Advice For Long-Term Investors

Thursday, March 24, 2016

The last four years in the metals market have seen much upheaval.  The price action has turned many fundamentalists on their heads.  Many have been screaming that the fundamentals support higher prices, yet the metals continued to follow through in their four-year decline.

Even many of the technical traders have been fooled by this market over the last four years.  One such analyst even noted that he no longer uses his cycle methodology, since it does not work, and, instead, now guesses as to where he thinks the market will be manipulated in order to determine the next market move. Yes, I was astonished at this admission of failure too.

What Has Become Of This Market?  

Why have people been so badly fooled, and continue to be so badly fooled?  Personally, I think it is due to their lack of appropriate tools to really understand this complex.  While most will post analysis week after week, much of it is unreliable, and they offer various reasons as to why that is the case.  But, no one has been looking under the hood, at the engine, of the market.  Everyone just seems to stand around kicking the tires.  

I think it is time for investors to take a deep breath and recognize that what has been sold as guidance for the last four years is simply guessing.  This market has been quite difficult for most people, but I suggest you move away from those that have been clearly dishonest in their analysis, as well as those that have admitted their methodology does not work.

The main question now on everyone’s mind is whether the bull market is back or not.  And, for long-term investors, it really matters not, in the grander scheme of things, at this point in time.  As I said to my members at Elliottwavetrader.net back at the end of 2015 and coming into 2016, I have deployed approximately 80% of the funds that I have designated for long-term investment into this complex.  

I exited the complex back in 2011 at just about the highs, have earned a lot of money shorting the market for the last 4 years, and have now redeployed that money on the long side.  In fact, my metals broker, Doug Eberhardt of buygoldandsilversafely.com, continues to kid with me about my knack to buy lows and sell highs.  My purchase of gold with him was on the night of December 3, when gold struck $1,045, which was also posted in my Trading Room at Elliottwavetrader.

While I still view the probability of a lower low at approximately 35%, I have become much more aggressive and only have another 20% still remaining in cash to deploy at a confirmed break out or at a lower low in the coming months. 

What Should Investors Do?

As a long-term investor, one’s goal is clearly to maximize profit, but one maximizes profit with price improvement.  That means recognizing where the general topping region is for a market, selling at the high (or, at least hedging your portfolio), and then buying back at a relative low.  So, most people do not have to catch the EXACT low to truly profit in the long term in this complex.  Rather, moving into the market at a relative low will earn you wonderful profits in the long term.  

Therefore, my current advice to those who have lost their way in this market and have been utterly confused is to focus on one thing: It’s time to buy pullbacks.  Whether the next pullback will result in a lower low or not is not something I am able to guarantee.  And, anyone who suggests that they are providing you a 100% guaranteed market perspective is simply foolish.  But, the one thing I can tell you is that buying on pullbacks in 2016 will likely set you up to earn huge profits over the next decade, from a probabilistic perspective.

So, let’s all put ego aside in trying to pick the actual low, and let’s start focusing on profiting from a beaten down market over the long-term.  I can assure you that if silver is over $50 an ounce several years from now, you won’t be kicking yourself for buying at $15 instead of $12.75.

Avi Gilburt

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net); a live Trading Room featuring his intraday market analysis (including S&P500, metals, oil, USD & VXX); interactive member-analyst forum; and detailed library of Elliott Wave education. Visit his website:https://www.elliottwavetrader.net. You can contact Avi at info@elliottwavetrader.net.