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The precious metals bear market, beginning with silver��s blow out in early 2011 and the general top in the commodity and
��inflation trade�� along
with gold��s lesser blow out later that summer amidst
Euro crisis hysterics, has been all about psychology. Well, every bear
or bull market is about psychology, but the intensity of this dynamic has
been something to behold in the gold sector over these last few years.
Psych 101
In early 2011 long-term interest rates were rising in
response to inflationary pressures, ��Bond King�� Bill Gross famously shorted the long bond, virtual mobs with
pitchforks were storming the Fed��s castle calling
for Ben Bernanke��s head and silver went to $50 an
ounce, with calls for $100, $200, etc. All psychology my friends.
While on the subject of the long bond, our ��Continuum�� chart shows that players did
not learn 2011��s contrarian lesson with respect to
yields as they took Wall Street��s ��Great Rotation�� hype hook, line and
sinker in 2013. What did the 30 year yield then do? Why, it hit
our long-term limiter (monthly EMA 100, red dotted line) and has dropped ever
since.
 
Pigs on the Wing & Sheep
If market participants are ��Sheeple�� as many gold bugs believe, then the average gold bug �� as evidenced by so many peoples�� staunch
refusal to give up on the shiny relic �� are Sheeple
squared, because the gold ��community�� (right there a give away on group think) has distinct leaders or
troubadours who, if the faithful will just hang in there long enough, will be
proven right as we are all led to the promised land.
Yet the bear market has cruelly put the promised land
further and further out on the horizon with each impulse of hope. The
gold story is one of righteousness because sound value (and insurance) not
beholden to leverage is monetarily righteous. But promoters and/or
buffoonish spokespeople have either knowingly or unknowingly used the
righteousness of the message to keep people firmly in the grip of dogma all
the way down during the bear market.
To make matters worse the ��pigs��, led by Goldman, JPM and Wall Street in general, have feasted and
feasted some more on the propped up paper entity built on what will one day
be ��discovered�� to have
been disastrously insane policy making. That is a double whammy for a
gold bug who stands for what is right.
A Reality
But these are the markets. You sit at your computer
and I sit at mine. We press buttons and make digital transactions in a
system that is functioning just fine for now. Within this, psychology
is clustered toward speculation and risk taking and against a risk ��OFF�� environment. This is the
reality.
So I would say to gold bugs that what you must do is ��put your dogma on a leash�� [1], manage
risk against your world view and be ready for a) a return to sanity as the
system is compelled by the next bear market to reform its ways and b)
potentially a grand opportunity to speculate in the diggers of gold out of
the ground.
Current Situation
So where are we at? Well, I have a couple pet
market writers (un-named and shall remain so) on whom I depend for contrary
signals. One just went hyper bearish (with HUI now at the 2008 lows)
indicating the potential for a bounce. The other is still sounding 100%
right even as he has been bullish all the way down, ending most missives with
an (!) for effect. The fact that he is still apparently tugging at gold
bugs�� greed impulse is a negative and implies
further downside pending any bounce activity that may crop up.
In NFTRH we have
been managing what we called the 2008 ��Fear Gap�� for years now. Once gold made its first major support
breakdown, we looked at the potential for the entire sordid mess we used to
call ��Armageddon ��08�� to be closed out with a fill of the upside gap in gold vs. the US
stock market. Well
consider it closing if not closed.
I believe that those who will be bullish on gold and the
gold miners from the depths of this bear market are going to well rewarded in
both their holdings in real monetary value (gold) in a world gone berserk and
in their speculations associated with that value (gold stocks of relative
quality). But first you must be intact and that means guarding against
your own bias, dogmatic beliefs and even certain truths as you know them.
These are the financial markets after all. Be
guarded when appropriate and be brave when appropriate. NFTRH has spent
all too many years now guarding against bias reinforcement and simply dealing
with what look like insane realities. It was too easy to listen to the
promoters for many people. That was the easy way out, to have their
perceptions reinforced.
We are not out of the woods, and on coming bounces these
promoters will be right back at it. When they are neutered or more
accurately, when the gold bug community��s actionable perceptions of them are
neutered, the sector will resume its bullish place in a global financial
market that is ripe for change where today��s pigs
will become tomorrow��s bewildered sheep and today��s bewildered sheep�� well, you know.
[1] Quoted from a song by long-ago Boston rock band
Volcano Suns.
While Biiwii.com will remain active and even increase
many of its functions, the more technical of its former topics will now take
place at the new NFTRH.com. Check it out and don't forget to bookmark/follow!
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