more articles by

Roger Wiegand


Click to enlarge Click to enlarge

 

Trading Gold & Silver Against The Cartels

By Roger Wiegand      Printer Friendly Version
May 14 2008 11:42AM

www.webeatthestreet.com

"Initially, we wanted to title this essay ‘Trading With The Enemy’ but we’re trading against them not with them. Former Treasury Secretary Robert Rubin and former Chairman of Goldman Sachs wrote the PPT Plunge Protection Team Playbook to support and suppress certain markets using direct market intervention. Allegedly, this game was installed to prevent stock market crashes but it’s morphed into an ‘Interventionist Market Place.’ There are no more free markets in the stock indexes. Roughly 66% of these monopoly positions are traded by funds. The trading cabal exists. When stocks are falling below plan they just buy S&P’s and Dow Futures. And, of course, they sell gold; the arch enemy of fiat currencies and false markets. Let’s stop whining about it and just learn to deal with it. In our view, this continues until their entire game and global system falls apart, which we feel is cast in bronze." –Traderrog

As Chopper Ben Was Busy Jawboning Markets on TV, The Boyz Were

Just As Busy Selling Gold Short. Nothing Like a Coordinated Effort

To Produce Immediate Results. Gold Flopped $20 In Minutes.

June, 2008, Most Active Gold Futures Intraday 10AM 5-13-08

Market intervention will work quite nicely on a shorter term basis. However, for the longer term, nothing can stop major markets from seeking their proper levels. Stocks, adjusted for inflation and dollars are in the tank and have been for years. New York feels they can keep the game in play if the Dow stays above 10,500. So far this has worked. However, with each manipulation and intervention the situation requires larger amounts of additional support trading stock futures and gazillions more in printed dollars. Economic history tells us it won’t work but it can delay the inevitable.

We used to wonder how in the world the IMF, World Bank and the U.S. Government could lend so much money overseas having it all end so badly. Now we understand. These loans are designed for political posturing and gain. This is just maneuvering for imposition of control over foreign national finances. No wonder those loan recipients, suffering follow-on disasters (loan or currency related) are so angry. After all, if this grant-loan money is never repaid; so what? They just print more. If global investment banks take nasty loan hits they just re-capitalize by issuing more stock, or borrowing on extremely favorable terms from the Federal Reserve. Is it ever repaid? Who knows? Who cares?

Trading in a Rigged Environment

"As traders of gold, silver, energy futures and other shares and commodities, we must recognize these games and learn to trade around and over them. At first blush, this seems unlikely, but it can be done with employment of certain trading strategies." – Traderrog

The larger stock markets, their indexes and related foreign markets run on regular annual cycles. Yale Hirsch, a trading legend discussed advantages of buying these big markets annually on October 31 and selling them all in the following May. From later May through October, the idea suggests not owning any shares. This cycle has been proven infinitely more profitable for the longer term producing much higher returns and reducing losses from seasonal choppy and downer markets.

That cycle remains in effect today with some changes. Now we have market intervention deliberately designed to allow some movement but arranged to take the annual sting out of yearly failures in the spring and fall. The same cycles still prevail but they just get jerked around and become choppy convoluted trading messes. They are direct victims of intervention from off-shore computers.

This negative environment is fine with Wall Street if they maintain certain non-failure price support levels to control and confuse the Sheeple into thinking all is well at Wall & Broad.

Despite recent credit market mayhem producing pure, unadulterated naked fear among frozen, non-lending bankers, a majority of the Sheeple remain resilient and totally bamboozled. This is great news for Wall Street as some semblance of control has been achieved. It can’t be hidden but 90% of the really nasty trash is swept under the accounting rug no where to be seen. For now.

A perfect example of this is Fannie Mae, which for all intents and purposes died years ago. This scandal ridden nest of fictional accounting should have been put out of its misery with several of the old zombie corporations of later 1990’s Japan. Like the Texans say, “They are all hat and no cattle.” Lots of PR, pasture piles, and media hype with legendary hollowed out nothingness underneath.

However, Fannie Mae serves a primary purpose. They are the magnificent dumping ground for zillions in bad mortgage paper lending banks must off-load, or get poisoned from it and die. Therefore, despite an army of 850 auditors working on Fannie’s financial discovery 24/7 for years, the books remain a mystery and the stock goes up.

Gold and Silver Shares

Precious metal shares have been dragged lower from several factors. On pure technical analysis, this sector needed a rest after a fantastic rally run. Nothing goes up for ever without some kind of correction. Now, the senior metals shares after having their rallies are correcting on technicals, but other operations factors make things more difficult. Overhead and inflation have taken a severe toll.

We watched as shares of a favorite stock flew higher on a formerly favorable cost/operating number of $85 per ton. With higher fuel, electricity, water, machinery, labor, EPA and a variety of other expenses racing up, that number today is more like $255-$285, or perhaps higher. Some of these senior mines cost $500 a ton, or more to operate.

Another nasty expense is the ‘takings’ by host nations of taxes, demands for nearby social needs and political contributions. This part of the mining business we think is the worst of all. These political dudes keep coming back to the mining well to take more. In their view, the miners are nothing but a giant ATM machine at political disposal to purchase votes. A giant Asian mine is paying over $One Billion in taxes and other non-direct mining costs. They are a fine corporation. For this latter reason, we’ve narrowed our preferences to Northern Mexico, Northeastern Nevada and several parts of Canada and Alaska. Quite frankly, we are very worried longer term about the many others.

Junior shares have taken a pounding as for the most part they are non-producers but instead are exploration companies. Their role in life is to find a property, prove it up, and sell or merge with an operating senior. Meanwhile, they live on stock purchases. The larger senior miners are having a struggle finding enough reserves large enough and fast enough to satisfy on-going requirements. The seniors would prefer to not only replace the ore mined each year with replacement properties, but also add further additions to their reserves for the longer view and solidity of the company. The PM juniors have taken a beating but they shall rise again. This newer rise might possibly start this summer of 2008. The gold and silver bull remains intact and the best is yet to come in the longer view.

Futures and Commodities Trading

Underlying values of commodities are reflected in associated shares of public companies. The rise and fall in gold and silver quickly adjusts related share values. Also, the ETF’s for gold and silver have taken a nice chunk of investable-tradable cash from the futures and shares markets. Those preferring metal ETF’s like the idea of trading shares, not futures for gold and silver. The leverage is much smaller but so is the volatility.

We began in this business on the futures side and are more comfortable with this sector. We also like faster results in an effort to ring the cash register each week, or more than once a month. Shares require more patience and a list of other factors must be considered when buying, or selling them.

In our view with faster markets using technical analysis, traders have an edge in defeating the manipulators. Normally, for them to adjust a market, they watch the same trading action we do and then respond. They are not in the market that often but prefer to support shares when it’s obvious something bad will happen. Usually, by then we can make a trade, move stops and/or adjust our positions to dodge most PPT trading moves.

I learned the hard way when we recommended share options on senior miners for the last quarter of 2006. Prior to that date we had several similar trades earning 100-300%. We should have known shooting these gold and silver share option ducks in a barrel could not continue forever. After all, those folk on the trade’s other side, do not exist in life to hand over their money to us and our traders.

What happened was the interim US elections and the PPT moving swiftly with vigor to prop the stock market for their incumbents and sell gold with legendary fervor. They killed our options. Keep in mind we face a similar event this fall in November. The incumbents and the PPT are buddies and they shall work in tandem to do it all over again. What is different this time are the terrible credit problems, failing consumers and lenders and a host of other negative events smothering most markets. The outcome remains to be seen but keep this idea in the back of your mind. Be wary.

Ten Tools For PPT Manipulation Evasion

  1. Play the annual stock cycles. Watch the dates and plan your investing-trading accordingly.

  2. Trade futures using protective stops. Enter and exit based on trends and potential intervention.

  3. Trade futures using spreads enabling traders to dodge negative draw-down periods and remain in good trades.

  4. Use technicals to determine historical cycles with advantageous dates.

  5. Use technicals to determine potentially good trades using Elliott Wave Light and Fibonacci Retracement levels.

  6. Watch the open interest and volumes.

  7. Do not believe anything in the news. Lots of contrarian pro traders move opposite the news immediately.

  8. Pay attention to share indexes. When they need immediate repair look out for intervention.

  9. Think like a manipulator to discover when these guys will mess with markets.

  10. Stay with longer trends but adjust your trading to work around the manipulators.

Spring Selling Cycle Delayed And Disrupted

Watch for new rallies in most all markets in late May and early June. Sometime in 2008, the bloom goes off the rose and the off-schedule, belated, nasty “Sell-in-May-And-Go-Away” arrives. We forecast a -24% haircut in most stock shares including precious metals. The only action to prevent the selling is our stunningly time-worthy Plunge Protection Team who has failed twice in April to prop the shares. Will they win during the next push-‘em-up event? Soon we’ll know. In the next selling instance, presuming the PPT fails, the PM baby gets tossed with the gray water.

Traders should prepare and act appropriately selling into strength those shares they prefer to be out of and wait for a later summer bottom to buy in again. Some smart traders are all in cash or bullion right now planning to buy heavily after the next lower base has been secured. Others will simply hold and ride out the storm clearly understanding what lies ahead. Still others will sell half and keep half. In our newsletter, Trader Tracks, we provide weekly guidance and extra e-mail alerts to report our best new trades and offer suggestions for trade management.

Whatever you do, make a concerted effort to stay with the trend and hang onto your core holdings of preferred shares, cash, and coins. Physical gold should never be sold or, traded but rather accumulated steadily on a monthly savings plan and squirreled away. Big traders are always ready to buy on the dips and normally never sell their physical gold and silver. You would be amazed how quickly your personal gold and silver will accumulate using this strategy. - Traderrog

Roger Wiegand
Editor Trader Tracks Newsletter
& The Rog Blog at webeatthestreet.com

 

****

Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares and futures- commodities trading with specifics for individual trades.  See www.webeatthestreet.com for more information.

Contact Claudio Bassi, at Trader Tracks New York City publishing offices for a modestly priced trial subscription 718-457-1426 Monday through Friday, 9:30am to 5pm or, e-mail Claudio at cbassi@miningstocks.com