It's Different This Time Isn't It? Roger Wiegand “We have noticed during our current updating markets review some newer pressures not on the trading table in previous precious metals rallies. Tremendous computing power and imposition of the Plunge Protection Team’s smothering trading blanket is screwing up cycles and time. Also, gold and silver stocks must now share investment cash with ETF funds. Actual mining production shortages will not go away. Inflation for the producing miners is becoming a heavy load. The end game is inevitable but the getting there can be confusing.” -Traderrog In recent trading days, gold and silver shares have been trending quite a bit with the big index stock markets. While cold logic tells us our PM positions ought to trade opposite weakening mainstream stock sectors it’s not happening yet. Precious metals seem to trade inversely with the U.S. Dollar but not always. As liquidity and credit dries-up in the aftermath of subprime, derivatives and other junky bonds, major market shifts have begun. At this time of year, the general stock market has normally been through a spring correction and follows with two months of choppy nothingness as dealers and brokers are mostly absent for beach time and fun in the sun. Crazy bond markets, we suspect have spoiled more than a few vacations this year. It’s just plain slow out there now but smarter traders not on holiday are busy with homework separating the wheat and chaff on their junior shares. With so many from which to choose, how do we find the good stuff and run from the others? In our weekly newsletter we offer trading ideas with stocks of all price and trading sizes, along with futures, commodities and spreads. While there are a variety of available trading tools they do not work well all the time. Traditional annual and semi-annual cycles are still built into the game but now we have more powerful variables. An abundance of trading and investment cash created more juniors than we would normally see when money is dear. World-wide cash printing causing inflation is beginning to bite mining operators affecting everything from fuel, to parts, and labor. In some cases the cost per ounce for production has risen 50% or more over the past 18 months. Trading junior shares has become increasingly volatile. We think volumes are more erratic with folks moving in and out of positions faster and more often. Even the best technical analysis will not always be accurate as the market manipulators arrive to shake the trees when their key trading components get sick and need propping attention. This then affects most every sector including gold and silver. Credit derivatives have been abused to the extent nobody knows or really understands the final outcome. However, understanding trillions have been originated with no one on the other side of the trade this scares the you-know-what out of those with enough sense to understand what can transpire. We are convinced the peaking of major stock markets has arrived. The larger trends are broken and for now it’s only a matter of time for the main selling event. Big global banks and broker-dealers over extended into the stratosphere. The shorter term-intermediate cycles of 90-120 days seem to replicate 1987. Watching these global and investment banks closely we see they reflect trouble ahead. Japan has been busy doing the same wild stuff as we see in America. Throwing cheap piles of money at the world for next to nothing (1/2%) and printing Yen at the speed of light. Worse still, they, along with China have been buyers of last resort for USA bonds and notes hardly worth more than the paper they are printed on. We are not certain at this point which is weaker; the Yen or the U.S. Dollar. Violence and unrest along with terrible weapons availability for naughty people keeps politicians and armies awake at night. China, Russia and the USA are selling billions in war machine tools. Eventually, somebody will use this stuff. Oil markets are at higher risk as a result of geography, politics and now religion. Oil traded yesterday with a new record high for that date on the New York Mercantile Exchange. Product scarcity is part of it but so is growing inflation. Hedge and LBO funds temporarily own way too much cash used for over and under investing (shorting) a host of market sectors. We are seeing some markets careen from highs to lows so fast new trading records appear. These fund guys have been buying ETF gold and when they get cornered on other non-performing assets, they sell the good stuff (gold) to pay for their messes in other markets. The PPT Plunge Protection Team ordinarily uses these tools to redirect markets: They sell gold futures, buy dollars, sell Euros, and buy S&P and Dow futures. This removes gold as a flight to safety threat and props the sick junk that needs to either shrink or die financially speaking. Where Does This Leave Us PM Traders? We cannot change the trading world but must just learn to deal with it. Junior PM shares offer a great deal of upside but they are going to get beaten around a bit before we find the finish line and cash in our chips. Senior PM shares have more staying power and market exposure but less upside potential. Shear size requires a lot of buying to make them move significantly. The few good ones however, are a good choice for part of your portfolio especially very large accounts. We had a good long run with senior stock options but general market volatility and PPT interference caused option seller’s to overprice their products taking away our odds. Futures’ trading in gold and silver is risky without proper trade management. With expert controls, many times it can be safer then stocks due to high liquidity permitting easy entrance and exits. Spreads and fairly priced options are also good tools. We’ve helped silver traders with outstanding results in this fast market. Technical analysis works when applied with experience and a handful of proven indicators. Fundamental trading including buy and hold is still beneficial but the time requirement is longer and the outcome is usually better with a larger trade list. We expect some selling, some accidents and some surprises over the next 90 days. Weak traders will falter and sell, lying back in the weeds to lick their wounds. Normally, when this happens, your favorite markets take-off in a huge rally and you are out of the game. Trader Tracks has been preparing and finalizing an updated trading plan to deal with these variables. These new market changes and affectations will not change the outcome. We know the final answer. It’s just the getting there that is more worrisome this time around. It is different this time but not in the way most think. -Traderrog Roger Wiegand Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional futures and commodities trading with specifics for individual trades. See 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