It's Over... and the hedge funds will devour their young

As we used to say in the pits of Chicago, "This is going to get ugly."

Today, we confirmed that "Ugly" has arrived.

Trade update: We exited long gold positions on the 18th at 990.2 basis spot.

Today (
the 19th) we also had a major sell signal in spot gold. Very unusual that this happend so quickly after our exit signal. Like I said "Ugly" has arrived.

Downside targets (Fibonacci Retracements) for gold are:

1. $855
2. $800
3. $750

Stand aside and give these guys a lot of room as every hedge fund and commodity fund is bolting for the exit doors in all the commodity markets, including gold.

You have read on this blog before that the markets slide faster than they glide. Just look at Bear Stearns slide and several other recent meltdowns.

With the end of the month and the quarter fast approaching these hedge funds have got to have something to show for the month and the quarter. This slide may wipe out all their profits.

It all reminds me of what Bette Davis said in her 1950 movie, "All About Eve."

"Fasten your seatbelts, it's going to be a bumpy night"

Look for more bumpy markets and more volatility as the hedgies continue to bolt for the exit door that just got a whole lot smaller today.

Trade smart and trade to win.

Adam Hewison

Use this really cool analysis tool and get instant answers in plain English on any market. There is no cost.

22 thoughts on “It's Over... and the hedge funds will devour their young

  1. As predicted, it's traded mostly in the 880 to 940 range this spring, and is right on track for the rally this summer and fall. Cup and handle forming.

  2. Haha, no way. This wouldn't be interesting if there wern't people with different view points who had good arguements talking as well. It will be interesting to see what happens with gold and the economy in the coming months. Good luck

  3. I jumped into gold in early August. I also bought wheat and other commodities. Potash Corp has been a huge winner for me. Ditto silver. Anything real, either above or below ground, did great.

    Bye, bye now. Really. (Do I hear cheering?)

  4. I'm NOT talking about ancient history. Unless you jumped in in the last year or so and took your profits and ran, I think Gold has been a poor investment for the last 5 years. There are many stocks that do better. Commodities-wise, Wheat did better too, and in much shorter time

  5. One more thing, and I'll leave you guys in peace. If you want to go way back in history, check out how ownership of gold miner stock did in the Great Depression. Stocks in general went down what? - 80, 90%? Miners went through the roof. They were paying as much as 70% per annum in dividends.

  6. I wish I could share your confidence that the USD will never be worth zero. It may get real close. I do not own more than I need for bills.

    I am no gold bug. I did not buy until it was at $653 in August. I loaded up. I'll take 45% in eight months. It still has a long way to go up, imho. Maybe not until the fall, though. Just be real careful using technical indicators to trade in and out. That plunge was due to forced sales for margin calls and probably arm-twisting by the Fed. Can you really tell by looking at price charts when such positions are fully sold?

    Gold dropped after the sell alert. Good call. Well done. It's already recovered half that loss.

    I find it a little strange that you guys are talking about the folly of buying it decades ago when interest rates were at 20%. Ancient history. This forum is about TRADING, right? Since 2001, the ratio of the Dow Industrials to gold has dropped from 40 to 13. In 1981, it was around 1.5.

  7. Been a lot of activity on this entry. I'd like to contradict some of the ideas posted here.

    1. Yes, there is a demand for gold, it is used increasingly in sophisticated electronics.

    2. I can't disagree more with the comment that owning gold is an important for one's retirement. When people talk about owning gold "for retirement" they are not talking about diversifying an investment porfolio with COMEX gold futures or options. What they mean is actually owning the physical commodity in the form of coins, such as the South African Krugerrand or in the form 1 oz bullion bars. Owning the physical commodity to protect your retirement or absolutely NOT necessary and in really far, far from the best investment out there. Gold hit $1,000 so what? The gold bugs have been advocating the purchase of gold for decades and if you had done that your money would have just languished until very recently

    Imagine buying gold coin or bullion in 2003 when people started getting excited about it that it broke $400 for the first time in a long time. Good job, your gain was 150%. BUT IT TOOK 5 YEARS TO DO IT. I can name you many well known stocks that you could have made 300%, even 400% percent in that same time frame. And even more stocks that made 150% in NINE MONTHS that you could have traded in and out of over that same 5 years.

    I also laugh when I hear people praise gold (coins & bullion) as and investment because "it will never be equal to zero, it will always be worth something." So will the US dollar. You could make the same argument for putting your money in a federally insured savings account....because the US dollar will never be worth zero. I say never because realistically the USA is not going to go out of existence or go bankrupt and collapse. Even if it did, you would probably be dead, due to whatever catastrophe caused said collapse of the USA. At that point land, water, and food are going to be the only thing worth cant eat gold.

  8. First of all, I didn't short gold yesterday, I shorted the ETF GLD when it traded at over $99. Its still down around 7% for me. I agree that these are different times. And I think you raise a good point. However, I do not think any forces other than hedging can be attributed to golds climb. Input demand for gold is constant, Gold supply is constant, and costs of Gold production, other than oil costs, if anything are declining. If you have a reason other than investor speculation while Gold should be trading so high, please let me know, I may be missing something.

  9. In the 80's, Fed Chairman Volker raised interest rates to 20%. If Bernanke were capable of that, would NOT [sic] have gold. Pattern matching only gets you so far. Behind the patterns there are people and governments with self interests, taking actions.

  10. In the 80's, Fed Chairman Volker raised interest rates to 20%. If Bernanke were capable of that, would have gold. Pattern matching only gets you so far. Behind the patterns there are people and governments with self interests, taking actions.

  11. So did you fellows short gold right before it came back 2.4% in a day? The hedge funds (and very likely Bear Stearns) who were margin-called into closing winning positions last week have some breathing room now, but the gold shorts who have to cover or roll by the end of the month don't. The fundamentals driving gold and silver higher have not changed.

  12. I agree cold is a constant; a constant that trades at much lower values during normal market conditions. Look at the historical gold prices, if you can draw the conclusion that gold should be at $1000 an oz, then you must be looking at differnt chart than I saw. The times that gold spiked like it has currently were followed by massive sell offs. I'm not saying this is occuring right now, but it will happen. And it will happen when the market starts to correct. Unlike other commodities, gold is not expierencing demand due to necesity (wheat, copper) or supply shortages/expected future shortages (oil.) Gold is rising because of speculation; people want a hedge against the crashing market. When people feel the market is safe again, Gold will drop because there will no longer be a need for this hedge. People said the same thing about Gold in the 1980's, that it would never drop again. Those are the people who lost all everything in a matter of months.

  13. The plunge was probably due to margin call selling. Bear Stearns selling to mollify the Fed? I know it was way back a week ago, but do recall that the whole dang financial system almost collapsed.

    Look for gold to trade sideways, say 880-940, for the spring and possibly summer - unless there is another financial system panic or geopolitical event to send it to the moon. This fall it should continue its upward climb as the central banks continue to devalue the currencies. Business as usual.

    In the very short term, there may be a rally before options expire at the end of the month, as tons of short sellers are forced to roll-over or cover.

  14. Fed money to banks,stocks rise,commodities down ,dollar up.Stocks are a process,limited in time.Commodities are consumable things,dollar is exchange rate.The processes will be more valuable for a short time,supply and consumption will become extremely variable,influenced by its own feedback loops of geopolitical processes including new wars.Dollar is in infinite supply.Gold is the only constant invariable.

  15. I disagree, and i think that gold may have seen its peak. The huge price increases in gold were due to people rushing to hedge against the market collapse. There is no basis for golds increase other than this, which makes it seem almost like a speculative bubble. The Fed and Washington have shown this week that they are willing to act differently now to prevent the collapse of more big banks, pumping liquidity into the market with unprecendented moves. This is not just another rate cut. The markets appear to be bottoming out, which would make sense being that the resettring rates on subprime loans peaked this month. Defaults should only go down from here. If I am right, and the markets have about bottomed out, starting sometime within the next 6 months the market should begin to recover, and Gold will dive bomb before this, like it did in the 80's when it was much higher priced in terms of real dollars (about 2250 real $/troy oz)

  16. Gold has value before a period of market trouble. Gold has the same value after a period of market trouble. However, _during_ a period of market trouble the 'price' of Gold is in flux just like everything else. This crisis is not over yet. Don't expect to be able to anticipate prices week to week or month to month during times like this.

    Why buy gold?
    1. For your retirement. (You didn't actually think you're 401k was going to make you a millionaire it today's dollars did you?)
    2. For insurance against total financial system collapse. (If you think this current crisis is bad, wait until the SS SHTF)

    I'm not an expert. I don't do this for a living, but I wager my gold will still be worth something in 20 years.

  17. Fed money to banks,stocks rise,commodities down,dollar up.Stocks are are a process,commodities are things,dollar is exchange rate.Stocks have numerical limits,commodities are consumables,dollar supply unlimited.The processes will be more valuable for a short time,supply and consumption will become extremely variable,influenced by its own feedback loops of geopolitical processes including new wars.Dollar will continue to increase in supply.Gold is the only constant in process,intrinsic value and supply.Get some.

  18. This is the same thing that happened after the rate cuts in Dec and Jan. The dollar "recovered" for a short time, and then dropped off like a rock. Each time, the drop has been more pronounced. What you are seeing is the run-up to a catastrophic hyperinflationary event that was just triggered by the last few nails the Fed put in the dollar's coffin. When it goes into freefall this time, no amount of intervention or rate increases will be able to stop it. People around the world will start dumping their worthless dollars. We'll see the dollar index in the 60's by the end of next month, along with gold around $1200, silver near $30, and oil pushing $150. You should be buying more gold, not selling it. You're going to kick yourself. It's not "over". Not by a long shot.


  20. "Trade update: We exited long gold positions on the 18th at 981.34 basis spot." You are so full of ****.

    I assume you are not a MarketClub member... so here are the charts with the triangles. Feel free to watch this video to understand how to determine trend and how to determine timing points.

    If you have any questions or comment I would be happy to hear them.



Comments are closed.