Doji Star Journal

I had a good weekend,thanks.
Yes,you're right Fxtrader, I've upped the ante, and decreased the number of my trades as well. Let's hope it works out.

April 21 (Bloomberg) -- Dennis Gartman is ``abandoning ship'' on his outlook for higher gold prices.

``We are abandoning our long held bullish outlook on gold this morning,'' Gartman wrote in his U.S.-based daily Gartman Letter today. ``It has bounced today and we shall sell that bounce and exit entirely.''

Gold for immediate delivery fell $1, or 0.1 percent, to $916.09 an ounce as of 10:34 a.m. in London, reversing an earlier gain of $6.

Gartman is probably the biggest Gold bug around. For himt to 'abandon ship' says a lot.

Well said there Doji, thats one of my man strategy, to look for a retracement or pullback in a strong bull market and pounce on the market as it resumes its prevailing trend. Sometime i get stopped out and the market continues in my direction, but the main point is to stay focused and stick the rules of my system and i know with this robust approach, i will come out with a profit at the end of the year. I like buying at a bargain, and this has proved to be profitable to me. My wife is even getting bored with me when we go shopping becaude i am always looking for bargains... LOL

Ahhh! At least you don't suffer from my shopping phobia! I'm in and out of there in a flash,just take what I'm looking for and I'm gone!!
It's hard to tell exactly what a bargain price would be in this instance.
It's heartbreaking getting stopped out and you know you're right. Yes, when I think back to 2006 correction from the +$730 Gold high, many ,including me ,got burned trying to pick the reversal or the trend resumption, yet we were all of the opinion Gold would eventually break $1000.Catching this turnaround would be difficult. The only strategy that comes close enough for preparing for, not really predicting, reversals is Jacko's Anti-Hedging,but even here you could get stopped out, except you'll minimise the loss.Thing is, I think we've got to follow it down until it clearly tells us it wants to resume the trend.Equally difficult! Looks like our work's cut out for us here I'm afraid!

I'm expecting a retest of the 61.8% fib retracement. This is where price bounced off like a rubber ball on Friday.
Notice the parabolic bowl shape that formed (all along the triangles),these always break lower.

My friend in India says:Last Monday also gold and silver fell only to pare all the losses. Will last week repeat itself this week? All will depend on the US housing numbers today. If they come in lower than market expectation there will be another round of US dollar selling before the Fed meeting next week. Technically the euro/usd is bullish over 1.5690 and as long as it holds the euro still has a chance of breaking 1.60 in the short term. It’s better to remain on the sidelines as far as the US dollar is concerned.

i agree with u that commodities might still have a long way to go
but the fact is with people having inflation fears all around the world the actual demand for gold will decrease as people's first and foremost concern will be coping with these high food prices and not buying jewelry.

wat do u think about this point?

For the average man in the street jewellery will be furthermost from his mind,yes, but when you think of countries like China and India and parts of the Gulf, who have trillions of dollars they are looking to get rid of, you can see the broader picture. If even a very small percentage of their foreign reserves money is moved into precious metals, like the People's Bank of China alluded to last year on many occassions, that will easily set $1000 as Gold's new floor.The Gulf countries are also looking to diversify their dollar holdings and they're not expected to only move it into the Euro. A percentage of that will move into precious metals as well.Add to this the fact that we're suddenly inundated with ETF's (a new one in Shanghai and another few being slated for India) in other words, more demand for precious metals delivery, it's easy to see why the precious metals sector would seem undervalued at the moment.

2 of the original lots were stopped out for -248 pips each.
I moved the stops of the other two to above 17.190 so they are currently up 340 pips each. I'm tempted to take this.

Stopped out today. It went well ... all things considered.
Lot 1: -248
Lot 2: -248
Lot 3: +365
Lot 4: +371
Nett pips for Trade #35: +240

Hmmmm.....

http://www.resourceinvestor.com/pebble.asp?relid=42163

THIS FROM A GUY CALLED "Trendsman":...I would like to debunk some of the reasons given why the bull run in precious metals is over.

1) The Fed will be done cutting rates.
The Fed has to continue to cut rates so that banks can borrow short and lend long (profitably). The Fed Funds rate is 2.25%. As I pen this, the 5-year US Treasury yield is 2.97%, while the yield on the 10-year is 3.74%. The Fed tends to follow the 3 Month T Bill, which is yielding 1.34%. Even if the Fed cut rates to 1%, banks would only make a few percentage points on their loans. That doesn’t even beat the “core rate” of inflation. Even if the Fed stopped at 1%, would it immediately raise rates thereafter? No. Would it be bearish for precious metals if the Fed held rates at 1% or 2% for a while? Hardly. Fed policy is not going to be bearish in regards to precious metals anytime soon. More on this later.
2) A recession means lower demand and consumption, which in turn pushes down inflation.
This is a lazy argument and it’s a shame that many of the well educated subscribe to this. The correct point is that price inflation is more likely to worsen in a weak economy. Prices essentially equal money supply divided by production. In a recession or weak economy production does not grow. For price inflation to decline in a weak economic environment production has to fall less than money supply growth. We are in a recession and the broad money supply measured by the folks at nowandfutures.com is skyrocketing (now growing at an annualized rate of 20%). Negative growth coupled with an increasing money supply (20% annualized) is going to give us much higher prices.
3) Precious Metals are in a bubble.
For a market to be in a bubble, investments have to be extremely concentrated in the bubble sector. Remember in the tech bubble when so many investors had 50%, 60% or 70% of their assets in tech? The bull market becomes a bubble when its size begins to dwarf other markets. Precious metals have surely risen quite a bit, but have they experienced the same rise against other markets?

The reality is that since August of last year, the shift from paper assets into hard assets has begun to accelerate.Gold at its recent peak was not as extended as it was in May of 2006.Where might gold find support? The 50% retracement of the recent move from $640 to $1034, is $837. $850, being the 1980 peak and the peak in October 2007, is another consideration.

Like gold, silver is in better position than it was at its May 2006 peak. Silver has major support at $15. It was an important peak and it took silver four tries to best it. Also the 200-day moving average is at $15.17 and rising. I should also note that the corrections that followed silver’s big moves in 2004 and 2006, corrected more than 62% of the advance. The 62% retracement of silver’s recent move is $15 exactly. So silver is going to hold up much better than it did following the previous two spikes. Any dip below $16.50 and silver is a great buy.
Silver
Looking ahead, $25 is the next magnet for silver. $25 was the peak prior to the spike to $50. Also, if you look at a very long term chart of silver you will notice an obvious cup and handle originating from $15 in 1983 down to $4 in the early 1990s and 2000s and back up to $15 in 2006-2007. The recent breakout gives us a target of $26 (15-4 = 11. 11 +15 = 26). Okay, so it isn’t $25 but you get the point. $25/$26 is the next target.

The effect ETF's are having on precious metals:
Reuters reports: Investors bought 72 tonnes of bullion through gold exchange-traded funds (ETFs) in the first quarter of 2008, bringing the total to 943 tonnes, according to the World Gold Council’s Gold Investment Digest, Quarter 1, 2008.

The report also said that jittery financial markets, global economic uncertainties and a low U.S. interest rate environment boosted gold to an average price of $924.83 an ounce for the first quarter.

I have enjoyed reading your posts, Doji Star. I thought I could contribute.

Gold and silver in my opinion can't go much higher. Assuming that there isn't a demand for gold/silver, I had always thought of it as a difference in widening spread of eur/usd. Given that gold was at 1030 and oil at 110 sometime back, now we have gold at 910 and oil at 118. Discounting hysteria, I assumed that what drove gold and silver prices was hysteria and the widening spread between the euro and the dollar due to cuts in interest rates. As the US slows down its interest rate cuts, unless the EU starts hiking rates, I assume that gold or silver will not go much higher. However, this discounts demand. But as you say, if China or India, do decide to shift money into real assets, perhaps gold and silver could rise, I don't know.

Technically, this is a retracement, however, I just don't see how anything that would further fuel rises in metals other than demand or hysteria, which I don't expect.

You're welcome to contribute anytime requin!

Your views echoed mine back in May 2006. Gold moved up from $400 to what seemed at the time an unusually and unsustainable high around $730. The May 2006 spike did seem like hysteria, which would mean the end of a bull run.The inevitable correction did come and it seemed so severe that the trend simply had to be over.Two years later it slashed through a nearly thirty year high +-850 and then spent quite a bit of time above $1000.However, the following factors that are poised to be around for a while, could at least sustain the price around these high levels:
1) rising oil price and OPEC bent on decreasing output
2) the flight from the dollar
3) increased tensions in the Middle East and elsewhere, because Gold is still at times seen as a safe haven in times of turmoil
4) sub-prime fiasco-it seems that recent suggestions that the worst of the subprime/credit/liquidity crises is over may have been premature. A growing number of bank failures (a-la Bear Stearns) would likely drive gold significantly higher as people seek to protect their assets.Gold's recent run upwards came in August last year,just after the sub-prime situation came to the fore.
5) The big one ,for me anyway, is the China-India-Gulf economic juggernaut.
As I mentioned before and as they have stated publicly over the past two years,if they only park 1 or 2% of the trillions of dollars they're looking to diversify out of, in gold, it could easily establish $1000 as a floor, because that amount of money in such a small market would be unprecedented.They're also making it easier for the average man in the street to invest in Gold.All the new Gold and Silver ETF's that sprang up over this past year have sprang up in these countries.One ETF accounted for over 70 tonnes in gold sales thus far.

Having said all that...I'm opening a short Silver position looking for at least 16500 as a target. I know this isn't in the direction of the trend and flies in the face of my previous post, but this is seasonally when the precious metals take a downturn.I'm just trading what I see on the charts, I'm not looking to add to long-term buy positions trading spreads.I'm better off looking to add to my small and insignificant stash of coins on a quarterly /yearly basis. The bull will probably resume around September-October. If it resumes before then it'll be one spectacular leg up.
Read this recently:
"An acquaintance of mine lost $34,000 in silver futures these last few weeks. It was an awful story. He started out with just a few contracts, and added more as he started to do well in them. Then, the dip caught him, and he got a margin call. He initially invested $20,000, which went to $12,000, and then to $50,000 in silver. Then, he had to put up an additional $17,000 just to maintain his position, and he lost all of that and had to bail out before he had to put in more money, and his account was down to $3000. Expensive lesson.He wanted to see what he could to to "get back" what he lost, but his money was gone. You can't "get it back", you can only wisely invest what you have. That's the trouble with futures and options; you are trying to invest and control what you don't own. You are not taking dominion over what you have, you are trying to take dominion over what another has.Silver is volatile, more than gold. In Gold's last bull market, gold dropped nearly 50% in 1975, from about $250 to $125, and didn't recover for 4 years. What if silver did that? Or worse? Could you sustain that kind of loss in futures? Could you ride it out? Not in futures that only go out 2 years. How can you protect yourself from such an event in silver, in this bull market? Would you have to use less leverage? Or buy longer dated options that don't exist? Should you put down 75% of the money for your silver position, but not hold the silver and still risk a delivery default? Futures and Silver are fundamentally different things.
Futures expire. Silver does not."

If you think about, rationally, you would assume that gold and silver are inflation hedges. From current prices however, it looks more as if they were used as currency hedges. As things are, if inflation continues to quicken, perhaps it is possible that metals could awaiting another rally.

Thanks for the reply.

Requin

Currency hedges is right. Park the cash in metals 'til we get clear direction I guess.
Anything is possible, to be quite honest my opinions on the situation are just based on what I read in the mainstream media, and like everyone else I take it as fact.It's difficult to see the forest for the trees sometimes, but the one conclusion I've come to is that though I don't always like the seeming "doom and gloom" scenario the current world economy is allegedly facing, it would appear that for Gold to continue it's course up it would be as a result of some catastrophe, such as the credit crisis worsening, war, dollar "collapse",astronomic oil prices,etc.
Nobody in their right minds would want these scenarios to unfold. In which case everyone loses (if it does pan out that way).
Let's hope the movers and shakers can set things straight, 'cos I believe it's possible (and for me,preferrable) to still trade metals profitably at lower prices.Technical analysis would still work were gold at $200 or $1200.

Trade #37:I'm taking the pips today. +271 for the day.I didn't get stopped out because I adjusted the stops up, but simply because I can't be sure whether or not it'll fall that much further. Don't want to turn a tidy profit into a loss.

hey man great silver show today.
was only in for 200 pips but i am completely satisfied.

beats braking ur back for cable.


good luck bro.

200 pips is 200 pips, whichever way you slice it!
Great trading,salah!