Coping: Buying Gold Yet?

In a word: No.  But since this is Friday you get the long answer:  Reader wanted to find out if we’re into a buy zone for gold yet:

“George,

Can you believe that people are still fleeing into the dollar? It’s like they are running to the one room in the center of the burning house that doesn’t have smoke in it yet. The DXY was up to 80.28 at my first check this morning (3:30 AM…the puppies got active early). I can’t seem to find a straight answer on whether Greece is going to default and start the cascade or accept restructuring with austerity and have a total political meltdown. The EU bankers are smoking dope if they think Germany is going to bail out the whole Mediterranean region. I read that Spain is twice the burden of Greece, Portugal and Ireland put together. I don’t know whether that is an exaggeration or not. Today is going to be a good day to buy Gold. I look forward to seeing what you have to say today.

I don’t give financial advice!  But IF we fire up our hugely complex graphics program and take a couple of Kitco charts (that’s where I bought my lone gold coin, LOL) we’d see that 1) there’s a trend line which we can see in the one month charts which to me (not you!) infers lower to come and also that someone(s) saw yesterday coming and probably made pretty good bucks on the $46 beat-down:

 

Remember, gold spiked up to $1,212 in December, so I keep my credit card handy and Kitco’s phone number in hand for just the moment when I think a bottom is really in.  Now?  Not in my opinion – but that’s because I want to see if the $990 holds, or between now and summer if there might be further beat-downs administered to shake out some of ‘those of little faith’ which would allow the PTB to add to their positions before the whole economic system hits the skids later this year.

More than 2-cents worth, but since you asked, that’s how I see it.  Again – THIS IS NOT TRADING ADVICE!

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Still, the longer-term decline in the dollar seems to be reversing and so a rally to 0.80 vis-à-vis the basket can’t be ruled out, especially if the Eurozone is going to have a series of financial IED’s going off. 

So follow my logic on this.  So given that we’re around $0.73 this morning, that would infer a run of something near  8 3/4% rally, which means in my vastly simplified way of looking at the economic world that I am expecting:

• Gold pulling back to at least $980
• The Dow coming down to the 9,400-9,500 range

 

Of course, this is just a dart thrown early before the CES jobs adjustment got unveiled, but that my present trading plan.  The only thing that changes more than my trading plans, however, is Elaine’s choice of paint colors for the house and even then, I sometimes run ahead.

Once we get there, i.e. Dow 9,500, then I may go long a few selected stocks (via options) and then once the rally targets are hit, roll over once again onto the short side of stocks.

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Lots of times people ask me about entry points into trades that I make and I seldom answer.  Oh, sure, I will occasionally tells Peoplenomics readers about this trade or that but only after I enter and updated again after I exit so no nit-picky regulator can accuse me of profiting from revealing my trades…and that’s all goodness so no problem. 

But the remarkable thing is while everyone seems to want to know my entry points nobody ever asks my exit points.

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Howard Hill (www.mindonmoney.wordpress.com) and I were talking about this last evening since one of my short-term plays might be to buy ‘aty-the-money’ call options at the depths of the current decline (today or Monday maybe) on the cheap and then roll out of them in about 7 trading days (or so) going into the February options expiration which comes on my birthday this year.

Howard thinks I’m nuts (not that he’s wrong, mind you) and he suggested as an alternative I consider buying one of the “Four Horsemen” (of Bankpocalypse) since there’s one which is still priced like an option and about half its book value and his gut is that it could return 20% in fairly short order (6-8 weeks).  It’s why you oughta read Howard’s column.  Damn smart fellow and generous to boot.

It was about here that I interrupted his thinking to remind him that I can’t envision anything more boring than a 20-25% return in 6-8 weeks.

Howard – having the Big Name School math degree (but he didn’t go skulls which is a clue as to which school maybe, LOL) – pointed out that if I’d make one 20% return trade a month, I could end a year’s worth of trading up nearly eight to nine times my original stake.

True that, and maybe it’s why Howard’s house is much larger than mine, but I like adventure, adrenaline, and the riskier plays.  Something about all those flashing lights going off on one of the monitors.  Gives me an excuse to sit on my butt staring at a screen.  Still, I figure if I can make 40% returns in the same period, my year end return would be closer to 56-times my grubstake.  Magic of compounding. Either that or the wild-eyed greed of unresolved karmic issues.  Or, whatever….

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All this ambles around to something serious pros do and rank amateurs don’t:  The pro has a defined entry point for a trade as well as a defined exit point.  The amateur asks only for entry points.  May I remind you: Divine inspiration when to sell usually comes when the trade is upside down and by then it’s a little late.

Soooo…If you plan on making serious money, might I ever-so humbly suggest that you get in the habit of writing down before each trade what your entry and exit points are as well as the “do not exceed levels” along the way? 

Ure’s Primary Trading Rule:

 ”He who trades and runs away has cash to trade another day.”

Hurts having such discipline, but following it I clicked out of half my put options yesterday when 10 puts purchased for $100 per contract hit $140 per contract Thursday afternoon, and yes, that’s a 40% trade entered on 1/12/2010 and exiting 2/4/2010.  The other one I closed out was 4 options at a different strike entered 1/12/2010 for $170/option contract and closed yesterday for $240 per contract. 41%.
Sometimes I win, sometimes I lose.  But I have been sitting on the sidelines long enough that I’m no longer considered a pattern day trader.  Time to start buying a few of these cheap lotto tickets as the markets panic? 

With Maps of Global Risk

A reader told us that the World Economic Forum has a mighty slick “Risk Interconnections Map” online which is useful for figuring out how one world event interacts with another.

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I can’t tell for sure but it looks like the map is a 2D isolation off a mapping ap most likely done in the ThinkMap platform. I showed you the p0latform back in December, 2008 (scroll down to VisualThesarus here.)

So yes, while the map looks cool in a static 2D display, it’s even cooler when you can pop up the 3D version and spin it, rotating around, up, and under it…Even neater if it has streaming news content and an emotional impact engine on it, but presumably you don’t get all the bells and whistles unless you’re in the WEF…still, the static display gives you the idea.

Now make each one of the dots a multiple drill-down into the supporting systems (markets, resources, manpower, politics & religious sects, etc…)within each country and see if you can get it on the store shelves at the $59 price point before Christmas…and don’t forget the RSS feed with risk ranker, OK?

Nice to see the ThinkMap ap being used…if that’s indeed what it is.  The fonts and links look right…. I talked to Cliff about rolling the web bot predictive modelspace over into ThinkMap instead of using the IntelliCad LISP interface, and while it would be keen and neato, doesn’t gain anything at a practical.  Still would have been cool to have link maps tying concepts in and changing over time, but the rickety time machine isn’t going to market.

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Speaking of which!

The new RAID 3 X 9 is happily check-checking its heart out so spiders oughta to be venturing forth in a few weeks and we may get out first glimpse of web bot data around March 21st, or so.

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Send your comments to george@ure.net

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