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Tuesday, March 16, 2010

THIRD LEG IS NOW UNDERWAY

It's been my contention all along that this cyclical bull would consist of at least three major legs. Now that the S&P has also broken to new highs I think we can safely say the third leg is underway.

That being said the market is due for a move down into a daily cycle low anytime. Sentiment has become extremely bullishly skewed, breadth is deterioating and we are seeing signs that institutional traders are taking chips off the table.

So I'm expecting another brief breather, probably starting next week as I think the market will probably hang in till after options expiration.

The key to the next phase of this cyclical bull is as always the dollar. I've been saying for a while now that we are getting late in the dollar's intermediate cycle. As you can see from the chart despite the powerful rally the dollar still hasn't been able to move above the last intermediate cycle high and it now appears to be failing at the downward sloping 20 week moving average.


If the dollar is about to begin the trip down into the intermediate cycle low (and I think it probably is) it's going to act as a big tailwind for virtually every asset class. Actually I expect it's going to be more like a hurricane driving everything willy nilly before it.

Once we get through the impending correction I expect most if not all assets to enter runaway moves for the next 2 or 3 months. Unfortunately that includes the energy markets. And that my friends is going to ultimately be the fly in the ointment for Bernanke's plan to print our way out of this mess.

85 comments:

  1. Ugh! I thought this was the time to be an observer? Should I get back into my miners trade or wait until we hit 1061 and then buy on the pullback?

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  2. Gary - if there's a close lower than 79.56 then I agree that it'll be odds on that we'll see a very significant drop. Fast Stoch is already giving confirmation but I'm holding fire till that trigger is pulled.

    As an aside an in reference to the 4 year cycle - assuming that the cycle aligned with Obamas entry to the White House - its looking very left shifted. Any comments??

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  3. Gary, using your analogy, shouldn't we wait to enter in shorts in dollar and longs in gold until the correction in stocks has run..it seems like we are very far stretched into this crazy rally in equities.

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  4. Yes I would wait till the stock market corrects before jumping into anything just yet. Remember gold did this to us in January also.

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  5. This is a selling opportunity in gold and a buying opportunity in the dawler...and short equities...

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  6. There was another anon yesterday that was shorting gold on this move...he shorted at 1115, then 1127...I wonder if he will short more at 1135?

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  7. If the 200 DMA was declining you would be right but it's not. So there are no selling oportunities in bull markets. One can go to cash if they feel a correction is coming but shorting bull markets is a flawed strategy and one that will end up costing one money.

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  8. I sold more gold this am...this is junk and going alot lower...

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  9. Gary,
    What happened to false break out from the coiling pattern you previously mentioned? What you said would suggest false break down then rallying on the USD.

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  10. Like I said in one of my reports last week about 30% of the time the initial move is the CORRECT move.

    Since the dollar is in a secular bear market I think this is going to be one of those times.

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  11. Seems like there is still a lot of dollar bullishness out there. A correction is just that until it isn't... Did we just form a weekly swing high?

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  12. Of course there is. It's why the dollar is probably heading into the intermediate cycle low. Bullishness recently was higher than it was at the March 09 top.

    That's the recipe to run out of buyers.

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  13. Gary,
    do you have an expectation of how long and how far this correction into the daily cycle low will go? Couple of days to a week? No more than 4%?

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  14. I'll just watch the BoW numbers. But I would expect the gap to fill on most indexes.

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  15. Don't get to complacent here...Gold will go lower...dawler higher and of course equities lower...

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  16. hhhmmmm...my gold sales looking pretty good now...will look better later...

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  17. Trying to be "right" will just end up costing you a lot of money in the long run.

    It's best to wait till the 200 DMA turns down before shorting stocks or gold. Plus the fact that gold is in a long term bull market is working against you.

    Now if gold was stretched 30% above the 200 DMA and miners 60% then you would have an edge.

    As it is, right now you are just gambling, and heck you can get much faster action at your local casino if that's what you want to do.

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  18. Anon, you sold at 1115 and 1127! that doesn't sound like it is looking very good. You could get out now for a small loss though

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  19. dawler trying to get some leggs above 80 again...

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  20. The dollar completed the weekly swing high. Another one of the confirmations can now be checked off.

    The only one left is for gold to re-phase the last intermediate cycle low.

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  21. If the Dow closes here it will wipe off the nonconformation that's been in place for the last few days.

    That's a big positive. Although we still need to drop inot the daily cycle low, probably starting next week.

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  22. I think the timing is now to start adding to positions. Maybe 25%.

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  23. I am putting on a full position long gold and silver here. I will reconsider if the dollar closes back above 80 today.

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  24. Just be prepared to hold on to them when the market corrects and if gold and GDX fill those gaps.

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  25. Silver and silver miners seem stronger than gold and gdx, I wouldn't be surprised if it didn't correct much and may continue to go up.

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  26. Now India might also want that 191 tonnes of gold the IMF is selling:

    http://revolutionarypolitics.com/?p=3633

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  27. If it wasn't for the stock market being so darn overbought and sentiment pushing extreme bullishness I would jump on the bandwagon. But the market is setting up for a sharp pullback soon. I just doubt that miners will be able to resist the pull of that.

    They never have in the past.

    I would say the odds are high the gaps in GLD, SLV and GDX will get filled when the markt corrects.

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  28. Blake
    Let me sell'em to ya...

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  29. Wow, this thing is running nicely now! Just wait until the weak hands like Gary who panicked out of the trade jump back in for fear of missing it. ;)

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  30. Just waiting for the final confirmation and the stock market to correct before Jumping back in.

    If this is going to develop into a runaway move we will have several months of upside ahead. Plenty of time to wait for the last confirmation before piling in.

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  31. Bada bing...bada boom...south we go...
    Hope all you Nobama lovers like the 53% tax increase coming on cap gains...

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  32. I doubt the market will top until after options expiration. After that though we can probably expect a pullback to reset sentiment before the next big push higher.

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  33. Thank you for your generosity Anon!

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  34. Blake
    I call it how i see it...tomorrow i could be long gold...and if i was would you thank me even more...

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  35. Dawler losing ground here...

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  36. < Heading for a double-dip.,, If I am wrong then I will gladly re-post and admit it. Thanks for letting me share my bearishness. >

    Gary, I was wrong! My last few stops are cents away now. The close should set me in total cash.

    Ok, About your premium service,
    I trade in my IRA and do not have a margin account. When I buy or sell it takes 3 days to settle. So, how do I find out more information on how you're methods could help me? TIA. my email is: tedavis630@aol.com. Anyone that uses your service feel free to send me your thoughts or recommendations as will.

    Peace

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  37. gary, why do you have the same post as from the gold scents website.
    just curious?
    tx

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  38. Anybody have recommendations for what to buy if/when we get a correction or decent pullback?
    TIA

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  39. Wow, just at about break even on the blood bath that was my portfolio after G-man's all in call in January!

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  40. tomorrow will be lower in gold...i believe we need to test 1075 or lower before going higher...When not if gold is going much higher...I believe gold/dow ratio will sometime in the next couple of years be 1 to 1 or less...

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  41. daily lows taken out here at the comex close is very s-t bearish...

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  42. opex melt-up, ES futures pulling back now into the wedge.

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  43. Like I always say as long as you don't place a time requirement on your positions the bull will always correct any timng mistakes.

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  44. Gary
    I do keep stops on long and short positions all the time...not always tight...one needs room because no one (especially me) gets it right...i always leg into a position gradually and most times take off gradually...unless the shit does hit the fan..

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  45. Just went short oil this pm....small

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  46. Going down from here, start getting back in once things pull back. Trading here, wouldn't sell for long-term. May have to pay for a higher re-entry point if I am wrong.

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  47. Its hard to keep a good buck down...

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  48. Yo Gary, what happens to the dawler if the markets pull back as your expecting...just wandering....!

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  49. I am expecting a 1-2-3 reversal pattern to play out in the dollar as the markt corrects.

    Folks the dollar IS going to move down into an intermediate cycle low at some point. It is getting very deep into the cycle so the weekly swing high that just formed has good odds of signalling the beginning of that process.

    I will note the dollar has now also broken the trendline.

    My expectation is for the dollar to bounce as the market corrects but that bounce will be unable to move to new highs. After that the dollar should resume the secualr bear trend into the next 3 year cycle low due sometime next year.

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  50. Gary- Do you think the stock market correction is going to start this week? Do you anticipate the spx getting to its 50 dma or will 1150 be a deep enough pullback?

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  51. I'm going over all that in last night & tonights report.

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  52. The dawler wants to go higher...and will...sold 1126 gold...

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  53. closed out my gold and silver futures for a very small profit. I am going to short silver here for a day trade

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  54. CPI shows DEFLATIONARY pressures...

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  55. LOL hardly. Year over year PPI is up 6% and that is the governments adjusted prices in order to suppress COLA's.

    The real number is probably over 10% and if the CPI and PPI were still figured the way they used to be I'm sure it would be over 15%.

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  56. Gary
    Absolutely agree 100%...you hit the nail on the head with last statement...
    The question really is what do we do about it...so much number manipulation that really nobody knows what the real numbers are...we do know the government issued numbers are NOT true...
    Most Americans saying "everything is good"... for now...

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  57. Everyone except the 15-20% of Americans who are unemployed or underemployed.

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  58. What price on the USD would negate the weekly swing Gary?

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  59. It would have to trade above 81.50 by the close tomorrow

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  60. For the deflationists, please consider the following article:
    http://www.debtorsprisonblog.org/journal/2010/3/18/what-kind-of-inflation-can-we-expect-if-the-monetary-machine.html

    - KB

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  61. Gary-

    Any comments on the dollar rally this am? Could this be the bounce out of the intermediate low we have been looking for?

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  62. KB-
    That site must be down...I'm looking forward to reading that one.
    JH

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  63. The dollar just climbed. I wonder if I should add to my other currencies now. Everbank IRA that I have allows currency investing. I have presently .02% in each - Canadian, Norwegian, Swiss and Singapore. Maybe grow it a little more. Then when dollar bottoms maybe I move back into the dollar?

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  64. The dawler goes higher fellows...why fight the tape...sold more gold 1127...a gift...

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  65. Jayhawk -
    I see the link to that article is down. I also highly recommend this blog http://jessescrossroadscafe.blogspot.com/
    I found the link to the other article on the left hand side of his homepage.

    I believe the writer of Jesses Cafe lives in Europe and he is usually spot on with everything! Even his market timing has proved to be most accurate, although I don't think he is a "trader". Whenever I feel doubt or fear, I gut check with his material.

    - KB

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  66. PZG on sale today and I picked up some more. Very speculative so do your own DD.
    Embrace volatility and prosper.

    - KB

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  67. Tommy D

    Remember it is not the dollar average that determines dollar up or down via other currencies. You have to check the strength for each currency against the USD. CAD is up over 20% for the last 52 weeks.

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  68. KB-

    Yes, I've got Jesse on my blog list. Good stuff there usually and I have not been by lately so I missed the link. He always has some great photoshop work as well.

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  69. TommyD,

    Do you Interactive Brokers for your currency trades? I use them and have considered longer term moves like that.

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  70. SPY stopped at the 200 wma so far

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  71. Algos kicking in the last 30 min to run em up boyz...33 Liberty says full throttle ahead...shorts have been vaporized...none left...up on no volume...no players left...market may never see a down day again...

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  72. No the dollar has only just begun the trip down. Right now I'm expecting a 1-2-3 reversal as the stock market corrects.

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  73. Gary
    You seem very confident about the buck...be careful...

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  74. I hope you don't mind the plug, but I'm part of a team that just launched a beta version of a new mining stock screener:

    www.miningalmanac.com

    Right now we have data on 400+ companies: financials, resources, and tools for analysis. Soon it will have data on 1500 stocks (basically every miner or explorer traded in US, Ca and Au).

    Hope you like it.

    Mike
    SovereignSpeculator.com
    MiningAlmanac.com

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  75. I am because there is ALWAYS and intermediate cycle...ALWAYS.

    Sometimes it can stretch long and sometimes it's short, but human nature never changes so we will get a drop into an intermediate cycle low and when it does unfold it's going to convince everyone that the dollar is toast, whether it is or not.

    That's just how human nature works.

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  76. Gary - looks like someone has been stealing your charts.

    http://www.321gold.com/editorials/connor/connor031810.html

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  77. Gary,

    In your Mar 15 update you talk about the length of cycles. (I will not divulge more here.)

    My question is, why does the low in early October not represent a daily cycle low? It would certainly affect the analysis.

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  78. Now this is weird Gary. Are you running another blog going by the name of Toby?

    http://www.goldscents.blogspot.com/

    Or is he plagerising your work?

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  79. I've already answered this question multiple times now.

    Toby is the ghost writer for my new partnership and the GS blog was kept separate so we could track marketing efforts.

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  80. David,
    The Oct. low was a half cycle low.

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  81. Gary...I like your style and your
    very realistic. I'm going to subscribe for 6 months.
    How often do you show your positions held, daily or weekly?
    Joseph

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  82. I publish my portfolio every weekend. I will tell you right up front that I'm not a short term trader. So if you are looking for someone to give you daily or weekly stock picks I'm not going to be your guy.

    Mostly I buy ETF's so as to avoid company specific risk.

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  83. Thanks for the quick information.
    Joseph

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  84. this post is the wrong call....

    yes, dollar will begin decreasing eventually, but the short term move (1-2 weeks) is market correction, led by a jump in the dollar....

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  85. LOL no kidding. That's what I said.

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