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Wednesday, June 23, 2010

HOW WILL WE KNOW?

Question: How will we know when the bear has returned?

Well, for one, the market will break back below a yearly cycle low initiating a series of lower lows and lower highs. This year that cycle low was set in February.

But didn’t the market break that low during the recent correction?

Well yes and no! The S&P and Dow did both marginally break below the February lows. However a big part of the weakness that dragged these two indexes down was due to crumbling energy stocks as the mess in the gulf unfolded.

The rest of the market held above the February lows. Some like the transports comfortably above those levels. I tend to think if the economy was ready to fall back into recession again we would be seeing a lot more weakness in the trannies.

The banking industry has also held up quite well during the recent crisis. Surprising since it was the failing European financial sector that has been blamed for the current market swoon. If the financial sector is collapsing again how come the banks are holding above the February lows?

 
 
So we are kind of up in the air right now on whether we are indeed making lower lows.
 
The next thing I would need to see before I would be willing to call another leg down in the secular bear would be a Dow Theory sell signal. In order for that to happen both the industrials and the transports would need to break below a secondary low point. I think we just put in that low a few weeks ago. So if the Dow were to close back below the June 8th low of 9939 and it was confirmed by the transports closing below 4089 then I would have to say it’s time to hunker down bad times are a comin’. (They are surely coming eventually - we are just trying to get the timing right.)
 
Then the final straw would be for the 50 day exponential moving average to cross back below the 200 and for the 200 to turn back down.
 
Obviously none of these things have happened yet. Until they do it’s just too early to get beared up.

82 comments:

  1. long liv dawler guy

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  2. Too bad DG got stopped out at the short term top 2 days ago.

    Besides, it's not like gold is losing much ground, being it's the same level it was still higher than it was 8 days ago. Action like this is perfectly typical.

    Buy your GOLD before it's too late.

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  3. ". Now, precious metal remains his No. 1 overall holding, as Mr. Soros has nearly 10 per cent of his assets invested in the SPDR Gold Trust ETF (NYSE:GLD). He also owns call options, which could increase his ownership stake in the coming months"

    http://etfdailynews.com/blog/2010/06/22/george-soros-may-have-dumped-citigroup-c-to-make-room-for-more-commodities-gld/

    I don't care what this criminal Zionist does, but thought some might find it interesting.

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  4. Interesting observations Gary. Indeed we did get some bullish non-confirmations at the lows which should suggest at least testing the Apr highs.

    Sentiment seems to have quickly swung to bearish on this week's pullback too. That suggests a further push up before a stronger drop to test the June lows.

    As always with the market: who the hell knows why exactly. Other than that sentiment drives it, more than anything, in the shorter term.

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  5. Crashingggggggggggggggggggg

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  6. How is down 2 points a crash?

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  7. How come gold and silver are down so much while everything else seems ok?

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  8. Earthquake...5.7

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  9. Well they aren't down that much but as I've been saying for several days now gold is due for a daily cycle low.

    You have to expect a correction about every 20 days. It happens like clock work and gives investors a chance to add to positions if you understand how the gold bull moves.

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  10. Look here people you either have the balls to hold on to your positions or you trade something else.

    Gold will make those with determination rich but if you are a little girl and can't whether draw downs then you are going to have to put your money somewhere else.

    Either man up or put your skirt on and slink over to some BS trading blog.

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  11. Well I don't think I would have put it quite so bluntly but basically yes the gold bull isn't for the faint hearted.

    If you have a tendency to run scared on every dip then maybe you would be better off just buying physical gold or silver.

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  12. I agree. And trading off Fed "news", or any propaganda like CNBS is for monkeys.

    Hoping for a down open in GOLD so I can get a full position!

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  13. I don't think the break of the Feb low can be dismissed simply by saying energy was weak. There are no footnotes on previous yearly low violations saying they occurred just because such and such sector was weak. A price break is a price break. We either have to say that there is a chance that May marked the end of an extended yearly cycle or that the odds are very low the market will set another high for the cyclical bull. The evidence I see suggests the latter.

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  14. I have to say that it makes no difference to me one way or the other since I have no intention of trading the stock market.

    Gold is still in a secular bull and that is where the safety net is ;~)

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  15. Just checking in, and must say that gold's consolidation near the highs is exquisite. My only concern is that I might not have enough. :)

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  16. Hefty Buying on Weakness today for SPY ... $259M worth.

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  17. I'm back in some blue chip miners as of yesterday. Today looked promising. What your opinion on miners? I'm itching to add more.

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  18. My personal strategy is that I am in and not worrying about the short term. I'm looking to ride the rest of this C-wave. I will exit when I think the C-wave has topped, not until.

    (I don't even bother to look at my portfolio)

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  19. There is no question you are right that gold is not in a bubble. True bubbles have true bizarre behavior by the general public and we have not seen anything like that with gold.

    That being said I still do not think gold has much upside for the next two years but at some point this decade will become a bubble.

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  20. Gold is a scam.

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  21. I'll be adding to my gold position this morning on any gap lower.

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  22. If gold does nothing but grind higher and is boring for 2 years I am very happy. Gold went up 25% since we hit the public known 1000 mark, and nobody even cares...that's 25% for freeeeee!

    Silver is even worse. Silver may even beat out gold miners at this point since it is so under-valued! Silver should be at about $100 and if we get to a 10:1 ratio and gold hits 5000, are you kidding me. we go from 18 to 500. From what I read silver is more scarce than gold at this point as well.

    No problem treading water, even for 2 years, if this is what I am looking at.

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  23. Trader impatience has probably cost people more money than anything, especially in a bull market.

    It takes time for the bull to unfold. If one is willing to give the bull the time he requires he will make you rich. If not then you will miss most of the bull and end up with little or nothing.

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  24. Wasn't DG short T-bonds also, via long TBT etf?

    Looks like he has another big problem on his hands, but he doesn't seem to come around much anymore, at least not as DG.

    In any case, it ain't easy losing your shirt, so I wish him the best of luck.

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  25. You know you've got a strong hand when you're actually hoping your position pulls back so you can add (Gold).

    Thanks Gary!

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  26. Subscriber here. Added to my basket of 25 juniors/silver yesterday as they were on sale. Expected a drawdown as always, market is down 1%+ and I'm positive still for the day...the strength is building...

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  27. Oh dear, we're crashing again it seems.

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  28. Dow to 1000 by the year 2012. Even gold can't survive.

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  29. How can we be crashing when the Dow isn't even below 10,000?

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  30. So rare to find sweeping, dramatic predictions of distant future events from anonymous posters. :-)

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  31. That's what my man Precther keeps on saying. Is he for real.

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  32. Dow to 1000 by the year 2012. Even gold can't survive.

    You do realize that gold went up during the 08 meltdown after the hedge funds finished unloading. You do realize that the gov's are ready to print as a solution; they want a weak feable currency.

    If you have a logical reason to why gold will go down from here in a substantial way, I would love to hear a honest arguement.

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  33. I am a super silver bull, but 10:1 silver:gold is a bit of a fantasy. The mean for the 20th century was 50:1, and that's a reasonable expectation for the future. Even when the Hunt Bros. tried to corner the market the ratio only went to 16:1 for one day.

    I also read an interesting article which talked about how silver:gold ratio is in an 800-year bear market. The chart was pretty ugly.

    However, I also think that it's very possible that we will see hedge funds jamming silver at some point. It's a tiny market and very easy to manipulate.

    In short: hope for 50:1, and be pleasantly surprised if we do better than that.

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  34. When we go parabolic in gold, I would anticapte closer to 15 to 1 at the least. I say a possible 10 to 1 due to the massive amount money sloshing about. I don't think I would hold until 10:1, but I wouldn't be surprised. I doubt silver will only manage a 50:1, assuming gold hits a parabolic climax top. I would guess people would start diving into silver at that point. The mean ratio is not to be used as a reasonable expectation during parabolic moves, and I doubt the metal will be quiet when it happens.

    either way up is still up. :)

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  35. Gary man, I'm scared. Do you think we take out 1140 this time?

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  36. Could be but why do you care. Gold and miners have decoupled from the stock market.

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  37. "Gold is a scam."

    It's a 5000-year-old scam. It's a scam that predates every other investment or currency in existence.

    But as I always say, feel free to short it.

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  38. Gary, what were you doing during the '08 crash of gold?

    must of had some doubts about the gold bull then eh

    were you crapping your pants, buying, selling, holding?

    Thanks

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  39. I was shorting drillers.
    Gold was due for it's 8 year cycle low. I didn't ride it down.

    I will always try to avoid riding a D-wave if I can.

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  40. Any of you chart-pattern types concerned the $GOLD daily chart from the May highs appears to be a rising wedge, with negative divergences on RSI and MACD, along with falling volume?

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  41. Looks liek a cup and handle to me but who cares if it's a wedge. Any pullback will only be temporary.

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  42. What can I say, I'm a worrier. :-)

    I certainly see the cup-with-handle (hard to miss), as well as the bullish ascending triangle with a failed breakout (thus far).

    Still, we worriers tend to notice these things, with all of the attendant secondary indicators, as well as the timing band for a cycle low and poor seasonality for gold.

    If the cycle low results in a high-volume red candle that closes well below the rising TL, I plan to reduce my position and/or hedge.

    I know you inveigh against this sort of trader mentality, Gary, and I appreciate that you're in it for the long haul. Myself, I tend to get burned when I feel I'm in the clear.

    Just trying to inject a note of caution for those who might be trading this market, in the face of your suggestions to the contrary, and doing so with leverage, ditto.

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  43. Pleasant surprise this morning for those long the gold, eh?

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  44. How come Dawler Guy doesn't address his bond short trade that's also way against him?

    At least he clammed up for awhile.

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  45. It is very hard for the average retail trader with no research team or inside infomation to consistently make money.

    Most like to believe they can get an edge by looking at charts but history has shown they can not. So this is what happens. You have a period where you make some money and then when the market goes against you you give it all back.

    If you don't control risk the periods of losses end up destroying your account. If you are smart enough to control position size then you might be able to stay even or even scracth out a meager living.

    If you want to get rich then you just ride a bull market and you just smile and nod your head when the traders come on during a draw down and bash your strategy.

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  46. Boy, this recent pullback in gold after new highs sure didn't last long. Thanks Gary for keeping us focused.

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  47. What you saying Gary? Gold and silver not going to crash anymore?

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  48. Gary, what's the difference between buying actual gold or silver vs. buying the etfs like GLD or SLV?

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  49. Gold never crashed even during the market melt down in `08. It never even dropped below its 200 week moving average.

    So I really doubt we are going to see gold crash. The only scenario that could happen would be for the Fed to turn off the presses, jack rates way up and start draining liquidity forcing the global economy into a depression much worse than the 30's.

    You tell me, what are the odds of that happening?

    Anon,
    Not much difference. The plus with physical is one isn't tempted to sell every time we get a short term dip.

    The plus with GLD and SLV is they are very liquid. The spreads are much smaller than buying physical.

    You do have a small administration fee with both of the ETF's that will cause them to underperform the actual metal by a very small amount.

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  50. Gary, does it mean from this point on if the market rises gold and silver also rises?

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  51. It is a bull market after all.

    And gold and miners have clearly decoupled from the stock market.

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  52. Oil lube really helped my rocks too!

    All together now sing!

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  53. I don't understand why most people try to connect "the market" (stocks) to where gold is headed, as if that would give them some insight/edge.

    The fact is most people can't even trade stocks profitably. If they could, they'd just keep making money in stocks without inquiring about other vehicles. If you don't even know where stocks are going, then there is no edge in gold, and if you are confident where stocks are headed, trade them. Simply put, stocks don't necessarily lead gold or anything else for that matter. It's your head making the connection that isn't really there.

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  54. Uh oh, one of my favorite indicators, wrong-way Timmy Knight, has turned bullish on gold.

    I'm staying long, however, as my time horizon is very long term compared to his, but it makes me uneasy in the short term. :)

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  55. Let the melody ring!

    All together now sing!

    Markets are closed July 5th...FYI for everyone. Time to celebrate our independence day with some more pushing from Ben!

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  56. TK is just getting whipsawed to death trying to trade gold. One minute he's short the next minute he's long with a target much higher. Then one down day and he's forgot all about his target and he's short again.

    He's the quintessential dumb money trader.

    Apparently he's managing money now too. Anyone who would give someone like this any money to mange needs their head examined.

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  57. The most silver can do is maybe a triple within the next 10 years. How is that a raging bull market you suckers talk about? Certainly that would make you rich -- 200% within 10 years. lol

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  58. Gary what is you reasonable expectation for the gold:silver ratio when gold finally peaks? I am thinking of adding to my silver positions. Looking for another opinion, because the number seems insane and unrealistic from my calculations!

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  59. Gold is stronger than silver, yet everybody wants a bargain.

    Go with the strong horse. Sure, silver will eventually outperform, as will everything else in time, but gold is and has been the best, holding up even when silver is weak.

    This might change in the next couple years, but that is when I'd focus on silver over gold.

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  60. someone doesn't understand how silver works I'm afraid.

    Before this is all over I'll eat my hat if silver isn't $100 and $150 to $200 is probably more realistic.

    That's quite a bit more than 200% my friend.

    Besdes I dare say you are never going to make 200% by trying to trade the stock market the next 10 years so even if that's all it does its still going to massively outperform trading.

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  61. SLV at 200, are you kidding me? It can't even get above 20 for years.

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  62. Anon,
    When silver decides to move it can quickly leave you in the dust if you aren't already in.

    The big moves in silver come at C-wave tops which I think we are heading into right now.

    Now is not the time to lose one's position in silver.

    Btw silver has been outperforming gold ever since the Nov. 08 bottom so I'm not sure what you mean by gold being the strong horse.

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  63. C'mon Gary....$200 doesn't take into the fact that silver is way undervalued right now when compared to other PM's. I figure a run on gold when silver is so undervalued will put silver to at least $300. (said in friendly jest)..up is up!

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  64. C'mon Gary....$200 doesn't take into the fact that silver is way undervalued right now when compared to other PM's. I figure a run on gold when silver is so undervalued will put silver to at least $300. (said in friendly jest)..up is up!

    Call me Bob, since I am not the disagreeing Anon.

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  65. It couldn't get above $3 back in the 70's for many years either then it shot up to $50.

    Bull markets always go much further than anyone can imagine at the beginning.

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  66. Silver is up %500 in the last eight years. You think it can't do 200% in the next ten? It's doubled in the last eighteen months.

    Has your portfolio outperformed silver in the last eight years? I highly doubt it.

    You are Son of Dawler Guy. Please short silver at the earliest opportunity.

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  67. I think what people don't understand is that silver is a very thin market. It doesn't take much new money to drive a big move.

    100% moves are pretty common for silver during speculative C-wave tops.

    A 100% move at this point would take silver to $40. Then another 100% move from that point would take it to $80.

    Now do you see how easily it could hit $100?

    And a 100% move from $100 is $200.

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  68. Hmm..so do you think that there will only be 1 or 2 more c-waves then before the bull is done?

    bob

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  69. Just checking in, and have to say I'm PUMPED to see how gold is acting. I fear it might never pullback so I can get more.

    I'm taking a long weekend with the profits Gary has shown me, and have a great one yourselves!

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  70. P.S.

    Bob, you're thinking too hard. 2 more C waves aren't enough for you?

    :)

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  71. Bill Gates no longer own silver, via PAAS.

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  72. I would prefer this were the last C-wave that blasts gold to $10,000.

    :)

    Bob

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  73. Gary the cycle guy, has the stock market bottomed?

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  74. Monday we will rally HARD. This is the most critical junction in history (a 3/6/09 moment, if you will). Mortgage your home and get in on this market - Monday morning, we're going to the moon.

    The bull market isn't over yet, we all know that.

    RUN, BULL, RUN!

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  75. what is 3/6/09 ?

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  76. >> I don't care what this criminal Zionist does, but thought some might find it interesting.

    The stupid things people say...

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  77. ANON 8:19
    You need to get wit the program...you most certainly have selective memory or fail to read properly...I sold TBT about a week after i bot it...looking to get back in again...waiting for a dump in the stox...

    GL to all...D G out...

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  78. Analyzing cycles doesn't seem to work.

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  79. If you want cycles to perfectly time entries and exits you are wasting your time, they won't do it.

    What they can do is give you an idea when you should back off a bit or when you might want to step on the gas.

    Example if it is getting late in a daily cycle it's probably not a good idea to take on leverage. The odds are high you will suffer a draw down that may result in a margin call and kick you out of your position.

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  80. http://noir.bloomberg.com/apps/news?pid=20601087&sid=aTyp7ChptHWs&pos=1

    Well I guess everything is free and clear now. Gold will tank now for sure...consumers are spending more now...sure their homes are underwater, and they don't care about making the mortgage payment, so might as well spend everything since you are going bankrupt anyways. But this is all good for a good growth economy. Nothing like potential bankruptcy to spurt economic growth.

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  81. What's everybody's best guess as to when this current C-wave (assuming that is what it is)is finished?

    I'll say late July.

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  82. Instead of trying to guess a time frame just look for signs of a C-wave top.

    Gold stretched 25+% above the 200 DMA
    Miners stretched 40+% above the 200 DMA.

    Sentiment extremely bullish. We will often see extreme bullish sentiment here on the blog right before a major top.

    Spike down in the Gold:silver ratio below 50.

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