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  • Archive for April, 2011

    What will happen after silver mini-bubble crashes?

    Posted by Frugal on 29th April 2011

    This is just my hunch. I could be wrong, but I might as well take some guesses.

    First of all, an important thing happened today. Gold appears to be entering a similar parabolic phase just like silver. The only things that haven’t joined the parties are the miners.

    Let’s say that gold continues its parabolic trajectory, then I’m guessing that the following may happen:
    1. Gold tops out at around $1680.
    2. Silver tops out at around $56 to $59.
    3. Miners (GDX) tops out at around $67.5.
    The time-frame is probably within 2 weeks, until May 16th or so.

    After silver mini-bubble crashes, my correction targets are
    1. Silver may crash to $30, with $22 as my lower target.
    2. Gold drops to $1250, with $1150 as my lower target.
    3. Miners drop to $51.
    Silver will enter its zig-zag Elliot wave 4 of bull market. The trading range will be from $30 to $60 for probably about 1.5 years or more to shake out both bulls & bears. In the meantime, I am guessing that miners will take lead the next phase in this PM bull market, with gold prices go to new high from about $1600 to $1850.

    If the gold price doesn’t do a parabolic top, which seems to be more likely to me, then I’m guessing that the following may happen:
    1. Gold tops out at $1600.
    2. Silver tops out at $52 to $53.
    3. Miners tops out just below $64.
    The time-frame is possibly before next Tuesday or Wednesday.

    After silver mini-bubble crashes, my correction targets are
    1. Silver may go down to $30 to $34, with $25 as my lower target.
    2. Gold drops to $1250 to $1300, with $1150 as my lower target.
    3. Miners drop to $54, with $51 as my lower target.

    Have fun poking the bubble! Don’t get the soapy water splashed onto your face.

    Frugal at www.1stMillionAt33.com

    Posted in Gold/Silver | 2 Comments »

    Gold/silver may have a correction coming

    Posted by Frugal on 20th April 2011

    Gold has broken $1500, and silver is almost at $45. While the rally in silver has been more than amazing, the rally in gold is quite within its normal trading range.

    I have been reading Cara’s trading blog at caracommunity.com, and Bob Hoye’s podcast on Howestreet.com every Friday. I am aware that rally of silver should be “exhausted” long time ago, but one needs to have his own opinion. The latest exhaustion signal from Bob Hoye should be at the end of this week at the latest. However, I think the market may be exuberant slightly longer than that.

    Gold/silver have a tendency to make a parabolic top. In fact, I almost want to say that without a parabolic top, it is simply not a top. I would never go short on this market (or at least not yet). At every market, one must decide on the bias (bullish or bearish) first, and then only move between cash & long/short (depending on the bias). I think those advertisement about swing trading that goes between long/short is really a myth. For most normal human traders, that is just a fast ticket to poverty, not to the riches.

    The next correction in silver & precious metal mining stocks may be quite big. I think a minimum of 20% is almost definitely in the cards. I wouldn’t rule out a 30+% fall. However, the fall will be respected to the peak prices, and we still don’t know what the peak prices will be achieved. I am looking for silver to possibly fall to low $30 range. Based on the ratio of the last rally (from $17.35 to $31.21), and the start of the current rally from $26.38, I think it’s possible for silver to go to $47.45. If silver price exceeds $47.45, then I think the coming correction may be more extended in time to wash out the excess in bullishness. I think $50 is possible, but I am not counting on it.

    While silver is very extended, mining stocks in general are not. I would think that the correction in mining stocks would be less than silver, but I could be wrong. I would be looking for GDX to pull back to low 50 at the maximum.

    For gold, I think the pullback could be from $1150 to $1250. I would deploy my capital starting at around $1250. I know all the shorts out there think that gold/silver are in the final stage of bubble. But I believe the next wave is the 2nd minor wave of 3rd major wave. Yes, it’s going to be painful when it falls, but when we reach 3rd of 3rd major wave, it’s when majority of shorts are literally destroyed. Frankly, I don’t know why anyone wants to be short in this market. For the sake of your own wealth, please don’t. But if you’d like to add to my wealth, you could go ahead.

    The other phenomenon that I see is that between gold/silver/mining stocks, the sync of waves has been somewhat broken. You will never see this at the final top. At the final final top, all of them should be synced up together to the top, with very small time lag. However, currently only silver is acting crazy. Given that, I’m also quite confident to state that this is simply not the final top.

    I wrote an investment advice series back in 2006, advising people to buy silver Eagle and Warren Buffet’s company(BRKB). If you had followed my advice, you would have returned 260% on your silver, and 31% on BRKB since August of 2006.

    Here are the entire series of My Investing Advice. The series is also listed on my Site Map at the upper left corner of every page on my site.

    1. My investing advice if you only have $10
    2. My investing advice if you only have $100
    3. My investing advice if you have $1000 to $10K
    4. My investing advice if you have $10K to $100K
    5. My investing advice if you have $100K to $1M

    Best luck, Frugal at 1stMillionAt33.com

    Posted in Gold/Silver | 1 Comment »