Why technical analysis is dust in the
- Why Bernanke trumps TA
Benefit from the dips with this gold
It’s always an education to look at the other side of the
In a July
10th article on Seeking Alpha, I found what can only be called
a complicated chart which is supposed to illuminate the technical reasons why
silver is due for a fall in the near-term.
Here’s the chart, for the masochists in my
Even after reading (and re-reading) the accompanied
explanatory paragraph for this chart, I still have no idea what I’m supposed
to be seeing. Will silver prices break down for technical reasons? The author
seems pretty certain. But I’m hesitant to rely on technical indicators as a
reason to modify my precious metals investment thesis.
My advice: forget
technicals for precious metals, because technicals are always right until
they’re astoundingly wrong – and they’re brainless when it comes to big
events – which can render irrelevant even the strongest candle-technique,
monkey-style, volume-judo that Techie T Techerson can unearth.
Chartists focus on patterns in the tea leaves, and
admittedly, they can do some very fancy analysis with
those tea leaves in the short term. I’ve seen our own Jason Cimpl make
regular, solid gains in one week to one month holding periods with stocks.
(to the right you can see a list of Jason’s recently closed positions from
his paid service Trademaster Daily Stock
But for precious metal investors who are in it for the long
term, it doesn’t make much sense to pay attention to tea leaves when any gust
of wind (big event) can blow those tea leaves clear out of the cup.
What’s the big event that will derail any technical
chartist’s master-level thesis on silver?
It’s sewn into Ben
Bernanke’s underpants: “Thou Shall not Allow Deflation.”
The Federal Reserve and our Federal Government itself are
kabuki players in a Keynesian drama. Standard bearer and Nobel-Laureate
economist Paul Krugman is
still urging lawmakers to spend yet more – because, as he says, the
only problem with the economy right now is that the Feds aren’t spending
enough! At this point, the Fed, the Congress and the President have entered
into a Keynesian suicide pact and Krugman is loading the gun.
Do you think they’ll all of a sudden switch horses and
pursue fiscal and monetary austerity – or do you think they’ll print
$trillions more in order to “solve all our problems”?
If the technicals on silver (or gold, oil, natural gas,
coal, sugar, wheat, rice, etc. etc.) breakdown and give us another chance to
load up on all of them at a discount to today’s prices… that’s good news –
but it doesn’t change the fact that our Fed Chairman says that he will avoid
deflation at every cost, and that silver and gold (et al) are due for much
higher dollar denominations.
I’ve been recommending that you buy these commodities on any
price weakness, with the understanding that these dips are times to gobble up
more of the pie – and to further hedge yourself AWAY from holding cash, which
is now a political tool just as much as a currency, and INTO real assets and
the appropriate securities.
To back up for one second, I should note that even the
temporarily bearish author of the aforementioned seeking alpha article ends
it with this sentence:
“Please note that this is
not the end of the bull market for silver.”
Okay. So it would seem that my recommendation would be to
continue to look for weakness in commodity prices as an opportunity to buy
If I sound like a broken-record it’s because the situation
for the dollar is only getting worse. The only people minding the store are
steadfastly in the “dollar devaluation” camp – so there’s little alternative
but to protect your wealth with precious metals.
My favorite way to profit from rising gold prices is a
small-cap gold producer, hauling thousands of ounces of gold out of the
ground in North America. They’re one of the lowest-cost producers in the
market, and every increase in gold’s price hits their bottom line. You can
still buy this company for around $4 a share, but I expect that number to
double in the next year or so if not sooner.
p.s. I mentioned Jason Cimpl’s paid product Trademaster Daily Stock
Alerts – (which is worth every penny) but if you just want to test-drive
Jason’s research, he recently launched a new free daily letter which comes
out every weekday after the market close. He calls this service Trademaster
Market Forecast, and you can sign up by clicking here