Metdown in Stocks offer Bid to Gold and Silver
Thursday, October 09, 2008
by Ira Epstein of Ira Epstein & Company
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10-9-2008 As many of you know, I publish my Mid-Day Videos both on the IECo Website and on YouTube. The videos on the IECo Website will have a much better look and playback quality than those on YouTube because of the technology we employ. Try viewing, by clicking on the link below and you should see the difference. http://www.iepstein.com/videos_start.aspx
Today's report will focus on Gold only.
History in the making At a point in the very near future my hope is that we will look back at what has occurred in the past 16-weeks with awe and learn something from this disaster. Course in schools will without doubt begin lecturing about what took place, government actions that were employed and yet to be learned lessons from the excess deregulation America and other free governments allowed that created this mess. For a long time I have been writing that what is at the root of world economic problems goes back to mortgages. However, it is and was more than simply that. It was the greed of investors, lack of government oversight, loans that should never have been made and so on. Real estate was the engine, but in the end it is people who are to blame. All who had a hand in constructing buildings, servicing them and so on are part of the problem, which in essence means that the real estate boom trickled down to every aspect of life as it provided funds to invest, funds to improve life styles and so on. We are all to blame. A way of life is changing before us. Shakeouts bring change. We saw this in the aftermath of the Savings and Loan debacle and the crash of 1987, where stocks lost 20% in value in practically one day. America Nationalizes the Banks? Right now the "free world" is looking at the Central Banks of world governments to bail us out of the downward spiral we find ourselves in. This will come with a cost. Not just a financial one, but one in terms of government intervention and more government control. Today the "talk" is about getting the Libor Rate to come down, which is the rate that banks charge each other to lend funds amongst themselves. Simply put, it is out of whack because banks don't trust other banks. Who can blame them? Loaning out money that you may not get back can wreck havoc upon banks balance sheets, putting them in jeopardy of either going out of business or being taken over by larger banks. The solution? The "new idea" of the day is to have our government directly buy into banks and guarantee loans, which many believe should lower the Libor Rate as banks most likely will loan to banks with government guarantees on funds being loaned. In essence, government ownership of banks is being floated. Not 100% ownership, but ownership of a sort. Last I looked, owners had a say in how things operate. As such, it seems to me that allowing the government to own stakes in banks can only increase regulation going forward. This may not be a bad thing right now, but in a couple of years it will be a bad thing. History shows that once government controls are put into place, freedom to wheel and deal before those regulations take place rarely exist as it did before. Deflation versus Inflation Deflation, not inflation has been and is what is taking place in commodity markets. In large part this is because money to buy goods is simply not available or is being rationed out, rather than being spent. Fear has gripped both lenders and spenders, locking up credit markets. Those that are in Index Funds can't get out quick enough, as investors dump their shares. As this is done, additional pressure is put on the underlying assets of these funds. In time, all the money being pumped into the world economies eventually will cause a change of attitude. When that happens, retailers and manufactures will end up being caught "short bought". Shelves in retail stores will be short of supply, manufactures will have little product on hand and demand for goods, well it will magically and "suddenly" pick up, catching the market off guard. When this occurs, inflation will take hold. Given the magnitude of the breakdown in pricing and the speed in which it occurred, the question going forward will be how long before inflation takes hold. I think it will be before the first half of next year ends. Safe Haven Without doubt, gold is a "Safe Haven". Yes it is well off its highs, but in comparison to Crude Oil, Grain, Interest Rates and so on it has held up very well. Keep in mind that the Dollar has rallied. The Dollar has risen from its low about the same percentage that Gold has fallen from its high. This does not mean that Gold isn't holding up. It is, especially when pricing it in terms of Euros, Pounds and other foreign currencies. Seasonally speaking, October is typically not a strong month for Gold. As such, even with the meltdown we're witnessing in financial markets, I don't look for Gold to surge. Rather, I look for back and forth price action; base type trading, with an eventual breakout to the upside, sometime in early November. I do not see Gold losing its "Safe Haven" status for a long time to come. Gold's Seasonal Story A pull back in prices into mid September has occurred. This pullback skewed this chart. Look at the Seasonal Chart below provided to us by the good folks at Moore Research Center, Inc. 
If a low was made, it was made in September. Any new low simply doesn't fit in if the Seasonal trend is to kick in. December Gold Lets start out by looking at a Daily Chart of December Gold Futures 
The first and most obvious thing is that December Gold is now trading over both the 18 and 100-Day Moving Average of Closes. Second, prices are NOT overbought according to the Stochastic Study on the bottom of the above chart. A reading over 70 would be necessary for an overbought condition to be present. The 18 and 100-Day Moving Average of Closes are converging near the 880 level. In terms of trend, the market is now making higher highs and high lows, which means the current chart pattern is bullish. It will take a move under 822.5 to change the current chart pattern to one of making a "lower low". What I am looking for is the trading range to narrow in, while prices stay over the 880 price level. If this occurs, a move over a lower Swingline High, one that has not yet developed, would be a buy signal. 
We are getting close to a buy signal. At this time, I recommend simply getting yourself in a position to get long. The seasonals kick in around the first of November. However, given the financial crisis, I would not be surprised to see them move forward. I am looking to get long and will keep you updated via my Twice Daily Recommendations.
I receive a lot of questions on how I use Stochastics in my price analysis. I teach how I use them in my trading course called The Futures Academy. I've created a short video that explains my teaching style. In the video I speak about The Futures Academy and the indicators I use in my trade analysis. You can click on the image below if you are online or simply type the link address below the video image into your web browser. 
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Let's start off by looking at a Seasonal Chart of Silver as provide to us by The Moore Research Center...http://www.mrci.com/. Like Gold, the Silver Seasonals Chart ended up with a lower September low than that of August, which has pressured prices December Silver Next week I will pick up on Silver analysis. 
I want you to keep your existing exisiting position on. There isn't enough remaining value to give up the profit potential at this time. Since there is nearly 2-months left to run, hold.
As Exchanges and Vendors raise and/or lower rates, those changes are passed on. The Fees and Commission being quoted are on a per-side basis and are all inclusive! Volatility is here. That's what traders thrive on. Take advantage of trading conditions by using our super low commissions and great trading software which make it feasible to enter trades where commissions aren't much of a decision factor, placing the burden where it belongs. On being right the market! It's really that elementary. To learn more about us or to get started trading through us simply go to our website at http://www.iepstein.com/ and fill out the New Investor Kit Form. A CD-Rom will be sent to you. At the same time you will instantly begin receiving access to and instructions on how to access our daily market research, trading recommendations, charts and much more. If phoning us is easier for you our phone number is 1 800 284 3010. We handle trading accounts from individuals in a number of foreign countries as well.
Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from Ira Epstein & Company or Shatkin Arbor, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication
Recent articles from this author
- Gold can go either way - Thursday, December 04, 2008
- Gold ...could the current price break be setting tGold up for a year end rally? - Thursday, November 06, 2008
- Gold and Silver Break Down - Thursday, October 16, 2008
- Metdown in Stocks offer Bid to Gold and Silver - Thursday, October 09, 2008
- Washout Does Not Provide Gold or Silver Safe Haven Status - Monday, September 15, 2008
About the author
In 1984 Ira Epstein & Company was founded by Ira Epstein. Ira was a highly successful retail futures broker, having mastered TV to showcase his talents, which in turned helped Ira develop and create a very large customer following. Many of you may remember his TV show "Stocks, Options and Futures", which was one of the most popular Finance Television shows on what was then called The Financial News Network, which is now known as CNBC. Ira showcased his talents in many other TV markets as well, including Los Angeles where he was a regular guest on KWHY-TV as well as WCIU-TV in Chicago, where he was on the air for nearly 20 years. Ira Epstein...the man behind Ira Epstein & Company Ira's background...written by Ira I was born in Chicago in the mid-forties. A War Baby. Graduated High School in Park Ridge, Ill and went on to college. I obtained my Bachelor of Science Degree from Arizona State University, majoring in Marketing and Economics. I completed courses toward a Masters Degree and attended John Marshall Law School in Chicago. When in Law School, I needed a part-time job. While my family helped with my schooling costs, they simply could not carry the continuing financial burden of Law School. I needed a job. Ira discovers the Futures Market One day I found myself looking for a job on the Law School's Bulletin Board. I noticed a job offer for a "Runner". I had no idea what that meant, but I was thin and in good shape. Ready to run. Few people outside of Chicago knew at that time, 1969, knew much about the Futures Markets, including me. I applied for the job and was hired at G.H. Miller & Company. They were a clearing firm at the Chicago Mercantile Exchange(CME), specializing in the trading of Eggs and Broilers...chickens. Turns out they were pretty good at what they did. So I began running. Orders were phoned in by brokers to Miller's trade desk on the exchange floor. My first job was to "run" the order into the appropriate filling broker. I had a knack for it, but have to tell you that running wasn't really allowed. Just fast walking. Very fast walking. I also became the designated employee to take Polaroid Pictures of the chalk boards. No computer boards on the exchange back then. Rather, the exchange had employees who used chalk to write on blackboards the price a trade took place at in the order they were called up to the chalkboard writer. It looked very very chaotic, but it worked. As the blackboard filled with prices, those boards were handed down to ground staff who took Polaroid photo's of them to both track official pricing and provide member firms with trade records. The boards were than washed and put back up. My job was to take pictures of the boards or photo's of the pictures themselves. Fun times. All the while I was still in Law School. School began late in the afternoon and the markets back than ended at 1:00 P.M. I was burning the candle from both ends, studying hard, writing legal brief and whatever. Who cared. I was young and eager. I found myself liking the market. Really liking it. I was fortunate to find that making contacts with "important people' in the business was easy on the exchange floor. In fact, many of the owners of trading companies you know of quickly became influential in my life. Keep in mind that basically I had "nothing", and here I was talking and soon socializing daily with multimillionaires. I remember making $35 a week gross, owning 6 shirts and 3 pair of pants. all specific to work. My boss, Gil Miller continually told me I was being overpaid given the education I was getting. It was mind boggling, but true. Promotion and more... In a very short time promotions began. First to Order Taker and than to running part of the trade desk. I became very good at it and was assigned to one of Gil Miller's largest clients. His name was Ray E.Friedman. I worked as his personal trade deskman. Ray later sent his son to Chicago to learn the business. I shared a small office with his son, Tom Dittmer for quite a while. Today you know that company as Refco. I found Law School less and less appealing. I'd made a lot of friends and acquaintances early on at the exchange. I was never bashful and constantly asked about the markets. I needed to learn and who better from than the pro's. I was surprised at how helpful some were. Leo Melamed, the founder of the IMM division of the Chicago Mercantile Exchange and Barry Lind of Lind-Waldock offered solid advice early in my career. They were always there, answering all my questions. I watched these men, what they did, how they did it and followed my closest mentor, Gil Miller into the unknown. My parents at that time were convinced Futures Brokers were professional gamblers. The big event... O.K. Here I am watching everyone getting rich but me. It looked so simple. I had to try it. After all, I was on the trading floor, in the thick of things and couldn't miss. I had a few months of learning under my belt and "knew" how to do it. I won't bore you with all the details. You already know how it turned out. My family gave me some funds they really couldn't afford to lose. Market went against me, I had no stop, the market was of course "wrong", but I had lost more than I had in the trading account. All in but a few hours. Quite a feat. Had no way to pay it back. In panic I even resorted to calling my college roommate, pleading for help. His dad said he'd come to my aid...partially, but couldn't cover the whole loss. After exhausting all my resources, which didn't take very long, I came to the dreaded realization that by the morning my goose was cooked. I could not cover the debit and was in deep trouble. I couldn't let that happen. Late in the day, that tragic day, I walked into Mr. Miller's office and asked to speak with him. We sat down and he began talking about my progress. I didn't know if he knew about my debit or not. I then, practically choking to death, broke the news to him about the debit, hoping for some mercy. His reaction surprised me. He got up and asked me to follow him. I did. He showed me his personal shower, his sofa, stereo equipment and asked how I liked his office. I of course told him I "loved it" and was so thankful for the opportunity he had given me. He smiled, went to either his drawer or a closet, I forget which, brought out an old hotplate and handed it to me. I must've thought he was giving it all to me. Well, he said something like, "I'm glad you love it. You now live here. You can use the shower and sleep on the sofa. Be out when I get to work. Now go to work and pay me back". I ended up living in that office for a bit of time. I do mean living...not just working. One of the best times of my life. By the way, looking back on it, I know he knew before I ever walked into his office, about the debit. Did I say I also got a raise? Maybe he liked how I handled myself in terms of being honest and addressing the situation head on... or maybe he knew I couldn't afford food after my trading fiasco. I quit Law School. Had to. Didn't have the funds to continue, owed too many people money and frankly found something I had really had a passion for. I turned my attention full time to the markets. I registered and became a licensed broker. Back then there were no exams to become a broker. No studying. You simply signed up at the front desk of the exchange, listing your name, social security number and an address on a white legal pad. You were a broker. How things have changed. The rest of the story... I worked for several years both on the trading floor and up in the office as a registered broker. I discovered I had a knack for marketing, but wasn't the best trader. I knew enough to go looking for help. I learned a lot from the "old-timers" in the building, and there were plenty of them. They never seemed to go home. I remember spending literally hundreds of hours in Barry Lind's offices. I found traders everywhere. They saw I was interested and many took the time out to teach me trading disciplines. I wish there were space to name them all. In any case, I think of them often. Eventually my turn came. I had a membership at the Chicago Mercantile Exchange. My dream had come true. Or had it? The rest of the story... I vividly recollect my early dreams. I, probably like many others before me envisioned my life in the trading pits as something very different than it turned out to be. Being a runner, phone clerk and customer's broker was one thing. Trading in the pits another. It didn't take long for me to discover I liked trading outside of the pit way better than in it. The screaming and intimidation when I was trying to buy or sell a few contracts, while watching the multimillionaire trader next to me offering hundreds of contracts on the other side of the trade can shake the strongest of wills. Needless to say, I didn't stay long in the pits. As it turned out, that was a smart move for me. Skipping forward.... For 15-years I honed my talents at G.H. Miller & Company. I developed strong marketing and trading talents, which enabled me to develop and build a large retail client base. My business eventually grew too large for G.H. Miller & Company to handle. When that happened it was Gil Miller who setup my move to Shatkin Trading, with partners Hank Shatkin and Pat Arbor. Pat was recently past Chairman of the Chicago Board of Trade and Hank is one of the most well known and liked traders at the CBOT, running a large floor trader operation. The rest is simply history and my other accomplishments...well there's been a lot. Ira Epstein & Company continues to flourish and grow. What makes us unique is how quickly we adapt to change and embrace technology in the market place. I can't emphasize enough the word "we". The staff at Ira Epstein & Company is dedicated to our clients. Our staff realized that to survive, one has to evolve. We do just that. However, along this ever changing trip, we stay fixed on who we are and who we service. The Futures Academy Life has changed a lot since I began in this business. One of the things I notice is that because of technology, specifically the Internet, personal contact is lost. When I was trying to learn trading, I could knock on doors and speak with seasoned traders. That can't be done today. Most traders now have computers at home, making long hours at the office a thing of the past. There's a void that needs to be filled. Win or lose, you the client pay commissions to trade. I'd rather take the commission out of winning trades than add them to losing trades. I have no "Holy Grail". No get rich quick system. What I do have is a trading discipline that I believe in and that can be easily taught. Years ago I learned that most good traders are disciplined. They work off a checklist. That list can be written or innate. A few years back I co-authored a book called, "The Psychology of Smart Money". The premise was a comparison of professional traders versus amatures. We looked for differences in each group. What we found was profound... and obvious. The pro's had discipline. They worked at maintaining their discipline. The average trading client, the amature, had little or no discipline. Rather, they often just took "shots" in marketplace, to often because "someone told them something". Not the best laid plan. Many amatures just wanted some market "action". The list goes on and on. I hope this doesn't hit home. If it does, it's simple to change and yes, you can still have the "action". The Futures Academy teaches a simple 5 step approach to trading. You must have a computer and Internet connection. We teach over the Internet, using a "live virtual classroom" where you and your mentor work privately together. No need to worry if you miss a classroom. We work around your schedule. No matter what your profession in life is, the odds are someone was looking over your shoulder when you first began. It's rare that one becomes a plumber, hair stylist or whatever without first becoming a "Journey Man". As a Journey Man you had a supervisor. That supervisor looked over what you were doing, to be sure you were doing it properly. That's how you learned in school. Your teacher did not pass out books at the beginning of a semester and say I'll see you at "final exams". Rather, they went through the books with you. The books had chapters. An order to each chapter. That's how The Futures Academy teaches trading. Each step builds on the next. You should take a look into it if you want to learn a disciplined trading skill. In any case, you now know something about Ira Epstein & Company. You'll find that some things don't change. We'll work hard for your business. Good luck and good trading to you. Ira Epstein
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