- Gold stock investors have been experiencing a type of “2008 again” decline in the price of their gold stocks, yet many other assets have barely declined at all. The question on everyone’s minds is, “Will this pain end soon, or is it just the beginning of something much bigger?”
- Please click here now. There are some good reasons to believe the Dow could be making an important top. “Sell in May and go away” is a respected market adage that is based on seasonality, and it is in play now.
- Aggressive speculators likely have a lot of sell orders just below the 12,700 area. I’m more interested in buying the Dow if it falls than trying to guess if it is making a top. It may be simply consolidating for a move towards 14,000, but if it does fall hard, I want to start buying it very lightly.
- The Dow has risen almost seven thousand points from the 2008 lows near 6500,so I would not commit very much capital to a price sale of only one thousand points.
- The 12,200 price zone is very light support. Please click here now. You can see more substantial support near 11,200. Buying the Dow very lightly about every 1000 points down is prudent, but investing huge amounts of capital after a few thousand points of price weakness is definitely not a good idea.
- If the Dow starts a severe price decline, could that cause an acceleration of the decline in gold and gold stocks? Yes it could, and you need to be prepared for such an event.
- A lesson for gold stock investors who think a bottom is in can be had from the price action of natural gas recently. A lot of investors became interested in natural gas at about $6.
- Instead of bottoming, it went to $2, and investors who thought that such a decline could never happen found themselves in a fair amount of trouble.
- I bought all the way down, and if natural gas goes much lower, I’ll continue to accumulate it. Most investors allocated too much capital in price areas where they thought gas had to stop falling, so their cash reserves are now low or non-existent. Your buy orders should always be “smaller than you know is rational”. This is because the market itself is not rational.
- Let’s not see a repeat of that natural gas situation with gold stocks now. Many investors and analysts are sure that gold stocks must bottom soon. Perhaps, but are you prepared to deal with much lower prices if they don’t? Prepare now, rather than assume that much lower prices are impossible.
…..read points 11-24 HERE
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|Tuesday May 15, 2012
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