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Saturday, July 3, 2010

LONG EVEN FOR A BEAR

The current decline has now lasted longer than even the longest leg down in the last bear market. The longer this goes the closer we get to a significant rally.




As you can see this decline is now 7 days older than any decline during the last bear market. I'll say again that bears hoping the head & shoulders pattern will drop straight down to 850 are probably going to get caught in an explosive intermediate degree rally.

It just doesn't make sense to continue pressing the short side at this point. It's safer to wait for a rally and then sell into it when it looks like it has topped.

We've already had two intra-day reversals. There is a good chance this correction (bull market) or leg down (bear market) has reached  exhaustion. At the very least one should tighten up stops so they don't lose whatever gains they might have. 

Although any little piece of good news or "surprise" Fed announcement pre-market could send the market rocketing right through stops trapping shorts in a losing position.

That is the risk one takes playing the short side. The powers that be are going to do everything they can to halt the bear and hurt the shorts. I think we can count on at least one more round of QE if not more. Bans on short selling are surely coming again and I wouldn't put it past the government to massage the economic data even more than they already do to paint a better than reality picture.

Before this is all over I even expect Ben to start dropping dollars from his helicopter although they will call it rebate checks again. Whatever it takes, Bernanke is not going to allow deflation.

He already halted the most severe deflationary spiral since the depression in less than a year and aborted a left translated 4 year cycle with his printing press. That has never been done before.

I don't know about you, but I have no desire to go up against that kind of firepower.  

And if that isn't enough to convince you the NY times had a feature article by Chicken Little, the sky is falling, end of the world himself Bob Precther. 

If sentiment has gotten so bad that the NY Times is giving interviews to Bob Prechter is must be time to back up the truck on the long side.
(no thanks I'll just stick with my miners)

33 comments:

  1. yes..we are due for bounce
    (1) timing & magnitude is anybody's guess
    (2) numbering done by you is again controversial as this decline might have ended on June 08 and new decline has started on June 20 (isn't the rally from june 08 turned weekly swing low)
    (3) you could be very well wrong here ...again a coin flip 50/50
    (4) I don't listen to precter. He is always wrong..but that does not mean market can not go to 1000 or 950 (definitely it will not fall apart..so precter is not better than a coin flip :-)

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  2. Hi Gary,

    How come you don't count the 8 day Rally in June?

    Thanks for all your posts. I hope you are right.
    Todd

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  3. Dow to 1000, says Prechter. That's scary. Will gold and silver crash as well?

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  4. Todd,
    It was way to small in my opinion to count as a separating rally. But even if you do then history is that these small rallies separate one more drop that usually lasts no more than 13-14 days.

    Human emotions can only remain negative for so long before we become exhausted.

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  5. Prechter suggests getting into cash and out of Equities, Muni Bonds, etc. He suggests owning physical Gold as he does, no futures contracts or ETF fake Gold. He doesn't recommend shorting for anyone but skilled traders. He is all about safety at this point in time - hanging onto your hard earned cash as it grows in value. Chicken Little may just have some good advice embedded in his story, I know I am a lot better off than if I didn't go to cash in March.

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  6. Yes except he has been advising shorting since around 950-1000. I guess his subs lost enough money that he changed tactics.

    But I would agree cash is much better than shorting for all the reason's I've mentioned. You will be going up against Ben's printing press. I have no desire buck that kind of firepower.

    I would also point out that he was calling for another move back below 680 on gold unless he recently changed his mind.

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  7. "Human emotions can only remain negative for so long before we become exhausted."

    They were saying the same thing in 1932. It is going to be just as bad or worse this time. C'mon people just look around and see what is happening. Nothing good i out there.

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  8. The 30-32 market had 13 counter trend rallies. The last bear had 6. Like I said human emotions can only remain negative for so long before they need to take a break.

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  9. hmmm denis gartman predicted a parabolic run in gold and then no wonder opposite happened last week...someone pl keep this idiot away from doing bullish predictions on gold

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  10. Shorting is for the stupid absolutes.

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  11. ...sorry but even The Great Bernanske can defeat the most invincible of opponents...

    MATHEMATICS



    ..in the end...cash flow will dictate....you will see...

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  12. Couldnt you argue that some of those legs down could be combined? Of those seven you have highlighted it seems like you could combine 1 and 2, or 2 and 3, or 3 and 4, or 4 and 5. What criteria was used to separate them out?

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  13. The only one that saw a bounce short enough to consider it being the same leg down was from Oct. 08 to Nov. 08 and that bounce was a 17% move. Ever other bounce was a rally out of an intermediate cycle low which is exactly what the market is trying to put in right now.

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  14. Sort of worried this time, about going long. Consumer confidence, dropped 17%, this month to last month..Which is unheard of. Could be GS's way of laying a bear trap, possibly. But still..

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  15. Gary,

    Out of CDE, EXK, HL, MGN, MVG, PAAS, SLW, SSRI, & SVM --- when compared to SILVER's performance over the past 3 years, only SVM & SLW seem to done as well as silver. Lately, SLW has been out performing SILVER.

    Since about February, CDE, EXK, HL, MGN, PAAS, & SSRI have all under performed Silver. Do you think that once Silver enters the C wave these other miners will "catch up"

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  16. Karl Denninger's take on gold:

    "Momentum is unfavorable and the close under the 50MA not positive at all. Short-term regaining and holding the 50MA, and preventing it from turning downward, is critical. Should that fail first-level support is around the 1160 level and second-level around 1075 - the latter, however, is under the 200MA and isn't very likely to hold if we get there."

    "This isn't the sort of pattern you want to see if you're bullish on Gold. I've talked about it for months now - the original triple-ascending slope is a relatively-common and dangerous parabolic blow-off sort of move. Gold then fell through the second trendline and wallowed along the lowest-slope one for over a month, leading many to proclaim it as a "buying opportunity." I warned on the 28th that if it did not regain that trendline with at least a chart pin in the next few days a huge selloff was likely, and that's exactly what we got."

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  17. They will certainly catch up and then some. But it's like the old saying if you watch the pot the water never boils.

    It may be that I have to hang on to my silvers for several months or several years I have no idea. I do know that in the past when they decide to move they can recover months and months of losses in a single week. So if you aren't on board you miss the move.

    Ultimately I intend to hold all my mining positions until I think the C-wave has topped. These are just not trading positions. They are investments.

    If you can treat them as such you will make a lot of money off them. If you think of them as trading positions then I can almost guarantee you will sell right before the big move occurs. So if know you can't hold on then just buy SLV or physical silver is probably even better.

    I doubt anyone has ever sold their physical silver or gold out of boredom. By the same token no one in physical ever missed a rally.

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  18. John,
    The 50 DMA is pretty much meaningless. Gold has fallen below that level 10 times since the Nov. 08 bottom. None of them stopped the bull.

    Here's the thing, all the people who constantly try to guess golds short term direction will ultimately just succeed in missing big chunks of the bull market. Why? Because this is how the bull keeps as many people off as possible. He does things to make one think the trend has changed then when everyone freaks and bails he surges higher leaving everyone behind.

    I know, I've watched the bull do it for 9 years now.

    The person that can just hold on to their position will ultimately be the one making a huge bank deposit at the end of the bull. The Karl Dennigers of the world will walk away from the greatest bull market of our time with nothing to show from it.

    You have to ask yourself is it more important to avoid a short term draw down or is it more important to make the huge deposit 3, 4, 5 or 10 years from now.

    Do you want to be in the same position in 10 years as you are now and as you were in 2000 or are you going to do something different this time so you get a different outcome?


    There is a reason why Buffett, Sorros, Paulson, Rogers, Greenblat etc. are worth billions and Denninger is ...well just Denninger.

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  19. Geez, permabears really suck bagpipes. Why people even bother to listen to these snakeoil men is incomprehensible. Their incessant end of the world diatribes never made them a single dime even after decades. I guess only losers follow losers.

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  20. "There is a reason why Buffett, Sorros, Paulson, Rogers, Greenblat etc. are worth billions and Denninger is ...well just Denninger."

    That's a great observation.

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  21. Pullbacks in gold will continue to be bought, plain and simple.

    I only buy dips, and will not even consider selling gold for some time. Forget "news", it follows price.

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  22. The greatest thing about bull markets is that they at least offer longs that have changed their long term opinions another opportunity to exit.

    Buyers step into declines in a bull, especially when it's the only game in town like gold. The fact remains that everybody on earth will at least think to buy gold if the price continues lower, while the same cannot be said of stocks. It may or may not last, but it is the best place to make long side bets.

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  23. I would recommend to anyone worried about the technical analysis calls for PMs to fall just pull up a weekly chart of gold. Now compare that chart to say, the S&P(or almost anything else) and ask yourself which one looks stronger.

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  24. Bagwan RajneeshpuramJuly 6, 2010 at 4:35 AM

    I also like the PM sector for the long term. We must not react to every immediate distraction.

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  25. Looks like ole "Wrong Way TK" is going to get his butt handed to him again. Rest easy though, he'll come out late morning to tell everybody how he took a small loss but then got massively long (if the market is still up). :)

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  26. True about Mr. Knight. It seems like a "professional money manager" that trades mostly options for the short term would have figured out by now that SHORTING options is the best probability trade, and that the bid/ask spread on options (around 10%) would eat a frequent trader alive.

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  27. Com on guys isn't it obvious? Anyone who trades 200 positions is a gambler not a trader.

    And now he's gambling with other peoples money. Like I said the other day you would have to be a moron to give this guy your money.

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  28. Gold crashing again.

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  29. Gols isa doing just exactly what I wanted it to do. Once we make a lower low I will be buying.

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  30. Here we are at that pesky 450 level in HUI. We break 450 and down we go pretty fast my friends. Be careful.

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  31. Gary why are we crashing and everything else is going higher?

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  32. What is crashing? Gold is down 1.5% surely you aren't suggesting a 1.5% decline is a crash???

    Gold is just working it's way into a daily cycle low. You are getting a buying opportunity in an ongoing secular bull market. Take it or not, although don't expect to time the exact bottom.

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  33. The *ONLY* way to trade options is with options spreads. Otherwise you are dead. And the ***ONLY*** way to enter a spread (such as a straddle or a strangle) is to wait, and wait, and wait.... and ****WAIT**** for your stock to scream either waaaaay up or waaaaay down so that it is very overextended in one direction. Then, there might be a powerful whipsaw movement back in the opposite direction, or the stock might defy all odds and rocket even *further* in the current direction it is moving. This is still an incredibly dangerous game though. If you guess wrong (and it is ALL guessing) you may hit a multi-week or multi-month flat spot of consolidation and then... you're toast.

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