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Sunday, July 11, 2010

BEAR'S BEWARE II

In my last article Bear's Beware, I warned that shorts were running the risk of getting caught in an explosive rally as the intermediate cycle was due to bottom.  Well, it did bottom and bears have watched their profits quickly evaporate as the market has surged out of the intermediate cycle low. 

The initial thrust out of one of these major cycle bottoms will usually gain 6-10% in the first 8-13 days.  We are now 5 days in and up 6.6% so far.  I expect we will see a test of the 200 day moving average before we see any significant pull back.  These initial moves out of intermediate bottoms don’t tend to wait around as smart money smelling blood in the street pile in quickly.

It's only the little guy, who doesn't understand what has just happened, that continues to fight the trend change.  This is usually about the time that I see the technicians start calling for this or that resistance level or trend line to put a halt to the rally.  They are, of course, assuming this is a bear market rally and it will soon be over.

First off, let me say I'm not convinced yet that the cyclical bull is dead.  I would need to see the market come back down and break the recent lows first.  If both the transports and industrials do that then yes, we will have a Dow Theory sell signal and at that point I would have to assume that the market has begun the third leg down in the secular bear market that started in March of 2000.

Now let me say this, bear markets don’t begin because of lines on a chart.  They begin because something fundamental is broken in the economy or financial system.  Now we certainly do have a broken financial system, no doubt about it, but then again this cyclical bull was never built on the foundation that we had fixed anything in the financial sector.  We certainly haven't fixed anything in the economy with unemployment remaining above 15% if one counts everyone out of work. No this cyclical bull was built on a foundation of massive liquidity.  I’m not convinced yet that that fundamental base is broken.  Only time will tell.

But even if this is a bear market rally let me assure you that bear market rallies don’t end because of lines on a chart.  If you think you are going to spot a top in a bear market rally by drawing a few trend lines or some meaningless resistance level you are just kidding yourself.  It ain’t gonna happen.  It never has and it never will. Lines on a chart don’t halt bear market rallies anymore than they initiate bear markets.

I’ll tell you exactly what halts a bear market rally.  Sentiment! Sentiment, at every single one of those rallies during the `07-`09 market, reached bullish extremes.  Not one single rally was halted by a pivot point or resistance level prior to sentiment reaching extreme bullish levels.


Even after the recent surge, sentiment is still so depressed that it’s at levels lower than most of the intermediate bottoms during the last bear market.  So let me tell you, if you think the market is going to turn tail and run because it hits the pivot at 1130 or the 200 day moving average, or because you think earnings aren’t going to be rosy, you are going to be sorely disappointed.

If this truly is a bear market then before you even begin to look for a technical turning point you first have to wait until sentiment does a 180 degree turnaround.  That just doesn’t happen quickly after the kind of beating we just got.
 Trust me, it’s going to take a while for investors to forget a 17% correction and dare to become bullish again.  If I had to guess I would say at least 8 to 11 weeks.  Even longer if the next half cycle (due around day 15-20 of the rally) and full daily cycle correction (due around day 35-45 of the rally) are strong enough to scare investors again.

The problem with the move out of February bottom was that we got no corrections and it quickly turned into a runaway move.  Those kind of rallies tend to end with some kind of mini-crash.  I started telling subscribers there was a high possibility of that back in late March and early April.  It happened in Feb. of '07 with the China crash and sure enough, it happened again in May with the flash crash.

Traders become extremely complacent during one of these runaway moves.  At the April top sentiment had reached levels more bullish than at the top of the last bull market.  As usual, we paid a heavy price for that complacency. But now we've swung 180 degrees back in the other dierection, with sentiment so depressed it even makes the `09 bottom look positively giddy. That my friends is the base for another powerful rally.

Actually I won't be at all surprised if the market rallies back to new highs ... even if we have begun the initial topping process of this cyclical bull.  Remember the bear market had already begun in the summer of `07 but that didn't stop it from rallying back up to marginal new highs in Oct. before finally rolling over into the second worst bear market in history.

This idea that the markets can somehow magically look into the future is just ludicrous.  I can assure you no one can see the future, and that includes the millions and millions of investors that make up the global markets.

Now let me say this - we already know where the cancer is.  Does that mean the stock market will now start to discount the next bear market?  In the summer of `07 we knew the cancer was in the credit markets, initially beginning in the subprime mortgage market.  Did the market look into the future and discount the unraveling of the global credit markets at that time?  No it did not.  The stock market rallied to new highs.

Well, we already know what will eventually bring this house of cards down, it's already started just like it had already started in the summer of `07.  We are going to have one sovereign debt implosion after another and that is going to lead to the cancer spreading through the global currency markets eventually infecting the world's reserve currency.

But don't expect the market to look ahead and begin discounting the unraveling of the global currency markets.  Markets don't do that. What they do is slowly recognize the fact that the fundamentals are broken.  Once enough traders realize that, the markets begin to roll over, usually in an extended process taking many months.

I doubt this time will be any different, especially since the central banks of the world are going to fight the bear with a blizzard of paper.  Don't make the mistake of thinking the markets have to act rationally.  They don't and won't.  If the Fed prints enough money markets are going to rise even though the global economy is crumbling all around us.

If you are bearish and determined to pit your stash against Ben's printing press I'm afraid you are signing up for one very difficult time ahead. I seriously doubt we are going to see another credit market implosion like we saw in `08. Without a severe dislocation like that there will be no market crash this time. When the bear does return (and he will eventually) the next leg down is going to be a long drawn out process with multiple violent bear market rallies. Selling short in that kind of market isn't going to be easy. As a matter of fact I doubt 1 bear in 10 will even manage to make money in that kind of environment.

Bear's should be careful what they wish for. I suspect the next leg of the secular bear will manage to destroy both bulls and bears alike.

130 comments:

  1. Gary,
    I'm thinking about subscribing and was just wondering what a subscription to the premium service includes.

    ReplyDelete
  2. If you go to the link (upper right hand corner of the home page) there are several free reports you can look over to get some idea what subscribers get. I've also unlocked the June 28th report. Be sure to read it as it will layout my goals in publishing the subscriber newsletter.

    That way you will know quickly if the newsletter is for you. Basically if you are looking for someone to pick stocks and guide you through day trading strategies I'm not going to be your man.

    ReplyDelete
  3. Is there difference between the "subscribe" and the "buy now" icons?

    ReplyDelete
  4. BUY now is a one time deal.

    Subscribe means Paypal will automatically renew when your subscritpion expires.

    ReplyDelete
  5. Anon,
    I can tell you as a long time subscriber that the SMT is an invaluable resource that I simply couldn't do without. (Gary don't go falling off any cliffs)

    Gary likes to down play his short term timing skills but I can say after following him for a couple of years now that if I would just follow his advice I would rarely have a loosing trade.

    He doesn't always get the timing right on the money but he's almost always very close price wise.

    His recent call for a bottom is a perfect case in point.

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  6. If you like money, better get some gold.

    ReplyDelete
  7. As Gary's service continues to grow in subscribers, I hope he doesn't raise the price on us early ones that saw the value here! :)

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  8. Going to $1000 per year next year :)

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  9. Worth every penny...but I hope you're kidding!

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  10. Gary_UK here.

    Well well.

    We've had lower highs and lower lows since the April 26th top, we have a little 3 day rally out of some oversold conditions, and yet again Gary our host is still (for some totally unknown reason) repeating his 'the bear is not back yet' nonsense!

    Just a month ago he was saying 'we need to see a series of lower lows, and take out the Feb low of 1044, before he would consider it a trend change.

    Well, well...now we have seen all of that, and a little 3 day relief rally has him changing his tune again!

    He slates lines on a graph, yet how many times do we see a gold chart with 'the only bull market' noted within it. Maybe if he turned an S&P chart upside down, he'd day the same!!

    I used to think he maybe just didn't quite grasp a topping process, but now I wonder if the PPT has him as part of the 'pumping team'?

    Folks, trading this thing is a piece of cake...load up with long-dated puts, or open-ended shorts, and just sit back and enjoy the ride... it may take a day or 2 to drop the 30-40% that is coming, or it may take several months. Who cares, just let it come to you.

    And please don't make your equity trading decisions based on the schizophrenic ramblings of this guy, he may know gold, but not much else.

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  11. Read the post again. I said if the market comes back down and breaks the recent low (which should be the secondary low I've been looking for) then we will have a Dow Theory sell signal and that would be the final confirmation that the bear is back.

    Anyone buying long dated puts is an idiot. If the Fed prints enough money they can abort a bear market or at least greatly extend a cyclical bull. Did you learn nothing from the 02-07 bull market.

    We already seen the Fed abort a left translated 4 year cycle.

    I have no idea why you are in such an all fired hurry to call a bear market. Even in the worst circumstances these things take time to roll over.

    Just look at what happened to the Nikkei from 93 to 2002.

    Gary from the UK you seem to have a severe case of perma-bearitis.

    Not a very profitable way to make money I'm afraid.

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  12. G,
    Why waste your time with this nut? He's not even intelligent enough to read and understand what you wrote.

    Just another newbie trader seduced to the short side by the Precther end of the world nonsense would be my guess.

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  13. Gary_UK, I learned my lesson, to not bet against The Fed. I shorted the market 18 months before the Oct./Nov. '07 crash, and tripled my money (I made one bet with everything that I had).

    I was convinced that the economy was in terrible shape (and still am), and went for a smaller short bet, beginning in Jan. '09, riding it until earlier this year. I lost 85% on that bet (fully offset, thank goodness, by gains in SLW, gold, and silver).

    Ben and the shysters/schmucks/shylocks will soon have their back up against the wall. I presume they will print, just as they did last year. I will only make small, limited duration short bets, and will keep the 95% of my money now in gold, silver, and SLW just as is.

    In fact, it appears that Ben and the cabal may be printing already:
    http://www.zerohedge.com/article/guest-post-fed-funding-treasury-through-banks

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  14. The long-dated put plan sounded awfully good a few months out of the Mar. '09 low. Volatility just kept dropping, the market just kept rising.

    That might not happen this time, of course, but putting a leveraged directional position on after this impulsive move certainly strikes me as premature.

    Just as there can be false breakouts (gold's move in the second half of June sadly comes to mind), there can be false breakdowns.

    Even if we do resume the downtrend, "loading up on open-ended shorts, and just sit back and enjoy the ride" is not the advice of a prudent investor/trader.

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  15. Gary_UK is misses the point. Gold going higher is a far higher probability than stocks going lower, even if neither trade works. Both Garys think stocks are going lower, they only differ on the time prediction. Meanwhile, gold continues to be best trade on the long side, with the most potential of all ideas.

    Gary_UK is an uncomfortable short, as if that wasn't already clear.

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  16. Who cares where stocks go, as long as PM's work higher? PM's benefit from any likely scenario going forward, except that everything is all good again.

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  17. I think Gary_UK needs to spend a lot less time reading TK, Mish and Karl Denniger and start reading a lot more SMT :)

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  18. If this does turn out to be the intermediate cycle bottom, and I think it probably will, then it won't be long now before we start seeing the perma-bears blaming the PPT for proping up the market.

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  19. Gary,

    What level do we need to get past on the s&p to confirm that this is the intermediate cycle bottom?

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  20. We have to get past about 1083 to form a weekly swing low. That would be one confirmation.

    We already have a four day corollary followed by a four day rule trend change so that is another one.

    If we get a follow through day that would be a third.

    At that point I think we would have to assume the intermediate cycle has bottomed.

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  21. Great post, Gary.

    (And nice rebuttal to Gary_from_UK. Is there some way to block this guy from commenting? His posts don't add anything of value, and it seems like he's basically trolling. But it's your blog, you make the call.)

    Have a great week!

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  22. I never block anyone as long as they remain civil. Certainly not just because their views differ from mine.

    Granted Gary_UK does have a bit of a snarky edge to his comments but I can handle that.

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  23. Gold looks to open lower, but the question is will the perma-bears have the sense to get involved on the long side?

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  24. Let's just wait and see who is right shall we?

    So many readers here seem to forget your previous bullish posts, I don't though.

    And the Fed at al did such a great job preventing S&P 666 last year, well done to them, I guess that's why you Gold bugs trust themto have similar success now, with the bullet chamber nearly empty.

    Deflation boys, wake up and smell the coffee.

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  25. I don't think anyone here believes for a second that the secular bear has ended, certainly not me. We haven't reached true secular bear market bottom conditions yet.

    I'm just not convinced that the cyclical bull is dead yet. And the secular gold bull is most certainly not dead. It still has a long way to go yet.

    As long as that remains the case it's just senseless to try and fight with a bear market. The gains will be minimal compared to a bull and they are going to be incredibly hard to come by.

    Gary,
    You don't seem to understand the mathmatics involved in bull and bear markets. If you did you would never waste your time trying to short stocks as long as the secular gold bull is alive and well.

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  26. Not only does Gary_UK not understand basic math, he doesn't read too well, either.

    Many here are up much more than short-side stock traders, no matter what time frame we use, other than only the last 2 weeks. The bottom line is that gold is still near all time highs, while stocks are still 60% off their lows, even after the last month or so 20% selloff.

    If Gary_UK could read, he'd see we mostly agree stocks are going lower in time, but that gold going higher is the much better trade and with more upside. Inflation/deflation debate is just a distraction. Gold loves deflation, and hyperinflation, just not steady, low inflation.

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  27. OOps gold crashing again. Bears are invincible.

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  28. LOL someone certainly has a liberal definition of the word crashing. Gold is still just working it's way into an intermediate cycle low.

    I went over all this last week in the Curve Ball Theory report for subscribers.

    We have to see a weekly swing low before we can start looking for an intermediate bottom.

    Bottom line you get the best buying opportunities at these intermediate cycle lows. If you can think like a value investor and scoop up the bargain, you are playing the game correctly.

    If however all you can see is gold "crashing" then you will let the opportunity pass you by.

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  29. Gary_UK again (wasting my time I fear).

    Gary, cutting to the chase, I believe you are wrong, the cyclical bull is over, and I see no evidence to back up your claim that we go higher.

    End of discussion, the rest is just your fairly typical smokescreen, I choose how I make my cash, you choose yours, on this one issue I believe you are wrong, and I am right, and you have been fighting this (for some reason) even as we made a 1010 new low for the year.

    I couldn't care less what all of your followers say re gold, I hope you all make huge profits there. Doesn't make other trading strategies wrong, you goldbugs are so tunnel-visioned though, makes me chuckle. You all forget deleveraging 2008, and the carnage in gold stocks. Odd that I don't?

    I will say no more, let us just watch and see.

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  30. Gary_UK,

    Bull market= trade from long side? Yep, that's tunnel vision.

    Do you feel gold is now going to enter a bear market? Or is it that you think gold is in a bull, but going to get hit hard, exactly like '08? Are you planning to buy gold into your anticipated decline, or is it the end of the gold bull, in your opinion?

    Let's hear your comments about something we are involved in.

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  31. Gold bug vs. Gold-o-phobe

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  32. G-Uk yet again.

    I trade the equity markets, so gold $700 or $3000 is of no interest to me.

    Secular bear in equities v secular bull in gold, I can live with that.

    Goldbugs are defensive things though, bless them!

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  33. We are just trying to figure out why you would put yourself through that kind of pain for small profits when there is basically a big pile of money sitting over in the corner waiting to be picked up.

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  34. G-Uk.

    No, it isn't that, it's tunnel vision.

    I don't need the concern of goldbugs, I do fine with my swing trading thanks, and there is no pain involved. Do you feel pain when the gold price falls 5% in 30 mins? Same here with a relief rally in eguity markets.

    Can't see why that is so hard to grasp.

    Oh well, just trying to avoid folk going long here and losing a bundle.

    And, I do think gold will come down to around $1000, but will hit $3000 in a year or two's time.

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  35. So you're not interested in making 300% from $1000 to $3000? That sounds like a goldophobe, which is even more crazy than a gold bug when 300% potential return is acknowledged. Will you buy gold at $1000?

    What is the most stocks will decline, 50 or 80% if you're really lucky?

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  36. "I do fine with my swing trading thanks, and there is no pain involved."-Garyuk

    LOL! Sure, buddy.

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  37. It seems one could also swing trade gold, right?

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  38. 5% pullbacks aren't as painful as UK suggests, when you're up 25%+ before the decline occurs, and you're on the right side of the trend and surprises. My trading has taught me there is not big money in calling trend changes, as they fake out, then resume the trend more often than not.

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  39. Why not use those finely-tuned swing trade skills to get long gold on dips?

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  40. Gary/UK Gary,

    (I know your timeframe is measured in years, US Gary), this is an interesting day to have this argument.

    Equities have been all one could ask off the bottom for a bull, imo. Today's pullback was shallow and constructive, with SPY now back to the unchanged mark. UK Gary, we may be in a bear market, but I think your swing short is quite premature. I'd much rather be long than short SPX at the moment.

    Not sure I'd say the same for PMs right now. The high-volume selloff on July 1 has turned the 50dma into a barrier gold has been unable to cross, and miners continue to confirm the weakness.

    Oil is just as down as gold today, yet OIH/XLE are only slightly underperforming the market, while the miners cling to the lows.

    I'm not trying to sow seeds of doubt or antagonize anybody, but those of us hoping/expecting to see PMs lead the market out of the recent low are more than a little disappointed.

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  41. It all depends on if you look at things like a trader or a value investor.

    A trader sees gold pulling back and assumes the recent action will continue so he says "ugh it looks terrible"

    A value investor sees gold pulling back and understanding the secular trend is up, knows that he is witnessing an opportunity in the making. Gold is being put on sale.

    The value investor doesn't worry about the short term movements, all he cares about is that he is getting a chance to buy gold cheaper than a couple of weeks ago.

    If he's really asutue he also understands that golds intermediate cycle is now going on week 23 and these things rarely last longer than 25 weeks. So he knows gold is getting close to a major intermediate bottom. He understands that even if he doesn't time the exact bottom he shouldn't have to wait long for the intermediate trend to reverse and the secular trend resume.

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  42. I understand that's your view, Gary, and I'm not really faulting it. I realize you spend 80 percent of your time on this blog combating the short-term trader's mentality and focusing on the big picture.

    Just making small talk while we await the next move, up or down. I know you find technicals the least compelling tool for evaluating markets, but right now the technicals for gold seem pretty tired, imo.

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  43. Gary from UK,

    Hey, if you're making money swing trading the equities markets, good for you. Keep doing what you're doing.

    Many traders/investors have trouble making swing trading work for them (i.e. making it profitable). Those folks prefer finding a long term bull and getting on that train. They will likely not make as much money over time as a successful swing trader, but they will make money as long as the train they've jumped onto is indeed a bull.

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  44. Just don't let the technicals "talk" you out of buying the bargain.

    I heard the same thing at the Feb. bottom.

    Bottoms are never going to look like bottoms. Like I always say at some point you just have to take your best shot and then let it ride :)

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  45. PC,
    I would beg to differ a swing trader will never even come close to making what someone riding a bull market will make.
    Not even in the same ballpark.

    Any kind of trading requires strict position sizing. That alone limits profit potential drastically.

    An investor not worried about draw downs in a secular bull market doesn't have that limitation. He's free to enter large positions and then let the bull do his thing.

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  46. I've never posted here before, but I wanted to share my investing experience with Gary so far.

    Gary does an amazing job at keeping his subscribers looking at the big picture and keeping us focused on riding out this once-in-a-lifetime bull. He has as much patience and class as anyone out there, and is extremely dedicated to his work.

    I have run the spectrum as an investor over the last decade...swing trading, shorting, options - you name it, I have done it. I was sick of only making average returns, and being human my discipline and position sizing would fail no matter how determined I was to do the opposite.

    Luckily through a friend I was introduced to the long term thesis in gold and started visiting sites such as jsmineset and thankfully, Gary's site during 2008. Even though miners and gold had a down year, I had already decided to move into the "value" category as an investor. I am never an instant convert to a new viewpoint. However, Gary has a simplicity and patience to his approach that you will only find in the great investors (and I have had personal meetings with Warren Buffett many times).

    I became a subscriber, and investing since early 2009 has been the easiest and most worry-free thing I have ever done. I don't fight the trend, I don't try to outsmart the market or the crowd, and I have more time to spend with my family and my hobbies. I add when the market drops on intermediate cycle lows (such as the one coming up), and even if I am a little early or late I don't stress out.

    I have long since achieved "strong hand" status, and those that sell or short or get margin-called are giving your shares up to people like me. When you own TGB at 1, HL at 2, UXG at 1.5, SLW at 6, GSS at 1.25, NG at 2, NGD at 1.5 among many others, and your portfolio is up over $5 million in 1.5 years, it doesn't matter in the short-term who is right or wrong because people like me aren't going to sell, even if gold or miners drops 50%, I'll just buy more (and I'm not even a hedge fund, though I'm very blessed).

    I'm not bragging, because I've lost my shorts shorting and using options early in my investing career, but instead I'm encouraging you to change because its the best move I ever made, and I'm lucky I did it at the right time. I respect all viewpoints and those that love to watch the market, but if this is truly all about making money, then there is one easy way to do it and Gary will keep you on track.

    All the best to each of you, I know where I will be in a few years, and I hope you're on the beach next to me...

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  47. Get real penny stock addict! Consider yourself lucky. Now sell half or lose it all.

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  48. The smart money/strong hands will continue to buy gold on pullbacks. Since even the bears think $1000 is the potential downside, that appears to be a level we might never see in our lifetimes again.

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  49. Any thoughts on this?

    http://ftalphaville.ft.com/blog/2010/07/12/283141/a-gld-contango-strategy/

    I'm no futures guy, but the contango in gold never struck me as particularly steep (not as much as oil, say), but pretty stable.

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  50. Edit to previous post: The contango referred to covers a multi-year timeframe (rather than several months, as I had assumed), so disregard the note I placed after the link.

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  51. Futures up big again today. G-man you hit the ball out of the park on this call.

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  52. Don't you bears feel silly now calling for a crash and all?

    Probably should have paid attention ugh?

    G would have saved you a lot of money.

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  53. What's to say the FED can't prevent the secular bear from ever returning in a nominal perspective. Just keep printing...

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  54. It looks like DG is getting double hammered by those equity and gold shorts again today!!!

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  55. Sam,
    Because eventually printing leads to runaway inflation. That spikes the energy markets just like it did in July of 08 and that destroys the economy.

    There really is no free lunch.

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  56. Ole Yeller might have been playing possum this month.

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  57. From the Bull department: Just looked at the Kitco 24 hour Gold chart and "To the Moon, Alice!" comes to mind.

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  58. China's ratings agency not too hot on US:

    http://blog.rebeltraders.net/2010/07/13/chinese-ratings-agency-cuts-united-states-sovereign-rating/

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  59. Went to attempt an entry in IVN this morning as it looked like 14.50 would work. What a nice pop that one is making... Maybe there will be a retest to fill the gap?

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  60. Where are all the overly confident bears? I sure hope they use stops, because the next few days could see some follow through.

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  61. This comment has been removed by the author.

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  62. If I was short stocks, I'd definitely cover into any intraday weakness.

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  63. Consider the overnight move in gold, volume for GDX is miniscule.

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  64. The longer stocks stay up here, the more likely we'll see a continuation higher. Equity shorts best cover ASAP.

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  65. What is everyone's opinion of the low volume in gold and silver and in the equity markets asof late?
    Would like to be a fly around the buy and sell desks at the exchanges...

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  66. It's always nice to see strong volume but that doesn't mean a rally is doomed to failure. Just look at the rally in GLD and GDX out of the March bottom or stocks out of the February bottom.

    As usual the accepted dogma that a rally is only sustainable on rising volume doesn't hold up under historical scrutiny and more than the H&S pattern did.

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  67. A constant bear's lament in 2009 (one of several, made at times by myself) was that up-volume was pitiful and participation only ramped up for selling. That didn't end up stopping a 550-handle year-long run.

    Still, when you're trying to position yourself in front of the crowd, you'd like the crowd to show up at some point. :-)

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  68. GDX still has work to do. Rejected at the 20dma and currently printing a reversal candle, trending opposite SPX. It also made an appearance on the SoS table, not too surprising given the action.

    Perhaps it simply need to fill a few of those downside gaps before moving up.

    Bellewether SLW having a more solid day.

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  69. Yikes! Intel up almost 8% after hours after reporting best quarter ever. Equity bears better get some rest, they're going to have a tough day tomorrow.

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  70. Okay, Gary, let me ask you to pretend to be a trader for a moment. ;-)

    We've got a low-volume reversal day in response to a pop in overnight gold.

    Pulling back, $GOLD is trading within a large rising wedge (two of them, actually). The $GOLD daily still looks like a bear flag. The action certainly seems to suggest a continuation crawl underneath the 50dsma.

    Now, I know your long-term view, and I'm not challenging it, I promise.

    That said: If someone were looking to press long in anticipation of a cycle low at this point, I wonder if awaiting additional upside confirmation wouldn't be prudent. Ideally a strong move and close above the 50dsma for starters.

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  71. Personally I would prefer a move lower. I like to buy cheaper not the other way around.

    The fact is one will drive trhemselves crazy trying to time the perfect entry in a gold bull. The only way you are ever going to do it is by luck.

    So to be safe get part of your position now and then if the market gives you a break lower take advantage of the sale. If not then you will be forced to chase.

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  72. I understand, Gary, and I my concern isn't so much one of timing as an accumulation of warning signs.

    I realize ambiguity is the norm in the markets, and the $USD action doesn't seem like the sort of thing that would spark a PM selloff. Just thought I'd bring it up and get your take.

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  73. Waiting for confirmation isn't typically profitable for short term traders. More often, the meat of the move has already occurred by the time it's confirmed.

    Longer term investors might benefit from confirmations.

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  74. Another short-term cautionary reading of the technical tea leaves.

    http://www.safehaven.com/article/17471/gold-analysis-and-strategy-11th-of-july-2010

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  75. Anyone buying a Tesla S model anytime soon with all that gold bunion of yours?

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  76. Okay, the gold buggers think the dollar will be worthless and that is why they're getting into gold. So within a few years when you unload your gold (GLD) and silver (SLV) onto the poor average unsuspecting joes when the bubble gets hot and heavy, you get your funds transfered to your brokerage accounts in supposedly the worthless fiat Dollar. Is there a joke there I missed?

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  77. I don't know about anyone else but I'm buying gold because it's the only secular bull market left. And at the top you will be able to trade your gold for extremely undervalued stocks not dollars.

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  78. I buy gold because bull markets go up.

    Does Beanie think getting rich from shorting stocks, then likewise cashing out back into worthless dollars is any better?

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  79. I doubt we will ever see Beanie shorting stocks. Beanie is the consumate perma bull.

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  80. True. I wonder if he bought Tesla (shares). :)

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  81. DEFLATION folks!!!!
    Get out of gold NOW!

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  82. I'm prepared to buy more gold. Strong hand status allows us to wait patiently for a pullback to add.

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  83. Hey Gary in UK how are those open ended shorts doing for ya? LOL

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  84. LIke I always say in a purely fiat system deflation is a choice not an inevitability. And Bernanke has made it clear he will not suffer deflation. Right now the banking system is getting Bennie's free money and they are pushing it into the asset markets.

    That's whjy oil has gone from $35 to $80 despite an ongoing recession. It's why the stock market has gone from 666 to over $1200 and it's why gold is over $1200.

    If need be the government will print money and mail out checks (remember the rebate checks). Deflation will just not be allowed.

    Don't forget Ben halted the worst deflationary spiral in 80 years in 9 months.

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  85. Gary
    I'm afraid this time its different.

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  86. Different in that human emotions have somehow changed? Or different in that all of a sudden Ben is going to do a complete about face and stop printing?

    I give both possibilities about a 0 percent chance of happening.

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  87. BOING!!! It's never different.

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  88. Seems like shorts are feeling some pain, especially considering we just started a stellar earnings season.

    Too early, and on the wrong side is no way to go through life!

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  89. Gary,
    About Chasing: That IVN I wanted to get at $14.60 yesterday morning is just on a tare... I had IVN way back when it was $8 but got shaken out. I didn't know about your blog back then.... There will be many more shoulda coulda's in the days ahead but I agree that sitting tight may pay off very well in the months and years ahead.
    Pepto bismal in the meantime.

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  90. Gary-
    What is going on with the quick wild Gold and Silver daily swings today. Seems somewhat unusual given the seemingly calmer markets everywhere else.

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  91. My advice is to go on vacation and quit watching the market as it will probably just make you do something you will regret later :)

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  92. It is very hard to turn from a trader to an investor. Keep at it boys; the first couple months are the toughest! Traders see every grove in the climb up the mountain. Investors look to the climax.

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  93. "Seems like shorts are feeling some pain (GAIN), especially considering we just started a stellar earnings season.

    Too early(LATE), and on the wrong side is no way to go through life!(couldn't agree with you more)"

    July 14, 2010 8:08 AM

    Long and very wrong. 1150 soon!

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  94. I hope we do get to $1150, I need more gold. I have a buy order there, and another at $1080, which I suspect will never get filled.

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  95. It's surprising the shorts haven't caught even a 1 day break, which seems due before we continue the ascent.

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  96. FOMC wow!!!!!
    I just sold then shorted the stox. This is not good from the fed.
    GET out now if your long!
    You have been warned.

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  97. To me Fed Announcement just means more easing.
    Good for PM's

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  98. Danny
    I hope you read the fed notes. Not good my friend.

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  99. Anon-
    I am assuming you are referring to the worries about weaker economic growth going forward. I have not read the minutes, just heard the headlines. my point being is if growth going forward will be weak for years than the chances of deflation are greater which means Bernanke and the Fed will err on the side of extra stimulus. Herego, good for PM's Right?

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  100. stronger dollar, weaker euro, gold goes up.

    weak dollar....gold goes up

    weak paper anywhere, and gold benefits.

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  101. Strangely, I haven't listened to one word from the Fed ever since i started making money. :)

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  102. The FED is just trying to set the excuse to hump Congress into more stimulus via fear-mongering.

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  103. SPYder Buying on Weakness has built up throughout the day, including during the Fed selloff (went from approx $250M to the current $335M).

    GLD even rates a mention, to boot.

    http://online.wsj.com/mdc/public/page/2_3022-mfgppl-moneyflow.html

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  104. I know your advice is to quit watching the market but sometimes I can't resist ;)

    Anyway, earlier today there was selling on strength in SPY but then the last reading was almost 300M buying on weakness in SPY.

    Gary, do you only look at the EOD numbers for this?

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  105. Marc,
    Usually just the end of day.

    Most of the time I'm out climbing during the day anyway :)

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  106. Gary,

    There simply was no evidence of financial distress during the correction. Looking at the junk bonds (HYG), which certainly should be the financial canary, shows only a modest reaction.

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  107. Yep I pointed that out a couple of weeks ago to subscribers.

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  108. Gary, you and I know that shorting stocks is rarely the best way to make money in the market. :)

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  109. Who can recall the last time the Fed predicted a negative scenario 5-6 years into the future? It's ridiculous. They're politicians and nothing more, manipulating the sheep into more dollar debasement via another QE. As it is, they don't even need to have us agree, as they can print money and buy all the debt they want, in taxpayers' names.

    The Fed just prefers to have it on record that Americans begged for relief, which they generously provided.

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  110. I see where our boy TK is still trying to short this market. I've never seen anyone have such a hard time figuring out that markets go up & down.

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  111. Dollar has serious support at 82. Euro strength will buckle at about that time. This will give gold a few more up days to about 1232 max and then a sharp sell off to retest its trend line from November 2008. This will most likely coincide with a wicked little sell off in the S&P500 which should take place in about 3 days. Hold on to your hats. Gold's retesting of the November 2008 trend line must hold or we could suffer a very sharp near term sell off. I don't like to see the trend line tested so many times in such a short period. That does not indicate strength, but rather doubt. Just my two cents.

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  112. Looks like pain for the bears again today. It sure gets quiet around here when they get spanked.

    Next time they resurface after a 2 day win streak, just remember a broken clock is right 2x/day, and don't let them convince you they made money, or even got whole again.

    Notice they never come to share their pain, as well as exit strategy and prices? When avoiding embarrassment is a factor in your trading, your typically doomed as a trader.

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  113. ^I wouldn't brag about being 100% long. If you don't hedge it is only a matter of time before you destroy your account. Might be 6 months from now. Might be 6 years from now. You can't possibly know when in these volatile and manipulated times.

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  114. Only Gary shares his thoughts and experiences during drawdowns, as he is held accountable for decisions through his writing a newsletter.

    Being 100% long GOLD is something to be content with come what may, not long OR short stocks.

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  115. 6 months or 6 years from now, we might be up several hundred percent, before this decline you refer to. The strong hands are the ones that keep most of their money and the only way to do that is to be on the right side, not guessing the next big reversal.

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  116. I might even take a short side trade in stocks sometime in the next few weeks, but it'll only be for a week-long hold at most.

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  117. No premium post last night?

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  118. No nothing last night. I had a doctors appointment that would have made it late and nothing happened yesterday anyway.

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  119. Anon,
    In caase you didn't notice gold rallied whether the dollar was rising or falling.

    Gold understands the fallacy of a strong dollar. The truth is there are no strong currencies. It's why gold has now decoupled from all currencies and is rising in every currency.

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  120. ^It is far too early to say that gold has completely 'decoupled' from anything. If that were true gold would be well over $1,500 already.

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  121. Gold has rallied from a low of 1040 to a high of 1265 while the dollar was moving up strongly. Actually to the same levels we saw during the extreme deflationary period of March 09.

    So yes gold has decoupled from the dollar.

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  122. ^A few months is far too short a time span to make such a judgment. And if you didn't notice gold began to have a cow in mid May. Gold has 'decoupled' from the dollar before only to swing back into sync violently.

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  123. May was just a normal daily cycle correction. They happen like clockwork about every 20 days.

    At the present time gold is working it's way into a larger degree correction that happens about every 20 weeks. As this is week 23 we are now getting very late in the cycle. It could bottom at any time and may have already bottomed.

    The fact remains that the dollar isn't really strong. Let's face it you can't print several trillion dollars out of thin air and end up with a "strong" currency. The world just doesn't work that way.

    Gold has been telling us very clearly that the strong dollar is nothing more than a mirage.

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  124. Gary,
    What do you make out of Gold's crawling pattern along 50DMA?

    You used to have tenet in the front page of the blog and one of them had pointers on crawling pattern. I was just trying to make a speculation out of this crawling pattern.

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  125. Gold is under the 50. The pattern works if it is crawling along the top of a rising 50 DMA. In that case we would look for a break lower. The dollar just completed this pattern.

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  126. Gold also "had a cow" in December -09, and Feb. of this year, only to hit all time highs last month. Get long gold while it's still cheap.

    Don't make me sell it to you at $4,000/oz.

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  127. Bull markets have cows, all along the way.

    Is it true that GLD's beta is only .10?

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  128. Gary,

    Your prediction that stock bears would be slow to buy into the move up in prices seems to be correct.

    The Hulbert data showed that newsletter writers actually increased in bearishness from -6.5% last week to -12.7% by the end of Monday.

    The Rydex ratio indicates slightly less bearishness now, moving from -16% last week to a still bearish -7.8% through yesterday. These guys are usually quick to embrace a move up, and this is unusual bearishness for them.

    The Investors Intelligence readings through yesterday show a plunge in bullishness from about 41% bulls last week to only 32.6% bulls. That is quite a move for these investors because 25% of them are perma-bulls. Of the remaining bulls, it looks like at least half capitulated this week.

    My favorite indicator is the OEX options traders. These large, usually always correct traders, recorded 14 consecutive days of buying more calls than puts, a streak that included 10 consecutive down days for the OEX 100. That streak ended yesterday when they bought 102 puts per 100 calls. Their 15 DMA is currently 78.4 puts per 100 calls, a very bullish result.

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