Is Stan Druckenmiller Long Gold Again?
Trader Scott’s Market Blog
February 7, 2017
Stan Druckenmiller caused a big hullabaloo right after the election when he said that he sold his entire gold position. Mypost about it the next day talked about the “news”:
“First of all, anyone who sold gold into the grotesquely bearish upthruston Tuesday did a very good job…….So Stan Druckenmiller was one who sold all of his gold Tuesday night. He’s one of the few big money managers around whom I respect (even though he did work for the ancient mummy idiot George Soros). But long ago when I became confident in my ability to survive in this business, listening to others’ market views became a distraction. My outlook for gold is much different than Druckenmiller’s. If gold is in a bull market, which is my view, then selling waves are potentially buying opportunities.”
Now there is an article claiming Stan Druckenmiller has “bought his gold position back”. And if this is the case, then he made a nice trade, selling into an ugly bearish upthrust on election night, and buying it back lower. Whatever he did doesn’t change the fact that gold is in a major bull market which began in December of 2015, and my belief we’d see a retest of the December 2015 low, but at a higher low in late 2016. Mr. Druckenmiller’s buying or selling doesn’t change the European and global political problems, the Euro banking problems, the Japanese banking problems, and the derivatives problems. Nor does it change the global currency problems, and the debt problems. Need we go on? Gold just needed to get out a lot of the weak hands into the December 2015 lows, and again late last year. The weak hands will continue this dumb behavior of getting in en masse too late and then getting shaken out, but that won’t stop this bull market. Gold, silver and the miners are in a big bull market, but into these big rallies is not the place to enter.
About
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.
'Trader Scott’s Market Blog – Is Stan Druckenmiller Long Gold Again? – February 7, 2017' have 26 comments
February 7, 2017 @ 9:09 am traderscott
The Euro continues weak, and the Yen joined the party, affecting gold. And the $ rally – the resistance in the $ is just above 101, and then likely re-testing. More later.
February 7, 2017 @ 10:21 am Fen
Thank you very much for the update, Scott.
February 7, 2017 @ 8:46 pm traderscott
Of course Fen.
February 7, 2017 @ 10:51 am Easy Al
Thanks Scott. I did not find your blog until late December. If I had discovered your site in early November, I would have likely added my miners at lower price and would probably have bought a little more mining shares in middle of December. I always tend to get in too early.
February 7, 2017 @ 11:02 am Easy Al
Looks like PM and miners do not want to go down.
February 7, 2017 @ 11:49 am traderscott
EA, I just got out of a daytrade in NUGT using the trade below the spike low price at the opening bar (12.73, GDX 25.09) They are stretched and closing in on resistance – GDX 25.90, and GDXJ 43.50. They really need some breathing room right now, people are pressing these.
February 7, 2017 @ 12:52 pm traderscott
Momentum is a fantastic tool for short term trading (entering the position in the direction of the momentum, but into a reaction or rally against it). But on a much bigger picture basis, the Investors Business Daily momentum crowd (and no offense meant at all, I know a couple of those guys, and they’re good traders, it’s just not my approach – it’s the Stocktwits crowd who are often good contrary indicators) is going to be our friends for many years to come. Specifically, they will help push these miners higher, after the big selloffs from the emotional highs. The IBDers are often pretty good, as they understand accumulation areas/bases, and they buy stocks coming out of big areas when they “break out” to new highs. (And I also like the fact that they pretty much avoid wasting time trying to figure out what to short. It takes time away from the huge opportunities on the long side. And I’m not talking daytrading here, but big picture.) Again, not my approach, as buying the big reactions is my way, but there are plenty of ways to do this well. And miners, biotechs, ags, and a few others are extremely bullish long term, there will be the big rallies, but also big selloffs over the years. And once again, I believe this is a terrible place to enter (investing-wise) global stock markets on a general market basis, but they are extremely bullish long term. I do not believe in the super bearish view of stocks, and have said so publicly since 2009, when there were massive selling climaxes in many markets across the globe. It’s just a matter of when and where. The political problems and currency problems and derivative problems could set up some amazing opportunities as we move thru the year. But it’s up to the markets, not myself. All I can do is be patient, and it’s the main reason for holding so much cash. As far as IBD goes, the two charts of a miner of mine MUX, click here and here, show how some of these breakout people operate. The long term chart shows the potential for many miners just going back to all time highs. The other chart at the arrows shows the momentum/break out crowd entering. It’s good to keep track of this and include it in your preparation. Also, the up arrow shows a ragged cup and handle – familarize yourself with that. I do not actually use “chart patterns” in markets per se, but it’s good to be aware of what others may be using. Also with MUX, the two boxes are so-called continuation patterns, again hard to actually implement in reality, but can be helpful. And the arc – in a major bottom in markets there is not one best buy point. All of the people who bought “too early” and held, well now look. I did that post called “turning points” for a reason. Some of my stuff is blah, blah (I’m trying to get better, the constantly having to write, and not just trade part is new to me), but some of the stuff can be helpful.
February 7, 2017 @ 8:04 pm Easy Al
Hi Scott,
Can you post a chart on CCJ (similar to the GDX chart you did on Nov. 10) ?
Uranium miners appear promise in medium term (several years) point of view because many nuclear power stations (mostly in China and India) will be built. In short term, however, there are more supplies than demand. Since the Fukushima earthquake and nuclear accident, nearly all (but 2) nuclear power stations in Japan have been taken off. The Japanese government faced strong opposition in restarting nuclear power stations. After Fukushima accident, German has also decided to phase out the nuclear power. Even though some new nuclear power plant has been built, the number is not enough to offset the ones taken off. Partly because of it, the spot price of uranium has dropped from about $50/Lb to as low as $18/Lb in late 2016. It has rebound to about $24.5/Lb, partially because of announced production cut by Kazakhstan and CCJ. While most nuclear power plants buy uranium at long term contract price (which are higher than the present spot price), the spot price undoubtly plays a role in negotiating the new contract price.
The consensus in middle of 2016 was that the balance of supply and demand will not be achieved until 5-6 years later. The announced cut back, if carried out, presumably can shorten the time somewhat. Since bottomed in November, CCJ has rallied from about $7.4 to as high as $13. It got knocked twice, once by the company itself to remind people of asset impairment and supply imbalance, the other by news that TEPCO, a Japanese power company, is trying to void the long term contract. However, CCJ appears to show a remarkable strength in coming back after the sell offs. I am somewhat surprised by today’s action because it seems someone really wants to move it up even though it is clear that the over-supply problem will not disappear in 3-4 years.
The insider trading data of CCJ is favorable, there were about 5 buys and 1 sale, all in small size and all took place about 7-10 months ago .
February 7, 2017 @ 9:05 pm traderscott
I will EA, but to point out the technical situation with GDX and CCJ are/were much different.
February 8, 2017 @ 12:41 am traderscott
CCJ has a different technical situation than the miners. GDX has been under accumulation for 4 years. The secular low was in January 2016, with the first rally off of the low and the retest in December. Those support points were part of the initial thrust and the reaction points. CCJ (chart) has just come off of the large ending action. Preliminary at the arrow, and then more at the bottom. I believe the accumulation started with the arc. It just needs time, but there are signs of strength, which is good. You can see the big resistance. It would be very helpful for it to trade sideways, probably with volatility. The first support (below is for nibbling/trading. And start getting more aggressive below the second support into the lows. Now it’s up to the stock to give the opportunity.
February 7, 2017 @ 10:18 pm Dmitrii
is first link to MUX wrong?
February 7, 2017 @ 10:55 pm traderscott
Sorry Dmitrii, it’s fixed. Thank you.
February 8, 2017 @ 12:15 am Easy Al
Scott,
Take a look at SVMLF too. Like MUX, SVMLF is also about to break out. Unlike MUX, SVMLF is traded on OTC and does not have a lot of liquidity. I bought a lot of it in the 4th Q of 2016. About 50-60% of its revenue is from silver (with very small part from gold) and about 40-50% is from lead and zinc. When gold and silver sold off sharply after the election, SVMLF got sold even harder than other miners. What many people did not realized is that SVMLF sells all its silver, lead, zinc and gold in China and starting on November, the premium of Ag, Pb, Zn, and Au in Shanghai Metal Exchange increased drastically over their counterparts on LME. The average premium of Ag and Au over the whole 4th quarter were $1.28 and $33 per T Oz. The average premium of Pb and Zn were $0.24 and $0.27 per Lb. At the present time premium in silver and gold has dropped to about $0.74 and $9.0 recently. But the premium of Pb and Zn are still $0.19 and $0.25 per Lb. If the Ag, Pb and Zn stays at their present level in China and SVMLF does not increase its production (it has about 20-30% of spare milling capacity), it will make about $0.28-$0.32 per share (It already made 18 cents in June, September and December quarters). At today’s closing price, it trades with a P/E of less than 13. So even after 25% increases in last three trading days, it is still much cheaper than many other gold or silver miner.
In late 2011, some short seller made serious allegation of SVMLF’s mine properties, production, and accounting. The company fought back hard and but was put under microscope. All those allegations were shown to be false (see the article below) . However, I still feel that it suffers from unfairly China discount. In late 2015, after its price dropped below $1, it refused to reverse split its stock and removed itself from NYSE. Probably for this reason, it is under-followed. It has about $97 M cash and $4 M debts.
http://business.financialpost.com/news/mining/short-seller-activities-come-to-light-in-b-c-regulators-probe-of-silvercorp-metals-inc-affair
February 8, 2017 @ 12:23 am Easy Al
Scott,
Take a look at SVMLF too. Like MUX, SVMLF is also about to break out. Unlike MUX, SVMLF is traded on OTC and does not have a lot of liquidity. I bought a lot of it in the 4th Q of 2016. About 50-60% of its revenue is from silver (with very small part from gold) and about 40-50% is from lead and zinc. When gold and silver sold off sharply after the election, SVMLF got sold even harder than other miners. What many people did not realized is that SVMLF sells all its silver, lead, zinc and gold in China and starting on November, the premium of Ag, Pb, Zn, and Au in Shanghai Metal Exchange increased drastically over their counterparts on LME. The average premium of Ag and Au over the whole 4th quarter were $1.28 and $33 per T Oz. The average premium of Pb and Zn were $0.24 and $0.27 per Lb. At the present time premium in silver and gold has dropped to about $0.74 and $9.0 recently. But the premium of Pb and Zn are still $0.19 and $0.25 per Lb. If the Ag, Pb and Zn stays at their present level in China and SVMLF does not increase its production (it has about 20-30% of spare milling capacity), it will make about $0.28-$0.32 per share in next 12 months (It already made 18 cents in June, September and December quarters). At today’s closing price, it trades with a P/E of less than 13. So even after 25% increases in last three trading days, it is still much cheaper than many other gold or silver miner.
In late 2011, some short seller made serious allegation of SVMLF’s mine properties, production, and accounting. The company fought back hard and but was put under microscope. All those allegations were shown to be false (see the article below) . However, I still feel that it suffers from unfairly China discount. In late 2015, after its price dropped below $1, it refused to reverse split its stock and removed itself from NYSE. Probably for this reason, it is under-followed. It has about $97 M cash and $4 M debts.
http://business.financialpost.com/news/mining/short-seller-activities-come-to-light-in-b-c-regulators-probe-of-silvercorp-metals-inc-affair
February 8, 2017 @ 3:22 am traderscott
You’ve done the hard work and you’ve done well with it. I like their diversification.
February 8, 2017 @ 9:57 am Easy Al
Scott,
Thanks for the CCJ chart.
February 7, 2017 @ 11:49 am Jon
Patience grasshopper. Lot’s of lower gaps to fill…
February 7, 2017 @ 7:15 pm Jon
Let the selling begin…
http://news.goldseek.com/GoldSeek/1486498936.php
February 7, 2017 @ 8:54 pm traderscott
He didn’t say a word about the grotesque upthrust on his chart – the massive surge and dump on election night. He does make some good points about TA, which I don’t use anyway.
February 7, 2017 @ 6:29 pm Easy Al
The strength in gold in last few days is partially due to the increase of the GLD gold asset. It added 8.30 metric tons today. Here are the assets in tonnes for the last few days:
31-Jan-17 799.07
1-Feb-17 809.74
2-Feb-17 811.22
3-Feb-17 814.5
6-Feb-17 818.65
7-Feb-17 826.95
February 7, 2017 @ 7:32 pm David V
(Trustworthy) HSBC will ensure that all of the Trust’s gold is held in allocated form at the end of each working day. Transmutated as it were.
February 8, 2017 @ 11:42 am Easy Al
I know that some people doubt if GLD really hold and own the amount of gold as it claims to. I follow GLD and CoT because the positive correlation between the change in price of gold and the changes in GLD tonnage and net long in gold futures and options of speculators.
February 7, 2017 @ 5:10 pm David V
I noticed that the dollar bounced of its .382 fib line and bottom and top trend line with a few days that natural gas did the same and both are at resistance now, is there a relationship or coincidence?
Seems like more correlation than all the seasonal supply demand hokum.
February 7, 2017 @ 8:45 pm traderscott
David, if you think you’ve found something, watch it/monitor and use it. It may work, there are no rights and wrongs, except for risk management, anything goes.
February 9, 2017 @ 12:01 am peter
Scott:
Somehow I missed the url for your website. Can you Post ?
Thanks
February 9, 2017 @ 2:09 am traderscott
It should be live next week Peter. I will let you guys know.