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Dan Mezick
11-29-2005, 09:32 AM
Time to attune attention to this market.

Fevered reports of a NY close over $500 (highest since 1980's) coming soon, to a TV near you.

dandy_don
12-07-2005, 05:21 PM
Which gold stocks do you guys own? I have 1000 shares of AUY (Yamana Gold, Inc.)--any comments? I jumped in @ $5.02/share; closed today @ $5.48.

Girchuck
12-07-2005, 07:23 PM
GLD

Warren Whitmore
12-07-2005, 08:08 PM
Please read
Storage and stability
&
World commodities and world currencies

both by Benjamin Graham, you will never again look at gold the same way.

DesertCat
12-08-2005, 02:58 PM
[ QUOTE ]
"It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

[/ QUOTE ]

Warren Buffett, 1998

Dan Mezick
12-08-2005, 09:55 PM
Do your self a favor and just hold on to it. Dont trade it, it's a good holding. Consider adding/broadening out via the gold ETF (GLD) or a gold mutual like Fidelity Select GOld (FSAGX) or Toqueville Gold.

This action has all the earmarks of a huge multi-month move from the recent $500 milestone close.

Dan Mezick
12-08-2005, 09:59 PM
Look at your dates for this statement. He later became a HUGE silver investor. Market realities change; ditto for informed opinions and sentiment. The best are quick to change beliefs quickly in the face of new realities.

Buffett is one such.

UNDERSTANDING BUFFETT'S SILVER PLAY
http://www.gold-eagle.com/gold_digest_98/milhouse020998.html

Evan
12-08-2005, 10:16 PM
[ QUOTE ]
Look at your dates for this statement. He later became a HUGE silver investor. Market realities change; ditto for informed opinions and sentiment. The best are quick to change beliefs quickly in the face of new realities.

Buffett is one such.

UNDERSTANDING BUFFETT'S SILVER PLAY
http://www.gold-eagle.com/gold_digest_98/milhouse020998.html

[/ QUOTE ]
Silver is a key input to film. When silver prices went up it really hit companies like Kodak hard. Silver has utility which creates tangible value. Other than jewelry I don't think much is made with gold, though I may be wrong.

If that's what your link said, I'm sorry for being repetative.

buffett
12-08-2005, 11:46 PM
[ QUOTE ]
all the earmarks of a huge multi-month move from the recent $500 milestone

[/ QUOTE ]
I'm not saying you're wrong, but it's interesting that you're saying this when it's at a 24.5-year high.

At what spot price would you recommend him to sell his holding?

12-09-2005, 09:39 AM
gold up another 5 this morning

DesertCat
12-09-2005, 11:10 AM
[ QUOTE ]
Look at your dates for this statement. He later became a HUGE silver investor. Market realities change; ditto for informed opinions and sentiment. The best are quick to change beliefs quickly in the face of new realities.

Buffett is one such.

UNDERSTANDING BUFFETT'S SILVER PLAY
http://www.gold-eagle.com/gold_digest_98/milhouse020998.html

[/ QUOTE ]

Your link explains why he invested in silver (it has tangible value and uses, and he thinks he knows what it's reasonable equilibrium value is). It also explains the differences with gold, which is why he'll never change his opinion on gold.

What if Bush decides to help reduce our national debt by selling all the (now unnecessary) gold from our central bank? What happens to gold prices then?

buriedbeds
12-09-2005, 11:36 AM
[ QUOTE ]
[ QUOTE ]
Look at your dates for this statement. He later became a HUGE silver investor. Market realities change; ditto for informed opinions and sentiment. The best are quick to change beliefs quickly in the face of new realities.

Buffett is one such.

UNDERSTANDING BUFFETT'S SILVER PLAY
http://www.gold-eagle.com/gold_digest_98/milhouse020998.html

[/ QUOTE ]
Silver is a key input to film. When silver prices went up it really hit companies like Kodak hard. Silver has utility which creates tangible value. Other than jewelry I don't think much is made with gold, though I may be wrong.

If that's what your link said, I'm sorry for being repetative.

[/ QUOTE ]

Gold is actually used in a lot of electronics, fwiw.

-bb.

dandy_don
12-09-2005, 04:24 PM
http://news.yahoo.com/s/nm/20051209/bs_nm/markets_precious_dc

Had to post this...

[ QUOTE ]
Gold fever rages as price tops $530

[/ QUOTE ]

Evan
12-09-2005, 10:44 PM
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Look at your dates for this statement. He later became a HUGE silver investor. Market realities change; ditto for informed opinions and sentiment. The best are quick to change beliefs quickly in the face of new realities.

Buffett is one such.

UNDERSTANDING BUFFETT'S SILVER PLAY
http://www.gold-eagle.com/gold_digest_98/milhouse020998.html

[/ QUOTE ]
Silver is a key input to film. When silver prices went up it really hit companies like Kodak hard. Silver has utility which creates tangible value. Other than jewelry I don't think much is made with gold, though I may be wrong.

If that's what your link said, I'm sorry for being repetative.

[/ QUOTE ]

Gold is actually used in a lot of electronics, fwiw.

-bb.

[/ QUOTE ]
How much is actually used? Are you talking about things like the end of headphones where it's (I would assume) extremely small amounts? I would guess, and this is definitely a guess, that silver prices are driven much more by tangible forces than gold prices.

buriedbeds
12-10-2005, 01:23 PM
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Look at your dates for this statement. He later became a HUGE silver investor. Market realities change; ditto for informed opinions and sentiment. The best are quick to change beliefs quickly in the face of new realities.

Buffett is one such.

UNDERSTANDING BUFFETT'S SILVER PLAY
http://www.gold-eagle.com/gold_digest_98/milhouse020998.html

[/ QUOTE ]
Silver is a key input to film. When silver prices went up it really hit companies like Kodak hard. Silver has utility which creates tangible value. Other than jewelry I don't think much is made with gold, though I may be wrong.

If that's what your link said, I'm sorry for being repetative.

[/ QUOTE ]

Gold is actually used in a lot of electronics, fwiw.

-bb.

[/ QUOTE ]
How much is actually used? Are you talking about things like the end of headphones where it's (I would assume) extremely small amounts? I would guess, and this is definitely a guess, that silver prices are driven much more by tangible forces than gold prices.

[/ QUOTE ]

I have no idea one way or another whether silver or gold is driven more by investment. However gold is definitely used extensively in electronics as it is an excellent conductor and is very resistant to corosion; the more high-end the device, the more that is used (see: the space shuttle). I was just bored enough this morning while running a couple of free (partypoints) tournaments this morning to do a (very) little bit of research on the web about this, and I found one site that may or may not be accurate, but which seemed the best resource vs. the others I found in this basic check...

For more on the industrial uses of gold:

http://www.gold.org/discover/knowledge/aboutgold/industrial_uses/index.html

A breakdown for consumption:

http://www.gold.org/value/stats/statistics/gold_demand/index.html

Which, if it is accurate (and my calculations are correct), shows industrial use at around 12%, use for jewelry at about 78%, and investment use at about 10%.

If you do the same kind of research for silver, we can find out the answer to the "which is driven more by investment" question.

If not, I'll live. /images/graemlins/smile.gif These freebie tournaments are just really boring...I started them to do in the background while I was working on something else, but then I finished the other stuff I was working on and was left staring at 2 tourneys that even if I win I don't care... /images/graemlins/tongue.gif

-bb.

Evan
12-11-2005, 02:51 AM
I will check up on price drivers for silver if I get a chance tomorrow.

On a realted note, here (http://sterntv.stern.nyu.edu:8080/ramgen/clubs/IAG/iag-presentation-newmont-012805.rm) is a link to a presentation given by a friend of mine last year for a club at school. It's a pitch for Newmont Mining Corporation (NEM) but it's got a very good insight into world trade factors that preceded the rise in gold prices. The guy in the presentation is one of the smartest people I know in finance so I think it's a pretty interesting/worthwhile video to watch.

NOTE: You need RealPlayer and you can skip the video to the 52:20 mark in order to avoid the dead air/administrative issues earlier in the meeting.

Edit to point out that I know the girl is an idiot, just bare with her because the guy really is very bright and worth listening to.

One more edit, for context, to say that this presentation was given on January 28, 2005.

Dan Mezick
12-12-2005, 07:14 AM
This gold rally is predicated on staying above the 500-510 price area on a closing basis. It looks like it will deliver on that pretty easily. It hit $540 in Asia on Monday.

When price gets higher than a historical significant top, all the miserable people (holding at a loss) are gone, having sold "too get even", and most all new and remaining holders are anticipating higher prices.

Many traders buy after price closed above 500-510 for this very reason.

A close below 500-510 would likely be bad news for gold short-term.

Dan Mezick
12-12-2005, 08:59 AM
follow trends, avoid prediction.

Dan Mezick
12-12-2005, 09:00 AM
Newmont Mining is a good example. A close over 51 would be special.

Evan
12-12-2005, 09:15 AM
[ QUOTE ]
follow trends, avoid prediction.

[/ QUOTE ]
Alternately...listen, don't think?

Dan Mezick
12-12-2005, 09:54 AM
If thinking includes judgement, yes.

Listen, avoid judgements.
Follow trend, avoid predictions.

Note that prediction requires judgements.

The typical limiting judgement is that price is "too high" when it may in fact just be getting started.

A good example is Newmont Mining. It's price for many observers is "too high" yet a strong high volume close over 50+ provides a low risk entry because:

0. The stock is already trending higher.

1. A close above 50 is great because most losing players who paid 48 or more (previously, in 01/04 and 11/04) have sold, leaving only players who likely hold for much higher prices. This reduces selling pressure and tends to increase price. All the miserable people are gone.

2. A close sufficiently below 50 (3% or more) invalidates these premises and indicates an immediate sale. The downside risk is the right size (2-6% max) to participate and find out if this trend really has legs.

3. After moving higher a retest of 50 is a normal occurence (not a threat per se) and is to be expected.

Dan Mezick
12-12-2005, 10:18 AM
Warren,

"World" by Graham is $164 on Amazon.
Any way you know to access this book for far less than that?

"Storage" is $95 on Amazon. Any better places to get this book?

I'm Googling around looking for these in the meantime.

I'd be happy to temporarily swap some books with you to gain some access to these titles; please PM me if you have an interest in this.

Dan Mezick
12-12-2005, 10:21 AM
The discussed event (NEM over 50 on a closing basis) may likely occur today, on Monday, Dec 19 2005.

Evan
12-12-2005, 10:28 AM
Why can't I use judgement? You seem to claim that its because most people's judgement is wrong. However, your method of following trends essentially just follows the net judgement of the whole market.


[ QUOTE ]
0. The stock is already trending higher.

[/ QUOTE ]
Fwiw, this is also the case every time a stock decreases from a price it will never reach again. I'm not saying that's the case here, but "it went up so its going to go up more" doesn't make any sense.

[ QUOTE ]
1. A close above 50 is great because most losing players who paid 48 or more (previously, in 01/04 and 11/04) have sold, leaving only players who likely hold for much higher prices. This reduces selling pressure and tends to increase price. All the miserable people are gone.

[/ QUOTE ]
You picked 48 as an arbitrary number. If you replace it with 52 it "proves" (used in the loosest of terms) the opposite case and makes just as much (or little) sense.

[ QUOTE ]
2. A close sufficiently below 50 (3% or more) invalidates these premises and indicates an immediate sale. The downside risk is the right size (2-6% max) to participate and find out if this trend really has legs.

[/ QUOTE ]
Not much to say here. looks like you picked a few more numbers for no particular reason (or maybe because you read them somewhere else).

[ QUOTE ]
3. After moving higher a retest of 50 is a normal occurence (not a threat per se) and is to be expected.

[/ QUOTE ]
What does this mean? If it goes above 50 by whatever amount you deem to be sufficient then it won't go below 50? We are still talking about Newmont Mining, right? What if the dollar appreciates...a lot?




I don't really or agree with anything you wrote in this post. I'm curoius to know if you do.

Evan
12-12-2005, 10:31 AM
[ QUOTE ]
The discussed event (NEM over 50 on a closing basis) may likely occur today, on Monday, Dec 19 2005.

[/ QUOTE ]
Ha, what makes you say this? Is it yesterday's close of $49.66 or today's pre-market trade of $50.75? Way to go, Nostradamus.

Sniper
12-12-2005, 10:53 AM
[ QUOTE ]
"it went up so its going to go up more" doesn't make any sense.


[/ QUOTE ]

Physics 101... A body in motion tends to stay in motion...

The trend is your friend... learn to embrace it, not fight it!

Dan Mezick
12-12-2005, 11:12 AM
You passionately disagree and I respect that. For more information, please Google "trend following" and check out the theory behind "breakout". You will likely disagree with most of it. And that's OK.

Sincerely,
Dan

Dan Mezick
12-12-2005, 11:14 AM
I dont want Sniper at my table.

Dan Mezick
12-12-2005, 11:23 AM
[ QUOTE ]
what makes you say this? Is it yesterday's close of $49.66 or today's pre-market trade of $50.75?

[/ QUOTE ]

Both items point to a possible above-50 close today. It's an observation of a specific probability, not a prediction.

Some may judge the price of NEM "too high", above 50. I view a probable close above 50 as a low-risk opportunity.

Evan
12-12-2005, 11:33 AM
[ QUOTE ]
[ QUOTE ]
what makes you say this? Is it yesterday's close of $49.66 or today's pre-market trade of $50.75?

[/ QUOTE ]

Both items point to a possible above-50 close today. It's an observation of a specific probability, not a prediction.

Some may judge the price of NEM "too high", above 50. I view a probable close above 50 as a low-risk opportunity.

[/ QUOTE ]
Just so we're clear, are you saying you'd prefer to buy this stock for $50 as opposed to $49?

Sniper
12-12-2005, 11:56 AM
[ QUOTE ]
Just so we're clear, are you saying you'd prefer to buy this stock for $50 as opposed to $49?

[/ QUOTE ]

Considering that it hit a high of 52 (actually 51.98) today, this question seems moot at the moment!

Evan
12-12-2005, 11:59 AM
[ QUOTE ]
[ QUOTE ]
Just so we're clear, are you saying you'd prefer to buy this stock for $50 as opposed to $49?

[/ QUOTE ]

Considering that it hit a high of 52 (actually 51.98) today, this question seems moot at the moment!

[/ QUOTE ]
Would you rather buy stock in any company, ever for $x as opposed to $x-1? That is not only relevant, but pretty critical.

Sniper
12-12-2005, 12:26 PM
[ QUOTE ]
Would you rather buy stock in any company, ever for $x as opposed to $x-1? That is not only relevant, but pretty critical.

[/ QUOTE ]

There are times when buying at X provides a better risk/reward opportunity than buying at x-1.. so, yes!

(Note: I spun off the chart branch into its own thread)

Evan
12-12-2005, 12:46 PM
[ QUOTE ]
[ QUOTE ]
Would you rather buy stock in any company, ever for $x as opposed to $x-1? That is not only relevant, but pretty critical.

[/ QUOTE ]

There are times when buying at X provides a better risk/reward opportunity than buying at x-1.. so, yes!


[/ QUOTE ]
Okay, I'm pretty sure we will never agree on anything related to finance, stocks or money.

Dan Mezick
12-12-2005, 12:55 PM
Yes.
49 is much riskier than 50. The basic premise is that all the miserable holders who bought at the previous high ($50) may still be around to exert selling pressure at $49. Once it closes above, they are likely gone. What's left are existing and new holders who bought expecting higher prices.

Now the shares can run.


DETAILS
1. 49 does not represent a breakout above 50, it is merely potential. Below 50, more selling has and can continue to take place coming from old frustrated holders of this stock. All of them might not have cleared out yet. The 100% natural, human thing to do is hold your losers "until you get even". Your opponents are human and they do the easy thing. They hold. And sell at $49 if it ever comes.

The main problem with 49 is the protective stop problem....defining risk. Buying on a close above 50 solves this problem-- simply set your stop slightly below 50, (3% below is a good rule of thumb) This is the level at which you are 90% sure you are wrong. Risk is defined.

2. Buying on close above 50 provides potentially unlimited upside (if you can let it run) and a clearly defined level of risk. Risk is

Purchase Price - ($50 -($50 * .03))- any slippage - commissions

For example if you buy on close today and close is 51.50 risk is

51.50 - 48.50 - slippage - commissions

Risk is basically 3 points plus costs. It's under 6% risk.

At 49, you are setting a subjective stop with reasons supported by your level of fear or greed. These are poor premises for choosing a stop.

At 50, you are setting an objective stop with reasons supported by the chart. These are a excellent premises for setting a stop.

The chart reflects the collective actions (and emotions) of all the players.

After it breaks out it is 100% normal for price to test $50 before it runs.

The 50-51 area is a pivot point for NEM. The difference between 49 and 50 is very large. Alot of emotion is focused on the 50-51 area.

Evan
12-12-2005, 01:27 PM
[ QUOTE ]
Your opponents are human

[/ QUOTE ]
Opponents? What the hell are you talking about?

[ QUOTE ]
simply set your stop slightly below 50, (3% below is a good rule of thumb)

[/ QUOTE ]
Please stop making up numbers and telling me they're "good" or even hinting that they're reasonable. They are neither.

[ QUOTE ]
Buying on close above 50 provides potentially unlimited upside

[/ QUOTE ]
Hahahahahahahahahahahahahahahahahahahahahahaha.

[ QUOTE ]
At 49, you are setting a subjective stop with reasons supported by your level of fear or greed. These are poor premises for choosing a stop.

At 50, you are setting an objective stop with reasons supported by the chart. These are a excellent premises for setting a stop.

[/ QUOTE ]
Man, this is great stuff. I wonder how many people will actually believe all this.

[ QUOTE ]
After it breaks out it is 100% normal for price to test $50 before it runs.

[/ QUOTE ]
And you still think it's a good idea to ditch your shares at $48.whatever?

[ QUOTE ]
The 50-51 area is a pivot point for NEM. The difference between 49 and 50 is very large. Alot of emotion is focused on the 50-51 area.

[/ QUOTE ]
I wish you'd stop making things up. NEM has a historical correlation to the price of gold of about 90%. Gold prices will move this stock, not whatever the fck you're talking about. Here's a short economics lesson for those of you that think any of what Dan is saying is true:

1) The price of NEM moves when the price of gold moves. Here is a graph of NEM compared to the CBOE Gold Index:
http://img423.imageshack.us/img423/7777/stockgraph3cl.jpg

2) Gold is priced in USD/Troy Ounce.

3) It is reasonable to assume that the intrinsic value of gold remains constant.

4) Gold is traded worldwide.

For those of you that can't piece all of this together, I'll help. When the US Dollar depreciates against foreign currencies, the price of gold (which is USD denominated) increases. Here's an example:

Let's say ther are 2 currencies in the world, Dollars and Euros. At time 0, 2 USD = 1 Euro and gold is 400 USD/ounce (or 200 Euros/ounce). At time 1, 3 USD = 1 Euro. This means that the price of gold is now 600 USD/ounce (still 200 Euros/ounce).

Note that this example is very much simplified, but it gets the point across. NEM moves with the price of god and the US Dollar, not whatever Dan is talking about. End of story.

Dan Mezick
12-12-2005, 01:30 PM
It is often 100% correct to WAIT and buy at X as opposed to X-1.

The reasons are related to the focused emotion of most players at pivotal price points.

Emotion of players are not distributed evenly across all prices. Thus pivotal points are created, setting up low-risk opportunities.

The chart of NEM illustrates how the $50 area was hit twice in 01/04 and 10/04. $50 is now a pivotal point where emotion is focused. Historical buyers in these areas are grateful to "get out even", now, selling at $49 and higher.

Most of these historical buyers are likely gone, now.

The strong evidence is any close over $50.

Evan
12-12-2005, 01:35 PM
[ QUOTE ]
It is often 100% correct to WAIT and buy at X as opposed to X-1.

The reasons are related to the focused emotion of most players at pivotal price points.

Emotion of players are not distributed evenly across all prices. Thus pivotal points are created, setting up low-risk opportunities.

The chart of NEM illustrates how the $50 area was hit twice in 01/04 and 10/04. $50 is now a pivotal point where emotion is focused. Historical buyers in these areas are grateful to "get out even", now, selling at $49 and higher.

Most of these historical buyers are likely gone, now.

The strong evidence is any close over $50.

[/ QUOTE ]
Homie, NEM moves with the price of gold. Gold moves inversely to the value of the USD. None of this has ANYTHING to do with pivotal points or emotional players or ANYTHING you're talking about.

Dan Mezick
12-12-2005, 01:41 PM
Yes.

90% of what is said about NEM applies to gold.

Gold is a better buy at $501 then $480.
Just like NEM is better at $51 than $48.
For about 90% the same reasons.

I respect all contrary opinions regarding same.

Sniper, thanks for the supporting cover.

Evan
12-12-2005, 01:44 PM
[ QUOTE ]

Gold is a better buy at $501 then $480.


[/ QUOTE ]
Awesome! I love that your "analyis" doesn't include anything pertaining to the USD. Let me guess, is the USD a better buy at .5 Euros than .33 Euros?

Sniper
12-12-2005, 02:20 PM
[ QUOTE ]
The price of NEM moves when the price of gold moves. Here is a graph of NEM compared to the CBOE Gold Index:

[/ QUOTE ]

Just for clarification, the chart you posted does not support your statement!... The CBOE Gold Index does not represent the price of gold, it is an index of 12 Gold related stocks including NEM.

It is not surprising that there is some correlation between NEM and the GOX index where NEM represents 8.32% of its value. Its also not surprising that the GOX index would be highly correlated to the price of Gold!

http://www.kitco.com/LFgif/au3650nyb.gif

edtost
12-12-2005, 02:25 PM
[ QUOTE ]
[ QUOTE ]
It is often 100% correct to WAIT and buy at X as opposed to X-1.

The reasons are related to the focused emotion of most players at pivotal price points.

Emotion of players are not distributed evenly across all prices. Thus pivotal points are created, setting up low-risk opportunities.

The chart of NEM illustrates how the $50 area was hit twice in 01/04 and 10/04. $50 is now a pivotal point where emotion is focused. Historical buyers in these areas are grateful to "get out even", now, selling at $49 and higher.

Most of these historical buyers are likely gone, now.

The strong evidence is any close over $50.

[/ QUOTE ]
Homie, NEM moves with the price of gold. Gold moves inversely to the value of the USD. None of this has ANYTHING to do with pivotal points or emotional players or ANYTHING you're talking about.

[/ QUOTE ]

duder, you need to accept that the behavioralists may be right every once in a while about the small effects irrational traders have on market prices, even though you have described how a rational investor would look at the company itself.

edit: note that i know absolutely nothing about this specific company and/or gold.

Dan Mezick
12-12-2005, 02:42 PM
I'm a trend follower.

I perceive this thread has topped, and is now probably moving sideways...or likely, heading down.

And I've been a little overweight in terms of attention to this thread.

Probably a good opportunity to exit, or at least reduce my size.

I do appreciate all the diverse replies.

eastbay
12-13-2005, 12:58 AM
[ QUOTE ]
follow trends, avoid prediction.

[/ QUOTE ]

Follwing a trend is making a prediction, silly.

eastbay

Sniper
12-13-2005, 01:05 AM
[ QUOTE ]
Follwing a trend is making a prediction, silly.

[/ QUOTE ]

No more than playing AA preflop is a prediction!

For some reason, prediction and assumption have been used with negative connotations in recent posts. I do not belive that this is the proper use of these terms for odds based actions!

Girchuck
12-13-2005, 06:04 PM
Doesn't that depend on why these historical buyers were buying in the first place?
What if most of these buyers anticipated a long-term upward trend for gold? In this case, why would they sell now when their predictions appear to materialize?

Dan Mezick
12-13-2005, 10:40 PM
"why would they sell now when their predictions appear to materialize?"


Because of the pain of holding on for so long while experiencing a negative return. They are actually VERY happy to sell here and "get out even".

The typical investor sells winners and holds losers. Yes. The sale of the winner makes him "right" while (in his mind) the losing play is only a loser "on paper" till he sells. So he doesnt.

This behavioral finance link explains this "loss realization" dynamic very well.

http://loss-realization.behaviouralfinance.net/LoMa00.pdf


Here is the behavioral finance home page where this article is listed under "Loss Realization"

http://www.behaviouralfinance.net/

eastbay
12-14-2005, 02:03 AM
[ QUOTE ]
[ QUOTE ]
Follwing a trend is making a prediction, silly.

[/ QUOTE ]

No more than playing AA preflop is a prediction!


[/ QUOTE ]

Without further qualification, I respectfully disagree. Strongly.

It's fairly common knowledge that some instruments on some time scales tend to be mean-reverting rather than "trending." Although really, we're talking nonsense until we quantify "the trend" and specifically how to "follow" it. You want to start, since you're the one making the assertions?

eastbay

Girchuck
12-14-2005, 03:22 PM
I have a very naive question. Forgive me if it sounds stupid, but how many trades can be made with the stock being at its top price? How significant is the number of people who actually bought the stock close to its previous maximums and held on to it? Doesn't the fact that it came down indicate a lot of selling activity?

Dan Mezick
12-14-2005, 04:09 PM
Volume is a very important part of price action.

There has been a ton of volume here.

You can see that in these charts:

http://stockcharts.com/def/servlet/SC.web?c=gld

http://finance.yahoo.com/q/bc?s=GLD

...today and yesterday is about 2X normal volume.

Volume like this on down price action following a steep run-up often indicates at least a short-term top and creates or reinforces a pivot. The 500-510 area is gold is already a battleground (50-51 in GLD) and the level of volume here is not surprising.

It's perfectly normal to see a test of $500-$510 at this point.

If price can bounce, 500-510 becomes a pretty solid price support area.

If price cannot bounce, and pierces 500 by more than 3%, then it's likely a failed breakout and 500-510 remains resistance, fortified even further by all the new (naive) buyers who piled in at the 515-535 area.

These buyers will be happy to get out at $515 at a smallish loss close to even. They represent part of the force behind selling pressure on any rally.

They will likely sell into any rally.

Buying in the 500-485 area represents a low-risk opportunity to place a bet on the long side. The reason it is low risk is because of the price action. You can enter in the 500-485 area and place a tight stop loss at around 480, assuming you believe $480 represents a failure of the breakout over 500 (test after breakout pierced $500, and is 3% below)

Buying at 500, the worst possible price in the target range (500..485), and setting a stop at 480 defines risk as 4% not counting any price slippage on exit ("skid") and associated commissions.

Getting in VERY advantageously at say $486 stop $480 defines risk = 1.2%

One symptom of trader disease (http://www.hardrightedge.com/wheel/hrestops.htm) is selling just before price takes off or buying just before price breaks down. This is mostly a function of your entry and exit stop placement(s).

[ QUOTE ]
Q: Why do I always place my stop loss at an exact high or low?

A: You're describing a condition known as trader's disease. It's caused by the market tendency to gravitate toward the price that causes the most pain. Options traders are especially vulnerable to this affliction. It's not really sinister, it's just the nature of the market.

Start by realizing that volatile stocks can't be traded with tight and scientific stops, because all their support-resistance levels are channeled. This pushes a stock back and forth through common stop levels but keeps the ongoing trend intact. If you get up close to a price chart, you'll notice there's large bar-to-bar overlap most of the time. This makes it hard to get your move without getting shaken out.

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BigBiceps
12-14-2005, 04:32 PM
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Time to attune attention to this market.

Fevered reports of a NY close over $500 (highest since 1980's) coming soon, to a TV near you.

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I didn't read the thread, but you are a bit late (but better late than never).

I took positions in Gold and Japan ~2 years ago, and believe that Gold is going to ~800 and the Nikkei is going to 20,000.

I am currently up 55% and 35% respectively plus annual dividends.

Easy ways to invest in these are through Vanguard due to their diversification and low fees, VGPMX and VPACX.

Dan Mezick
12-14-2005, 04:37 PM
Good call on gold. It seems obvious looking back that gold would be strong after 911, hindsight being what it is.

I posted when gold was poised to assault the $500-510 resistance to instigate some debate and discussion.

What's your take on the recent price action through $538 and the current 500-510 area over the next few weeks?

BigBiceps
12-14-2005, 05:35 PM
I stopped short term trading years ago. It is too much effort.

I look at the charts and the fundamentals every couple of months to make sure nothing has changed in my original analysis, when I inititated the position. Nothing has changed, those targets of 800 and 20,000 still stand, and I am prepared to wait 3-4 years or until something changes to settle the position.

For amusement, I look at the short term outlook:

3 months: http://finance.yahoo.com/q/bc?s=GLD&t=3m&l=on&z=l&q=l&c=

still in the uptrend trading range, the drop below 510 could indicated a 50% retracement of the current uptrend to 495.

1 year: http://finance.yahoo.com/q/bc?s=GLD&t=1y&l=on&z=l&q=l&c=

A drop below 475 could indicate danger of retesting support at 460. It is however still in the current uptrend.

DiamondDave
12-14-2005, 07:51 PM
Gold sits there and doesn't do anything. And you have to pay to guard/store it.

Sniper
12-15-2005, 07:38 AM
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Gold sits there and doesn't do anything. And you have to pay to guard/store it.

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There are many different ways to trade GOLD, other than buying it and sticking it under your bed /images/graemlins/wink.gif

Evan
12-15-2005, 07:54 AM
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Gold sits there and doesn't do anything. And you have to pay to guard/store it.

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There are many different ways to trade GOLD, other than buying it and sticking it under your bed /images/graemlins/wink.gif

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What does what you do with it have to do with how you trade it? Gold probably has the lowest utility:price ratio of any traded good in the world, I think that's all he was saying.

Dan Mezick
12-15-2005, 11:46 AM
Money:
"Money is any marketable good or token used by a society as a store of value, a medium of exchange, or a unit of account. Money objects can meet some or all of these needs. Since the needs arise naturally, societies organically create a money object when none exists. In other cases, a central authority creates a money object; this is more frequently the case in modern societies with paper money."

The widespread influence of Internet is fueling an attendant rise in education-- including education about what money is-- and also an attendant rise in both general skepticism and general libertarian ideals.

These ideas fueling societal trends ("memes") do not work against the price of gold long term. With the rise of ETFs (GLD and eventually also a Silver ETF) it becomes a checkbox option to have a 5% exposure to gold in all financially-planned portfolios.

This trend is also well underway. Financial planners who seek diversity and a basket of "negative correlation" in client accouts are finding a 5% allocation a very easy sell to most clients these days.

Imagine just 25% of all retirement accounts waking up to diversification with ETF-based gold, and placing 5% of portfolio in it. That would have a huge impact current demand, of which investment demand has been nil up to this time.

Gold is money.

Dan Mezick
12-19-2005, 08:51 AM
The recent action in gold is playing out as a classic breakout.

The price tested the 500 area several times (past 3 years) and recently busted out to almost 540. It then returned to test 500 (normal breakout action) and appears to be bouncing off that test today. This is often a low-risk spot to enter assuming you are adept at knowing where to place your risk-limiting stops.

buffett
12-19-2005, 10:36 AM
Dan, I asked this once before but either I missed your reply or you missed my question.....at what spot price do you recommend people to sell?

Dan Mezick
12-19-2005, 12:42 PM
It really depends on the timeframe you utilize to define trend.

If you are long term trend follower, you'd likely trade the weekly chart and use the monthly and daily to pinpoint your entry and exit.

In trend following exit prices are defined relative to trend rather than to a forecast or anticipated target. Many participants in the late 70's sold at 350, 400, 450, 500, 550, 600 etc because of strong belief that price was "too high".

Price had other plans and subsequently peaked at 850. Many trend followers started selling in volume right after that.

I assume you want to know where to exit a profitable trade in the current day.

Assuming a long-term trend following approach, any closing price on a weekly basis lower than the 50-week moving average is considered cause for concern by many long term trend followers.

How much to sell at that point is a function of your system and associated discipline in actual execution.

The current gold situation has the look and feel of a strong long term uptrend.

35 year gold chart
http://www.gold-eagle.com/charts/35yeargold.html