Mine Cave-In! – Investors Buried! (GDX,TLT)

There’s a danger in being too attached to your investment portfolio, and we’ve written about it enough times here to skip belaboring it again.

 

Suffice to say that securities serve a defined purpose. They’re not spouses. They’re not lovers or children or dogs. They’re purchased in pursuit of greater wealth and happiness and are dispensed with when their prospects run dry.

 

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That’s right, Rennie.

 

It’s been said countless times in Wall Street’s history, and yet still there are those who ‘believe’ in the securities they buy, whose zeal and faith for, say, gold, remains steadfast through it all.

 

And so it was last week, when we read an hysterical talkback to a less than interesting article on the future of the precious metals, which went as follows:

 

No analysis of the gold market is worth anything if it fails to address these questions:

 

— Are central banks in the gold market surreptitiously or not?

 

— If central banks are in the gold market surreptitiously, is it just for fun — for example, to see which central bank’s trading desk can make the most money by cheating the most investors — or is it for policy purposes?

 

— If central banks are in the gold market for policy purposes, are these the traditional purposes of defeating a potentially competitive world reserve currency, or have these purposes expanded?

 

— If central banks, creators of infinite money, are surreptitiously trading a market, how can it be considered a market at all, and how can any country or the world ever enjoy a market economy again?

 

Documentation responsive to these questions can be found here:

 

http://www.gata.org/node/14839

 

What’s absolutely astounding about the sickness inherent in the above writing is that it overlooks the fundamental reason for trading markets, i.e., making money, as mentioned above. And if the individual who wrote the above nonsense believes so strongly that the market is fixed, why wouldn’t he simply clam up and ride the sunuvaborch straight into the grave for an otherworldly profit on the short side!?

 

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What the hell happened to this nogginless toad, that he started ‘believing’ in gold to the point that he forgot the reason he loved it so much in the first place?! He was convinced it would make him rich! He wanted to make a killing from the very same asset he’s now watching go down the drain, getting poorer by the day because he’s too damned proud to admit the stuff can decline in value just as it can go up, so he has to make up twisted stories to soothe his conscience. And even if the muddle-headed ass is right – that’s right: even if he’s right – why not turn the trade and make money on the short side?

 

No, no… the sad truth is that he can’t. Because his belief in gold has taken a turn from being an investment possibility to becoming a holy activity. And the metal itself has morphed into nothing less than the holy object of his worship. There have to be, therefore, satanic groups of evildoers all over the globe who war in the dark against his holy golden statuettes. There has to be a sinister cabal determined to dethrone his god, because without this diabolical cohort, the fact of his losing more and more of his hard earned money on a daily basis would be far too difficult for him to bear. The truth of his stupidity would overwhelm him and an inescapable, black and bitter depression would conquer him.

 

Better to post links to gata.org than deal with that reality.

 

Heaven Help us, Friends!

 

This is not the time to bury your head. There is still time to make a big whack of cash, and no one – NO ONE! – is better situated to assist you in that endeavor than the wise old farts at Normandy.

 

So listen up.

 

We’re going to run down a chart of the Market Vectors Gold Miners ETF (NYSE:GDX), a stock that includes all the majors, with the goal of offering you an outstanding trade idea for the week.

 

But first, we’re going to report on a trade that closed last week.

 

____________________________

 

Back on August 13th we wrote a letter called We’re Selling the Bond Rally, in which we advised you to sell the TLT September 126 CALLs for $1.34.

 

And we hope you sold a lot. Because they just expired worthless last week, and your take on the trade is 100%.

 

This Week’s Trade

 

Yippee!

 

Back to our chart for GDX –

 

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The miners’ chart is simply a picture of a cave-in waiting to happen.

 

Look first at the descending triangle (in red), a technical pattern that speaks to a continued decline once the stock closes below support. The fact that she already penetrated below support two weeks ago is a bad sign. The fact that she’s bounced off support a full six times can be read two ways. By the bulls (as their hearts go thump-a-thump) it’s a sign of solid support. By us members of the global gold-hating cabal – we wonder what’s taking so long? Why isn’t the stock making its northward move?

 

And the answer, in our view, is that it won’t.

 

With all the moving averages pointing lower and price beneath them all, and the shares sitting a mere two percent above their last line of defence (in red), GDX ain’t goin’ nowhere…

 

…But Down

 

We admit to the oversold RSI read (in blue) that occurred mid-July, and we see the rising average volume figures ever since. But for the stock to be stuck in the exact same spot a full two months later does not from our lips elicit a shriek of joy. Neither RSI nor MACD has been able to climb above their respective waterlines, which means we have to be realists. Failing a wild blast higher on the part of gold and silver bullion, the miners will be buried alive within a week.

 

Options Trader Elite recommends you consider buying the GDX November 13 PUTs for $0.89 each and selling the GDX October 30th 14.50 CALLs for $0.38 each. Total debit per pair is $0.51.

 

Many happy returns,

 

Matt McAbby

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