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I am not trying to be a wise guy with the first half of the title (it’s a goof on alarmist media), but if you were not bear biased or outright bearish on the gold sector’s daily and weekly technicals, and its macro and sector fundamentals by now all you have left are the alarmist headlines now telling us about H&S breakdowns, HUI/Gold ratio bearishness and whatever else is going on out there in media large and small to scare the lowly gold bug.
It’s hard to feel bullish now and that is the point of markets. Sometimes you have to do what is hard. Let’s remember that we’d planned for the sector to bottom out in December or January all along and it is only dutifully working to that script. The time for caution was back when HUI topped out at 220, and extreme caution when it lost key support at 195-200. Now the sector is on a plunge that could be the final act of this correction. Either be thinking brave or be sidelines (or both, laying in wait).
On my crowded bookshelf of history texts is one book called Dot Con, which recounts the build-up to, and the bursting of, the Internet bubble. I hadn’t read this book in many years, but I pulled it from the shelf yesterday to thumb through it, since we seem to be living in identical times right now (although with a far more pervasive and much, much bigger, bubble). Here’s one quote I typed in for your reading pleasure. You’re welcome.
“All speculative bubbles go through four stages, each with its own internal logic. The first stage, which is sometimes referred to as the displacement, starts when something changes people’s expectations about the future…….a few well-informed souls try to cash in on the displacement by investing in the new vehicle of speculation, but most investors stay on the sidelines.
The early investors make extremely high returns, and this attracts the attention of others. Next comes the boom stage, when prices are rising sharply and skepticism gives way to greed. The sight of easy money being made lures people into the market, which keeps prices rising, which, in turn, attracts more investors. Eventually, those upstanding citizens who haven’t’ joined in the festivities feel left out. Not just left out. They feel like fools…..
Boom passes into euphoria. Established rules of investing, and often mere common sense, are dispensed with. Prices lose all connection with reality. Investors know this situation can’t last forever, and they vie to cash in before the bubble bursts……a larger and larger group of people seeks to become rich without a real understanding of the processes involved. Not surprisingly, swindlers and catchpenny schemes flourish.Finally, inevitably, comes the bust. Sometimes there is clear reason for the break; sometimes, the market implodes of its own accord. Either way, prices plummet, speculators and companies go bankrupt, and the economy heads into recession. A few months later, everybody looks back in amazement, asking, ‘How did that happen?'”
I’m going to be occupied with a meeting this afternoon, but I’ll be doing a post afterward. Until then, talk amongst yourselves. Here, I’ll give you a topic: the Holy Roman Empire was neither holy, nor Roman, nor an empire. Discuss.
In spite of some nice overnight weakness, the ES has managed to shave its losses down to almost nothing (by the time you read this, it could well be green), although it has been “scalloping” its way a little lower lately………