The golden pendulum formula of investing could be a belief that, in any investment area, the herd instincts of greed and fear are prevalent, that virtually all extremes return to a natural equilibrium point or gravity center, and trends and cycles of those tendencies are often identified and measured.
Uncovering the total spectrum of trends, cycles, equilibrium points and fundamental values of the market is important. The results should be harmonious with natural growth, maturity and regression.
An investors primary mission is to work out extremes of values, either long or short, which will end in a return to the present “gravity center” or an equilibrium point and thus a profitable trade. to the current end, all decision lines, formulas and ideas must be fully integrated and calibrated to lead to accuracy, precision and profit.
Many invest in gold and silver and resource stocks because of our huge trade deficits, unsustainable consumer debt, housing and stock exchange bubbles, etc. Robert Kiyosaki outlined fundamental reasons to buy gold at
The Rich Dad Channel. Those reasons are still valid now and supply a sort of contract against potential financial disasters.
Evaluating gold, silver and resource stocks isn’t easy. Some are producers. Others may have an outlined resource while others are explorers or prospect generators. In general, there are 10 areas within the gold and silver area particularly, that has to be considered, evaluated and positively answered.
1. Management, their vision, experience and partners
2. Location of property
4. Number of holes drilled.
5. Number of probably mineable ounces from measured, indicated and inferred resources.
6. Open pit vs. underground
7. Metallurgy issues
8. Political considerations
9. Finances, net present value & potential share dilution
10. Feasibility study planned or ongoing.
Outside of the basic criteria for owning gold and silver stocks, there are measurable trends, cycles and behavior that allow investors to participate and make the most of the pendulum swings into and out of this area.
Studies have shown that 60% of a typical stock price change may be directly attributed to the movement of the general market. Therefore, it just makes wisdom to get on the correct side of a market trend. thereto end, it’s informed first specialize in an index trend before considering individual gold, silver and resource issues.
Also, if we are about to invest in any market arena, then it goes without saying that we’d like to scale back the danger, improve the chances and use a more disciplined and original approach. My market direction indicators and advanced market behavior formulas are designed to help me for just such a purpose, and that i simply call it Pendulum. it’s a private toolbox, as it were, to guide me in technical decisions.
The concept of trend is basic and using or developing an indicator that demonstrates a trend is important. i like to recommend the MACD (moving average convergence divergence) found in preferred programs. In my work, i exploit my very own modified sort of the MACD which I called TSL (Trend Signal Line). just like the MACD it assists in determining trends but without as many whipsaws. For obvious reasons, it’s important to develop one’s own indicators so on avoid getting the identical results as everyone else.
Let’s study an example. one in all the more interesting concepts is to display a trend and cycle in one integrated view. One can therefore see the longer primary trend and therefore the short-term cycle within that trend. The red TSL is that the trend signal line noted above and therefore the SRA, my very own speed and acceleration cycle indicator. Here is an example from the May 2005 low within the XAU index. Please see. www.marketpendulum.com/pendulumconcepts.html for a chart description.
As you’ll see, it did quite well and allowed an early entrance into a profitable trend. So i’d encourage all to develop their own indicators and formulas.
Today, my Pendulum toolbox measures the swings within the market, their amplitude, force and energy while recording the motion of emotion across an equilibrium point or gravity center. The concept of gravity center could be a central feature of Pendulum and is found throughout nature…. that force of nature that compels both human behavior and physical objects to search out their equilibrium point.
Using the concepts and criteria above, I employ two model portfolios, one gold/silver and the other resource stocks. The gold/silver portfolio is up a mean 265% since 2002 and therefore the resource portfolio 74% since its 2004 inception, an awfully satisfactory result for my purposes.
We have discussed using key fundamental data and original technical trend criteria because the basis for stock selections within the gold/silver and resource investment areas. it’s dangerous, takes time and energy, except for the intense investor, it will be the golden pendulum formula of Investing for potential success.