Sunday, November 18, 2007

When You Hear The Long Lost Choir Sing

Many times, all that is needed to really get a feel for where specific markets are in their respective cycles is to simply listen and notice the huge increase in promotional material.
I remember when I first got into the Financial Markets the firm and all firms for that matter were promoting Oil and Gas Limited Partnerships. The sky was the limit on these gems as client after client clamoured to get into whatever partnership they could get their hands on. The year was 1981/1982 and we all know what happened to that sector in that time frame. CRASH CITY!!! Unfortunately I was very young and new to the business at the time and I had this naive notion that the firm I was working for actually had our clients best interests at heart. Well I learned that lesson quite well and very quickly and so did many many clients.
I realize at times it is hard to weed through all of the negative press and the many perma-bear analysts and market letter publishers. Remember if you call for a market meltdown long enough at some point you will be right. Of course once their predictions that they have been holding onto for 15 years comes to pass they cling on to it like a golden calf and use it to market, market, market. One primary group of these people are the gold bugs that have been sitting on their gold positions since the early eighties and watched as their investment crumbled for more than 20 years. Of course, now that gold has made a pretty sizable move they come out of everywhere promoting their huge profits and the huge profits yet to come. This to me is a tell-tale sign to take the money and run in the precious metals markets. The Commercial Traders seem to agree with this exact scenario.
Now, I do not want to say that gold prices are going to crash, but we do have a weekly sell signal, Commercial Traders selling more than they have in 20 years and Gold Fund Managers buying more than they have since I have the data on them.
The pattern on the Commercial Traders activity is eerily opposite to what developed just before gold made its final low in the mid 250's and I get at least 2 pieces a week in the mail about $1500, $2000 and $5000 and ounce Gold! Lets also add the currency markets showing a massive long term low being put into place for the Dollar and a top in the Euro, Pound and Canadian Dollar and you have a true blue recipe for a major top.
I have a short position in Gold at the $833 area and I do await a mini crash as buyers dry up very quickly. This last leg up in gold had all the earmarks of the smart money letting the small investor have as much of their long gold positions as they would like, even putting on some sizable short positions to quench the thirst for the metal from the small investors.
I do believe that there will be quite a bit of money to be made on the short side of gold and the first leg down could very well get ugly as there are very few who are looking for anything like this and once it begins there may very well be a massive exodus.
We shall wait to see what happens.

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