Email from new NFTRH subscriber...

It is not satisfying just because this new subscriber has nice things to say about NFTRH, but because this gentleman had been involved in the markets (PM's in particular) for years before ever hearing of me and immediately 'got' what it is I am trying to do.

"This is exactly what I was looking for" means that he was looking for a hard worker who really has no more answers about what will happen than anyone else, but is committed to doing the work - both in the big picture and in the interim smaller pictures - that is required to keep the ship right, no matter how choppy or turbulent the seas.  He is looking for unbiased dedication, not to join a win or lose battle of one ideology over another.

The work goes on because it's all I know how to do and I invite people who want to manage risk while positioning to be strong for what I believe are outstanding future opportunities to join me.  His note reproduced with permission:

Dear Gary,

I started my subscription just two days ago, but already feel comfortable with your style of providing timely input of clarity, that outlines the trigger points, the tolerances and the upside and the downside, thereby providing your subscribers with the tools to decide whether or not to adjust their positions depending on their own investment /trading/speculative criteria. This is exactly what I was looking far.

For your info, I am fully invested in precious metals and have been for 14 years. I am 80% invested in the physical and 20% invested in the PM shares. I have  very vivid and painful memories of 4 Q 2008 and have my figure [finger] on the trigger to sell 66% of my shares if I feel that there is a serious chance of the HUI falling to the low XXX's. My finger has been on the trigger for weeks now, and if I do pull it, I want it to be using my head and not my heart, and this is where I find your  input most useful.

Many thanks, and please do not change your style.

With my best regards,

James G

I think his mail came in response to my almost guilty sounding requests for people not interested in 'in-day' events to please tune out the noise of those type of updates.  The 'in-day', 'in-week' technical work is gaining popularity with many current subscribers.  Down the road when I have full time to devote to it this will be formalized and spun into another service.  But this 'Morning Notes' style update is even more important and it comes with the regular NFTRH subscription:

NFTRH Update - Morning Notes	Mar 23 (5 days ago)

I look forward to a time when you and I are not in such intimate and frequent contact, because that will mean we will have established a firm direction.  Until such time, we manage the market. 

Sentiment is bleak in the precious metals.  Beyond bleak really, as I am finding out anecdotally that a high percentage of PM players (and I am talking professionals, advisers, etc.) are under extreme pressure to puke.  Somewhere along the way (not sure if it was in an NFTRH or an email update) I mentioned that Brent Cook said something in an interview like 'everybody's under water on their gold exploration / resource stock holdings'.  I thought that was a strange assumption to make at the time, but from around the spectrum I am hearing something similar, now encompassing the entire gold stock sector and even creeping into gold itself with the growing 'end of the bull market' talk. 

There is real pain out there and a 'puke point' is looming.  Sometimes I feel a little uneasy being the [pick one:  hesitant, cautious, hype averse ney sayer] guy during the euphoric, endorphin releasing upside events that have come before in gold (most recently last summer) and will likely come again.  It does not win me friends when I poke fun (or worse) at the gold bug captains and actively avoid any 'precious metals genius' clubs that send me a membership card.  It also does not win subscribers when putting out cautious commentary (To the Newly Minted Gold Bugs) at potential points of change, like being risk vs. reward bearish as the hype blew out last summer and risk vs. reward bullish, like now. 

It seems like many market players (and esp. PM players) want to be tended and reinforced in their beliefs rather than challenged and made to consider a wider perspective.  So be it.  I am not saying I have called everything soup to nuts, as you have seen me screw up (esp. in my own trading) enough times.  But I hope that NFTRH is providing a tenor that is somewhat in line with the market at all times.  In need of tweaks or adjustments here and there, but generally on the big story. 

Okay, enough [navel] gazing.  The attached weekly chart of HUI has continued to degrade this week.  The target of 450 (38% retrace of the entire bull run out of 2008) is looking like a magnet.  Will it stop there?  Do we really care?  Well the answers are "I don't know" and "yes", because the analysis will have to incorporate a loss of 450 if this level breaks down.  If 450 breaks down, the next target is XXX (50% retrace).  Of course there are support levels to be managed all the way down to the XXX measurement target off of the topping pattern.  The pattern will become activated if we do not either rise right this moment or get a quick capitulation dive to 450 and near immediate reversal.

Has capitulation already come about?  I continue to lean toward 'no' because the HUI-Gold ratio has not yet pinged .27 (though at .28, it sure is close), BPGDM is at 24% instead of the gut wrenching target of around 5 to 10% and gold itself is still at 1645, with the weekly EMA 70 still viable at XXX.  Yet on February 29, there was significant downside volume in the metals and miners.  This was a 'kickoff', not capitulation.  The volume that followed was pretty intense and has been leveling off since, even as prices have declined.  Considering that the entire correction was in my opinion - and you know I am not prone to letting conspiracy theories color the analysis - manufactured by the people reworking the US Treasury yield curves, I wonder if a the kickoff volume is really all we are going to get.  How much is left to be puked?

Still, it will be best to operate slowly and carefully going forward.  I am personally using one little gold stock, Keegan Resources (KGN) as an indicator.  In 2008 NFTRH was able to add it for net cash value, substantial gold resource given away free as a bonus.  At last check, KGN's cash hoard was around $3/share.  So is Keegan at 3 bucks the bottom?  Don't know, but I'll add to the recently reestablished position at that point because it would indicate irrational bearishness along the lines of Armageddon '08.

Side tracking to gold for a moment, to answer what seems to be a frequent question on the minds of PM players, there is the potential for a bullish Inverted H&S-like pattern on gold.  I still dispute the terminology that most TA people use though, as an Inverted H&S technically should come at the end of a downtrend, not at a top.  Same thing happened in '08 however, and we all know how that pattern resolved; mega bullishly.  There is bullish potential for this one (target XXXX), but I'd call it more of a 'Cup' than an H&S.  Whatever it is, the right side shoulder can start forming right now or it can form at XXXX.  A break below XXXX.XX (the would-be 'Head' at the December low) however, blows up the pattern and gives credence to the people calling an end to gold's bull market.  In this scenario, Ben Bernanke wins, he can indeed control the yield curves and thus he can indeed control us; take a blue pill, sleep soundly.  I am still munching on red ones.  I like the taste.

This is not easy, but who ever said it would be easy?  Indeed, I have long felt that the next major leg in the gold stocks - if we are still correct to expect one - would be launched out of loathing and fear.  Thus far we have managed the 1.5 year long agonizing consolidation 'Handle' as being the provider of that loathing.  Now, our maker (market maker, anyway) is calling us to consider more dynamic possibilities.  In another nod to subscriber and blogger Doug (Monty High), I just do not know what is going to happen.  Nor do I feel any need whatsoever to try to guess. 

We are following a progression, trying to remain strong and also being open to the idea that none of us has the ultimate answers.  Functionally, at this time I would rather start seeing some signs of a bottom (either a dynamic 'V' or a more drawn out rounding process) amidst constructive sentiment before making major additional commitments.  The sentiment part is already there, but some of the worst declines - and capitulation - can happen from already suicidal sentiment backdrops.  I would rather do additional buying higher, or at a 'puke point'.  As to the latter, if it is in the cards, I think we will all know it if and when it gets here.

Have cash, have patience, have balance so as to remain strong.

Regards,

Gary
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