"Most of us are familiar with the above quote taking from Shakespeare's Hamlet, but how many of us know this verse: "And it must follow, as the night the day, Thou can not then be false to any man." Unless we can be true to ourselves first, we cannot be true to others.
To thine own self be true…..how profound. How many of us have a hard time being true to ourselves? Those of us that gave our life to another at the cost of loosing who we are in the process will have a hard time being true to ourselves. Allowing someone else to define who we are, we lose our ability to discover and grow inwardly. We no longer are able to discern a truth from a lie. For many of us, we have accepted lies for so long, that finding out what is true takes time. Having done this very thing, I know how difficult the journey to self-discovery can be.
Truth….truth is a word that brings out such negative reactions to many of us. You see truth is really an action word. You cannot accept truth without change. Accepting truth about ourselves is difficult, especially to those of us who have been abused. But truth does set one free if we will allow it to; it is a crucial part of healing. It gives us the freedom to be who we are. We are able to come to terms with our weakness (without condemnation) and appreciate our strength. Truth gives strength; it naturally builds healthy boundaries. Truth is open; it is honest even at the risk of being vulnerable again. Truth is light and brings forth life. When we walk in truth, we walk in light and when we walk in light we live a healthy life.
Truth is also love. The greatest act of love towards another is living a life that is truthful. For those of us who find it difficult to love ourselves, we will find it will come more easily when we walk in truth about who we are. If we walk in truth, we walk in perfect love, and if we walk in perfect love, then we do not walk in fear because perfect love cast out fear. Because we have been honest with ourselves, we are able to love ourselves with all of our imperfections, knowing that we are in "process" and therefore need not have others approval. This is freedom indeed.
The second part of this verse is a natural occurrence if we hold true to the first part of the verse. So, when in doubt as to our motives of not being truthful with someone….look inside, are we being less than truthful to ourselves?"
My reasons for the posts above are to let you know what I believe about the promises and prospects of the bull market in the precious metals complex. I also want to inform you of the pitfalls as I see them. These are pitfalls that I have experienced and that many folks I know have experienced. You must understand completely that I do not write what I write with absolute certainty or a guarantee that my thoughts will prove to be accurate or correct for you. They are my thoughts based on my experience with and study of the markets and people involved in the markets. They are also based on my experience with and study of myself and my reactions to participating in the markets as a trader and investor.
If people are active in the markets for 50 years they will be fortunate if, on one occasion and one occasion only, they recognize and allow themselves to benefit by the type of opportunity that is being presented to us at this point in time. This rare opportunity is in the precious metals markets. Based on what I see, the maximum appreciation will take place in the precious metal shares. They will far outstrip the performance in gold and silver bullion. Their performance will surpass the well known 3 to 1 ratio of appreciation of shares over a rising price of gold and silver. At this point in time and from current price levels I believe there is a more than reasonable probability that a sound portfolio of gold and silver shares will appreciate at a minimum of from 10 to 20 times the current investment over the next three to five years. A portfolio that consists simply of the Tocqueville Gold fund will do very well and achieve a substantial level of appreciation. The portfolio of shares that I have recommended which consist of all the shares in the HUI index should do better. The shares in the HUI may be changed from time to time by the American Stock Exchange. When and if they are changed I will adjust the hypothetical investment and trading portfolios at the same time. I like the Tocqueville Gold Fund because John Hathaway is an excellent precious metals portfolio manager. In addition to that, he has occasionally traded for the fund in a manner that has enabled the fund to pay an excellent dividend just about every year. I would expect the dividend to rise over the next 3 to 5 years. The fund is no load and the dividend can be automatically reinvested.
There are several commonly encountered pitfalls that can prevent you from benefiting from this potentially monstrous bull market in the precious metal shares. The first pitfall is short term trading. Short term trading should be left to the professionals or to those who pursue trading as a full time career and are well acquainted with the pitfalls of short term trading. Successful short term traders have a certain kind of personality that allows them to take many small losses without being emotionally distraught. In addition to that type of personality they have a type of short term patience that allows them to look forward to the results of their trading at the end of the year. As long as their trading is moving in the direction of year end profits they are satisfied. A successful short term trader approaches trading as a business. In other words, "Win some. Lose some." However, the bottom line at the end of the year is what matters to the professional short term trader.
Following the advice of a short term trading advisory is often a hazard in and of itself. It is just not possible mechanically to give a large number of people short term trading advice that works well and can be safely and closely followed and executed. For a short term advisory service to be of value, it must supply buy and sell points and provide buy and sell stops. Those figures can not be provided to hundreds or thousands of traders at the same time and be properly executed by market makers or floor brokers. The worse thing that can happen to neophyte or inexperienced short term traders is to incur losses that turn you completely off of and away from the current precious metals market and the huge long term benefits that are ahead.
Over commitment of your portfolio or your available funds to the precious metals arena is another pitfall. When you are over committed to the precious metals arena every blip down causes fear and anxiety to surface. If fear and anxiety surface they may cause you to sell some or all of your shares. 10 to 20 times the value of your commitment to the precious metal shares over a three to five year period is a rather handsome return. That should be enough for anybody.
A get rich quick approach and attitude is the most destructive. It leads you down the path of excessive risk. At the end of the get rich quick road lies failure for most that choose that path. If you told short term trading professionals that you can show them how to increase their capital 15 to 25 times in a three to five year time frame, many would jump at the opportunity. They would jump at the opportunity until they discovered that they must stop short term trading. So, there may be more to the need to engage in short term trading than just the desire for quick gains. If those type of thoughts lay hidden deep within you, it may take a massive effort and amount of time to get rid of them. To engage in short term trading before you have rid yourself of all the internal obstacles to success that are planted in your mind guarantees you only one thing. You are embarking down the road to internal upheaval and failure. It is a well known fact in the short term trading world that 90 percent of those who try short term trading end up failing. One out of ten succeeds. Those are terrible odds. However, it is possible that you are different from most and you can succeed while others can not. If you must engage in short term trading, it is best to know ahead of time what the odds for success are. Nine out of ten short term traders fail. These statistics are supplied by Lind- Waldock, one of the largest commodity brokerage firms in the United States.
The quarterly and monthly charts posted below have the Directional Movement Indicator beneath the chart. This is the DMI indicator.
"Directional movement is the most fascinating concept I have studied. Defining it is a little like chasing the end of a rainbow. You can see it, you know it's there, but the closer you get to it the more elusive it becomes. I have probably spent more time studying directional movement than any other concept. Certainly one of my most satisfying achievements was the day I was actually able to reduce this concept to an absolute mathematical equation."
I should probably post this chart with every report. If you become agitated and anxiety ridden with the fluctuations in the precious metal shares stare at this chart until you feel better and more relaxed. This is the most magnificently bullish chart I have seen in my 50 years of charting. This is a quarterly chart. Each line represents 3 months. The angle of ascent has become greater. The wave count, as I see it, is perfect. We are about to enter the third of a third wave when the up move resumes. Once again, I will post what you can look forward to when a third of a third begins.
"Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. Increasingly favorable fundamentals enter the picture as confidence returns. Third waves usually generate the greatest volume and price movement and are most often the extended wave in a series. It follows, of course, that the third wave of a third wave, and so on, will be the most volatile point of strength in any wave sequence."….Elliott Wave Theory
The precious metal shares are not even half way to their eventual bull market destination. The DMI indicator beneath the chart has been bullish since this bull market began. The green line above the red line is the bullish position for the DMI indicator.
The precious metal shares as represented by the HUI index may have completed a type of correction that indicates the third of a third wave that I have been describing for some time is very close to beginning. The type of correction I believe we have witnessed is called a "running correction." If I am right about the type of correction in the HUI, we can look forward to a powerful move up directly ahead. We don't have long to wait to see if I am correct. If I am wrong about this type of correction having taken place we will most likely have to wait a bit longer before the next dynamic move up begins, but begin it will. The five wave move up from the 165 level to the 401 level required 12 months. This correction began on May 11, 2006. On Sept 11 it will be four months since the correction started. Four months is sufficient time to correct a 12 month five wave move up. If the correction takes the form of three waves over a four month period it is just about over. When we look at the chart of the HUI we see five waves up from the 165 level to the 401 level and then a running correction in three waves. First let's look at the description of a running correction and then I will point out the numbers on the HUI charts.
Running Corrections
In "The Wave Principle", 1938 {2} by Ralf N. Elliott, it is called a strong correction.
"Hamilton Bolton considered it to be an irregular type of correction, together with an expanded flat. He wrote about it in his annual magazine "The Elliott Wave Principle of stock Market Behavior. Bank Credit Analyst Supplement" {3}."
"In 1967 and 1970 in column "Thrusts" in "The Elliott Wave Principle of stock Market Behavior. BCA Supplement" {4}, which Alfred Frost continued to publish after Hamilton Bolton's death, he wrote:
"A flat formation is generally followed by dynamic market action, which Elliott called a thrust. Within a thrust, corrections are usually subnormal in character, giving impetus to each successive move up or down. Triangles have the same technical implication as flats in generating strong market action."
"In 1997 Robert Miner in "Dynamic Trading" {7} mentioned similar running correction as a pattern, preceding continuation of the strong trend."
"If the C wave were to fall short of a wave A it could be interpreted as strengthening and supportive for the underlying trend and the next impulse wave."
"My goal for trading purposes is to have 4 to 6 high probability, low risk trades a year."
We started these trades December 8, 2005. We have accomplished two successful trades in five months. There are about three months left and we may be able to obtain one more profitable, low risk trade before the year is over.
Ms. Piggy has been enlarged in order to accommodate greater profits.
Gold and silver bullion are not on the exact same timing schedule as their shares. Gold and silver bullion have different Delta turning points than their shares. Sometimes the turning points coincide and sometimes they don't. Silver has slightly different turning points than gold. This accounts for those occasions when the shares are going in one direction and the bullion in the other direction. When this happens there are all kinds of reasons given as to why it is happening. All we need to know is the Delta turning points.
The investment and trading accounts are hypothetical accounts only. Commissions on buying and selling and taxes on profits are not used to calculate the final figures. When I decided to start writing these reports I felt strongly that I should not trade for my own account or any family accounts. I believed the conflict was too great and I did not want that to influence my judgment on buying, selling, and timing. This has been an interesting experience. I am still involved emotionally but in a different way. I know I won't lose any of my money, so that type of emotional involvement is not there. However, if I make mistakes in timing and you use my opinions, you may lose money. I am amazed at how much that possibility concerns me. You might lose money and that would be a result of my mistakes. When I trade only for myself no one knows about any mistakes I make. This way everybody knows!! It is truly amazing how much this makes me concentrate on what I am doing and recommending, more so than I ever did just for myself. That's a benefit I did not think I would be offering. O.K., that's enough for "True Confessions". Let's look at the composition of the HUI and each of the 15 stocks, and their dollar weighting in the HUI average. This is how we decide how many shares of each stock to buy. We try to match the weightings so the trading account can mimic the HUI's performance as close as possible.
Disclaimer: The contents of this letter represent the opinions of Ronald L. Rosen. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Ronald L. Rosen is not a registered investment advisor Information and analysis above are derived from sources and using methods believed to be reliable, but Ronald L. Rosen cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions.