There was a time not so long ago on this planet that obtaining information on gold, be it fundamental, technical or quantitive was a daunting task. From a technical price perspective, if you wanted to look at a chart you had two choices. You could buy the Wall St Journal, get the price, and then draw (yes draw) your price chart. Or you could mail order for a yearly subscription to one of only a few companies that provided this service. Every Thursday or Friday you would get your charts and then spend the weekend drawing Thursday and Friday’s bars on your chart and recalculating your indicators for the upcoming week. Your charts were only updated to the preceding Wednesday because they had to be printed and circulated to subscribers. So for every stock or commodity you tracked you had to take a pencil or pen and update all of those pages with price bars from the past few days.

Now if you wanted fundamental information there was the Wall St Journal, the Journal of Commerce, Annual reports from mining companies, and the local Library. I mention this not for a nostalgic look back, but to make a point about how difficult and time consuming it was to obtain basic information that we whip up on the internet now in a matter of moments.

We are clearly in the information age and the ease of “info at your fingertips” has spawned a whole new bull market in….technical analysis and information gathering.

Whatever your opinion you may have of the precious metals future price, there is information out there to justify your “position.” Myriads of information. This can be very dangerous for the individual investor. No matter how much we’d like to think we are not biased and opinionated, there is no way around it. It is inherent and in our nature. The exceptions are rare. What usually happens is we tend to gravitate towards the information that most fits our view of the market’s future price direction. And this type of information is especially powerful when we hold a larger than we should position in a stock, or commodity sector. And there are many voices (commentary) out there mixed in with an incredible amount of supporting data. The investor is left with the problem of sorting it all out by himself or procuring the services of a market maven to assist him with the details at hand. And even there I have seen a good analyst go from bullish to bearish and actually get subscriber cancellations. Unfortunately, this makes it very difficult for the analyst to remain unbiased knowing if he/she becomes a bear, and then subscriptions will suffer. Who do you know who’s a bull in gold or any other commodity for that matter that accumulates bearish data and subscribes to an advisor who is an outright bear?

The proliferation of analysts and websites on the internet are many.

In order to be successful the advisor must have made some good/great calls at some point in time, and must have a good reputation. Most importantly is how the advisor performs when a trend change develops. A perma bull analyst who had services in the 90’s for stocks must have built quite a reputation by just being long. But what were their results in this last decade?

If you’re a perma bull there are subscription gold advisors and websites that held thru the entire collapse of the Mining stock sector where week after week a new “support” area would be chosen, a new channel drawn, and another key CYCLE would be due to bottom. One advisor, in order to remain bullish during the crash of 2008 would change indicators to suit their outlook. Near the end it got silly as the moving averages would be lengthened as long as it took to make the moving average look like it had not been broken by the price of gold during the bull market. I think near the lows the advisor was using a 21 or 29 month moving average on his long term charts. You’d look at it and it would show all the lows holding and of course the latest low was showing resting right on the line too !!! The advisor would go thru all the reasons why the low was about to be made, and if one got off he/she might miss the train.

The reality was that most of his subscribers were in STOCKS and not gold the metal. While gold was only dropping 30 percent the gold stocks collapsed. At their lows in 2008, a lot of investors had been pistol whipped to the tune of losses from 50%-70%. Those who used margin by buying the major producers and then using their margin to buy the junior miners lost everything and were wiped out even before the low arrived via margin calls.

On the other side of the aisle are the perma bears. There are some very famous ones too that have been allowed to be perma bears for many a year. There was a certain bear, who in all fairness called for a rally near the lows in gold. But in his view this was only a bear market rally in an on-going bear market. He called for a rally to 420 and was right on the money all the way up. Now we are talking a guy who had been bearish since the peak in 1980 and the results spoke for themselves. He had been correct for 20 years on the long term price of gold. And by the time we got to 420 in gold, he gave his first sell signal. Then a second sell signal at 460. By this time of course he had built up quite the case as to why gold was about to peak. How gold doesn’t do well in a recession, and how the US dollar was still in a bull market and was just going through a correction. Well by the time we got to 480 his case data read like a dossier. He gave us the millennium cycles, the historical data from the last great depression, actually making a case that Homestake mining only went up after the whole stock market bottomed.

Finally in great detail, he laid out how the psychologies of the masses were not ready for a bull market in gold. At that 480 level in his own words he said to his audience “This is your LAST chance to short the precious metals at these prices for a long time”. He was right on that call. It was the last chance to short gold at those price levels because gold just took off and we never saw those levels again. And do you know what? He has remained bearish throughout this entire rally all the way to today.

Now the above examples are not extraordinary just because each call could not have been more wrong about market direction. What is extraordinary about it is they still have a huge following. Granted there must have been a lot who left (what else you going to do once your broke) but the process of wiping out entire client fortunes are not achieved overnight. What happens is that once the “clients” are committed on the wrong side of the market, the advisor babysits himself and his subscribers throughout the demise of their equity account by assuring them at each new high or each new bottom that “this is it.” This is the bottom and the bull or bear market is about to resume.

And that leads us to today. We have so much information at our fingertips. I recall reading that a study was made to determine if investor performance of today has improved along with the information age. It hasn’t.

Fortunately there are advisory services that are not afraid to follow the trends and are willing to be bullish at times and also bearish when price dictates. Twenty year rallies are the exception not the rule. And even during bull markets, there are times when one needs to be bearish as most bull markets suffer at one point or other pullbacks that are as deep as 38% and even 50% or 61%. The commodity chart below speaks for itself. One must be flexible in the world of commodities because at the top, few were bearish.

Goldman Sacs Commodity Index

Goldman Sacs Commodity Index

Recently, after a long consolidation of five months the commodity markets have come alive again as price has broken out to the upside. With the Asian miracle there have been new demands on food and energy to the global supply as an increase in wealth always brings new demand.

With the onslaught of fiat currency and the mass printing press of the United States and the loss of confidence in various governments, the investment world is also shifting towards gold and silver as a means of preserving their purchasing power. Taken in context, the fundamentals for food, energy, and hard money assets (barring another meltdown) favor the upside. The crude oil chart shows how close it mirrors the commodity chart.

Crude Oil Commodity Price

Crude Oil Commodity

Here too we see that crude oil has recently moved out of a consolidation pattern of pretty much the same length of time as the GS commodity chart. In both charts, we see that we are not that far away from price resistance. Now if all resistance areas halted each commodity price appreciation, it would not be called resistance. It would be called “the top.” So while the resistance for crude is going to be the 90 to 110 area over the medium term, the key is going to be providing the analysis of whether we get through that area. And that’s where an unbiased investment advisor becomes the important factor. The chart above clearly demonstrates that you cannot buy and hold oil forever. (You can but your results will not be that good. There are some who bought above 140. But even more important, even the ones who bought at 90 are looking at a zero net gain over the last two years. So we think buying and holding is not a good strategy. If you’re the type of person who uses an advisor, you would be well served with one who follows the trend, is patient and waits for low risk set-up’s for his clients. That is our number one goal for our subscribers.

This recent breakout in energy and commodities is one that we’ve been watching and we think that the possibility of trend resumption has merit. Let’s look at one more market.

Gold Commodity Prices

Gold Commodity Rrice

Since the meltdown of 2008 there is only one major market that has broken out to new highs and that is GOLD. Shunned as a barbaric metal for over 20 years, gold has quietly rallied 4X over this decade. More importantly, it has broken out to new historic highs after a long 19 month consolidation pattern. Long term price breakouts of this fashion can produce great price moves and the prospects for gold, when viewed in relation to what is happening in the United States, suggests that the potential for an inflationary environment down the road is one that is difficult to dismiss.

All of the demand/supply prospects look very bullish for gold and should investment demand increase from here, it could (and is already) overwhelming the demand. With the advent of ETF’s the ability to buy commodities like crude and gold has been a huge success as far as providing vehicles for investors to participate in these commodities. But as we’ve seen, there are times you need to be out of the market. If we think about it for a moment, knowing when to get in is certainly important to success but knowing when to get out is the KEY to profits in markets like this.

Over the past few years, it was easy. Get in and stay in. We think over the next few years it’s going to be a lot more difficult as volatility is the order of the day. Crude’s drop from 147 to 35 is a clear demonstration that “holding” for the long term might not necessarily be the best way to go. While the fundamentals are known today, we can expect one thing. And that is that fundamentals will change. Crude is an excellent example. At the turn of the century, guess what was a key energy source? WHALE BLUBBER. Sounds incredible now but such is the case. Petroleum’s only use was Petroleum Jelly. Remember that stuff? Petroleum is now the main supply of energy for the entire globe. Can you imagine telling a whaler 100 years ago that the stuff (petroleum jelly) that you rub on a baby’s butt to keep it dry while in cloth diapers was going to replace whale blubber and become “the” worlds main energy component and that the world would consume 400 million gallons of petroleum a day by the turn of the next century? You would have been laughed off the docks.

How about gold? Can you imagine telling someone 100 years ago that real money (gold), the stuff used since the dawn of civilization would be replaced by ……PAPER. Not only would it be replaced by paper, but less than 2% of the world’s population would even own gold. Then you would lay this bombshell on him/her. Even though paper has replaced gold and that less than 2% of the population own gold, the price of gold would rise from $20 dollars per ounce to 1000………..a fifty fold increase. Surely they would look at you as if you were some nut. You could carry on with your story. You tell them that the United States government would confiscate all gold from its citizens, pay them $20 dollars for their gold, and then once they had it all, they would revalue it (overnight) at 35 dollars. Then they would make it illegal over the next 40 years for you to even OWN any gold. Can you imagine the look on their faces?

Since the dawn of civilization gold has been real money. However, in most of our lifetime that has not been the case. Real money (overall) does not lose its purchasing power. But paper money does. We can even make the case that the PRICE OF ANYTHING in the long term does not go up. What you’re really seeing is the value of the paper dollar going down. Here’s what I mean.

In 1908, Henry Ford sold his model T cars for $850 dollars or 42.5 ounces of gold. The base price of the all-wheel-drive 2010 Ford Taurus SHO with some (but not all) options comes to about $42,500 dollar or ………………………42.5 OUNCES OF GOLD!!!!

Any questions?

Now that we know what real money is, don’t you think its time you started buying some? If you’re answer is a resounding yes, and you have never done so, do yourself a favor. Get the services of someone who is familiar with the trends so you can have the confidence to buy some. If you don’t, 100 years from now some person will say something like this to another person. “Did you know 100 years ago, given the choice, people used to keep their wealth in paper instead of gold even though they knew that they would lose 90% of their purchasing power?

Think of how much more sophisticated the new 2010 Ford Taurus SHO is comparatively speaking to the Model T. Yet the price, in terms of gold has not increased one iota in all that time. If you don’t own gold, do yourself a favor. Get some. If you don’t have an advisor who is tracking the market for you, get one. One that follows price trends.

Let’s take a look at one more chart.

Recall the story about whale blubber and how a SUBSTITUTE eventually arrived on the scene? The chart below is a chart of Natural Gas. As you can see, it has incurred a tremendous drop as it saw prices that were near 10 year lows. Recently natural gas seems to have made a MAJOR LOW in price. The move is in its infancy and for the last month we have been consolidating. While gold and crude oil are well along their way in their bull markets, Natural Gas is really just beginning to show signs that a major long term trend change may be in the making. Now is the time to seek out opportunities in this upcoming market. This is a market that has the potential to increase its usage in the area of transportation and home energy. Already cities use natural gas for their bus fleets and the technology to burn cleaner increases every few years.

Natural Gas Commodity Price

Natural Gas Commodity Price

In summary, the potential for the world to move away from paper is growing in leaps and bounds and the growing demand for energy is rapidly expanding. The advent of ETF’s and other investment vehicles has made the participation of these markets to the average investor easier than it ever has. Gold is in a major bull market, crude is the horsepower of the world, and natural gas is a market that has probably put in a long term bottom and has the potential to do what crude did to whale blubber.

The charts also demonstrate however, that drops of up to 75% can and do occur in these markets. It also shows that 400% increases (gold) and 1400% increases (crude from $10 dollars to $147 this decade) can also occur. Thus the ability to cash in on these markets requires only two things. Knowing when to get in and knowing when to get out. We invite you to come to our website and follow along with us as we analyze the trends of these markets and look for low risk set-ups to enter them and participate in their current trends.

If you would like to receive my free weekly trading reports join my free newsletter at:

John Winston

Futures and CFD trading alerts for virtually 24 hour trading. Alerts are based weekly, daily, hourly and 5 minute trading charts. Using hard stops and trailing stops allows us to trade around the clock as positions mature during times we are not available to watch our screens.

Trades vary in holding times from a few minutes to several days depending on market volatility and current trends.

Gold Futures Trading – Coming Soon

When you get right down to it, no matter what techniques one might rely on for his investment decisions there is one thing that they all have in common.  In order to be successful an investor has to be on the right side of the longer term trends. We are all bombarded with daily charts and sometimes weekly, but looking at the long term monthly charts can reveal areas where price on the long term has historically shown to be important turning or continuation points.  Not only do they give you a perspective or where price has been in the past, it gives you an idea of where price is now in relation to where major peaks and bottoms occurred. A great example of how a long term perspective can influence an investment or trading decision can be seen in the Corn chart below courtesy of Moore Research, Inc.  http://www.mrci.com/pdf/c.pdf A quick look at the chart and we can see how the $4.00 area has been a major price turning point in the past.   Over the past 38 years, $4 dollars (with the exception of 1996) had been uncharted territory.

Corn CBOT

I’ve used this example because it is relevant right now as Corn futures are knocking on the $4 dollar area.  But now that we’ve seen a long term chart, we can see how significant this price area is to this commodity.   On the inverse, we can see historically that buying Corn at/near/or under $2 dollars a bushel over the past 38 years was buying when price was cheap.  Of course it’s not that easy buying 5000 bushels of corn and storing in your basement and trying to re-sell it a few years later.  However, I am using corn for illustrative purposes and we will look at the Crude, Natural Gas, and Gold markets after this exercise.  Having viewed the chart we can now see how the $4 dollar area is kind of like a pivot point going forward here.  Either it’s still a long term price point where corn will turn down or it has the potential to become a floor for long term price.  Armed with this knowledge one can at least formulate a decision making process for corn and better understand if the price fundamentals are about to change on a longer term basis. Now we can also surmise the following after having viewed the monthly corn chart.  First, either corn is at or near a potential major peak in price or the long term fundamentals of supply/demand are changing.  And there’s a third possibility.  The US Dollar’s weakness is affecting the price of corn.  To elaborate on the third possibility, it seems that the commodity and financial markets has become a one way street.  For the most part, the stock and commodity markets all rally together when the dollar is dropping in value and the opposite when the dollar is rallying. During the latter part of this decade adding currency fluctuation into the analysis is a must. This history of paper money is littered with great dynasties that have come and gone.  Even in the days of Rome, the beginning of the end could be seen in the amount of gold purity that was contained in their coins.  Near the end I read somewhere that the gold coins had less than 10% gold and substitutes like bronze was used in the making of the coins. Over the 20^th century little by little the same thing has happened to the currency of the United States.  From the confiscation of gold during the great depression, the Bretton Woods agreement to finally Richard Nixon’s removal of the US Dollar from gold, the US Dollar has become nothing more than a piece of paper backed by nothing. On that fateful night Nixon was heard afterward to say “Now……….we are all Keynesians.” About 36 months later the stock market bottomed at 577 and over the next 40 years, would rise to a high of 14,000, gold would move from 35 to 1000 and crude oil from $5 to $150. (At their respective peaks).  And that brings us to the world we live in today. The status of the American dollar from which the term “it’s as good as gold” comes from, has become a currency that has lost the credibility of the global world and while it is not being reported, a mass exodus is underway by the nations who are holding most of it.  Its rejection will bring profound changes to the wealth and power that the United States once commanded.  The pillars are being removed slowly and while no one has noticed that much, it will be obvious to all when the building finally comes crashing down. Throughout this global debt crisis, each tool that has been wielded by the Federal Reserve has rendered no results.  At first, we were assured that the situation would be remedied, but we have to ask ourselves, what can the Fed do?  They have fired all of their bullets already. Today besides other currencies, the world’s basic substitute for dollars is oil and gold.  There is already a move underfoot to no longer price oil in US Dollars, and when that happens, the power of the USA will greatly be usurped. Since oil and gold play’s such an important part of our financial world and is at the center of headlines, let’s take a look at the long term charts to get a price perspective of where we are at. First up we have the long term Crude Oil chart.  Recall the importance of the $4 dollar area for corn and we can see that Crude Oil has the same long term PIVOT point with the exception that it’s $40 dollars and not $4.   We can see how IMPORTANT the $40 dollar area is and we can ask the same questions as we did with Corn.

Crude Oil CBOT - NYM

We can see that the 1990 Desert storm spike was right at the 4 dollar area and was a hint of things to come.  Forty dollars has an important element to it as well.  Recall that we had a mini recession in 1991 about a year after oil had hit $40.  Now move over to the year 2000.  Notice we had a peak at $40 there as well.  Shortly after that, we were in a recession.  As a matter of fact, that recession ended not long after the 911 event.  Who in USA can’t forget George Bush telling us to all go out and spend money? We can see that the collapse from the highs near 150 bottomed just below the 40 dollar area and interestingly we’ve been through the deepest recession in 80 years.  Now once again oil is moving higher but this time from basically the $40 dollar area.  Is $40 the new floor for gold as $20 was during the 80’s and 90’s?  Until proven otherwise, we think yes.   And if $40 is the new $20, is $80 the new $40?  That answer we should have soon as oil is making its second foray into the 80 level with new highs this past week. The seasonal average for Crude usually peaks in this time frame and it is very possible that Crude could indeed pullback, but it will only do so if the US Dollar bottoms and begins to move up.  November is usually the strongest period for the US Dollar as well so it’s an important test.  In an average year, we probably would peak here and pullback to the 6o dollar area and form a low sometime in the January/February period. You will notice that there are three channels that have been added to the price chart. Notice this latest consolidation over the past few months in oil has been bouncing off the bottom of that line at around the 65 dollar area.  Then over the past month, we’ve broken out of that range and price has just hurdled $80. Of particular interest is the second red channel line on the chart.  This line goes all the way back to 1997 and if you look at the price action this line has provided resistance to price in 2005 and 2006.  Now if we look at the price spike of 2007 we can see that once this second red line was exceeded, we rallied to the 100 area and then to confirm the channel lines importance, price pulled back from 100 right back to the top of that trend line at about $85, and then for about three months price oscillated in that same range as oil bounced back to 100, and one more time down to 85 before liftoff to the 150 area. Therefore, we can conclude that if the oil market is not peaking here and now and it still has legs, then the most likely price event would be for Crude Oil to climb to the 95-100 area and for price to touch that second red channel line on the chart again. A final observation is that we can see how the lowest two channel lines have provided the highs and lows for crude oil since 1998 with the exception of the 2007 overshoot oil mania and the 2008 meltdown liquidation event.   And since the meltdown low was at the $40 dollar area, we believe that price is now the new floor for oil.  In fact, we think that price action will most likely follow between the two red bottom trend lines between now and February.  If this is the case, we should expect the highs to be in the 95-105 area and the pullbacks to be in the 68-75 area over the next 3 or 4 months. This brings us to the currency situation affecting the global marketplace.  Up until recently, government debt and printing of money had been done in a somewhat orderly fashion, and for the most part the ravages of inflation were well masked with cheap labor from the developing nations. But as in the last war (Vietnam) this war was to be no different.   Combined with the fact that USA has given its industrial base to China, the latest war on terror has proved to be a deficit killer.  The final straw of course was when the real estate market collapsed but the cracks and fissures had long been developing.  In fact shortly after the 911 event, when the USA reflated its markets that one final time, the commodity known as gold ended a 20 year bear market and bottomed at the 250 dollar level.

GOld CBOT - CMX

The long term view of Gold shows that as $4 dollars is to corn, and $40 dollars is to gold, the chart above suggests that the $700 dollar area is most probably the PIVOT point for gold.  We can see that although 1980 did have a spike to $875, the chart reveals that 700 (or just slightly above it) was where the price rise was really contained.  The 2006 high was also at 700 and spent almost a year and a half bouncing off that area before it blasted thru to 1000.  Finally, the subsequent 2008 meltdown low was right at the $700 dollar area.  We think the weight of the evidence suggests that $700 is indeed the new pivot. From this chart we can see that gold’s price has been trading in its second channel from the top and like crude’s drop below its channel to its $40 dollar pivot point, gold’s drop during the same meltdown pierced its channel and dropped all the way to $700, its pivot point.  The subsequent bounce back into its channel for the past 12 months is now reaching the upper boundary of its channel line.  That line is pointing to the 1100 dollar area in the October/November time frame.  Like Crude, Gold is also due for a seasonal pullback at this time of the year.  Therefore we should be cautious when gold reaches the 1100-1150 area should that price level be realized over the next 2-4 weeks. Now with that said, the question arises as to whether gold could break above that channel line.  Usually channel lines, when broken, are the result of price having tested and bounced off it for a period of time.  In this case, while there have been no price hits on this channel, we see that the highs of 2008 were very close to touching that line.  And the latest bar on the chart is also very close to touching that channel. Sometimes there are price spikes that develop at these price points.  The 1980 high is one example.  But more to the point, 1983 and 2006 witnessed spikes above the red channel line.   The potential for gold to do the same on this current rally is a strong possibility as well.  The most incredible thing about gold is that it is the only well known commodity to be making NEW HIGHS since the meltdown. It is an amazing thing that less than 2% of the population own form of gold.  In fact, Doug Casey’s work shows that there is only about 1 ounce of the metal available for each person on earth. That leads to the next question, how much paper money is there on earth?  At last look in 2008, it was estimated that there would be about $3000 per person on earth should it be divided up equally.  Now there are a lot more complex ways to arrive at what price of gold should be, but even in this simple method it shows that equally speaking, the price of gold should be at least $3000 per ounce. So what conclusions should we draw from the chart?  First, gold is in a major bull market, it is currently the LEADING market of the world making new historic price highs and appreciating at about a 30% clip per year over this decade.    We can see that a price high in the 1100 (and possibly 1200 on a spike) could coincide with an autumn pullback that usually develops around this time period along with Crude. The US Dollar as we have mentioned is the wild card that gets thrown into the mix.

USD - US Dollar

The US Dollar’s pivot point seems to be the 80 area.   As you can see, it always provided a support area until interest rates fell to almost zero in order to try and restimulate the US economy over the last few years.   Overall however, we can see that the dollar has a down trending channel that it is following long term.  We can see that while gold and crude are making their way to the next upper trend line, the US Dollar is making its way to the lower trend line.  And this comes at a time when the Dollar enters its usual seasonal rally. Finally, let’s look at one more chart.  Natural Gas.

Natural Gas - NYM

We list this chart because we have recently made a major low in this energy commodity.  The recent low near $2 dollars was at the low PIVOT point price.  I’ve also highlighted the high PIVOT point on this long term chart, the $10 – $11 dollar area. During the month of September, Natural Gas made a major low and a spike to the $5 dollar area brings us to the first trend line on the price chart.  We see that beyond this area, the $8 dollar area is the next trend line that price projects.  For those of you watching the Natural Gas market, think of how more confident you might have been in purchasing a Natural Gas investment had you seen where price was on the long term chart.  But if you look closely at the chart, you will see that every time we have ever hit this trend line, price has always BOUNCED off it twice.  In 94-95 there was a double bounce.  The 98-99 low had a double bounce and finally the 01-02 had a double bounce.  If history is any guide, the odds suggest we will get a retest of this area once in 2010 and a long term low will probably be established.  Armed with this knowledge, the next time Natural Gas gets anywhere below the $3 dollar level, buy with both arms.

Now that we’ve looked at the long term charts we can draw some probable conclusions

The Crude Oil market seems to have a new pivot low price of $40 dollars.  It is in a price channel that projects the range to be in the 65-100 dollar area.  The current rally on the monthly charts projects a rally to the 95-100 dollar area. The Gold market seems to have a long term pivot price of $700 dollars.  It is in a price channel that projects the range to be in the 910-1100 area .  The current rally on the monthly charts projects a rally to the 1100-1150 area. The Natural Gas market seems to have a long term pivot low price of just above the $2 dollar area.  It is in a price channel that projects the range to be in the 2-5 dollar area.  The current rally on the monthly charts projects a pullback to the pivot line one more time before a long term rally gets underway. Now that we have the long term price perspectives, we can better focus on our medium and shorter term perspectives.  But those timeframes all have their own support and resistance channel lines and their respective up and down trends within these longer term channels.  If you have an interest in following the trends of these commodities and getting some advice when great set-ups with low risk entries occur, we invite you to visit our website For more information join my free trading newsletter:

By: John Winston