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NOTE: Originally
published for Metal Augmentor
subscribers on January 8, 2010 at 4:16PM EST.
After more than a
year of dithering and trying to find the best content management and back-end
solution for Metal Augmentor, we
are happy and relieved to inform you that final implementation of the
necessary programming to bring our site to full functionality is in progress.
As a result, we will be announcing our official launching within weeks if not
days.
In celebration of
the conclusion of this dragged-out affair, we will be opening up the Metal Augmentor
service to new Founding Members for a short period of time at the lifetime
rate of $107 per year (quarterly and monthly subscriptions will also be
available). We already have quite a few people on the waiting list, which you
can sign up for by going to the website.
Among the new
features we have just introduced are full charts on the basis in gold and
silver which we hope to shortly have available for subscribers in a dynamic
format that updates in near-real time. Over
the next few weeks we will be posting public commentaries on websites such as
Kitco, Goldseek, Seeking Alpha and Gold-Eagle to explain how the basis can be
integrated into trading and investment strategies as well as to serve as an
early warning for monetary calamity.
Thus, we urge
readers of SILVERAXIS to sign up for the Founding Membership waiting list now
before the crowds start knocking down our doors. But seriously, we are
placing a strict limit at this time of 500 Founding Members (we are well on
the way to that number already) until we can get a better sense of how much
effort it will entail to provide individual attention to a group that size.
And for those of
you who think our investment strategies suck, we invite you to sign up as
well, since if you turn out to be correct, then your subscription renewal
will be free under our one-of-a-kind gimmick whereby our portfolio selections
and allocation must beat a 50/50 investment in gold and silver bullion. You
might think this is easy but in fact very few people are able to do it.
Honestly, if we can’t, you shouldn’t be paying us anything. We
will also be encouraging the various newsletter writers, experts and pundits
to join us in this dare, so look for plenty of teeth-gnashing and
hair-pulling from the competition as we challenge them to rise to the
occasion.
Without further
ado, here is today’s commentary:
We don’t
listen to most gold bears but there are some with great market timing and
extensive trading experience like George Slezak who
you ignore at your own grave peril. Although Mr. Slezak has been wrong on
gold more often that not in the recent past, his overall record is very
impressive. Indeed, even while his gold calls have been off the mark, he has
been among the top recognized market timers
during 2009. We like his approach because he views price itself as the
key trading indicator along with supply-demand fundamentals. No, not physical
supply and demand but rather the supply and demand of traders as evidenced by
the Commitments of Traders data.
We are not going
to provide much running commentary with respect to Mr. Slezak’s latest
call on gold other than to point out that he does not make his speculative
trades public very often. Over the past couple of years, he has only made a
few and some of these were also put options in gold like this one (none of
which have paid off by the way). So there are certainly reasons to doubt his
latest bearish thoughts on gold. On the other hand, George’s message is
simply and straightforward. Moreover, a trader with his experience will
eventually get it right, and usually when it happens, the payoff is really
big.
No question the
$1000 level in gold is now a really big line in the sand with various pundits
claiming that the Beijing (and Delhi) Put along with the general state of
global economic affairs guarantee no future sojourns below that price. To
answer this, we will just say that instinctively we like a contrary option
play that targets a “dramatic” price level like this. If you are
going to be controversial and disruptive to the consensus groupthink, you
need to go for broke.
Without further
ado, here is Mr. Slezak:
GOLD
The following
chart is a 30 year chart of gold with the net commercial positions from the
COT report plotted over the chart of gold in red. The chart shows the net
commercial position is the largest net commercial short in gold in history.
The above chart
of the net commercial position suggests we should be on watch for a change in
trend in gold. The net commercial positions on the currencies (not shown)
suggest we should be on watch for a turn to strength in the Dollar. These net
commercial positions suggest we should look closely at the short term chart
of gold to track potential weakness.
The following
chart of front month Gold futures shows that Gold recently bounced back above
HALF BACK to it’s all time high. Half back to two thirds back
might be important resistance “IF” gold is at a major top area.
“IF”
gold breaks the recent support at 1080 and the long term trend line at 1080,
gold could QUICKLY fall towards next support near 980!
 
Someday, the
bottom will fall out of the gold market. “Many” things suggest
the decline may be closer at hand than most believe.
Considering the
potential volatility of the gold market I am making the following option
trade recommendation:
FUTURES OPTION
TRADE RECOMMENDATION: 1/15/2010, BUY ONE JUNE GOLD 1000 PUT FOR 15.00
($1,500) or better. Risk is the premium paid plus commission if exited before
expiration. Gold options trade on the electronic market until 5 PM eastern.
Monday is a US
Market Holiday.
We would note
that in the above chart it is obvious that reaching the $1000 price level
before option expiration would mean that the uptrend from the November 2008
lows would need to be broken decisively. Such a break could very well create
(or be the result of) gold market panic. This means that the trade arguably
makes sense even if the market interpretation turns out to be incorrect. We
are not ready at this moment to side with Mr. Slezak on this trade, but we
certainly are willing to be convinced. Indeed, our short term trading flag is
still flying red, which means our own market positioning anticipates a period
of market volatility and weakness (like Mr. Slezak, we’ve been wrong
early and often in this regard).
In conclusion, we
know this type of commentary grinds against the sensibilities of most people
in the gold bull camp, but our job is not to appease but rather to make money
for ourselves and our subscribers. Importantly,
since we are not pure ideologists, we don’t care if the market is going
up or down, and that includes the gold market. What we care about is being
positioned for profits.
Disclaimer: Mr.
Slezak is a licensed professional, we are not. He is making a “futures
option trade recommendation”, we are only providing our opinion on
speculative trades. Futures and options can expose a trader to substantial
losses including more than the original amount invested. If you have money
burning a hole in your pocket and you are looking to trade futures and
options, you should consider the services of a licensed broker like Mr.
Slezak. Even though we can’t recommend his trade ideas, we can
recommend him.
Tom Szabo
Silveraxis.com
Tom Szabo
introduces The Metal Augmentor,
which will be the detailed coverage of mining
equities from junior explorers to major mining companies.
Subscription
is US$ 87 per year, and you will receive in addition the Mining
Equities Report: Cash is King?" which includes the following :
- Coverage of over 30 exploration and mining
companies trading near or below cash value
- Technical analysis charting on 25 of these
companies
- A robust, interactive Excel file
- Over 60 pages of material
- Free access to future, updated editions
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