustrated investors (you?) had to sit and watch this take place helplessly!

19.           Then, like re-run of the Royal Wedding, gold sold into $1515 last night, and then skyrocketed to $1550.  With no access to the futures market, you have had no access to two phenomenal gold sales!   I predict huge growth in these night time gold sale and profit booking sessions, in terms of both frequency and size of the price moves.

20.           Use futures markets to access the gold price action, not to leverage it. 

21.           Also, remember my phase from Saturday, which is, "patience is the leverage of champions!" Soon the action you have witnessed at night time from the gold market audience stands will start to become regular fare during the trading day, while the night time becomes an even bigger boiling cauldron of volatility. 

22.            For the rest of 2011, the technical oscillators will likely accelerate their "rate of malfunction", and therefore number of investors taken to the golden woodshed will grow, probably like a wildfire targets a gasoline tank. 

23.           There's been a massive outpouring of emotion about gold stocks.  Let's repeat, together, "patience is the leverage of champions!".  Are you champion? Click here now to view the  GDXJ 60 minute chart.

24.           Notice the action of the RSI oscillator.  There is nothing "wrong" with gold stocks.   Sat [Sit] back and light a cigar while buying and selling between the $40 and $42 area on GDXJ.  A $2 gain repeated 3 or even 4 times is how much profit?  
A $2 gain from $40 is 5%.  Making that in a few weeks or even days is very, very good.  Making that 3 or 4 times is a 15%-20% gain for you, in a month! That's 200% annualized, and it is while you wait for the parabola!  Even if you make a tenth of that, it is excellent!  Don't worry about gold stocks.  The hedge funds will be burnt to ashes by the gold punisher and your gold stocks will go ballistic, provided you embrace the leverage of champions.  Patience is the leverage of champions!  Redline your use of it!

Gridtime.  Lets take no prisoners out there on the HSR gridlines today.  Those using borrowed money to do now what they should have done at gold $400 and silver $10 are being inserted by the banksters into the blast furnace for baking.  Do you like cookies?  I do. Eat one, rather than be one, is your theme for this week.

Thank-you

Cheers

st