Friday, January 22, 2010

Technical Update on the Dow

If you missed that initial shorting opportunity, don't fret too badly - there should be plenty of good entry points to short-sell in the coming months and we'll try to hit you up with some of the better ones.  I just pulled a chart of the Dow about 20 minutes ago and posted my analysis of the price movements since yesterday.

**Click the chart for a closeup**

We should see either one more further break of the bottom channel line (which would then act as support on a retracement), or a small corrective move higher to finish out the counter-trend move.  A possibility in the coming week or two is a few very strong down days pulling the price far down from its trend, followed by several days or a week of consolidated sideways movements.

It's tough to say exactly at this point the gritty details of how it will all play out, however we are not so much concerned with how far DOWN the market is going to go until we are ready to close out our trade - what we are concerned with is the extent of the counter-trend rallies which will offer key entry points and position-building points.

Either way we'll keep you posted.  The Precious metals look to be correcting inside of a smaller pattern within this downtrend movement.  Silver has had a pretty broad trading range so far of $.68 / oz (4%), while gold is consolidating tightly - this should also be a theme with gold where a large move is followed by consolidation and then another decent move.  However, if and when the dynamics of the move change we will keep you updated, and of course will begin letting our readers know when these trends are expiring and the optimal time to go long on PM's and stocks (and short the USD inadvertently by converting it to alternative assets).  Expect volatility in Precious Metals to move to extreme heights over the coming months.




The first note I would like to make is about general investor psychology - bear markets always seem to take everyone by surprise even though someone can reliably predict them if they keep a detached mind - i.e. don't listen to the hype about stocks "always going up" and that perma-bull mumbo jumbo.  Remember, the people telling you that are usually 90% + invested (mentally bought in) to the idea, or they are trying to sell you a product like a fund.  These guys can't survive if they are bearish, it's just plain bad for business.

As such, bear markets by their very nature are far more "exciting" than bull markets as they seem to emerge from nowhere and wreak carnage with breathtaking speed.  As a good example, consider this:

The Past 3 Trading Days on the Dow have taken prices all the way back to November 9, 2009 - erasing almost 6 weeks of gains in such a short span.  Who could have seen this coming?

Well, you already know the answer to that...

I try to be as clearheaded about my investments as possible - I don't live in any major financial centers or even in a very densely populated city so it's easier to avoid the general social mood that comes with heightened stock markets.  Draw your conclusions from the data, not the data from your conclusions - you will have a much stronger approach that will net gains consistently and leave everyone else chasing the mood-wagon in the dust.

If you cannot keep this sort of attitude about investing then it is in your best interest to find someone who can do this for you that has these attributes.  Hard to find, I know, and even harder to really quantify or prove.  But that's one of the ways Investophoria can help.

We do offer proprietary investments but I only work with people in my city who I can meet in person regularly with and develop strategies.  However, we are going to be setting up a full blown website with some study guides for beginner investors or those who would like a refresher, a few trading resources, a model portfolio (which will be an exact mirror of mine), and a weekly or monthly publication.  If you are interested in something like this or you as a potential customer have an idea, feel free to send them my way via the email button on this page.

And to wrap things up for the weekend, here's exactly how the Dow finished off the day:


Have a great weekend everyone.



  1. Derek,

    I can't seem to find that e-mail button, but I would be interested in paying for any training and or services you would have to offer. My e-mail address is


    Kiley Kuhl

  2. Derek,

    Is it possible to hold the short position until we hit the bottom?

  3. It is absolutely possible - and I would recommend it for those not so much into sub-division moves of a larger trend.

    Generally when I am shorting an index, stock, or future, I will use a long term top as an indicator for the bulk of the position and then take another portion and use it to maximize the swings.

    But the best bet if you are not so inclined is just to hang on and ride it out. Keep in mind, as I mentioned yesterday, that you might actually have trouble CLOSING the position so if you see a lighter period a little earlier than you like it might be an idea to close out even half of it and book profits in case there are some technical issues that impede your later exits.

    All the best!


  4. @Kiley - don't forget to subscribe to our articles and we'll keep you posted on our upcoming subscription services.


  5. Hi Derek, good posts and I am becoming a fan of your work very quickly, seeing how you have been predicting whats been going on for some time now, keep up the good work as I am sure your efforts will bring you rewards that you have never have dreamed possible.

    Derek, can you explain to me why you think China would be ok allowing the price of gold and silver to drop to three year lows now that they have urged their citizens to buy as an investment opportunity? Do you think China will wait for this coming selloff in gold as you predict to make their mark on the gold market? What is your take on China and the price of gold this coming year, I would appreciate any comments you have in this regards, all the best and keep it up young man!

  6. Dear Mr. Blain,

    I only came across your articles on Kitco very recently and find them
    very worthwhile. I am particularly interested in your outlook for deflation and the near term bearish forecast for gold and silver. If you are correct, I think it will be a tremendous buying opportunity.

    I do wonder, however, if the deflation forecast will only be correct for
    a brief period. While I think you make excellent points (M-2 only rose 2.5% in 2009), total credit in the U.S. (as per the Fed Flow of Funds) continues to rise despite private sector debt reduction.

    Don't you suppose inflation will eventually rise as private sector debt reduction ceases (or slows down from current levels) and the U.S. government continues to spend and increase credit?

    Perhaps this could be the subject of another article. Keep up your excellent articles and ignore the inane gold bugs e-mails.

  7. When people in the U.S. only hold at most 3% gold and silver this is not a bearish sign or top in the market. Especially when they sell the gold to these ads on TV. I see no hoarding (demand) in these markets, yet and a shortage of supply. Gold has not even reach the high of 1980 inflation adjusted.

    See you at $1500 for gold in March beginning on March 1st.

    The gold wouldn't won't break $1030.


  8. Derek,
    I find your articles on Kitco very informative.
    You are bookmarked and you will be a constant read.In this post above your remarks about keeping a detached mind ,not listening to all the hype about stocks and "they are trying to sell you something" reminds me of a quote by P.T.Barnum
    (there is a sucker born every minute).
    I am not an investor or a trader just need a good guide with words of wisdom on buying silver bullion
    Keep up the good work!