“In 1581, Galileo, while attending services at the Cathedral of Pisa, observed a chandelier swinging back again and forth. Energized by shifting air currents, the chandelier moved inside a selection of arcs and amplitudes. Therefore was born the concept of the pendulum which Galileo utilized as a time measurement device in his later experiments”
The pendulum formula is a belief that, in any investment area, the herd instincts of greed and fear are prevalent, that practically all extremes return to a natural equilibrium stage or gravity center, and trends and cycles of the tendencies may be identified and measured.
Uncovering the full spectrum of trends, cycles, equilibrium points and fundamental values from the marketplace is vital. The results must be in harmony with normal growth, maturity and regression.
An investor’s primary mission is always to ascertain extremes of values, either lengthy or short, that may outcome inside a return towards the present “gravity center” or an equilibrium place and thus a profitable trade. To this finish, all selection lines, formulas and concepts must be fully integrated and calibrated to outcome in accuracy, precision and profit.
Fundamental Formula:
Numerous invest in gold and silver and resource stocks due to our large trade deficits, unsustainable consumer debt, housing and stock market bubbles, etc. In 2003, John Embrey outlined 15 fundamental reasons to own gold at http://goldmoney.com/en/commentary/2003-09-26.html. Individuals causes are still valid nowadays and supply a form of insurance policy against possible financial disasters.
Evaluating gold, silver and resource stocks is not easy. Some are producers. Others might have a defined resource while others are explorers or prospect generators. In general, you will find 10 areas inside the gold and silver location in distinct, that ought to be regarded, evaluated and positively answered.
1. Management, their vision, knowledge and partners
2. Location of property
3. Infrastructure
4. Number of holes drilled
5. Number of potentially mineable ounces from measured, indicated
and inferred resources.
6. Open pit vs. underground
7. Metallurgy problems
8. Political considerations
9. Finances, net present value & possible share dilution
10. Feasibility study planned or in progress
A more detailed analysis of those guidelines and other issues by Kenneth Gerbino can be found at http://www.321gold.com/editorials/gerbino/gerbino060804.html
Technical Formula:
Outside of the fundamental criteria for owning gold and silver stocks, you can find measurable trends, cycles and behavior that allow investors to participate and profit from the pendulum swings into and out of this location.
Studies have shown that 60% of a typical stock cost change could be directly attributed towards the movement of the overall marketplace. Therefore, it just makes common sense being on the proper side of a marketplace trend. To that finish, it’s wise to first focus on an index trend before considering individual gold, silver and resource issues.
Also, if we are planning to purchase any market arena, then it goes without saying that we will need to reduce the risk, improve the probabilities and employ a a lot more disciplined and original approach. My industry direction indicators and advanced market behavior formulas are designed to assist me for just such a purpose, and I simply call it Pendulum. It’s a personal tool box, as it were, to guide me in technical decisions.
The concept of trend is fundamental and using or developing an indicator that demonstrates a trend is essential. I recommend the MACD (moving average convergence divergence) found in most popular programs. In my work, I use my own modified form of the MACD which I called TSL (Trend Signal Line) Like the MACD it assists in determining trends but without as numerous whipsaws. For obvious factors, it is really important to develop one’s personal indicators so as to avoid getting the same outcomes as everyone else.
Let’s take a look at an example. One with the a lot more interesting concepts would be to display a trend and cycle in one integrated view. One can therefore see the lengthier primary trend as well as the short term cycle within that trend. The red TSL may be the trend signal line noted above as well as the SRA, my own speed and acceleration cycle indicator. Here is an example from the May possibly 2005 low in the XAU index. Please see…. www.marketpendulum.com/pendulumconcepts.html to get a chart description.
As you can see, it did quite well and allowed an early entrance into a profitable trend. So I would encourage all to develop their personal indicators and formulas.
Today, my Pendulum tool box measures the swings within the marketplace, their amplitude, force and energy whilst recording the motion of emotion across an equilibrium place or gravity center. The concept of gravity center is really a central feature of Pendulum and is discovered throughout nature…that force of nature that compels each human behavior and physical objects to discover their equilibrium point.
Outcomes:
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 an average 265% since 2002 and the resource portfolio 74% since its 2004 inception, a very satisfactory result for my purposes.
Conclusion:
We have discussed making use of key fundamental data and original technical trend criteria as the basis for stock selections in the gold/silver and resource investment areas. It isn’t simple, takes time and effort, but for your serious investor, it can be the golden pendulum formula for potential success.
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