Silver as an investment

Jim wrote:From www.jsmineset.com:

http://jsmineset.com/2009/06/17/the-third-week-of-june-is-upon-us/

http://jsmineset.com/2009/06/16/alf-fields-and-martin-armstrong-will-be-proven-correct/

My limited exposure to reading that site once in a while, is Jim is a perma-gold bull, and has been consistently wrong about timing. Any one have any examples of short-term timings he has called correctly?

As I remember a few weeks ago, he was saying we would breach $1000 and not have a pullback. Whereas, I was saying we would run to $16 and have a pullback (it is all in this thread).

I do believe we are headed much higher for the precious metals after this current pullback completes. I think the next time we hit $16 and $1000, we will break through it (again, as we did in early 2008).

wescal wrote:...Perhaps I jumped the gun. I may have to "convert" myself to a day trader. I'll be winning ugly as my stop may exceed my Take Profit (TP). On average it is not good...

wescal wrote:...LOL. What a mess!

Maybe I am correct to surmise that you are trading with tight stops. I don't use explicit stops when I enter a position, rather I am watching many different metrics to tell me if I am close to near-term top (such as when I sold recently at $15.72). I think the volatility of silver (or gold) means we can't win with tight stops (we will get statistically stopped out for as many gains as losses), we have to actually be good at buying bottoms and selling tops, and be able to tolerate multiple % points of gyrations in between. I remember I bought AGQ (2x leverage on silver) at $13.30 (a spontaneous emotional decision that I have learned from), then it dropped to $11.90 and I bought more. I sold on the recent peak for a gain on both positions.

The high volatility is great, because we can see huge gains both on way up and way down in short periods of time, assuming we wait for safe entry and exit points. Actually buying is a much more critical decision than selling, because if you buy near enough to an absolute bottom support, you have the confidence to hold until gains are reached. Selling on gains, even if not the absolute top, is profitable action (unless you measure you net worth in silver, not dollars). This is why selling short is much more risky (open-ended). I would only do it on a very clearly extreme oversold condition, e.g. $21 in March, 2008.

I am risk adverse to buying on a very fast, extreme dip, such as we just saw, when we have not yet had time to consolidate that the new lower level, nor hit the 50 DMA nor have the RSI and MACD into oversold region. I remember too many times, such as silver dropping from $21 to $16 in 2008, then dropping again to $13, then again. Or even on moves up in late 2006-7, and again in early 2009, the big reversal dips were never followed by a quick V reversal blastoffs. This time could be different, but I would rather wait for the safer entry points and miss some of the action some of time. Almost never will you lose if you buy on the 50 DMA and hold long enough, and always buying at or below 200 DMA is a no brainer. Many are not in the position to buy at 200 DMA, because they can't stomach letting a "mushy" case run away from them.

I assume you are not using borrowed (margin) leverage. I could not advise anyone using margin, because my trading logic wouldn't be factoring in the probability of interim margin calls.

Also as long as deflation and deleveraging is the main theme (or a whisker away from rushing back), I have a bias towards buying lower and not worrying as much about prices running away to the upside, especially precious metals which the TPTB must maintain control over. If I was truely worried about precious metals rocketing to moon, I would own only physical. Actually I do own some physical for that possibility, but I don't think it is likely. For the time being, I think the greater bias is for prices to peak and fall again.

At some point, hyperinflation may set in earnest, then we will have to adjust our trading methodology. I would probably want to hold more physical then, because hyperinflation implies the spiral is out-of-control.

Maybe I am correct to surmise that you are trading with tight stops. I don't use explicit stops when I enter a position, rather I am watching many different metrics to tell me if I am close to near-term top (such as when I sold recently at $15.72). I think the volatility of silver (or gold) means we can't win with tight stops (we will get statistically stopped out for as many gains as losses), we have to actually be good at buying bottoms and selling tops, and be able to tolerate multiple % points of gyrations in between. I remember I bought AGQ (2x leverage on silver) at $13.30 (a spontaneous emotional decision that I have learned from), then it dropped to $11.90 and I bought more. I sold on the recent peak for a gain on both positions.

I use a stop that is adjusted for my time horizon. If I am thinking a time horizon of a month, then I will have a more liberal stop. That is where average true range comes in. On top of the ATR, I need to make good decisions as executed stops can get expensive.

The high volatility is great, because we can see huge gains both on way up and way down in short periods of time, assuming we wait for safe entry and exit points. Actually buying is a much more critical decision than selling, because if you buy near enough to an absolute bottom support, you have the confidence to hold until gains are reached. Selling on gains, even if not the absolute top, is profitable action (unless you measure you net worth in silver, not dollars). This is why selling short is much more risky (open-ended). I would only do it on a very clearly extreme overbought(correction) condition, e.g. $21 in March, 2008.

I suppose you could write a call option at the top. Or do a bear spread. Anyhow I love candlesticks when it comes to fine grained decisions.

I am risk adverse to buying on a very fast, extreme dip, such as we just saw, when we have not yet had time to consolidate that the new lower level, nor hit the 50 DMA nor have the RSI and MACD into oversold region. I remember too many times, such as silver dropping from $21 to $16 in 2008, then dropping again to $13, then again. Or even on moves up in late 2006-7, and again in early 2009, the big reversal dips were never followed by a quick V reversal blastoffs. This time could be different, but I would rather wait for the safer entry points and miss some of the action some of time. Almost never will you lose if you buy on the 50 DMA and hold long enough, and always buying at or below 200 DMA is a no brainer. Many are not in the position to buy at 200 DMA, because they can't stomach letting a "mushy" case run away from them.

I think I could have waited a bit for stronger technical picture as you just mentioned.

I assume you are not using borrowed (margin) leverage. I could not advise anyone using margin, because my trading logic wouldn't be factoring in the probability of interim margin calls.

Yes, I am a wild man. That's why I need the stop. I use 10X leverage. I see we have had a late morning smack down at about 11.45 am at 933. If I were a day trader I would buy now and sell the evening price. But that isn't on topic.

Also as long as deflation and deleveraging is the main theme (or a whisker away from rushing back), I have a bias towards buying lower and not worrying as much about prices running away to the upside, especially precious metals which the TPTB must maintain control over. If I was truely worried about precious metals rocketing to moon, I would own only physical. Actually I do own some physical for that possibility, but I don't think it is likely. For the time being, I think the greater bias is for prices to peak and fall again.

I suppose you saw what Roubini had to say. You might be right. Gold has set a higher floor here, but who knows what the mid-afternoon lull will do to the price. I could sell at a higher price in the evening, and chalk it up to experience.

At some point, hyperinflation may set in earnest, then we will have to adjust our trading methodology. I would probably want to hold more physical then, because hyperinflation implies the spiral is out-of-control.

I think the 70's PM market was ideal in many ways. It was simpler to trade. A naive assumption with a stop loss usually made sense. Damn working group nonsense.

My limited exposure to reading that site once in a while, is Jim is a perma-gold bull, and has been consistently wrong about timing. Any one have any examples of short-term timings he has called correctly?

As I remember a few weeks ago, he was saying we would breach $1000 and not have a pullback. Whereas, I was saying we would run to $16 and have a pullback (it is all in this thread).

I do believe we are headed much higher for the precious metals after this current pullback completes. I think the next time we hit $16 and $1000, we will break through it (again, as we did in early 2008).

Good old Jim. I think of him as an uncle you politely listen to, but you use a big grain of salt with his advice. There are people who are smart, but they aren't canny or foxy. The world is so much bigger than me or you. That sounds like Bogie somehow, "I'm no good at being noble, but it doesn't take much to see that the problems of three little people don't amount to a hill of beans in this crazy world." Anyway the world doesn't care about your plans or preconceptions. It will be itself, and it takes empathy to see the world. I remember the old saw, "Man plans, and God laughs." I pray we can do a lot of laughing. That requires some humbleness.

http://www.kitco.com/ind/vermeulen/jun182009.html

Apologies afaik I don't have a goal to let my ego enter my analysis (counter-productive). Of course I am not in control. I am just trying to watch for repeating patterns and roughly calculate odds off of them. I appreciate everyone's input, that is why I read as much as I can find. I was feeding back to Jim, and asking if he had seen trading success following jsminset.com. Vermeulen and Clive Maund seem to have made several correct calls this year (Maund has missed a few in past). I don't think your entry point was necessarily a bad one. I was just explaining my risk logic for waiting. Also trading decisions will be different for each person, as they know their tolerance for volatility.

Shelby wrote:http://www.kitco.com/ind/vermeulen/jun182009.html

Apologies afaik I don't have a goal to let my ego enter my analysis (counter-productive). Of course I am not in control. I am just trying to watch for repeating patterns and roughly calculate odds off of them. I appreciate everyone's input, that is why I read as much as I can find. I was feeding back to Jim, and asking if he had seen trading success following jsminset.com. Vermeulen and Clive Maund seem to have made several correct calls this year (Maund has missed a few in past). I don't think your entry point was necessarily a bad one. I was just explaining my risk logic for waiting. Also trading decisions will be different for each person, as they know their tolerance for volatility.

I was speaking to Jim Sinclair to his trading decisions. AFAIK, you are beaucoup tao with your trading. No apology needed.

A reminder from March 18, of what silver can do at a similar pattern juncture as right now (not saying it will do this):

If you would look at the chart you will see 3 descending black rectangles, a bear trend, before the big slide. The big slide day was the perfect day to get in at the low range as it formed a powerful hammer which is a reversal pattern for a bullish trend. This is March 18. Thursday and Friday saw sustained advances. On Monday the 22nd we saw a Doji Star, which signals indecision between bulls and bears. That day would have been a good day to get out of dodge-sell. This is for March silver. Let's look at the June silver period.

June 16th provides an interesting pattern. It looks like an inverted hammer, and it is indicative of a trend reversal. I wish I had gotten in on silver, but I don't have the belly for it. I consider 5X to 8X a safe leverage for novice gamblers in silver. If you have an outlook of a month or longer you should put in a stop at 1.0 X .50 ATR. Not many people can gut that, but a good decision has to be made in the first place, and one hopes to have a good eye for candlesticks. Also you had to watch for the lull periods or get in near Comex close or Globex afternoon trading. I know that the 17th would be a trying day, and if you made a good entry you would have been within cents of triggering your stop. Gulp! Of course opinions may vary, and no one knows but heaven above.

We may get a intra-week or 1 week bounce, but the Weekly charts have shown no reversal and MACD and STO indicate we are headed lower. Ditto weekly $USD (going higher) and $SPX (S&5 500, going lower). S&P 500 Daily chart is similar, in that it shows a mini-bounce is possible first. The S&P 500 Weekly shows we need a dip to let the 50 WMA bottom. The S&P Daily shows a magic cross coming soon (higher prices in future, not now, because 200 DMA has not yet bottomed).

Overall a very murky technical confluence, so I do not like to enter a trade here. I understand you can see intra-week bullishness signals, but the Weekly charts are telling me these are sucker's rallies.

I am probably going to wait to enter at the 200 DMA. Weekly charts are giving me more confidence we may get there again.

I could be wrong and we get a run now with a blowoff top in S&P. But in the summer? I don't think so. I think instead it is time to bring these down to get the rest of the fund managers on board who didn't get in March/April, for the continued ride up in markets in fall. Alternatively the S&P could be done and ready to roll over to new depths, but I don't think so. The massive reflation from 2008 has to play out first as a massive blowoff top, before another downward leg due to worsening conditions.

Right now the psychology of the markets is a mix of apprehension (is the recovery going to last?) and jealously (wish I had gotten in March). We are seeing this juxtaposition in the Daily versus Weekly charts. The jealousy is not enough to pull it much higher (maybe just intra-week moves), and the apprehension is great. I think the only way for this to clear is capitulation on the apprehension side, so we get a dip in markets, which then allow an entry point for all the jealously, then a reversal of the apprehension pyschology as time is a reinforcing pyschological factor (something that keeps going up, makes people think it will continue longer). Maybe I am wrong and there is a lot more pent up jealously than building apprehension?

Within the pyschology, the precious metals are at addition risk, because people may decide their fear is waning (the longer the markets stay up). Silver can move down on that and move aggressively up on jealously in the commodity upwings. Notice how oil is consolidating now. Silver is like a future's contract, it can't hold steady, if other's things aren't move up, it needs to fall while it waits, then as commodities head up again, silver blasts off to catch up. Perhaps this is because the nature of the silver price market is so SMALL and heavily skewed with options, not physical delivery contracts. In short, silver price is heavily influenced by momentum.

The more I think about the macro factors on the ARMS (even factoring in California's urgent budget woes, rising interest rates, etc), the more I think we won't get a massive cratering of the S&P until after Fall (instead only an interim dip to reload), maybe even not until 2010 or 2011. The charts support it with rising trend lines and trend lines that will bottom soon. 2007 - 2012, will attempt to be a more extreme and volatile version of 2002 - 2007. We are in a stealth period in markets, and they are going to turn higher after some murky bounces and dips. I do not think we are going immediately into the Greater Depression next massive wave down, because the reflation efforts worldwide have been so intense, which I bet will cause markets to rise nominally unlike in 1930s:

http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-165.htm#1477

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ADD: Even Richard Russel thinks the markets will decline from here:

http://www.gold-eagle.com/editorials_08/duplessis061809.html

Swenlin thinks medium-term correction has begun:

http://financialsense.com/editorials/swenlin/2009/0619.html

I sold out for a loss of a 100 pips or so. Friday showed a bad candlestick. I got out Sunday evening. You were right Shelby. It was too early.

I was traveling and hadn't reset my limit order lower, so it filled at the bottom price for the day. This only moves me 1/3 back into silver (for the cash I had, I have other long-term holdings in gold&silver). I might be (80% sure I am) a little early, but the charts are getting into extreme ranges now, even the MACDs and RSI are getting close to going into oversold. It is still possible that the markets roll over entirely (not just a correction) and we will head for the 200 DMA ($12.12), but the risk is the jawboning about world slipping back into recession is just to reload the dollar and Tbonds, and so it looks like we are just a couple of weeks away from ending this correction. If this was going to be the big rollover (i.e. the next big wave down for the stock markets in Greater Depression), I don't think TPTB would have the WB announce it as they did. So I say this is the reload correction, on the way for stock markets going much higher into rest of year. I will hold rest of my powder dry, to wait for more clear signals. I probably would have preferred to set my limit about 5% lower, but I did want to take a 1/3 position around $13.50. I got in a little higher, because the leverage vehicle I am using (AGQ), swung lower than I estimated for that target silver price (hit $41.27 on $13.67 low for day).

After a sharp candle stick down in Gold yesterday, I feel I need another day of trading to get a candlestick sign of a reversal. I don't know what the morning Comex has in store. I would like to see how bad the midmorning dump will be. This day would be a great day for a whipsaw by the working group. By extension silver could be liable to the same action.

I don't think the Fed can afford the risk of an economic contraction with a rate hike. We should know by tomorrow what the decision will be. I expect a fair sell off in the mid morning (to the 918 level for gold) followed by a bounce in the Asian/European trading. I see some range bound trading till we know for sure.

If we get a fast move up into $14s again (missed it yesterday because I was off the computer), I will sell. If we get a break down well below 50 DMA, then I will buy.

At some point, we break out of this, and to me it looks like the probability of move up and down are about equal right now. I think we will see a lower price before we break out past $16.

Shelby wrote:If we get a fast move up into $14s again (missed it yesterday because I was off the computer), I will sell. If we get a break down well below 50 DMA, then I will buy.

At some point, we break out of this, and to me it looks like the probability of move up and down are about equal right now. I think we will see a lower price before we break out past $16.

Exactly. I will sell at the beginning of Comex, then I will buy after the mid morning through lunch dump. Then I will either sell Europe/Asia or wait for the 9 PM to 10 PM Comex pump to sell. Well, your method is safer.