nspolar/frank - re: Gold:CRB & HUI:Gold Leadership Prerequisites:
Gold led the CRB Index on both the move from $340 to $431 Gold in 2003 and again in 2004 when Gold moved from $371 to $456.
Gold leads the CRB-Commodity Index on virtually all of it's Major moves:
stockcharts.com[d,a]daclynay[d20030601,20050824][pf][iut!lj[$crb]][j57576805,y]&listNum=2
It's no different for the Goldstocks... the HUI Goldstock Index needs to lead Gold the Metal...and on the major moves for Goldstocks - it has:
The HUI led Gold on the move from HUI 112 to 258 in 2003 and again on the move from HUI 165 to 248 in 2004 and here of late, on this move from HUI 165 to 219:
stockcharts.com[d,a]daclynay[d20020824,20050824][pf][iut!lj[$gold]][j57579240,y]&listNum=2
Here's a shorterterm Chart that I posted a while back, that clearly show's buy/sells based on the HUI relative POG:
stockcharts.com[d,a]daclynay[d20041115,20050803][pf][iut!lj[$gold]][J54037815,Y]&listNum=2
Frank; you asked whether Gold is a commodity, or a currency/money ?
The answer is that - it is both.
The QUESTION that Traders need to constantly be asking themselves is this:
Is Gold presently trading more as a commodity, or as a currency.
Savvy Gold Traders must ALWAYS monitor BOTH the fundamentals and the Technicals for both commodity & currency catalysts for Gold.
And we can't just monitor currencies and commodities... we need to monitor the broad International Financial Markets and Global Geopolitic's as well.
...these are all catalysts for the Price of Gold and Goldstocks.
Another factor that is both highly discounted and highly "tradeable" is Investor Sentiment... the highly predictable nature of Human Emotion and Behavior...ie:
"Popular Delusions and the Madness of Crowd's"
Here's a chart on risk:reward vis a vis Gold & Goldstocks that I originally posted on August 4th...and look where the HUI Rally rolled over - right on my resistance line:
stockcharts.com[d,a]daclynay[d20031104,20050825][pf][iut][j56406907,y]&listNum=2
There are many methodologies to trading.
On a very basic level I break trading styles down into 4 basic styles, or methodologies:
1. Pure Fundamental Traders
- they completely ignore the technicals - James Cramer on his Mad Money Show - eschew's this methodology.
2. Pure Technical Traders
- they completely ignore the fundamentals and trade purely on technical analysis ONLY - the tape knows all...and nothing else matters.
3. Technically "oriented" Traders
- who do monitor and trade off of the underlying Fundamentals for a given stock, sector, or commodity; but are more technically oriented in their approach.
4. Fundamental "oriented" Traders
- who do monitor and strongly ultilize Technical Analysis, but place greater emphasis on the underlying fundamentals, as opposed to the Technicals.
Fwiw...I am #4.
Obviously I am speaking in broad brushstrokes here.
At given times... I may place more emphasis on the technicals...especially at key "Technical" inflection points... such as when a stock, commodity, or index is nearing a 50, or 200 dma, is breaking to new highs, or lows; or if it has been in a trading range and is near the bottom, or the top of a given range.
Something that Traders often fail to do - is to anticipate.
To put themselves in the mindset of those who are on the opposite side of any given Trade.
- what catalysts in the market are likely to cause them to buy, or sell; enter, or exit; Fade, or Fold ?
- at what pricepoints are they likely to do the above ?
If you want to see an incredible lesson about market sentiment... this weekend if I have time; I will try to post a classic textbook study on Market Sentiment in the Gold Sector.
For me personally, "SENTIMENT" is often more valuable than either the Technicals, or the Fundamentals in Trading.
Sentiment - was THE most Profitable Indicator in this recent trade on the Goldstocks - period....and I will prove it to you this weekend with that a detailed post on market sentiment.
Anticipation verus Reaction is another prerequisite for successfull trading....on this move, it was imperative to anticipate that Gold Fund Mangers would NOT take the HUI/Goldstocks to any level near where they did on the prior rallies - relative to the Price of Gold...and that's why this rally has rolled over - where it has.
For Goldstock Traders we now have SIGNIFICANT resistance lines for BOTH Gold the Metal and Goldstocks.... in fact, the HUI rolled over on the exact tic of the tape - on that lower resistance line - in the chart shown above.
It would have been much more bullish, if we would have made it to the upper resistance line before failure, instead of merely the lower line...but, it is - what it is...
We can only take - what the market gives us... no more.
Ideally, as Traders we try to take perhaps 75% of the best risk:reward portion of a given sector, stock, or index move... and that is what I think I accomplished.
I was chastised and virtually alone in loading up at the bottom...and I was chastised and was virtually alone - taking profits and the chips off of the table here at the top.
It puzzles me how many Goldbugs cloak themselves with "contrarian" pride... but, how few - possess, or exercise even the slightest degree of contrarianism in their trading of Gold, or Goldstocks ?
Anyway... for the Goldstocks to move onward & upward to New Highs:
Gold must lead other Commodities & the CRB....and Goldstocks - must lead Gold the Metal.
...untill that happens - we'll continue to trade in a choppy trading range without any attractive Risk:Reward Metric's.
We just got a 54 point move from HUI 165 to 219 to Trade.
Hopefully if one traded this move; they've taken chips off the table and banked the move.
Now, it's merely time to take a breather, to relax, to really monitor a broad range of both fundamental and technical indicators and to sit patiently in high cash positions and only "core" minimum gold/goldstock positions and to wait for the market to offer us another opportunity.
As Traders... we can not force Mr. Market.
We can only take - what Mr. Market giveth.
...and if "WE" wait too long to "taketh".... Mr. Market will.
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