When The Gold Bull Becomes Frustrating And You’re Ready To Give Up—Review This Important 1990 Bottom
February 11, 2013 | By Tekoa Da Silva
The following in an excerpt from gold trader Gary Savage’s, “SmartMoneyTracker“ daily market commentary:
“It’s easy in hindsight to rationalize the correct trade…[but] tough to do in real time.
…I’m going to show you a market progression. Imagine you are experiencing this in real time.
In August of 1990 the stock market stagnated, formed a double top, and proceeded to plunge sharply below the 200 day moving average. At this point, as we’ve heard many times, chartists were screaming that the market was clearly headed down.
Imagine your emotions on that Thursday in August. Realistically, how many people would have been able to pull the trigger and buy at that point? The answer is, not many.
But buying on that Thursday, even though one’s emotions were screaming sell, was the correct move.
Or was it?
Well after two weeks the market certainly appears to be building a base for another leg higher. At this point, although almost certainly nervous, one could probably rationalize adding to positions.
So let’s see how that worked out.
Holy crap! That was a mistake. A huge freaking mistake. Sell, sell, sell!
Whew, that was a close call.
Son of a b***** no sooner did the market break down then we get a strong reversal candle followed by another reversal candle five days later. I have to say, it looks like we finally hit a bottom. Buy everything back.
You’ve got to be kidding me! Wrong again. This is obviously a bear market, time to sell short.
A couple of days later; Time to add to shorts.
A week later; This sure looks like we finally made the right decision, as this is clearly a bear market, and obviously about to begin the next leg down.
But did one really make the right decision? Remember this was a secular bull market.
As Paul Harvey used to say, now let’s look at the rest of the story.
As you can see, clearly this was the buy of the decade, although actually doing so and holding through that bottoming process was agonizing to say the least, or more likely virtually impossible.
So might I suggest that when the gold bull becomes too frustrating, and you’re ready to give up, you come back and review that 1990 bottom.
Bull markets never make it easy. Very few traders have the determination, stamina, foresight, and focus to make it all the way through one. But the rewards for the very few that can weather every punch the bull dishes out… are huge.”
Special thanks to gold trader Gary Savage, to learn more about his daily commentary visit: SmartMoneyTracker