Fancamp Exploration

Hello Tony.

I probably seem dense to you, having thought what you meant by “Venture” was Fancamp. When I read your headline, all I thought was, “That’s a nice colorful word to use. That’s good artistic license.”

My only excuse for misidentifying what you meant is the fact that I reside in New York. Unlike Canadian investors, when New York investors hear the word “Venture,” the “Venture Exchange” does not immediately come to mind because it is not part of the everyday vernacular. After your mentioning my misidentification, at least I knew enough about the general Canadian investment environment, to get the point.

So far as the general industry trend, I am more familiar with the GDXJ (the Junior Gold Miner Index), which is heavily weighted in favor of Canadian Gold Miners (with one or two Canadian Silver Miners thrown into the mix, for good measure). As I described in detail, as part of an earlier posting, I trade that index.

This is not the right place to bring up somebody’s individual trades. But, by through my referencing my own direct experience, you will get the most clear-cut illustration of what I mean.

I don’t make these things up. I put my money where my mouth is. Yesterday, I made a $7500 Buy. Three hours later, my $11,000 Sale of that same position concluded my trading for the day. As I mentioned in my earlier posting, the indicators I use are not operative very often. But when the indicators are perfectly aligned (or nearly perfectly aligned), the GDXJ is great gamble.

When I placed my order, I was confident of making a tidy profit (as much as $10,000) within three months or so. The fact that things happened unexpectedly, within hours, prompted me to get out faster with a smaller profit. Naturally, this exercise is not exactly the same as the precise workings of a clock.

#1) The GDXJ is very liquid and marginable. I get 4 to 1 margin leverage. So, $7500 bought me a $30,000 position (in round numbers). I sold that position for $33,500, netting me $3500 on the $7500 that I had put up three hours earlier. Of course, this is not the same as trading Stock Options (which impose rigid time restrictions on top of inflexible price constraints).

#2) The leverage is further magnified because GDXJ price swings, percentage wise, are much greater than the price swings in the price of Gold. Naturally, more often than not, you can use that price leverage to your advantage. Also, on the less often occasions when the earlier price moves happen not to be aligned, that can work out even better. For example, yesterday, Gold was up very slightly early in the day. Basically, it had been moving sideways all week. Yet the GDXJ had been setting intermediate Low after Low. Naturally, I did not expect that misalignment to last much longer.

#3) You can use the basic situation I’ve described to tip the balance, slightly, in your favor. But that is not sufficient. There’s another indicator that is close to being 100% predictive of major Lows (and turning points) in the price of Gold. Over the last few days that indicator has been moving towards 100%. Yesterday, I measured it as being approximately 80% predictive. The guiding principle is the Trading Volume Oscillation between Institutional Traders and Commercial Hedgers.

Usually, the Traders’ volume exceeds the Hedgers’ volume by a wide margin. Far less often (possibly, once or twice a year), the Hedgers’ volume almost equals the Traders’ volume. It’s a little more complicated than that; but that’s the general idea. Why bother to follow the Trader-Hedger Oscillator? Because, by doing so, you will be following a guiding principle that is close to being 100% correct. By the way, over the years, one oscillator or another has funded my entire FNC investment (with money left over to buy more).

How many times do you know ahead of time (with near 100% certainty) that your investment will generate a high rate of return within a few months? Take a look at the Trader-Hedger Oscillator, year after year after year. Without exception, the Hedgers are always right at the major market turning points. Without exception, the Traders are always wrong at the major market turning points.

http://www.finviz.com/futures_charts.ashx?t=GC&p=w1

With Copper trading, the same principles apply. In that case, I trade the JJC Index. The connection between Copper and the JJC is very tight and more reliable than using one of the copper stock indexes. However, the gain in reliability is at the cost of some of the leverage. In Copper trading, unlike Gold trading, at the market bottoms, the Hedgers’ volume doesn’t just approach the level of the Traders’ volume, it exceeds it by a very wide margin.

http://www.finviz.com/futures_charts.ashx?t=HG&p=w1

The one big problem with all this beautiful ideology is the very sad reality that it only works on a tiny number of selected days of the year. You need to apply very hard self-discipline to do absolutely nothing (in this regard), the very great majority of the time.