Thursday, August 11, 2011

Out of paper gold

6:49 am (Hawaii) I'm out of DGP. Took my small position and nice profit out of the equation. Much as I see gold going higher in the long run, for now, it's impossible to deal with short-term fluctuation and the trend is down. DGP got over 66 intraday yesterday and was still above 64 in premarket today (while I slept).

It tanked to 62+ this morning and I sold at 63.25. It was on the way back to 64 before CNBC started talking again about the margin hike requirement. I think it won't be long before gold and DGP go higher again, but there will probably be more margin hikes, eventually deflating the speculation and enthusiasm and cornering price into a range. As long as mainstream media keeps beating gold and silver to a pulp, I'll wait for momentum to return.

It's a game the CME mafia love to play. JP Morgan raises its price target above $1,800 on Friday. By Monday, they raise the target again, to $2,500. On Wednesday, they announce the margin hike. Coincidence? Hell no. They're making money on both sides of the trade while burying silver.

The recent action neutralized my latest buy of DGP at 63.46, but I'm content with the trade. I'm not interested in riding DGP down below 60 or 55. My entry point was around 49, and I don't expect to see that again. I'm more apt to quick trade in DGP now, play DZZ (2x bear) on the next margin hike. Trading something like DGP is almost ideal. There will be swings now, maybe from 60 to 65, 62 to 67, maybe on a daily basis. DGP and FAZ, that's a big enough list for short-term trading in my book.

I still like silver, but as long as the CME mafia has a lid on it, I'm not trading it. Silver tanked today with gold, but gold and silver miners are healthy, just trading up with the market (DJ +356/3.3%, Nas +87/+3.7%, S&P +40/+3.6%).

By the time I woke up, it was almost noon Eastern, so I missed the big move higher. Best move I made yesterday was to get rid of FAZ before after hours trading closed. Sold at 70.57 for a small loss. FAZ now at 62.98. It's not that I like banksters now. It's just basic numbers. The market is going to come back after huge losses in three of the last four sessions, including yesterday's monster drop. The machines are all about momentum.

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