Thursday, February 11, 2010

Not Much Happening...

It's good to be back.  While the conversation was good, the lake hut was toasty, and the peace was a welcome gift, we could have done with more fish.  It seemed that the biggest biting day of the week was the day before we set up, as many of the locals informed us.

So not too much happened on the ice fishing trip - not nearly as much as we would have liked, anyway. 

It seems the markets were up to about the same while we were gone, and may be up to the same for a while yet. 

As is often the case in bear markets, prices plummet rapidly, as short-term panic sets in with a side of negativity.  Then, a sharp rebound, or - what we are watching right now; a period of lesser conviction and sideways meandering as the collective of market participants build up courage for their next big buy and succumb to the call of the market.

This is about the time where a small upward thrust in the markets occurs before a resumption of the bear mood.

We are most likely in the middle of that sideways consolidation.  The short term EMA's on the major indexes have been allowed the opportunity to close in and tighten up, so we are definitely in the latter half of a consolidation period that should see a large break in prices - most likely first to the upside and then to the downside even harder.

We should probably see the S&P 500 move toward the right side of the downtrend channel, possibly break through for a short duration in a rush of euphoric buying, and then finally resume the downtrend.

The precious metals should continue to mirror the stock market (despite the repeated calls that they are NOT a speculative  investment) - if the markets make a pop, so should PMs, and when the markets turn, the PMs should turn with them.

The primary trend is still down, and therefore we are simply looking for points of exhaustion and ideal trade entries.  I know that you, dear readers, are probably tired of hearing about this trend (although it is only 2 months old in PM terms and 3 weeks old in stocks).  Despite that, this is the trend to focus on now, because all other assets are going to be affected by it across the board.

We will continue to sniff out areas of extreme sentiment using a laundry-list of methods, and are feverishly in the process of developing our website to offer you the best services possible.

Enjoy the day, dear readers.  We'll be back soon.

Derek Blain.


  1. People are Still Asking "What the Heck is Going On"?

    Gold up $22
    USD up

  2. People aren't as leveraged as the case was in 2008. So no major gold sell-off to come.

  3. Large holders of Euro's will continue to purchase Gold (as well as USD). Both Gold and the USD
    will continue upwards. US equities are a bit less certain. We may get a short term pop but unemployment will be a continued drag on earnings.

    At some point Gold will be the preferred "safe haven" trade as concerns for the USD will start to emerge.

  4. In two weeks the "Sheople Markets Rally". Smart money rally in GOLD and SILVER. March 1, 2010 get your ticket. Rally until the elections.

    Sheople this is your rally profit from it and then invest in gold and silver.

  5. Any news on STD or BBVA?
    Will the Greece bailout affect these?

  6. Silver will rise until the 17th and then take a long ride down till the end of the year!

  7. "Those who have been committed to gold for the past 30 years are still down 50% in inflation adjusted terms."

    Where's the top?? You said there is a top in gold! down 50% not a top.

  8. You just made your own argument why gold is undervalued. The whole financial and currency model has radically changed in the last decade. Be carful not to box yourself into predicting future performance with a broken model.

  9. @ last anonymous -

    We certainly agree with your assessment of inflation-adjusted gold prices.

    The top referred to is a peak in optimism towards the asset - the early december top could be considered an optimism peak in comparison to the past year, past decade, past quarter century. It is a context-needing term. After this peak in optimism we do expect gold to unwind down to a new nominal low, which should finally mark the end of gold's bear market. Once this nominal low has been clocked by market participants, gold should experience a multi-year bull market - quietly, and out of the spotlight.


    As to STD and the Greek bailout - we do not expect this to effect the trade in any regard. It might happen to fall in a pausing area in the general decline (coincidently - we think not), but will not affect the larger trend, which is down to new lows below those set in 2008.

    If you remember the US bailouts in 2008, the market only paused during those proceedings (and hardly that!), before dropping an additional 40% + from those highs set during the bailout period.


  10. Down 50% you should be backing up the truck. And you predicting $650 that is 100% down.

  11. Thanks Derek,
    I am still holding my June puts for STD....
    I will trade out for a longer experation if the need arrises...

  12. @Anonymous

    What strike did you take, and what did you enter the trade at? Was there a high time-premium? We are expecting higher time premiums in the future so you should make excellent gains if you got them around the time of our entry when complacency was high.

    All the best!


  13. I shorted when you did...I have the 12.5 strike for June....holding 200 contracts between $.46 and $1.40...average about $.90

    Good so far...

  14. Derek, in terms of gold falling away EXCESSIVELY into deflation, I think you are confusing capital and money. What people need most during deflation is capital, because deflation is the unwinding of mis-allocation of capital. Money is what society agrees is the best means of exchanging value and thus allocating capital. Unfortunately society has made a horrible decision, and they will be correcting that decision during this epoch. Gold will correct here to slightly below $1000, that is all. Silver will correct as it is more industrial in the mind of society (for now) and such a small marketcap ($11 billion per year annual production from mines) making it more controlled by the paper trades in the short-term.

  15. Note deflation can also be due to the correct allocation of capital on a (near) gold standard, as was the case during the 1800s where savers earned 33,900% more than savers during 1900s.

    Google search for my "How Deflation is Inflation" for the math on that.

  16. By EXCESSIVELY, I mean relative price. Gold won't crash (lose value) as much on a % basis as commodities, thus relative value of Gold with regard to real things, will be increasing. This is what happens during deflation (on both a fiat money or a gold money standard).

    Gold fell behind from 1980 to 2008 due to a bond bubble and massive selling of paper gold and silver futures (promises). The end of the fiat death dance is when the bond bubble ends. We are getting close. It is a giant ponzi scheme. The banksters sell us massive amounts of derivative paper, and they monetize it into real hard goods and industrial ownership. Music stops playing the sheople are holding confetti. Search "SilverBearCafe Think Like a Banker". Again I am calling for $12.50 silver and under $1000 gold by April. Then the monetary liquidity that has been injected starting Oct, will take effect again. "goldwetrust Shelby" for the charts.

    I will try to make this my last post in your blog. Look forward to your counter-logic or comments. Good luck all.

  17. goldwetrust shelby.....does not exist ??

  18. "What is this life if so full of care, we have no time to stand and share..... ( some humour)" with apologies to A.H. Davies

    I picked up the following snippet from an article at Kitco, and I comment....

    "....we find it curious to read on Bloomberg this morning that the Swiss guru (who sees America GDP as consisting of only beer and prostitutes anymore) now says..."

    Methinks a poor choice of analogy to describe what I believe he intended. Both those commodities have stood the test of time, and are in constant demand, internationally, in good times and bad.

    Ray Newton in London.
    Now loosen up, don't take life too seriously or if you make your fortune you are not likely to live long enough to enjoy it.

    Two not so bright, very naive, 'would be' entrepreneurs wanted to go into a business that they felt would thrive in a poor economy, and that would be within their ability to run.

    They decided on a cafe selling just soup with a 'soup kitchen' theme.

    However, it was failing as people, though down on their luck, it appeared, did not want to advertise the fact by being seen there.

    Then a more professional, though flaky, businessman suggested that if they wanted to really make money in bad times that they put their remaining capital in with him and open a brothel

    They turned the idea down saying ' Nah, if people won't drink soup, they're not likely to drink broth either.

    (they must have been followers of the swiss 'guru')

    (Well Steve, it's clean and it illustrates a point)

  19. Hi Derek,
    regarding your upcoming Subscription Service.
    I have been impressed by your techical and common sense analysis and not being afraid to take a contrarian view.
    I would certainly like to subscribe, as would thousands of others I am sure. But there is an issue that needs clarification. It affects me and thousands of other potential subscribers.

    I personally only trade in the Gold and Silver futures markets. I would like to subscribe to a GENERAL Newletter that cover S&P, USD, PM's etc.
    After all, these markets are interelated. The USD affects PM prices as does the S&P index. So a Newsletter covering these General Interelated topics would interest me and many others.
    But I do NOT wish to subscribe to a service that covers specific Buy and Sell recommendations on various Stocks etc.
    So you should have atleast two different services for different interest groups. A service that covers General Market Info and another service for those wanting specific Buy/Sell stock tips.
    People do not like paying for info they don't need.
    Cheers. I hope you have a solution.

  20. Goldbug,

    Well thank you for speaking for me but in my opinion it really does not matter what the service includes. Just take or leave what is on the menu. It makes things much easier for them to offer one service now and grow into more complex subscriptions in the future if needed. One price one service. What is the big deal here? You are concernced with cost and value. Why not increase your value by expanding your limited investing scope? If there is money to be made then learn a new trick. Let Derek be Derek and you adapt to fit his expertise. He is not forcing you to join. If you appreciate his style then roll with it. Making money here is all anyone should be focused on. The rest is frankly bullshit. I am probably going to join when he opens it up for membership. At some point however it may not suite me anymore and then I move on. It is always the same with these services. I hope though Derek can break the mold here and then perhaps I will have found something special with his service. Please do not be offended by my tone. Honestly though what does it matter as long as it works?

    Craig Sicinski

  21. Investors laying off concerns about Greece and the
    Euro to both Gold and the dollar. That is why higher dollar isn't squashing gold.Major PMs rally
    could be about to break!


    Goldman Sachs "..The bank reported net profit of $US4.787 billion in the fourth quarter. For all of 2009, net profit leapt to $US12.192 billion, a sixfold increase from $US2.041 billion in 2008...."

    Barclays ".....Announces Record-Breaking Profits - 16 Feb 2010 ... Banking giant Barclays posted record annual profits of more than £11bn today - triggering huge payouts for legions of its investment ...

    How the banksters really ripped of nations (and will continue to do so,because we deserve it)

    This is all caused by the fact that the mass,and that includes the vast majority of analysts, either cannot see, or have ulterior motives for not seeing, the big picture - the one that leans more to truth.

    Lets assume that this is merely a figment of my imagination. Little insignificant, unpretentious, 'moi'. Is it that only I could dream such an easy way for banks, or really those who control them, to rip the people off for 'trillions'. Got that - TRILLIONS!

    Dillinger, a victim from the mass suffering from the economic depression sweeping the world in the 30's, obtained notoriety, and an untimely death for robbing the banks for a fist full of dollars. But when done in reverse for unbelievable, uncountable, amounts - it is still only the ordinary Joe, and Jane that pays the price.

    If you could stop seeing the financial institutions, or banking fraternity as individual, unconnected units, but as ones, like military divisions, acting under a supreme command, then you are at the first stage of enlightenment.

    Let me explain.Even within a nation, there is often fierce competition between military commanders, even in time of war, to a point where one can wonder are they on the same side.

    This competition is sometimes even encouraged by the hierarchy. And sometimes punished (MacArthur). It also shows even between allies as it did between Paton and Montgomery.

    There are occasions when egos really lose track of reality and try to drop the other 'in it' often with great loss of life (own goal) to the innocent combatants. Sometimes men are sacrificed deliberately in order to deceive the enemy.

    In the end, however, the agenda of the hierarchy prevails. Only the mass are the losers, as always.

    In the recent financial debacle, the banking and related fraternity has been reduced. Less competition for those left standing = more profits, How convenient that a major institution in the US - Goldman Sachs, and now Barclays in the UK have announced vast profits. (Both nations are closely tied
    in many ways.)

    Could it not have been possible (think of the high stakes) that in the setting up of this 'crisis', obviously over some years, that it was a 'cause' to produce the 'effect' it achieved.

    There are far too many 'spin offs' from which to profit, to detail. But I will just take one -

    Banks gave away money (your money) even to those seeking a 'loan' or credit card whose 'residence' was a shop doorway, or box no 59, NW 4th avenue, Skid Row. Detroit, or Cardboard City, NY or wherever.

    Money is poured into the system, bubbles created, bursted, businesses boom, but where does the money finally end up?

    These banks and institutions are headed by men, many of whom have the 'badge' of Academia on their walls proclaiming proficiency in economics from Universities accepted as the highest in the land. And they all had years of experience in getting to where the buck stops. So they cannot claim ignorance, nor can so many claim an attack of dementia,or related sickness while it lay unsuspected by those around them.

    (continued below)

  23. Let's get to the punch line of this sick joke. It was planned that when, eventually, the SHTF, the governments would, under sham protest and it being in 'national interest' have to 'bail some of them out (again YOUR money). So their stocks get replenished.

    Some would be allowed to 'go to the wall' and make easy pickings from the one or two deliberately 'preserved' to benefit the most. (swings and roundabouts for those at the top)

    Incidentally, those 'in the know' got to make a killing on the stock market.

    And those left standing, even though on shaky legs, would benefit from less competition, which will give them a power far greater (if that were possible) than they had before.

    Enough from me.let your imagination if you have any left in your 'maturity' to do the rest.

    " The biggest mistake is to think it is only about money. Ir's all about power. Money is only a tool to get there."

    Ray Newton in the UK

  24. Gold may have topped this morning!

  25. Gold may have topped but not going down to $650. SDt has bottomed this morning bumper you missed your $12.5.

  26. This is awesome the ploy of the elite of europe against the elite of the US. European elite out bested the US elite. Poor and stupid US.

    Short the US Bonds. March 1 2010 another rally for the gold and US Markets. After US elections start of another US collapse. Gold $1500.

  27. Well, here is some food for thought. The Euro/Gold chart has a very nice cup and handle formation that broke out to the upside today with an objective of approx. 150 points. Now that being said, last year (2009) gold was making new highs in other currencies, but gold in US$ was slow to follow suit, will the same thing happen this year?

    The gold chart broke out of a falling wedge today. Is this a trap? Also, commercial shorts in gold have eased dramically, to the same levels prior to last years rally. Hmmmm?

    These are just some highlights to watch for and keep an eye on for to help us predict the direction of the next trend possibly forming soon, up or down.......

  28. Looks like all the negative short sellers are going to really get killed. I remember Larry Kudlow once described technical analysis as "goofy charts". Appears he is right.

  29. Wedges, flags, pennants. All bull.

  30. Market goes down, Derek appears.

    Market goes up, Derek disappears.

  31. That is too funny right there!!

    How you can you knock charting when:
    1) the blogger you all follow, Derek, posts charts all the time, and
    2) you don't know anything about charting and how to use them as a guide.
    Nothing is 100% accurate, but charting sure does help the trader know where a stock/commodity has been and help determine where it may be going

    I guess I dont understand your logic...
    Kudlow... lol

  32. @ Robert B.

    Two of the same posts on different topics - your originality is rarely surpassed, good sir!

    As I posted on my other topic, we are experiencing some problems with the computer system because we just had our phone system updated and it there might be a conflicting IP issue somewhere.

    So I'm sitting in a coffee shop down the street posting with free wireless.

    Derek Blain.

  33. Sergey, Kiev UkraineFebruary 17, 2010 at 5:26 AM

    Dear Derek,

    thanks for your ideas, i'm impressed by your correct predictions:)

    Do you think current $1120 price is a top, and gold will go down from here?


  34. No the top was last week or two weeks ago about $1050 didn't you read Derek blog. Then he said a straight shot to $650.

  35. My favourite Derek Blaine quote: From Jan 21

    "We are in cash, 20% LEAPS, and watching the action with a feeling of peace."

    How's that working out for you?

  36. The reason for the bashing is we don't want another Madoff or some who think is perfect. If some thinks they are perfect don't take there advice run away quickly.

  37. Look at this person perpective on Elliott Wave:

  38. EW is not bullish or bearish, in fact right now it is the bullish i have seen in years for PMs.