Issue #79
| Recommendations per every $25,000 in equity you are trading:1. I will sell ALL of your SPDR Gold Shares (GLD) January 2015 call options with a strike price of $155, symbol GLD150117C00155000 at a price of $1.90 or better go close. This order is good till cancelled.
Note: I will do the same one hour after you receive this issue. 2. If you are long shares in the SPDR Gold Trust (GLD), cancel and replace your order to sell your shares of GLD at $113.90 stop, good till canceled. NEW PRICE: $119.90 stop, good till canceled. 3. Cancel and replace your order to sell 100 shares of DUST at $39.70 stop, good till canceled. NEW PRICE: $36.18 stop, good till canceled. |
Dear Member,
I know what you’re thinking, or at least one subscriber is thinking:
“Larry, you’re so widely followed and have been so accurate over the years, I now think that the powers-that-be are actually targeting you and trying to destroy your trade recommendations. Why else would gold have popped so much higher yesterday right after you recommend a bearish position?!”
Let me be perfectly clear: While I am very widely followed, I have no reason to believe that I am being targeted by anyone who wants me out of the way. And even if that were true, it would be impossible for any trader, or even a group of traders, to push gold up as much as it popped higher yesterday, just for the sake of trying to target me.
Put another way, first, the gold market is too big for anyone to manipulate in such a way, and second, yesterday’s pop higher in gold was merely the result of me being dead wrong on my short-term timing.
It’s as simple as that. Now, let’s get to the facts.
First, yesterday’s rally, based on all of my indicators, smacks of nothing more than short-covering. There has been NO change in trend.
Second, volatility is increasing now in gold simply because it is now heading into a cyclical time period (January) when a major low is due. As a result …
Third, for gold to plunge heading into January, it needs the strength of sucking in people on the long side, so it can chew them up and spit them out when it begins its next major decline. In other words, to get the energy to bust below the $1,210 support level and then the $1,178 low, it needs to trap in some long positions, which will then become panicky sellers on the next decline.
Think of it another way: Suppose you want to break down a locked door to get to the other side. You put your shoulder into and it doesn’t move. You bounce off the door (support).
You try it again. You bounce off again, support holds.
But you simply must get to the other side, for whatever reason. So what do you do?
You back up, gather up some energy and enough distance to create more momentum to bust that door down and get to the other side. And you do it, on your third or fourth try.
Markets are the same way. Sometimes, to break important resistance of support, you will find them back up in the other direction, just like you would do to break that door down hard.
To the inexperienced, it looks like the market has found support and is going to take off in the other direction.
But to the experienced trader working with the right tools, it’s the opposite. The market is merely gathering up enough strength and momentum to plow through that door to the other side.
Everything I monitor tells me that yesterday’s action is nothing more than that. Gold getting up enough energy to plunge through support levels and find ultimate long-term support on the other side of the door at much lower levels.
Look, nothing has changed fundamentally. Inflation is still tame in the U.S. and Japan and deflation rules in Europe. At the same time, the dollar remains in a sideways trading affair with a bias toward the upside, so there is no support coming from a falling dollar.
And technically and cyclically, the precious metals remain firmly in a bear trend with lower process projected into January.
As a result, here is what I recommend:
First, let’s use this opportunity to clean up the positions and exit the longer-term January 2015 call options to preserve capital. I will look to buy new call options once the final low is in place in January.
Second, if you are long shares in the SPDR Gold Trust, GLD, tighten up your protective sell stop, per the recommendation in the box above. The reason I am not exiting this position as well at this time is that I want to give gold a couple more days to make sure it does not close above critical resistance at the $1,289.30 level.
If gold were to manage a close above that, unlikely in opinion, we may see a further rally. However, I am doubtful of it since yesterday’s rally was unable to close above the critical resistance I have identified for you at the $1,262.50 level.
Third, I want to lower the protective sell stop on the recently acquired position in DUST. Reason: Volatility is rising sharply, and we need to give this position a bit more room.
Go ahead and act on the above recommendations that pertain to your trading and stay tuned. If we get a further rally, to as high as $1,289.50 — again, that’s doubtful — I may elect to add more bearish positions in gold and in silver.
And if we don’t get a further rally and the metals fail yet again, which is what I expect, I may also add more bearish positions.
In short, gold is now backing up and gathering its strength and energy — which it gets from sucking people into the long side — so it can bust through that support door and head into major lows early next year.
Don’t be one of those who is sucked into the long side!
Stay tuned and best wishes,
Larry
P.S. Later, when the next leg up in the precious metals long-term bull market does finally arrive, you will find the opposite type of action in the market. The metals will pullback, get everyone thinking a decline is coming, but then it will take that energy and bust through the roof, to the upside. This is how all markets work.
Always keep these analogies in mind and they will keep you out of a lot of trouble and help you make much more money to boot.
