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Tuesday, August 17, 2010

S&P, SILVER AND THE DOLLAR

Unless something happens in the next couple of hours the S&P is going to form a swing low this morning. That is a prerequisite but not a guarantee of a daily cycle bottom.

Last week  I called attention to the volatility coils forming in the S&P and silver. About 70% of the time the initial thrust out of a coil ends up being a false move that is quickly reversed by a more powerful and durable move in the opposite direction.

We are seeing that play out right now in silver. As of this morning silver has completely reversed the initial break and is now in the process of breaking through the $18.50 resistance level.


With the formation of the swing low this morning in the S&P the odds are starting to look favorable that we are now putting in the daily cycle low in stocks. If the coil pattern plays out here like it is in silver, and like the historical stats would suggest (and I think it probably will) then we should see a powerful surge out of this bottom.

The fact that the advance/decline line has already made new highs is a big plus for the bulls.


Usually new highs in the AD line will act to drag the market higher. As you can see in the chart this is exactly what happened after the February intermediate correction.

I wouldn't rule out a move to new highs during this next daily cycle. Remember we are coming off one of the most depressed sentiment levels in the last 10 years. That kind of extreme sentiment can be a powerful base for a big push higher.

Finally I'm watching the dollar closely. Since I don't think stocks can sustain any significant rally in the face of a rising dollar we will have to see the dollar quickly break down. To do so now would not only indicate an extreme left translated daily cycle but also a left translated and failed intermediate cycle.

If you remember the last two requirements I'm looking for to determine if the 3 year cycle decline has it's hooks in the dollar is a move below 80 and a left translated and failed (drops below prior cycle low) intermediate cycle.

If the dollar breaks down here we are going to have confirmation that Bernanke is running the QE presses again and I think we will then be on our way into what will probably be the first of several currency crisis for the US dollar.

154 comments:

  1. Off to a good start. Remember that once we get that +1% the signal is fulfilled and has no comment on what comes next. Given my agreement with Gary's comments I will be holding on for more. Bought 1000 INTC after-hours last night. Looking to add SPY or Q's on early dip so long as we stay positive, but if we don't dip, I am long enough.

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  2. I think the perma-bears are about to get run over by the G-train today :)

    I think gap boy George needs to buy a subscription to the SMT so he can make some money.

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  3. George getting MUSHED, again.

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  4. All quiet on the TK front, as expected. I'm starting to think he enjoys losing money.

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  5. Gary, have you discovered (invented) this theory of daily, intermediate etc cycles ?

    Christel

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  6. No. I learned from Tim Woods. I have no idea who he learned from.

    There are other interpretations but this one seems to work the best and most often from what I can determine.

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  7. If you ain't gonna hop on the G-Train, at least step outta the way!

    These are the most difficult times in trading for me, and the reason I subscribe to Gary. In my short term accounts I sold some gold yesterday at the close. My long term gold holding remains unchanged, but it's hard to not ring the register when you're taking profits in the short term accts. I'm just leaving the LT to Gary-he's done a great job so far, and that account far outperforms my trading, even though it has much bigger swings.

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  8. Good shorting opp at the open today.

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  9. No shorting for me today. Looking to buy dips.

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  10. Old subject - perhaps I missed the answer... but
    why does almost everyone on this [great] blog choose to post under anonymous?
    I can't think of a reason except laziness.....
    You can click the central radio button and type any sort of signature which you can easily put in each time. YOur computer will probably remember it when you start typing it.
    Anything is better than anonymous!
    It'll be much better for us all here.
    J

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  11. SIL having a splendiferous day.

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  12. O.K. now it's a little harder. The SPX rallied .95%. (I had said 1%, but 5 basis points is close enough) Now the question is selling or not. I'm going to hold on as I expect more rally for the next few days, and go for the bigger win.

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  13. This may or may not be the cycle bottom. I tend to think it probably is but until I see a heavy selling on strength day I'm going to assume the cyclical bull is still alive.

    As long as that remains the case then the potential is there for a move to new highs.

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  14. Gary, what would you need to see to be convinced the bottom is in---selling would mean it may not be---but what would convince you?

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  15. A move above 1130 would seal the deal although I would be about 90% convinced if the S&P closes above 1100.

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  16. DG--We got our Gap and run. Watching SPY 110 area for a little work. Volume remains summer-like.
    Probably will take profits in FAS and TNA before the close.

    Nice work.

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  17. DG:

    I know your trading setup.
    :-)

    Should I tell you what it is?
    How about this: pick a section of the historical S&P chart (like a range of a month or so) that has ONE of your 'buy days' on it and i'll tell you the buy day. (It's more fun than printing the criteria.)

    PS: on a side note, why the heck are you trading ETFS (spy or Q's) instead of futures? I thought you knew your stuff earlier, but now you shot yourself in the foot. Are you aware of tax issues, leverage, and 24hr benefits of futures over the etfs?
    (Same goes for you too gary. Why the heck are you trading a silver etf instead of silver futures?)

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  18. DG:

    the 'trade day' in your historical date range can be EITHER a buy or a sell and it may have ultimately worked or NOT.

    that should make it interesting (and make sure nobody else can figure it out.)

    just tell me a date range (please no more than a month or so) and the security of whatever you want to use and i'll pick out your trade day on the chart
    :-)
    Just tell me afterward yes/or no if i picked the day. No need to reveal any other info by this fun test.

    PS: congrats on the move today.
    I knew you knew your stuff :-)

    PPS: i trade like you do

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  19. TZ: There are always other ways to do things and things we miss (could have bought wheat---better change my system!) I have been trading stocks my entire adult life and simply have no interest in learning how a different vehicle works. My life is not about maximizing money, but maximizing quality of life.

    My system has nothing to do with anything you'd guess, but if I give you the range you could conceivably figure something out. Go ahead and print it; the chance you have it right is about zero. It does not use oscillators, BB, oversold, or anything else anyone would guess. Go for it!

    And, gosh, you no longer think I know my stuff. How will I sleep tonight! I guess the fact that we are up 130 today and i am making a tidy little pile will help ease my pain.

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  20. DG might have to change his name to "Moneybags". LOL!

    Or he could start a short term trading site with signals. TK's will probably be up for sale after today. :)

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  21. I am in negotiations with a long-term hedge fund. I would be a 50% partner in the new fund. It's part of why I can't say what I use. If it doesn't happen, I may start a blog, but I really like having free time and would feel a daily obligation then. FYI, here are the last five signals (most of which have been posted here):

    7/1 Buy, UP 275 over 3 days
    7/15 Sell; DOWN 261 the next day
    7/30 Buy; UP 208 the next day
    8/10 Sell; DOWN 265 next day
    8/16 Buy; UP 145 the next day (so far...)

    This is MUCH better than it usually does. The market zooming up and down is perfect for the system and will probably not last. It has worked well for many years but never like this before (I hope the Market gods keep it going though, please!)

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  22. TZ--my apologies. I had not read your PS. I have never blogged before and am really tired of people sniping at everyone else. Gary says to just ignore it, but i feel like I have been wading through a sewer sometimes just to find intelligent commentary by justin, anon1, you, etc. (you know who they are). The "I thought you knew your stuff" but now I know your an idiot caused the response. Maybe I can find someone to weed out the garbage and print the adult commentary.

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  23. DG:

    wow...you have no interest in 'learning how another trading vehicle works' by trading futures over the ETFs? You are aware that the futures existed BEFORE the ETFs and that the ETFs simply arb the futures, right?

    and you gary, you have no interest in 'leverage'? um..well 1) you said your silver position was margined and 2)you don't have to use ANY leverage to trade futures. Just buy less.

    both of you guys really don't know the advantages of futures over ETFs? i'm floored (really...it's an honest statement)

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  24. DG,
    If I used the red-tag specials announced at Wal-mart for your trading signal's then I wouldn't tell your secret either. hehehehe

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  25. This is the last I'll say about Wrong Way Tk, but he's made it clear on his site that he's also a subscriber to Gary's newsletter, so how can he be so wrong all the time? How can he see value in Gary, yet fade him every time with such devastating results?

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  26. "Maybe I can find someone to weed out the garbage and print the adult commentary.", says DG

    What do you have against kids? I'm only 14 and subscribe to Gary because he makes me money. If it continues at this rate, I'm not going to college, and I'll retire before I can legally drink.

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  27. I traded futures a little bit and didn't like it. And I sure the heck don't want to trade 24 hours, nor do I want to use leverage. I always have much more capital available than I would ever bet on a market move. My entire net worth is liquid and ready to move on something in two minutes. I can;t imagine a situation where I would need leverage.

    Go ahead and print the system. I'm don;t see what it's "more fun" to do it your way. Just print it. If it's that easy to figure out then lots of people will do it and won;t have lost anything.

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  28. On the off chance that post was legitimate: I meant people who act like adults. Some kids act much more maturely than their parents. Do you really trade at that age (I started around then actually, but still...)

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  29. DG:

    You won't get sniping out of me. I agree with you that there are a lot of useless people dropping stuff here. Ignore it. I might actually know a few things and have some money and success to back myself up.

    (theDocument said this earlier; i'll reiterate)

    1) futures are taxed as 60% LONG TERM gains (15%) and 40% short term gains (35% roughly). all the profits you are making today are taxed FULLY as straight short term gains (assuming you a US citizen, not an IRA, etc.) I'm surprised you dont' want to slash your taxes simply by typing in a different symbol into your trading screen! That goes way beyond stubborness i've seen in others. (No offense. It's true. What other word do you have for it?)

    2) you can get in and out of the futures almost 24hrs per day with a spread of about 1/4 to 1/2 a point. ETFs are mostly 9:30-4:00. Even yesterday you mentioned about whether you would "make it or not" in time cause you needed to see the dow close. You are already proving my point. With futures, you could have taken a $10mil position in the middle of the night while you were taking a leak.

    3) you can, essentially, trade unlimited quantities without moving the bid/ask

    4) you need substantially less funds to do the same trade (if you don't want to use 'leverage', then, for example, if you want a $50k SPY position then just buy ONE ES SPY mini-future and keep your $50k cash in the account doing nothing. Boom - no leverage.

    DISCLAIMER: OPINION ONLY. I'm not a tax professional. These comments are to be verified by each reader using their own tax professional and NOT to be relied upon in making financial or tax decisions. Reader assumes ALL responsibility for their actions.

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  30. DG:

    I won't try to post or pick apart your system publicly. That in and of itself should tell you something about me.

    I respect what you have and I also respect things that work. No need for others to get something you worked for.

    It *IS* possible to make money in the market but laying out x, y, and z for free online is frankly stupid.

    I was trying to make it fun by having you pick a random date range with one signal in that range. That signal could have been long or short and could have worked OR NOT.

    I would then tell you a single day in that range and you would tell me if i got the signal day or not.

    With the criteria i gave you there is LITTLE TO NO CHANCE a reader could determine things simply by you confirming or not the signal. I thought I had made it fun and also SAFE FOR YOU TO PEFORM IN PUBLIC.

    Maybe not. Nevermind. It's ok.

    I'll say this. Your setup is based on daily bars with a multi-day setup (3 i suspect). The security (SPY) has to trade a certain way on those days and then the next day the move is expected to begin. My guess has nothing to do with oscillators and such. It's just a pattern based on the action of those 3 (or maybe 4) days.

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  31. TK trades solely based on charts. As Gary has said one can't get an edge trading solely off chart patterns.

    I think TK has proven that point countless times.

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  32. It's pretty easy to tell who knows what they are talking about and who doesn't. Thanks for your thoughts. The only part of interest to me is the tax scene, but I have lots of trading in tax free accounts. As for not moving the bid and ask, I tend not to in the SPY and QQQ which are my heaviest vehicles. If I start trading a few million I might switch. And what difference does it make whether you buy 500 SPY or 1 ES? And as for the "make it in time or not" getting a signal is very rarely that close, and worst case I just do it in the aftermarket. I easily picked up 2000 Q's last night after the bell. I don't care about the eighth. Lastly, I have learned over the years to follow that little voice when it says "no" and it has never steered me wrong. None of the issues you raise have much of an impact on me. We are all wired differently. If they turn you on, great! I am very content with my trading now (I think I'm up about $15k in the last six weeks---again this is very abnormally good because the system has been hot), and simply don't have any desire to switch to another style. I have a full life and do a lot of things outside of trading (I know it doesn't seem like it :) and don;t want to devote myself to learning a different way. I really appreciate your thoughts, though.

    And c'mon, man. Print my system! If you want privacy for some reason email Gary your email address and we can be in touch directly (he already has mine).

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  33. TZ--Nope. The system has nothing to do with any security's daily trading pattern. I swear it. I would like to be in touch, though. Send Gary your email address (Gary i hope that's still o.k. to do?)

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  34. Sure I'll be the go between.

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  35. DG:

    If you bought 1000 SPY yesterday (i think you said that), then that is the same as 2 ES contracts.

    your gains for now are about $1600.

    WITH SPY:
    $1600 x 0.35 (short term tax rate)=
    $560 in taxes.

    SAME TRADE USING ES FUTURES:
    $1600 with 60/40 split=$960/640.
    $960 x .15 = $144
    $640 x .35 = $224
    $368 in taxes.

    DIFFERENCE in 3 HOURS in taxes=
    $192

    That somebody wants to disregard this math as not worth their time when it's just a different symbol in their trade screen is amazing.

    DISCLAIMER: **NOT** financial or tax advice. Not to be relied upon. Reader is responsible for their own actions.

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  36. DG:

    You make 18% MORE by typing a different symbol (for the SAME INSTRUMENT) into your trading screen.

    This is a detail to ignore or not be worth sometbody's time?????

    DISCLAIMER: **NOT** financial or tax advice. Not to be relied upon. Reader is responsible for their own actions.

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  37. Note: i never caught gary's low for a number of reasons and won't buy gold in 'midair' as it is now. I'm still mostly out (I trade like DG - in/out big positions) and waiting for a gold pullback to get in.

    I think gold has peaked for now (today/yesterday) and the pullback will now start.

    I have a target about $10 below $1200.

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  38. Then if one adopts an old turkey strategy and holds positions for more than a year (which I',m pretty sure most of my positions will be other than AGQ) then they will all be taxed at 15% :)

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  39. Sorry, isn't 1000 SPY about the same as 20 e-minis, not 2?

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  40. Some good comments today. For the traders, of which I am NOT; and especially DG, I think you have been very honest and upfront about your trades. You're a stand up guy to post your trades before you take them. Anyway, at the end of the day we all, whether traders/investors want to make money. Frankly since we are all "little guys" we should want to help each other make money and keep from getting screwed by the "big guys" or dirt bags as I like to refer to them. yes I am a SMT subscriber and Gary definitely has kept me focused based on MY long term goals, which may not be the same as the next guys long term goals. SMT has also helped me grow my account at a rate faster than I was doing before I subscribed. And that folks is all that matters to me.

    So keep on posting your opinions/trades and hopefully we all get fat,rich and a trophy wife with large natural breasts..lol...ok just rich.

    I still want to figure out how to go long the second American revolution and short the American politician..anyone have any good ideas?

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  41. Gary, that's only true with miners. if you hold physical, gld, or slv you'll be taxed 28%. also, the 15% rate might be moving up...

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  42. 1000 shares (NOT lots) of SPY at $109 per share is $109,000.

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  43. I don't have physical gold or GLD, SLV. Only miners and AGQ.

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  44. DGP (2x gold) has the same tax treatment as miners at 15%.

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  45. Right, so a $1 move gets you the same gain/loss on 1,000 SPY shares as it does 20 e-minis (before tax, which is your main point, I realize).

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  46. It's just the POMO. Take a look at ZH today.

    The market will do this ramp again in two days at the next POMO.

    As far as the deleveraging not going on in the economy:

    http://pragcap.com/ny-feds-household-debt-report-improvement-but-still-a-long-way-to-go

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  47. Anon1,
    Are you trying to find reasons to stay in a losing trade?

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  48. If one holds physical gold or silver long term in Eagle coins there is no tax, as the buying and selling is not reportable....for now.

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  49. Anon1,
    Just like I said a very big part of consumer debt is mortgage. The change to mark to market has slowed that leak drastically and the current administration is contemplating requiring FRE and FNM to just forgive a big portion of martgage debt. If they do that a big chunk of consumer debt will jsut evaporate.

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  50. I think it is funny that when someone doesn't agree with Gary on his economics, that the lemmings come out and say those people are childish and have nothing to say, and call it a sewer.

    It would be the lemmings that start to bring in the personal attacks......

    pretty comical to say the least.

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  51. Owning gold is the best way to short politicians, IMO. There's no way we are getting out of this mess with them in there. It would be hard enough if they were actually trying to solve our problems, but they are just trying to get reelected.

    TZ Guy: I need one more sharp up day in gold for me to call a trading top. I hesitate to even call it because some people here will sell it to take their small profit and probably never get in again. I trade around my core position but am unlikely to get mostly out until, for example, the COT gets very negative, or we get lines outside a gold dealer.

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  52. Selling Eagles will be reportable thanks to Obamacare. Anything over $600 gets a 1099.

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  53. also it may not be mandatory, but doesn't that mean you still are supposed to report it?

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  54. "If they do that a big chunk of consumer debt will jsut evaporate."

    Which is the same as debt destruction.

    And it won't disappear. Think about that statement. Many people own Agency debt...... what happens to the wealth of those investors? It gets transferred from investors to the debtor who couldn't pay.

    Take a look at any and all bank reports. The acocunting change doesn't eliminate the debt, just allows them to not recognize the loss....... YET. It's not gone - just delayed.

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  55. Anon at 9:55

    And what losing trade is that which I am sticking with?

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  56. I would caution against expecting the COT to call a top in gold. It is pretty much worthless for that.

    As gold breaks out to new highs miners will start hedging production heavily but that doesn't mean they will call the top. The last two C-waves went a long ways both time and price wise with the COT at a bearish extremes before the top finally came.

    The only way I know to call a top is with cycles, mean regression and usually an exhaustion day above a significant round number (ex. 1000, 1200 1500).

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  57. For the traders: Watch the 1/2 hourly volume in OEX calls. Calculate how many puts vs. calls were bought since the last 1/2 hour. This is the only smart money option traders group. If the ration is 7 or 8 to one either way, it is a decent signal. not super, but worth noticing. The last 30 minutes the puts have traded 2475 contracts and the calls 360. Those smart guys think we are about to take a dip. Dow is plus 137 as I write this. Short-term predictor only, and not great but much better than random, so worth looking at. S&P 100 options only.

    http://www.cboe.com/data/IntraDayVol.aspx

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  58. Nat, I think we're out of luck when it comes to shorting politicians, at least in the long run. Both them and the voters who put them in power will drive this country into the ground. It has been going downhill for almost 100 years now - there's no stopping it until it grinds to a halt under its own dead weight. :(

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  59. As long as the Fed continues to print money and feed it into the banking system at virtually 0% interest rates then they can delay accounting for those loans for as long as they want and feel no pain.

    In the mean time the banks are making money hand over fist with the Fed's free money.

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  60. The miners would be the commercial hedgers, but I am talking about the spec positions (both large and small). Those guys are trackable separately from the miners/hedgers and have a pretty good record of being wrong, no?

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  61. This comment has been removed by the author.

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  62. This comment has been removed by the author.

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  63. Anon1, I'm reposting my reply to you from the last thread:

    You need to re-read my comments. I was not specifically referring to the USD, although I see it as the best looking horse in the glue factory. I was referring to most developed world currencies. As such, the devaluation will likely occur relative to hard assets, such as gold, land, etc., and NOT necessarily between currencies. The UK, France, Japan, etc. are pretty much in the same boat as we are so I don't expect huge swings relative to the dollar.

    It's true, the money in the bond market can't really flee anywhere else due to its size. But that alone won't keep a bubble afloat. Just because we issued a bunch of debt that was originally valued at X doesn't mean it's actually worth X simply because we issued an ass-ton of it. Having no place to go simply means the crash will be that much more violent as there won't be another outlet other than price - similar to what happens in the stock market when shorting is banned. And true, reserve currency status has its privilages - no argument there. But my point stands: it's all based on confidence. We can't force other nations to use the USD, they're doing it because it's the current AGREEMENT. Note that the world dumped the Bretton Woods standard fairly quickly and could do the same with the USD. Actually, they don't even need to dump the dollar - they could simply diversify the basket, say by adding gold or oil to it (which is already being discussed). That alone would hammer the dollar's status without actually killing it.

    I agree with your gold/cash recommendation - I've been there for two years now. I've also been staying away from debt and minimizing what little debt I do have.

    I read the bit about banks buying Treasuries as well - I think David Rosenberg has been on this for quite some time now. It's true, there will be a solid bid under them from banks (where else are they going to put all that government money???) and from retiring baby boomers who have had enough of the stock market. Having said that, I still find the bond market too risky given the underlying insolvency and I have no reason to go there - I've made far more money in gold/silver. Diversification seems like a pretty weak reason, but maybe I'll end up eating those words :)

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  64. DG,
    No not really any better than tracking the commercials.

    Think about who takes the other side of the commercial positions. Large specs and small traders.

    So one can pretty much count on the "other guys" being excessively long when ever the commercials get short. But like I said they can be excessively long for a long time before a top is formed.

    Tops are just tough to spot and rarely do the big boys get it right on the nose any better than the little guys. It's probably the reason the SoS numbers are usually early. The big boys know enough to start getting nervous so they start taking chips off the table but that doesn't mean the top will come the next day.

    They started heading for the exits in Nov. but the top didn't come until January. They were also early for the April top.

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  65. If this is a cycle bottom and it certainly is starting to look that way, I think I would ignore any option ratios in the OEX for awhile. A move out of a cycle low isn't the time to get squemish, It's the time it's sdafest to step on the gas.

    Of course one has to be convinced the cycle bottom is in place.

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  66. Gary: "As long as the Fed continues to print money and feed it into the banking system at virtually 0% interest rates then they can delay accounting for those loans for as long as they want and feel no pain. In the mean time the banks are making money hand over fist with the Fed's free money."

    Gary has a good point here. This is exactly what happened during the Latin American Crisis during Volker's reign. Their banks went TU and our banks held a ton of their paper - rendering them insolvent overnight. By bending the rules and keeping things under the rug, Volker was able to let the banks recapitalize over a period of about 20 years - he promised the time IF they got their act together. And it worked.

    The same is being done today so Gary is right about this NOT being a source of de-leveraging. However, the situation is far more dire today and they banks are unlikely to be able to recap since it's a global phenomenon and there are no other areas earning good money to prop up the bad, at least as far as I can tell.

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  67. @anon...yeah I know about that little $600.00 insert into the Obama care bill, but I am not too worried about it yet.

    as for reporting, I have devoured the legislation and the original bill and presently you don't have to report it any more than you have to report your income from your garage sale. BTW, the legislation DID explicitly mention Krugs and Maple Leafs as reportable. Austrian/Euro gold is also exempt for now as they did not exist when the legislation was passed. The fact is, all one is doing is exchanging FED notes for US Government money. We do have two "money" systems in this country. It is just that most don't know this and the criminal politicians will not tell you that...except Ron Paul.

    @low tax...I am with you on that.

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  68. Agreed, Gary. I was just pointing out the OEX stuff as a useful data point. I did not sell a thing based on it, BTW. Just worth knowing about, especially in flatish markets (unlike this one). I find the same is true for COT. I never sell because they get bearish, but it's worth knowing as a background condition. Once I know the background I start looking for a tape clue (reversal, super-overbought readings, petering out volume, etc.) But I also tend to sell a little early. Missed the rally into the top in 2000 for example. (Completely screwed up 2008 for some damn reason! A good lesson as I was getting cocky.)

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  69. anyone else see/read this article..if not well worth the read. The last line of the article says it so clearly...
    "Without a revolution, Americans are history."

    The Ecstasy of Empire
    Paul Craig Roberts
    Infowars.com
    August 16, 2010

    http://www.infowars.com/the-ecstasy-of-empire/

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  70. @Nat

    true, you don't have to report your garage sale, but if you sold your old baseball cards for 1 million bucks and deposit it in your bank, when you bought them 10 years ago for 100 bucks i bet the irs wouldn't let that one slide

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  71. @anon very true...however baseball cards are considered collectibles anyway, so the person you sold them to would have to report it...however, presently selling a million dollars worth of eagle coins is not reportable.

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  72. Sold TNA and FAS

    Good gains. May reenter on weakness tomorrow...decided not to hold for final hour.
    Still long several other stocks.

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  73. Some open thoughts..not a tax expert

    Bottom line you can't fight Uncle Sam. If it is a small amount they will probably overlook it, a large amount will raise some eyebrows. Deposit even a couple hundred k of cash or a transfer and it will trigger an audit. Have fun with that one. If you are right sell the coins outside of the US, still doing nothing wrong, but there are no eyebrows being raised. Sounds like the military’s view "Don't ask, don't tell (DADT)".

    You can also ask the IRS on its views on Eagle coins. Documented of course. If you sell in the States, the opinion should hold up during an audit if their opinion is in your favor today. If the opinion is open-ended, then the courts will have to interpret the spirit of the law and if enough people are doing this you already know which way the court will go.

    You could sell, say $1000 worth of coins today or whatever small amount to trigger a gain. (buy it back immediately if you like). Tell the IRS what you did and ask them how to record it. This will establish a precedent for future sales.

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  74. DG,

    According to this source, http://cotstimer.blogspot.com/
    the large specs in the gold market are to be faded.

    Here's his recent weekly spreadsheet. Note the column that tells whether he follows or fades the group.

    https://spreadsheets.google.com/ccc?key=rQFT1bog0Gq2w4RfDrdquDw&hl=en_GB#gid=0

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  75. Perhaps I'm mistaken, but it isn't you who issues the 1099, but the person who buys your coins from you, in which case Big Brother will expect you to put them on your taxes.

    The 1099 comes from the person that pays for anything, not the seller.

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  76. What a terribly painful day for stock market shorts!

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  77. yeah but my point is, reportable is not the same as taxable. you're just evading taxes if you don't report. it might not matter if u sell one coin for 1000 in profit but if you put your whole portfolio in gold and u make a lot of money im sure the irs will notice

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  78. Today is exactly what the bears needed to reload.
    What news could possibly take us over resistance here?

    Gapper downer tomorrow. Sell now.

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  79. Prima: Yes the large specs are to be faded as are the small specs. It's the commercials who are the "smart money" when looking at COT data. But as Gary says, you don't act just based on that alone, regardless.

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  80. Alright then, reportable vs. taxable is the difference, althought to me it's the same as a brokerage account. If the firm issues a 1099, it goes on the taxes. :)

    Gotta pay for that "free" healthcare Obammy handed out to everybody somehow!

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  81. Markets rarely trade based on news, just like they often don't trade based on the economy.

    If the Fed is pumping the money supply again then that money has the find somewhere to land regardless of what the economy is doing.

    You will probably be much better off trading off the cycles than just expecting a gap down every day. That strategy is most likely a sure fire way to end up in the poor house.

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  82. I will be selling a good amount at the close and will wait for the next fat pitch. At the way this market has been swinging so violently, it'll be within two weeks!

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  83. Asking for an interpretation is not tax evasion, nor is selling 1000$ worth of gains in gold coins for a profit and asking the IRS how to deal with it. If you can establish a precedent now in writing form the IRS, this will provide quite a bit of ammunition later when you sell the big stuff.

    Or you can simply create a corporation outside of the country to hold your gold for you. Legal separate entity. This is not evasion either. As long as the corporation is not sold or pays you a dividend you will pay no tax; the transactions of buying and selling should be taxed in the location of the company. A living trust might also work.

    Tax rules, and treaties, and blah blah blah apply. Obviously each must do their own due diligence.

    But one needs an exit strategy at this point, not later. Evasion is not the same as tax planning.

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  84. DG,
    Just curious. Why wouldn't you let your profits run? You could put a stop under the recent low and have very little risk.

    If the market makes new highs this one single trade would be worth more than all the other trades you've made this year.

    FWIW the half cycle low doesn't usually come into play until about day 15-20 and today appears to be day 1.

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  85. If you live in this country, pay your taxes to this country.

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  86. Yes, I have been considering that. The problem is gap risk. In a quieter market that's exactly what I'd do, but we keep gapping 10-20 SPX points at a time. I will "sell to the sleeping point" as they say. I have pretty full load right now, so I can sell some and hope I'm wrong. Also, my having a very good year let's me place large bets. If I reduce my gain for the year by guessing what the next few days will look like I get a little more hesitant to go all in on the next fat pitch. Lastly, Jason's stuff is very overbought going into the close. That all said, if things weren't so damn weird and the market less volatile I'd hold it all.

    BTW, did you notice the SonS. It's up to -$32 million.

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  87. Much more upside in stocks tomorrow, fellas. Getting long into dips is working again.

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  88. Geez Gary! Now you've got me thinking about it again. With such a good entry point maybe I should just hold. It's true the AD line has made a new high. And I can handle a drawdown at this point. If we drop I lose modestly, but if we make that new high...Hmmm...

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  89. Ha ha ha ha bears win bears win!

    Bulls can't bust through resistance!

    see ya at todays gap tomorrow!

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  90. Market not done going down. Be careful.

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  91. Oil is going to lead this decline to S&P 950 just like it lead the rise.
    Fact: everytime oil doubles within 52 weeks, the U.S. suffers a reccesion. We are going down folks.

    Buy DTO and get rich. Oil is falling a cliff anyday now. Look at the chart! Broken trendline, in the middle of hurricane season, and it still can't go higher! LOL!

    Down we go.

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  92. I'm tempted to get long Oil overnight, too.

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  93. I just checked out the charts for both stocks and oil, and stay flat overnight, but look to buy any weakness tomorrow morning, including a gap lower if it occurs.

    Higher prices pending!

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  94. Just like stocks oil is working its way down into a cycle low and its right smack dab in the middle of the timing band.

    Just like the stock market the odds are much greater that oil will be bottoming if not today very soon.

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  95. Wow! Talk about rejection at resistance!

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  96. Ole TK pointing out his 1 winner out of 8 million short positions means we have higher prices ahead.

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  97. "If you live in this country, pay your taxes to this country."

    Perhaps then, I am the only one that has been abused and seen abuse by the IRS’ most honest and truthful form of governance then and how their interpretations are self-serving and not for the betterment of its citizens. I will be silent then on this one, since I am hitting a patriotic line and I don’t wish for mine to be challenged (even indirectly). Since my challenger likes to hide in corners, I will come to meet him there as well.

    Done for the day boys and girls. :)

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  98. The first stab at a resistance level rarely makes it through but that doesn't mean the second or third won't.

    One is taking a big chance betting on lower prices this late in the daily cycle and with a swing low now in place.

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  99. Thanks for the input, G-train. These ideas are just for trading accts, while I'm always maxed long GOLD in the LT acct I'm letting you manage. :)

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  100. O.K. Gary I sold 500 SPY instead of 1000. Let it be on your head! :) Of course if we rally from here and I sold just some it's because I'm brilliant; if we go down it's your fault I didn't sell more.

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  101. Why would anybody pay tax to Grand Cayman when they live here, other than to just be out for themselves on a net basis. Selfish, if you ask me, and one of the biggest reasons this country is finished. I understand the small guy trying to look out for himself, but if corporations weren't doing the same thing abroad, we'd be in much better shape.

    At some point people have to ask themselves what is left if nobody pulls his weight. I agree the government is out of control, wasting LOADS of money on shit Americans don't want any part of (wars, free healthcare, etc), but if we were all paying and feeling the rape taking place, we'd get the criminals out of office and hang them. Then our taxes would drop along with getting on track again.

    If one can evade, cheat, or hide, they are not forced to fight for what's right and must eventually be done.

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  102. Keys has every right to be pissed, but the solution is to fix it right here, not play the games that the rat bastards do, which is what got us in the predicament.

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  103. Gary, the reason DG must take profits is he is in the cash market, and can wake up tomorrow 20 S & P points down and way below his stops. Personally I would hedge with options.

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  104. Why waste money on options? If you want to be nuetral then just go to cash.

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  105. USO is going to pay a visit to the $20s soon.

    S&P will join the cliff dive and park itself at 950.

    We will likely rally from there NOV. through April and all the bulls will say it was the elections along with the santa clause rally.

    Gary, Ben can't print money fast enough. Thats the problem. I think the worst of deflation is behind us but we are still in it. Time to go back down for a couple of months.

    George

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  106. Yeah I've never understood hedging with options. The best hedge is to just get out. If we gap down I go back to where I was Monday (or at worst late last week). If we are starting any kind of an up move (and I think we are) it's worth holding on. I look for about a 5 to 1 risk/reward setup and a good entry point, so a comfortable stop. This seems to fit both criteria, though I have to admit that guessing the next three weeks kind-of-stuff is not my best strength. The next few days will tell...

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  107. Gaps are the risk one accepts if they are going to take a big trading position. If one risks a much smaller amount then a gap can't hurt them.

    This is one of the draw backs to trading as opposed to investing. It's tough for a trader to take and hold a larger position because his stops may force a large loss.

    Generally speaking if a trader wants to remain profitable he can't risk more than 1-2% on any one trade. Obviously taking an "all in position" that suffers a large gap stop loss will violate this rule.

    I suspect DG rarely goes all in but if he were to do that repeatedly he would eventually damage his account as he would be exposed to larger than 2% losses way too often.

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  108. A bit tart with your response, your advice to just hold a stop that can be ripped right through overnight in a market that is driven by the futures market also wastes money.

    But hey, if you don't seek a dialogue, I am happy not to post.

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  109. "Ben can't print money fast enough"

    That has to be the most ridiculous statement I ever heard. If he wanted to Ben could print 100 trillion dollars with the stroke of a computer key.

    Where do people come up with this stuff?

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  110. I think George is a masochist and likes getting run over by the G-train. LOL

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  111. Why would anybody pay tax to Grand Cayman when they live here, other than to just be out for themselves on a net basis. Selfish, if you ask me, and one of the biggest reasons this country is finished.

    If you think protecting one's family is selfish. If you think protecting the education and well being of their potential is selfish, then by all means I am selfish. But if any government agency ever steals something from my family, I will be the first to stick a fork in his eye and take it back.

    Complacency is wrong in this country. We sue everything that moves, and are as lazy as can be. I would love to help every person in this country but I can barely handle protecting my own family. Selfish indeed, how many times have you fought with the government, or do you simply allow your liberties to dissolve slowly over time like the rest of the PC crowd. How much is enough before you stand up, and say, “this is not right” and actually do what you can about it.

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  112. DG, if you look at the table I posted, you'll see that the small traders are not always faded. Depends on the market. Turns out small traders are followed crude and nat gas.

    Large specs are faded on gold.

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  113. C'mon Gary, you expect us to believe that Ben can print 100 trillion dollars??? LOL!

    The Fed does not have the facilities, machines, ink, trees, or manpower to do it! Thats my point. Ben can authorize it but it doesn't enter the system. Get it?

    And since we have an Islamic militant president who wants us all to be at his mercy, Ben will obey the command to strengthen the dollar! Get it yet? Obama= zero expansion, and total dependancy!

    George

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  114. The dollar will strengthen

    The markets will fall

    Taxes will rise

    Home prices will fall

    The people will demand overthrow.

    Short at will. Gold (PMs) will be okay. But short everything else.

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  115. Not sure about the math here, Gary. If you go all in 10 times and make 1.5% on 8 of them, but lose even 2% on the other 2, why can't that work? The market virtually never gaps down more than 2%---or if it is about to you can smell it coming a mile away. Believe me I wasn't all in even once during 2008---too volatile. (I did get a buy on 10/10/08. We were up 936 the next day! Biggest move I've ever caught! Medium size bet though.)

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  116. Gary,

    You suggested to DG to let his profits run by pointing out the half cycle low is not due for 15 days or so.

    But do we know for sure that the daily cycle low came in yesterday? Aren't we still in the timing band for the daily cycle low? If so, isn't it possible that the market may make lower lows over the next several days?

    IMO, DG taking profit on part of his position and letting the other part run is the conservative way to play this.

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  117. George, much of what you have written makes sense...until I got to this part:

    "And since we have an Islamic militant president who wants us all to be at his mercy, Ben will obey the command to strengthen the dollar! Get it yet? Obama= zero expansion, and total dependancy!"

    With that statement I realize that at least on some issues that interest you, logic no longer applies. So I conclude that if you are not logical there, then how can I trust you to be logical anywhere else?

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  118. I can't remember who did the study, I think it was either Mark Douglas or Van Tharp but they ran a study and the outcome was always the same, risking more than 2% on any one trade always eventually led to severe damage to one's portfolio.

    It's the streaks that get you. Eventually every trader just like every gambler runs into a long streak of losing trades. If you are betting too big that streak damages your portfolio so much that you can't recover without continuing to bet big.

    Of course we all know what the end result of revenge trading is. I suspect George is on the verge of demonstrating it for us.

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  119. PC,
    I did qualify my statement earlier that one would have to believe we had seen the cycle bottom if they were going to hold.

    Unfortunately there is no way to "guarantee" we have seen the bottom. I guess that's why it's called speculation :).

    I would point out that we still haven't seen a large SoS day. Without that I think the odds are very small this intermediate rally has topped. As long as that is the case then the intermediate trend should rescue the trade even if there is one more push lower before a final bottom.

    All in all it's probably easier to let ones profits ride if position size is smaller and the risk of losss if the trade turns against one isn't as large.

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  120. pimacanyon,

    You are illogical with that last statement of yours.

    Everybody has a weakness in a particular area. For most men, it's beautiful women that destroys all logic especially when she has the hots for you. Remember Mark Hurd and that actress?

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  121. Gary, I would not reference Thorp or Douglass on that 2% nonsense. I don't think they were successful traders.

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  122. My point exactly, Keys. It's time for the pitchforks to the eyes! Much better than funding another criminal operation (Cayman Islands), and feeding the beast. It doesn't do anything but stave off the day of reckoning we both see coming.

    PC? not me buddy. Let's focus on the real problem instead of hiding our "stash" from it. Besides, there is no way you'll ever see your money again if you trust a criminal "over there" to watch it. I have 2 friends that have gotten smoked by a bank's officers in offshore accounts b/c they know what you're up to, and that you don't have enough to pursue the problem. Unless you're Rothschild or Soros, best to chase the scumbags out of town right here.

    I get abused by the IRS just like yourself, and I've had enough, so I'm active spreading the word every day. That's the stage we're in today. I'm sure as hell not going to trust a dirtbag with my savings that at best will help proliferate the problem.

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  123. I keep reading a lot about how the S&P will go down to 900-950, then rally. When too many people are thinking the same thing, no one is thinking.

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  124. The sudy had nothing to do with "their" trading. It was actually proof that position size is the #1 determining factor to whether one will make money in the market.

    There is an amazing amount of truth in the statement that it's not the size of a trader's winners that determine success or failure. It's the size of one's losses.

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  125. George,

    Where do you get that Obama is Islamic? I thought he was a Christian.

    If you're referencing his appearance at the ground-zero mosque site, then that's really a constitutional issue and I doubt there are any constitutional grounds for denying the building.

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  126. Gary,

    I see the SPY listed in the "selling on strength" list. I'm guessing that the selling strength wasn't enough to worry about (98/100 up/down ratio).

    At what ratio do you consider the selling significant ?

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  127. Marc,

    Don't bother with the facts. They don't matter to George.

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  128. I will let my point go at this point. I am confusing my anger with other issues. Needless to say I have been involved with others who's lives have been turned upside down by the mafia known as the IRS. People believe the law is the law, but it isn’t. Interpretation of law is what law is, and that interpretation can be severely different than the spirit of the law. Awareness is great, but I have been taking a more active legal-role as have all my actions and suggestions been towards. Cayman islands, nothing there. Putting gold outside of the US doesn't really have to do with taxes by the way. Its a safeguard against the US government doing something really really stupid and something really really dangerous at the end of the day. Feel free to comment further if you like, but I am bowing out at this point. Keep things real. :)

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  129. Excellent interview on CNBC (I know, I can't believe it either...). This relates directly to our discussion about sovereign debt risk:

    http://www.zerohedge.com/article/must-watch-kyle-bass-interview-there-no-way-i-can-be-long-stocks

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  130. 15 million isn't enough to pay attention to.

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  131. I'm still reading a lot of negativity out there. Much of it says we're doomed. This pretty much means we won't have a crash since there is so much expectation of one.

    Silver seems to be pretty resilient these days. The market seems to have priced in much of the bad news and Ben is printing away...PM's float on a sea of paper money.

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  132. Gary, one other thing about position size: When I start losing I trade smaller and smaller, so a bad streak results in very small losses as it goes on. This also safeguards against a market personality change that doesn't work for your trading style. I am pushing it in part because I have been so hot. In 2008 (a bad year for me because I was an idiot with an opinion) I traded smaller and smaller. So I may be willing to take a 2% hit now, but as time goes on it drops to .25% or less until I start winning again.

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  133. That sounds like a very intelligent strategy.

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  134. If $15 mil is too small, at what level do you start to worry ?

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  135. $100 million might be significant for a brief decline. For an intermediate level decline I would like to see either a large -300+ day or several smaller days.

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  136. Oh brother.

    Did you really believe that Obama was a Christian?
    Gosh, no wonder the S&P is headed for 950. We have idiots running the country and idiots believing those idiots.

    George

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  137. How about idiots that still believe money is made of paper?

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  138. How about idiots that keep standing on the tracks no matter how many times the G-train runs over them :)

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  139. Very poetic Marc:

    "PM's float on a sea of paper money."

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  140. Thanks for the vid LowTax,
    enjoyed it.

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  141. Think about this for a moment. Most of the great investors make it big not so much due to position sizing as the main factor. You have Darvis who was more or less put much of his money in only a few stocks. You have Buffett who has 25% of Berkshire in Coca Cola and 10% in Wellsfargo.

    If one uses merely 2% on a position, the returns will be subpar. To make a 100% gain, those 50 (2% per position) positions would EACH need to gain 100% for a total of 100% return on the portfolio.

    No greats do that sort of nonsense. Most are actually concentrated in a few big positions and the rest basically just for garnishes.

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  142. Which is exactly my point why trading makes it virtually impossible to win big.

    If you are going to use stops and attempt to time the market and avoid drawdowns you can't take large positions. If you do you will destroy your account.

    The way to make the really big bucks is to graduate to investor status and ride a bull market. There is a heavy price one must pay though. They must be willing to accept large draw downs and have the courage of their convictions to hold on through these draws.

    If you can do that then you can take a very large very consnetrated position and if you are right about the bull market you will join the ranks of the very few that have ridden a secular bull.

    This is how almost all muti-millionaires and billionaires are made.

    Trading is a way to make a living as long as you have a large enough stake to begin with. Investing is how one becomes financially secure.

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  143. Let me also clear up a misconception. I didn't say a trader should only take a 2% position. I said that a trader can't take more than a 2% loss.

    An easy way to adjust position size would be to take 10 positions with 10% of your capital in each one with a 10% stop loss.

    Any positions that hits the stop loss would cost you 1% of your portfolio.

    This is one very simple system to control risk and still allow trades enough wiggle room to actually have a chance of working.

    Now if you have a system with a closer stop you can take larger positions and still control risk.

    Ex. if your stop is only 2% below your entry then you could enter with 100% of your capital and if your stop was hit you would lose 2%.

    The problem of course is that tight stops tend to get hit... alot.

    The reality is that you will probably make a lot more money trading 10 positions with 10% stops than 100% positions with 2% stops.

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  144. Trading is a way to make a living as long as you have a large enough stake to begin with. Investing is how one becomes financially secure.

    Well said. But you also mentioned the cost to such a change, so also well said.

    I have been doing some pondering, I am waiting until sunday though(as it fits that time,share then)

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  145. Gary, something to add to that: It's important that your positions not be correlated, though most are. If you have "ten" positions but they are IJR, SPY, QQQ, MDY,DIA, etc. they will all go up or down depending on what the general market does. My spreadsheets do a lot of work to check for correlated positions when I figure out how exposed I am---and it keeps changing. Short the dollar is somewhat correlated to being long gold...usually. Etc.

    Regarding trading as a way to become secure: I know you have read Market Wizards. There are traders in there who have been making 50% a year for decades. Not bad! You can become secure by "investing" but also "broke." I know people who thought they'd be the next Buffett, picked the wrong time and/or the wrong item, and lost 80% of their account. Using Buffett as an example is like using Michael Jordan and saying, "See? You should do that." There ARE more people who get rich through sitting, but it depends on when. No one has been able to do that lately and not for a good while into the future either, I expect. If you get lucky enough to catch an enormous bull (like from 1983-2000) sure. I wonder how well Buffett would be doing had he started in 2000? Granhtam thinks we have another decade of poor returns ahead of us. Geez, the Dow went from 800 to 14,000. If we always were doing that, riding the bull would be great.

    Lastly, you have to go with your own temperament to be great at anything. If your nature is to be a trader you will never be a great to be a value guy, and it'd be a shame to miss your real skill. It IS harder to be a good trader. Nap Boy likes to sleep. I like to try to master my craft. I will never get killed trading my way. I have enough that i don;t want to lose what I have. Deciding "it's just a correction" and then finding out it's a horrendous bear market is not for me. It goes against me, I'm out and ready to fight another day.
    I guess we'll never agree on this one. For most people sitting is certainly easier, but I just can't say it's "better."

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  146. Yep, like I said there is a price one must be willing to pay if they are going to be an investor. The reward can be huge but if you are wrong the penalty can also be large.

    If I'm not mistaken Joel Greenblat (value investor) has about the best long term record with a 40% return over a long term time frame.

    Many traders can and do post stellar records, sometimes for several years in a row but in the long run almost no one ever does much better than about 25% annually over a multi decade time frame. And as we all know the vast majority of "traders" either match or underperform the S&P. It's pretty tough to outperform the index on a really long term basis.

    "trading" is more of a strategy to reduce draw downs than to get rich.

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  147. Stock bears will get all excited about today's minor gap lower, but I'd remind them this is the perfect setup to buy long.

    Stocks will be nicely higher at some point today, and this trade is a layup if I ever saw one. I don't mess with stocks too often, but getting long today is like taking candy from a baby.

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  148. Not looking too good for gap boy this morning.

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  149. http://www.thestreet.com/story/10829994/1/health-care-1099-expansion-may-break-gold-dealers.html

    'Health Care' 1099 Expansion May Break Gold Dealers

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  150. Dealers will just pass the cost on to the customer. Pretty easy to do, especially in a bull market.

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  151. From article...

    For example, if a customer bought a class ring 17 years ago for $1,200, accounting for a hefty retail mark-up, Poplievsky says it would now be worth $600. Under the new provision, that $600 will be taxed as income, at a higher rate, unless the seller can prove the original price paid in order to record the net loss.

    "Now I don't have receipts from 17 years ago," says Poplievsky. "So that's $600 that will be pure income to a family that's already starving. So on that $600 they might have to pay $300 in taxes, which they're not really supposed to because they bought it for $1,200."

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