Gold – oh my! Gold took continued to take some serious beating today.

Despite this morning’s effort to go up it closed with a bearish candle again and is now very short-term oversold, below the regression channel.

The following is the weekly chart of Gold – when looking at this chart the current pullback is a small and healthy consolidation (although my account is currently hurting):

GoldCorp and other mining stocks

The stock has been dropping for the last 3 days but with lower volume (which is not helping at this point). The next few days will be key. A lower low will force me to sell and get back at a later date.

Crude Oil – also short-term oversold. Note how Crude is below both regression channels. I believe a bounce is due soon.

Weekly chart for Crude Oil – the recent consolidation also looks health for Oil when looking at the weekly time-frame.

Financials (XLF) – Although the financials have put a nice show lately, a quick look at the Weekly chart reminds us where it is and where it has been…. the direction is still DOWN!

XLF – daily chart

XLF – weekly chart

Good luck to you tomorrow.

• INDU is short term oversold but could continue to the 11,800 level.
• Today was a bulish candle but on low volume, a break of today’s low could take the index back to 11,000.

The weekly chart below still shows the index is oversold, or below the regression line.

Gold - short term oversold, short-term bearish

Gold was up sharply this morning but then reversed and closed around the 948 area.

Oil - could continue descent and test $120 level

Although oil is oversold on the daily time frame it still has some room to consolidate on the weekly chart and could test the $120 level.

US Dollar - bullish bias

Looking at the weekly chart of the US Dollar Index below it looks as it’s trying to gain some strength and if it closes above the current flag it could attack the $75 barrier (upper channel). Any action above that point will likely be short-lived.

Euro - neutral

Weekly chart shows a slight break of consolidation.

Canadian Dollar - trading in a range

Disclaimer: Jonathan, these are short term trades and trading is a very risky business.

Looking at the daily chart of the $INDU below it has bounced back from an overextended state (below thick red line) to a short-term overbought (above blue line). I’m not in the business of predicting here but if today’s high is taken out over the next few days it could go to the 11,900-12,000 area. If otherwise it drops below 11,200 it could retest the 11,000 area.

Looking at the weekly chart below, the index is still oversold (below the long term regression channel). Again, it could potentially bounce back to the 12,000 level “if” today’s high is taken over the next few days.

Gold – Where’s gold at?

Looking at the short-term chart of the Gold Contract below it looks as the metal is still well positioned.

This next chart is a 180 minutes chart. Note at how it has started pushing to the upside since yesterday and it has broken the consolidation channel today.

Finally, the weekly chart. A bullish flag, bounced from the middle regression channel line and is now close to 1,000.

Summary - The Money Masters the documentary discuss the topics of money (as it relates to central banking and rational reserve banking), debt, taxes and their development throughout the modern world. [edit] Private central banking and fractional reserve banking The documentary criticizes the control aspects of modern centralized banking systems and regulation. The film uses as evidence the history of money and banking, showing the viewer how central banks came to be what they are today, and how they operate. It supports its assertions by references and quotations from past Presidents and major players in the banking industry. [edit] Media control The film contends that by the end of World War I private central banks owned and controlled much of America’s large media, paper and film outlets, and that they achieved this through the large consolidation of wealth generated by Fractional-reserve banking and later a fractional based finance system. The film contends this alleged near-monopoly of the financial system goes largely unnoticed or redacted from the human history because of the control of human information exchange through this mainstream media ownership. [edit] Tax The film touches briefly on the U.S. Federal income tax. See also Tax protester constitutional arguments. [edit] Monetary Reform Act By way of conclusion, the film presents an option for a different kind of monetary policy for the United States of America…

Money Masters – Part 1 of 2 – 120 minutes – on Google Video

Money Masters – Part 2 of 2 – 105 minutes – on Google Video

Thanks Peter!

2. A record-breaking consumer debt, with near-zero savings rate.

3. New jobs are not being created as fast as they used to be. Unemployment is creeping up in some regions.

please see post for more on unemployment rates.

4. Declining Dollar that countries, such as China and Japan, may grow leery of buying in huge quantities.

US Dollars held by other nations (2005):

• Japan, $832 billion
• China, $818 billion
• Taiwan, $255 billion
• Korea, $205 billion
• Hong Kong, $125 billion

5. The value of US Stocks (blue chip) grew nearly 10 fold in the two decades from 1982 to 2000, while real earnings (adjusted for inflation) increased only three fold over this same period.

The most recent drop in the Dow Jones and other indices will not be forgotten and will likely continue.

6. The US economy is heavily dependent on unprecedented low interest rates that simply cannot last forever.

Note how the interest rates have been declining to support the other bubbles such as housing and stock market.

• The huge supply of foreign money helps keep interest rates low.
• The government uses this money to fund its deficits. This deficits spending is highly cumulative of the economy. It allows for lower taxes and more jobs created by government spending.
• Low interest rates encourage purchases of capital goods such as cars and houses
• Low interest rates help make credit cards cheaper and easier to obtain, creating growing pool of capital to buy more goods (and a credit card industry boom).
• Low interest allow business to expand more easily.
• Low interest help the stock market.
• A booming stock market encourages foreigners to put even more capital into the US by investing in the stock market.

And what about Gold?

Gold could be a spectacular investment after the bubbles pop and a very good investment before they pop.

1. The gold market is very, very small ($500 billion) compared to the stock and bond markets ($45 trillion). Even a small shift of capital out of these markets into gold will greatly boost the gold market.
2. Gold is easily sold for euros, giving investors a double benefit. That means, if you buy gold, you are indirectly buying euros at the same time.
3. Gold has significant potential for being an illegal tax avoidance technique.
4. The gold market is much more of a world market than U.S. stocks and bonds.
5. It’s very difficult to rapidly increase gold production. Gold mining will not be able to keep pace with demand for many years. When demand for gold goes up, so will the price.
6. Gold’s value increase with inflation. Inflation will be very high in the U.S. and also in major European and Asian nations.
7. If the banking system comes under severe stress, as it likely will, gold will have even further appeal.
8. Short term, the central banks of world, which have been selling about 500 tons of gold a year since the 1999 Central Bank Gold Agreement, will likely reduced their sales. In fact, some are already saying they will increase their gold reserves - instead of buying dollars.
9. Short term, South Africa’s production fell 15 percent in 2005.

As usual, here are some supporting charts - first, the Monthly chart for Gold:

How does it compare to the Dow Jones?

How does it run against interest rates? Do you see my point, it doesn’t go along with Interest Rates…

Finally,

• you can see my Gold-related trades here. They are for real.
• please feel free to comment, I would like to hear your opinion.

References:

• “America’s Bubble Economy” by David Wiedemer, Robert Wiedemer, Cindy Spitzer and Eric Janszen.

And here’s the current daily chart.

Mini Gold Contract (YG) - 60 minutes bars

I normally view both OHLC and Candlesticks charts but sometimes candles gives nice insights on price action. The following is the daily chart for IBKR.

The green arrows are bullish (buyers) and the red are bearish bars (sellers) – Who do you think it’s winning?

Also, another useful technique is trying to visualize the Candles all together by combining them… look at the big green candle in the chart… it’s basically a combination of all the previous 7 candles – cool?

The following is the OHLC chart for the same symbol, you can still see the price action, is just a bit harder.

And lastly, the Weekly Candle chart. It’s almost what I’ve illustrated above.

Now, start combining those candles – it works!

I’m splitting my gold position between Goldcorp (G.TO) and XGD.TO which is the Canadian Gold ETF.

The first chart is the Daily CandleVolume for XGD. Note the volume on the breakout.

In order to gain more perspective, I’m adding the weekly chart (regular candles) where you can also see the increased volume on the breakout.

Also important to notice on the chart above the two previous attempts.

Finally, let’s get an update on the Gold contract (below). Looks ready to attack the previous highs.

The following is the 60 minutes chart showing my entry at the bottom of the lower channel.

Here’s the 5 minutes chart:

Closed Positions – BNS.TO (-5.8%), AGU.TO (-6.8%)

This will most likely be my worst month so far in 2008, I’ve been learning a lot about myself and my trading.

-

(BAM-A.TO)
Entry Date	19-Jun-08	| Exit Date	7-Jul-08
Price	$35.83	| Price	$31.01
Initial Stop	$34.00	| Gain %	-13.6%
Risk $ per Share	$1.87	| # Days	18
Risk % Cost	5.2%
Risk % Capital	2.8%
Price Target	$40.00
Expected %	11.6%
Risk x Reward	2.2

Buying Golcorp (G.TO)

I’ve decided to focus on Gold for awhile and spend a lot of time re-structuring my trading plan and trading tools. I see further drops in this market.

Here’s the current daily chart of Goldcorp.

Good luck to you.

If you read my blog often you probably know that I normally focus on long picks, so, don’t be scared, there’s always a strong up trend somewhere so long as you are playing the right sectors. Don’t believe me? Check out these strong picks?

Good luck to you.

Sector or industry strength can be effectively measured using RATIO charts. The following is the ratio chart for the XLP or Consumer Staples sector.

The next chart is the weekly chart for the XLP symbol only, not the ratio anymore.

Next, we will focus on sectors and industries that represent new trading opportunities at the moment.

REITs – As scary as it sounds, the sector is showing strength against the overall market. Please see the following. Keep an eye on it.

Stock Indices – Dow is oversold, Nasdaq breaks weekly retracement

click images to view original size

Commodities Highlights – New Buy signal on Gold !

Oil versus S&P 500 – Wow!

Currencies – Will the US dollar hold?

This month was slightly profitable (+1.5%) gain on capital invested. I did not meet my objectives for the month. Good thing is I did not lose either. Please refer to the blog for a list of trades this month.

Areas I did well:

• Win% rate of 52% is good
• Average risk % of capital (1.0%) is good.

Areas I need to improve:

• Risk vs Reward ratio (1.1) - meaning, $1 dollar risked to earn $1.1 – not good.  This probably explains my high win% rate and low profit.

Overall this was not a good month for me as I was not focused because of personal matters. July has started on the negative side (big) as the market is in really bad shape at the moment. Message to myself:

< CONTROL YOUR RISK! >

I have been working really hard trying to develop a set of tools that would make my discretionary trading more mechanical, specially when comes to the risk management part.

For the record, here’s a snapshot of the major market indices today, not pretty:

$INDU - Daily

$INDU – Weekly – things could get really ugly from here…

Hope you had a good June – Good luck to you in July.

Everyone has a different method and what I will explain here might not fit your style, I’m a “short term swing trader”, meaning I want to explore movements that last anywhere from 1-5 days (in most cases) – I will hold longer if I feel the trade has more potential and after I’m able to move my stop to break-even.

Now, back to BNS. When evaluating a stock I usually ask the following questions:

• What’s the long term trend?
• Is the stock historically oversold?
• How does it compares to it’s peers?

Let’s try answering some of these questions for BNS using charts.

What’s the long term trend for BNS? for long term analysis I usually use the Weekly chart. Given the recent market drop, BNS looks strong. Note how it bounced back from Dec-Apr and rapidly attacked the previous support breakdown at $50.00 – it looks like it’s consolidating at this point.

Is the stock historically oversold? I normally use bands for that purpose. The following charts shows BNS and how it reacted to band-stretches in the past… It looks very oversold at this point and it could snap-back – I’m not saying it will reverse the trend  and go up, I’m saying it could possibly bounce back, short-term… that’s what I do right? I explore short-term opportunities. Now, please visualize the chart below and next look at the previous chart… below it looks like a nightmare, support broken, etc… above, just a normal consolidation after a strong bounce back from support (or, what I normally call – Failure to Drop).

How does it compares to it’s Canadian and US peers?

Canadian Peers – BMO, RY, TD and NA

US Peers – C, JPM, BA – Ouch, that’s ugly…

In summary, BNS is amongst the strongest in Canada (chart-wise) followed by TD and NA and I think it’s worth keeping it for now. I feel the market could bounce short term anytime now.

Good luck to you.

Evidence of demand on the 60 minutes chart

Why am I entering? I have been watching this stock over the last 10 days and is pushing and trying to break to the upside.

Am I respecting my risk management rules? Yes, risking 0.8% of my capital on this trade – my limit is 1.3%

My plan has been working so far on JPM, trade is up nicely since 3 days ago. I’ve got a “green” bar which usually keeps me in the trade. This is a short term bounce, the stock is NOT reversing yet.