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Wednesday, August 4, 2010

WINDOW WILL CLOSE ON FRIDAY EVENING

Discount window is now closed.

172 comments:

  1. Gary:

    When you say you expect some twists and turns for next few weeks before C wave gathers momentum, would you specifically expect the low from last week to hold and we never go lower than that (but maybe come close). Or do you thing the twists and turns MIGHT include a lower print than last wed?

    Your commentary tonight was ambiguous on how you expected it to 'buck around'.

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  2. I think the low is in. I just mean we could see gold drop on days the dollar is weak or breakout levels reverse briefly. Just normal curveballs that gold throws at investors that everyone should recognize by now but for some reason don't.

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  3. G,
    You took the troll meter down?

    Have to say that was hilarious.

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  4. It served its purpose :)

    I'll put it away until the next intermediate correction later this year.

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  5. Whatever happened to Precther's deflation, end of the world, the sky is falling, apocalypse now call?

    Ooops looks like another miss for `ole Robbie boy.

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  6. Thanks for the concise update. I'm going to move my next buy limit up to around $1180, hoping to snag more gold into a couple days of pullback.

    It can't keep going straight up forever! Thanks again, G.

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  7. My thought that gold would drop a bit more to 1145 or 1120 looks unlikely now with recent performance. Thus, i'm now gonna have to chase it a bit. I expect a reasonable selloff thur and/or fri (unemp report) which might give me a $20 or $30 lower entry (buying the pop as we hit 1200 today looked foolish - it's ripe to back off that zone, pause, and punish those buyers.) Good call gary. -TZGuy

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  8. Gary, will you offer an opinion on TBT as an investment over the next 12-18 months? It is showing significant positive divergences on rsi/ macd on the daily and fits your overall dollar destruction theme.
    TBT

    Thanks, JJ

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  9. I do think bonds are in a bubble but interest rate cycles turn slowly so I'm not sure you would be doing yourself any favors by draining capital out on the PM sector to speculate in shorting bonds.

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  10. Gary,

    What wave was the rally off the 2008 low to December 2009 for gold? Must not have been a C wave if we can expect another one so soon. I still think the worst part of this gold correction is coming. Still patiently waiting.

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  11. The A-wave was the move back to 1000 out of the Nov. 08 low. The B-wave corrected back to test the breakout above the 1980 high of 850 and gold has been in a C-wave ever since. It's been consolidating for 8 months now.

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  12. I'll second Gary's call for some choppy gold action. The DX just bounced off its 200DMA. We'll probably see a few days of dollar strength, followed by the final plunge into a daily and intermediate low. The dollar will then bounce again for 2-3 weeks as the new intermediate cycle begins. However, the cycle will probably fail quickly and begin plunging again.

    This is all a recipe for some schizo gold action, but once the impending intermediate DX cycle rolls over, gold should enter parabolic mode.

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  13. http://www.zerohedge.com/article/gmi-describes-future-recession-ongoing-depression-must-read-report

    Excellent report and the part about QE having little to no effect on the markets is along the lines of how I'm thinking.

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  14. Gary, I like your thinking, that if the market goes above 1220, that retail folks might crowd in.

    But, it appears that retail folks have not been buying into this rally: volume has been anemic, and $50B has moved out of stock mutual funds YTD:
    http://www.zerohedge.com/article/and-scene-ici-reports-13th-consecutive-week-massive-domestic-equity-outflows-banks-start-pan

    Do you stand by your statement, that 'fools will rush in' even though they have (rationally, I think) stood on the sideline to-date?

    Great work on gold over this past month, sir.

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  15. It's the breakout to new highs that brings in the retail crowd.

    Most people can't buy until it feels right. Usually that is the exact wrong time to buy.

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  16. Actually most retail investors have been plowing money into bonds.

    Sound familiar? Always rushing in when they should be rushing out.

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  17. Okay, I'm convinced.

    I look forward to having some fun shorting the S&P 500 should it move above then below 1220.

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  18. I doubt you will have any fun at all. Selling short is the toughest way to make, and more importantly keep money.

    The Fed and government will fight the bear tooth and nail.

    They will change the rules as we go along. There will be many violent counter trend rallies. All in all probably less than 1 in 10 shorts will make any money in a bear market.

    Much easier and a hell of a lot more porfitable to just ride the gold bull.

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  19. Especially with a beta of .07

    Gold gets a bad rap as being so volatile, when in reality it's quite calm. No reason one can't keep their savings in cash, and gold is the best cash there is.

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  20. At Gary,
    As the gold bull is tending to correspond with a weaker and desperate dollar. Any thoughts to the belief that interest rates will rise, gold goes up to its final peak, bonds bottom, stocks bottom, relatively at the same time.

    Also at JJ, as logical as shorting bonds is....the fed has already artificially lowered interest rates by buying bonds. Who says they won't do that again? That isn't sustainable, but it may kill the short-side since you would have to wait even longer. We need a patient investment in order to take advantage of eventual higher interest rates. I don't think shorting bonds are it. I can't find any investment that deals with interest rate swaps (Floating for fixed)...I think this would be the ideal investment, but no way am I going to organize something like that on a personal level.

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  21. Holy cheet, Wheat is on FIRE!

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  22. I go to thru McDoanalds drive though 2-3 times a year when traveling. Here's and example of the delation some insist upon. Hash browns used to be 2 for $1, now just 1 for $1 on the "value menu" to boot.

    Last time I ordered them was a little over a year ago, but that's still 100% inflation.

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  23. New trade: Bought 500 SZO (crude oil short ETF) at 48.11 Overdone like OIH was. Not sure where to put stop as I usually do those by feel, as I do exits, but small losses is the key to trading. If you let a loss get out of hand you need to win five more times to make up for it. Probably 1 point is all I would stay in for if it went against me. This is my 17th oil trade this year.

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  24. Now you're talking, DG. Thanks for helping others know position size. It's just as important as directional calls.

    Good luck! :)

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  25. I'm really not sure why you feel position size is so important as everyone's life situation, other investments, trading goals, trading style, and other things make that number vary from person to person. My 500 shares might be someone else's 5,000, but if it makes you happy, I have nothing to hide. By the way, this item is thin and trades by appointment and so I got a little lucky that someone hit my bid. I would normally just simply short USO but my firm can't borrow it.

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  26. I'm really not sure why you feel position size is so important as everyone's life situation, other investments, trading goals, trading style, and other things make that number vary from person to person. My 500 shares might be someone else's 5,000, but if it makes you happy, I have nothing to hide. Newsletters just recommend an item and a price...the amount is up to the reader. By the way, this item is thin and trades by appointment and so I got a little lucky that someone hit my bid. I would normally just simply short USO but my firm can't borrow it.

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  27. It's simple. Size of each trade determines profitablilty. It doesn't matter if one is a millionaire or not, if he loses $1 on one thousand shares, and makes $5/share on 100 shares, he still is not profitable.

    Let's not get into it all over again. Size Matters! and you can add a zero ot the end of each position (or subtract) if you don;t want people knowing your assets (that's NOT why I ask), as long as you're consistent (you can even 10x your real size every time) and report when you take/exit trades, with size.

    This is the only way others can determine if they can learn from you (if profitable or not). The fact you didn't grasp this concept the other day is not only what got me irritated, but led me to believe you don't consistently pull money from markets. It's not an attack, it's being logical.

    And I do hope your trades work out, seriously. :)

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  28. Perhaps your firm can borrow UCO adn short it? Just an idea and something to check on, even though probably not if they won't let borrow USO.

    I wonder if that implies it;s going to be a great trade, as all the size is already borrowed by the fatcats?

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  29. Thanks, now I see what you mean. You were looking to compare size of trades for a given trader not just looking at absolutes. Makes perfect sense now---glad I asked. Thanks for the good wishes.

    I have never found borrowing-availability to be a useful indicator. Some of the best shorts have tons of people short (and thus you can't borrow the stock). other times that just leads to a short squeeze and you get killed.

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  30. Gary, it looks like money is flowing into the really undervalued asset class which is agriculture. This flow may be taking funds away from precious metals. Now, food to survive is more crucial than gold to preserve purchasing power in countries like china, russia and india.

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  31. One can always find reasons to doubt the bull. I guarantee one will even be abe to do it when gold is over $3000. ...Or you can quit making nonsense excuses and just ride the bull.

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  32. Not a whole lot of money coming out of gold to be agriculture, with gold flat on the day.

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  33. Meant "to buy" agriculture. Isn't coming from goldilocks.

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  34. "I guarantee one will even be abe to do it when gold is over $3000. "- Gary

    The hardest part is the patience. All this waiting has me ready to take a nap. I'm turning in for a few hours.

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  35. Oops, forgot to mention this is your friend Gary_UK...]


    Japanese bond yields just dropped below 1%, US 10-yrs will follow sure as eggs is eggs!

    This is what we have to look forward to in the next week or two, new highs are in your dreams.

    I'm short and ready to make a million...

    http://a.imageshack.us/img683/4879/dow1930todow2010.png

    I hope Gold hits $900ish so I can load up via BullionVault. Wish me luck!

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  36. http://a.imageshack.us/
    img683/4879/dow1930todow2010.png

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  37. Crb and commodities in general are suggesting anything but deflation.

    As a matter of fact they are starting to hint at a big surge in inflation...which is what I've been trying to tell everyone while everyone has been jumping on the deflation bandwagon.

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  38. The CRB is making a secondary top which usually happens after a bubble bursts. The Internet is littered with more inflation propaganda than deflationary propaganda, especially the mythical Ben Bernanke. You should read that report I put the link up to, it gives a good explanation for why QE will have no effect just like it did last time.

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  39. Are you kidding? That QE put a bottom in the stock market, recapitalized the banking sector and halted the worst deflationary spiral since the Great Depression.

    It also drove the dollar back down through the 200 week moving average.

    Were you asleep all last year?

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  40. Justin,
    You are irrationally trying to find reasons to continue holding on to a losing trade (you are a trader).

    There has only been one intermediate top in the last 5 years that didn't have one or more large selling on strength days before it topped. And the one that didn't probably had one intraday that just fell off the end of day data because the market turned positive by the close.

    The odds are pretty darn small that this market will turn before institutions start exiting and they just aren't doing it yet. The longer you hold on the bigger your loss will get.

    At least wait till we see smart money exiting and then follow them out the door.

    At the moment they are a great big train rolling down the trackes and you are standing right in the middle of them.

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  41. True deflationistAugust 5, 2010 at 1:21 PM

    Gary are you under a rock. Oil only went from $35 to $80. QE did nothing. Food prices only increased 40% in certain areas. But Gary, since losing my job I don't eat, heat my house, or drive anymore, so things are much cheaper. Gary you really need to join the band wagaon, sell your pm's and buy some bonds.

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  42. Gary,

    I understand things just don't move because of lines on a chart, but do you have any comment to Gary Uk's eery looking charts?

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  43. I couldn't get either one of the links to work so I can't say. Although I would refer you to my post about the train tracks to justin.

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  44. DG, why not use the double short crude etf SCO instead of the thinly traded short crude etf SZO? That instrument has a wide bid/ask because of the low volume. You could trade SCO at half the dollar amount you have in SZO.

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  45. Prima---Fair point about the liquidity. I hadn't looked at that, but I generally avoid the double and triple ETF's. I have plenty of cash and need neither the leverage no the buying power. The liquidity is a good reason, though, and I'll have to take a look at the tracking loss on SCO.

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  46. DG,
    Just take half the position size in a double ETF and you can accomplish the same thing and your return on invested capital will be larger.

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  47. Gary,

    How do you reconcile your logic when you say the sole reason for the market's rally was Ben Bernanke destroying the dollar, when the dollar HAS NOT MADE A NEW LOW since 2008. Two years now the dollar has been in a cyclical bull market, yet you fail to recognize it. The bond bull market also hums along yet you are so blinded by your erroneous belief in the Wizard of Oz at the Fed through some Internet brainwashing that you obviously have fallen victim too that you can't try and understand any other line of thinking.

    The only thing that is going to save you is that if you do end up holding gold long enough, you probably will win because the Kondratieff winter is going to punish everything except for hard currency in the end. But in the meantime even gold is going to get hammered a few times, including a good hammering back to $1000 which I think is going to happen again before a real rally gets going.

    So you might get lucky but you obviously have no clue what is going on. I'm fairly certain I will win on my dollar trade so it will be fun watching your disbelief while that plays out.

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  48. Gary_Uk again.

    http://www.mongabay.com/images/commodities/charts/crude_oil.html

    So, a month ago oil was the same price as it was in 2005? That's inflation I guess?

    Bigger picture, and we'll see it soon enough, is prices are headed down, gold too.

    You guys will hate it, but I think you all know it's going to happen, deep down, because exactly the same thing happened during the 2008-09 deflationary episode.

    After it happens, then we get more QE, and prices will rise, and maybe someday they'll print too much and we'll get the hyperinflation you goldbugs dream of, but not for many years.

    Debt/money destruction is the flavour for the next 10 years, go ask any Japanese family.

    Pretty soon, the debate will be over, because in a week or two we either break up, or we break down, hard either way.

    Just a week or two......

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  49. Justin,
    The 50 DMA only crossed over the 200 on the dollar chart recently so it has only been in a cyclical bull market for 5 months.

    All this talk about the bond market is simply useless to make money. I'm certainly not going to loan the government any of my money at 2% (and I doubt you would either).

    So unless one is willing to do that there is no profit potential in the bond market.

    I also have no intention of buying stocks. This is a secular bear market after all and at some point the bear will return.

    Gold however is in a secular bull market and has been independant of what the bond marke is doing. Bonds have been rising for almost the entire period gold has been in it's secular bull so obviously gold doesn't care one bit about bonds.

    All in all gold has tested the $1025 breakout in Feb. It held. Odds are very slim we will test that again.

    The intermediate cycle appears to have bottomed and gold is now heading into the strong demand season. No way am I going to pass up an opportunity to get on board close to or at an intermediate cycle bottom in a bull market. Heck they only come around every 5-6 months. I don't want to waste one and have to wait another half year.

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  50. Gary: I am not concerned with return on capital, because my cash in the money market fund is paying virtually nothing. If I short $25,000 worth of oil and make 10% or instead short $12,500 and make 20% I net $2500 either way. Putting up extra cash makes no difference, though it affects my "return on capital" per trade. I calculate how my account is doing based on YTD profit divided by starting account value, and do not care about the % return on an individual trade. A $2500 profit is a $2500 profit, no matter how much capital I put up. I am awash in cash.

    Re the inflation/deflation debate...this is why I am a technical (not chartist) trader. I have always found you can make ten intelligent arguments on the bull side and ten just as good one on the bear side at all times in every commodity. Who the hell knows?! The world is too complex to figure out how it will unfold, and I never have to worry about it. I let the market tell me what's going on, as Justin has said. You suggested walking across the room and looking at a gold chart from far away. it's obviously a bull market. Well, you can do the same thing with bonds! You may be right (I bet you are) but when you start to be right, bonds will start acting badly, and they sure haven't yet. Someday they will and at that point your ten good reasons will have something behind them other than theory. If we stay awake and do no marry our opinions we'll catch the change because the market itself will make it obvious.

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  51. Justin,
    Are you blind? Just look at that chart of the dollar. Straight down for two months. That's not a normal correction, that's something fundamentally broken and as Gary pointed out in tonight's report the dolalr is now starting to crawl along the 200 DMA.

    For a trader you certainly don't know how to cut losses or recognize when something isn't going as expected.

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  52. New trade: bought 400 FXP (double short China) in the after-market at 34.41. There is no non-leveraged version. by the way, for anyone looking to trade etf's, heres a great link: http://www.etftips.com/

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  53. Yes but the bond debate is simply useless. Trying to infer that something is going to happen because bonds are doing this or that is only good for a quick trip to the poor house.

    Justin seems to think rising bond prices are signalling deflation and one should be short equities and commodities. But bonds have been steadily rising since 2000 and we all know that being short either one of those other than the period between Oct 07 and March 09 would have been devasting to ones account.

    One simply can't look at one market and extrapolate an outcome in a completely different market. Most of the time you will just lose money.

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  54. I just mentioned the double ETF because you could use the other capital for another trade. In effect your money would work harder for you. If you can get the same return out of 12500 and use the other 12500 for another trade you are infinitely better off than if you had sunk all 25000 in one trade.

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  55. DG: Why not just short FXI if you'd rather avoid leverage?

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  56. Actually, DG be exactly twice as well off, all other things being equal. :)

    I noticed the trolls come out boldly every time we're due for a couple day setback, with total disregard to the fact their heads are still on fire from the last trade. Retards, but amusing.

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  57. I don't need the other 12500 for another trade as I always have a large cash balance. I can do as many trades as I want. Shortage of capital is not a problem. I never find so m any good setups that I need every last dollar!

    to anon: I didn't short FXI, though it would have been my preference, because my broker did not have any available to lend. I use Etrade and their stock loan department is o.k., but not great. I have been able to borrow it in the past, but not today.

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  58. If Justin is in the bond trade, I don't know why it is assumed he's experiencing/sitting on losses. Unless he was late to the party, he would appear to have plenty of room to lock in profits before the market turns, if it turns. It doesn't really seem relevant to the discussion either way, IMO.

    Personally, I like his long-bond trade a lot more than Gary_UK's short-equities trade. He's placed a lot of emphasis on market analogues, a natural habit for all of us (history does sometimes rhyme), but also a crutch and sometimes a trap. We've already departed from the '29-'30 script a bit with last month's false breakdown and 120-handle rally. Could just be a blip before the next big drop (though putting a deadline of 1-2 weeks on the next big move seems kinda silly), but the action clearly strikes me as more constructive/bullish than it does him. If he has other reasons than facile similarities to crashes past, I'd be curious to hear them.

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  59. Allow me to explain exactly what will happen to the trolls this round. Only 3 things can occur, they way they trade.

    They will either make a little, or lose a little over the next few days, and gloat uncontrollably because anything feels better than getting stuffed in the crapper (with 5x original size) for a 20-50% hit to your account like last round.

    Or the last option is they get blown out again, only to disappear to other blogs hoping we forget and they spot their next home run idea. LMAO!!!

    Man, if I could bet against them ever making big money, I'd drop Gary's service for the sure thing!

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  60. Like monkey's on coke, pecking away until they're right for a move that wouldn't even repair the damage they've already done.

    I have to admit, it's great entertainment!

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  61. PS. Bonds will go up, as will gold in the flight to safety. The only difference is that when people are done bidding bonds higher, even they will run to gold.

    Gold is the best choice in the end. I;m not shorting bonds yet, but I'll be laying into them hard at some point, and I'm not the only one. The fact people are itching (but patient for now) to short them will put a dent in the bulls dreams even if they make some candy.

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  62. This blog is getting some genuine interesting discussion rather than just insults and strong assertions with exclamation points. Great! A request, though, for all you "anonymous" guys out there. Can you pick a nickname or something so we can know who's writing? It's hard to keep track of who's responding to whom when everyone is named "anonymous."

    And evidence and reasons for an opinion are more interesting than just "boy XXX is going to get killed!" What makes you think that? Why is gold going to $1000? Why not $1100? Did you pick the number at random or because it's a round number? Anyone can make a claim but "because I said so" is not very convincing. Even if deflation comes first, why can;t gold go to 1300 first? Gary called the bottom using cycles (pretty damn well I might add). What is your target based on?

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  63. Bond trend is up, so not time to short. However, does one want to catch the end of a 30 year bull, or hop on one only 9 years young?

    Best to bet with the bull, and I agree bonds are still in bull mode, but when a bull eventually dies it gets really ugly quick.

    Depends on the time frame, but I wouldn't be looking to make a score being long bonds of the most indebted nation in the history of the world, after a 30 yr bull. If you're wrong there is HUGE downside and stops might not help. Even the bond bulls' best downside target on gold is $1000.

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  64. Good post tonight, G-train. Sometimes the best trade to be made is to sit tight.

    I might fade a big move off the employment (or lack of), if we get it, but that would only be a several hour hold as I lack conviction on equities.

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  65. Why wouldn't stops help? Do you think the bond market will be near its high and just open down 20% one day? I have large profits in bonds I have held for some time and will hold them until the bond market tells me to get out, rather than trying to guess when the top is. I have friends who have been warning about the bond apocalypse for 15 years! Timing is everything. I see the debt but I also see the bond market making new highs every day. Just don;t forget to get out when it starts acting lousy---don't talk yourself into staying because of some macro belief.

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  66. Actually bonds topped out in March of 09. We may be testing that low but anytime a government tells you they are going to force a market to do something you can pretty much bet agaisnt it.

    I think we will look back years from now and see that Bernanke put a top in the bond market when he suggested the Fed was going to try and artificailly force long term rates down.

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  67. gary...you like climbing you say:

    http://www.bloomberg.com/news/2010-08-05/deadly-everest-climb-clarkson-s-cairo-affair-holy-wars-rick-warner.html

    --TZguy

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  68. DG asks, " Do you think the bond market will be near its high and just open down 20% one day? "

    Sure. We're not there yet, but it will happen. Here's an example just yesterday and today, with Wheat being limit up (if short, you can't cover even if you want to, but exchange limits don't matter, Wheat is up around 15-20% in just 2 days).

    It doesn't happen all the time, but it happens enough of the time. Bonds are a colossal trade of a lifetime...everybody owns them, nobody really wants or trusts them, and lots of reasons to default or do the only other thing, eventually attempt to reinflate through printing presses.

    I still think bonds are going up, but I don;t want to be around when they get hit, so will leave that trade to others especially when gold is an easy trade. One of the easiest in my career, as a matter of fact.

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  69. Btw, Wheat was acting lousy and near the lows before it catapulted.

    Just providing a very recent example.

    You're right about timing being important, but if one thinks bonds are going higher, they must love gold here.

    Gold is also near it's highs, and also goes up in deflation (depending on what causes the deflation). Just because gold was sold in '08 does not imply it will happen this time. More people have lost faith in US paper since then, so the reaction might be different or just muted for bonds. We cannot know, but I'm not willing to play bonds even though odds are better that they go higher. Better odds are that gold rips, and if I'm patient I'll get the short of a lifetime in bonds.

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  70. I meant "best odds are that gold rips higher".

    One last point, I'd be willing to bet Gary will most likely be short bonds at some point in the future?

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  71. Not as long as the gold bull is intact.

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  72. What if bonds start an earnest downtrend, as strong but inverse of gold's bull?

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  73. Wheat's up 55% is 5 days, give or take.

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  74. It seems there is a lot of "either or" here. I am long bonds AND gold and both have done well. I guess if you have to choose, I'd choose gold, but I don;t like put every penny I have into one given trade or one item. I never feel I have to choose, but maybe others do.

    Re wheat: Futures can move limit against you, but bonds cannot. And wheat is many times more volatile than bonds. Bonds won't OPEN 20% down, so you have a chance to get out. What prevents people from getting out is inability to change and emotional rigidity, not speed. No market moves that fast. Just hit the sell button. I never trade futures in part because of the limit problem. Besides, the sentiment in bonds will be wildly bullish before such a collapse and it is n;t right now according to the sentiment surveys like Market Vane, etc.

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  75. Good luck with the bonds. I'm not saying it'll happen to you, I'm just saying you're on your own. :)

    I'm not an either/or guy with respect to gold/bonds, I just won't get long bonds. I also can take advantage of other situations, but most of my trades are short term when I take them. The long term stuff I leave to Gary, as he's helped me to ride through drawdowns keeping the bigger pic in focus.

    I will look to buy agriculture again at some point, but it'll be awhile, if at all.

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  76. All this bond talk is kind of funny, seems I stirred the pot. Look, the bond market is just another indicator to tell you what is going on with inflation. Right now the bond market is saying inflation isn't a worry, no matter how many erroneous comments Gary or his followers might make. They make blanket claims about how the government is printing us into oblivion, back it up with no evidence, and unfortunately some people I guess believe them.

    I'd rather just use price signals given by the market to determine what the real threat is. It keeps you aligned with the trends and that is really all that is important. I'd rather see my theory win in the market than in an argument.

    If the market actually gave me a signal to worry about inflation, then I'd worry about it.

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  77. So does that mean that all that time from 2000 to 2008 when the bond market was signalling no inflation you didn't need to worry about oil going from $10 a barrel to $147?

    And gasoline going from $1.00 to over $4.00?

    And health insurance doubling or tripling?

    Or groceries rising 50%?

    Or copper rising 700%?

    Or gold 400%?

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  78. I didn't say the bond market was the ONLY signal to look at. Those markets clearly morphed into uptrends that ended in parabolic tops, except for gold. And clearly what the bond market did tell you about that whole period was that it was EXCESSIVE SPECULATION, NOT TRUE INFLATION, that was the real problem. Because if inflation REALLY WAS A PROBLEM, interest rates would have trended higher, just like in the 70s.

    If commodities broke to new highs, and the bond market broke down, then I would agree with the inflation theory. Otherwise I'm just not going to believe it, no matter how much hot air is blown all over the Internet about how we are doomed by inflation.

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  79. The bond market does seem to be your go to indicator that's keeping you in a short trade against the trend and missing a powerful rally that has already gained almost 11%.

    Which btw is more than you would have made shorting even if you had caught the exact top of the rally in April... and didn't get knocked out during any of the violent counter trend moves.

    If you are going to successfully "trade" these volatile markets I would suggest you acquire a working knowledge of cycles, sentiment and money flows so you can have a fighting chance.

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  80. By the way, I was talking about every kind of bond except Treasuries. Ever other bond type is at new highs. Treasuries went nuts during the crisis because of the panic out of everything else. I agree with Justin that if we were in the middle of big inflation people would not be prepared to lend money at lower and lower interest rates. The markets do, in fact, discount the future by 6 months or so. Why did stocks head down in the Spring of 2000? The economy was fine then. The market "knew" a cave in was coming. Why did stocks cave in in 1929? How did they know? The markets discount the future which is why you can't make money off today's headlines headlines. The bond markets will start down before inflation really heats up in anything other than commodities. In the 70'e everything got more expensive, not just commodities. As Justin said, Once bonds break down and oil(for example) hits new highs, you've got my attention. Before then it is just mistrust of government, the Fed, etc. etc. without real-world corroboration. Oil is well above its lows but almost 50% down from its high. Time will tell. I agree they will panic and print rather than risk deflation, but we are not there yet. Another panic might do it...maybe. The amount of wealth being destroyed is many time what the Fed has printed...so far...

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  81. Did the stock market discount the recession in 07? By summer the credit and housing bubbles were already imploding. By fall we were already starting down into the recession.

    The market completely ignored the obvious and went back up to make new highs.

    Print enough liquidity and markets can be distorted.

    Zimbawian markets soared but that didn't mean the economy was in great shape. It was just a symptom of hyperinflation.

    I think it's probably more accurate to say that sometimes the markets discount the future. And then sometimes they act completely irrational, because let's face it humans are often irrational creatures.

    Now let me ask a question is it rational to loan money at 2% to a country that is so deeply in debt (and sinking deeper by the trillions) that it will never be able to pay that debt off without massively debasing it's currency?

    Of course it's not rational. Anyone with a lick of common sense can see that one coming a mile away. But does that mean we will act rationally and quit buying treasuries when we've been conditioned by a 30 year bull market to do so?

    Apparently not. But then we also convinced ourselves that real estate prices never go down and giving loans to people who clearly couldn't repay them was rational also.

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  82. Another key component to sustained inflation is wages. Not sure where the pressure for that might originate, given unemployment rates and trade flows.

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  83. Well, Gary, I know it probably a tired example at this point, and the parallels aren't exact, but JGB buyers were happy with a lot less for a lot longer. If that's not where we are (as I believe you believe), it certainly represents the danger.

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  84. Markets are filled with people trying to squeeze the last drop out of a rock. I doubt they have the ability to see ahead, even a minute, never mind 6 months. If that were the case, bubbles would never exist, since everybody would know ahead of time.

    Rational expectations, and rational market theory is a bunch of hog wash. People act to greed and to fear. People were fearful of 2001, so they lowered interest rates to nothing. People started buying and people started getting greedy seeing their neighbor get rich. People kept greedy, and then the market collapsed. Fear took over. Fear is not rational; fear goes with the herd, like a bunch of lemmings jumping off a cliff. Hence why the dollar went up, and morons bought t-bills even though they got a negative return a couple times. So now we have more fear, so people run into bonds. Anybody that got burnt in 07/08, heck even Paulson said he re-allocated his portfolio to fixed income (great news from an x-GS guy), went into the safety of bonds. People get an artificial sense of security. Then greed takes over, money to be made. People justify that greed until, bang, and yet another bubble pops.

    The bond bubble is curious though. It is unique in a couple weighs. The ceiling is well known, unless you believe in negative returns. The Fed may keep buying bonds, just to keep rates low(which is money printing).

    When the bubble bursts, will the fed prop it up....not good. Or will it allow the fearful holders to run. I am sure at this point CNBC will talk about future inflation, and the market will panic. Running into oil, gold, whatever, commodities.

    The only thing I am curious to is how long can this bond top go for as the fed may attempt life support. It should affect gold. When bonds break, the gov will either print to stabilize(inflationary) or it will allow the market rates to rise(which the market will interpret as inflationary).

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  85. I would disagree. If the first users of the money are the banking system (which they are) they could cause asset inflation including spiking commodity prices that would occur independant of whether wages are rising.

    That is exactly what has been happening. The Fed has been printing and forcing free money into the banking sector. But instead of making loans that money has been plowed back into the financial markets to earn a much less risky return than the traditional practice of making loans which in this environment would probably still have a high default rate.

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  86. Well, a high expected default rate strikes me as a deflationary feature rather than an inflationary one.

    The Fed's and Treasuries policies (and those of other CBs and fiscal authorities) are surely causing distortions in assets markets.

    What remains to be seen is whether it will ignite sustained inflation any time soon, or whether they will pursue sufficiently aggressive additional policies to do so. You are quite confident they have/will. I'm not saying you're wrong, just that the deflationary case doesn't strike me as quite so readily dismissable at the moment.

    Perhaps we will just end up with a situation where expensive dollars are required to buy expensive goods:

    http://macro-man.blogspot.com/2010/08/im-not-enjoying-deflation-im-too-busy.html

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  87. Many are confusing demand inflation and monetary inflation.

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  88. Gary,
    I have to say over the last month your calls have been amazingly accurate. I know you claim no one has a crystal ball but I'm beginning to wonder!

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  89. Gary: I am not at all suggesting that the markets are rational---just that they anticipate the turns. Your example of SPX, Dow, and Trans new highs in 2007 after the credit markets had started unraveling is the only example I can think of like that (just as you say there was only one time there wasn't negative money flow before a drop). This one exception actually cost me some real money, actually, unfortunately. But I have spent the rest of my trading life using the market behavior to make macro calls. Remember this only works at turns. A market going up means nothing. Zimbawe's market may have rallied, but if it made a top and then started down it might indicate the inflation is ending. It's only the change that anticipates the real world. Our bond market will start down before inflation gets ugly. If everyone is arguing about it, it ain't ugly yet No one was arguing about whether there was inflation in the 70's. It will become obvious at some point and the bond market (not the Treasury market) will have telegraphed it, if you can read the signs. Yes, markets are irrational, of course. They were irrational in 200, but they started down before the real economy did, so if you had been aware of that you'd have known a recession was coming. Once the market started down you had a few months to get ready for the recession.

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  90. i dont know, I find everyone has overcomplicated this whole thing. Its quite simple, and been repeated ad nauseum for months. the main issues going forward remain .. 1) high unemployment and 2) Housing values .. as long as there is uncertainty in both, the Fed will have no choice but to do a round of QE II ... the past week has shown weak housing data and today weak employment data , QE II is coming, maybe as early as next week.

    These are very interesting times, there is a clear shift in the financial powers underway. Resource based economies will be financial superpowers of the 21st century.

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  91. How's that long dollar trade going for you now Justin?

    The longer the employment problem continues the more likely it becomes that the Fed will continue printing.

    Catch a clue buddy.

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  92. I am going to get a second subscription after Gary's. If Nap Boy ever can muster up the energy to write his own blog, perhaps, I will join. That is if I can get out of bed, or out of the pool, or where ever there is a good place to snooze.

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  93. Looks like my extra-long nap yesterday is really paying off! Thanks to Gary, I make more sleeping than I ever made awake! :)

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  94. Wrong Way TK has been really quiet lately, with regard to positions, only pointing out the infrequent winner.

    Now that we have some downside, let's watch him crank up the PR. Expect lots of posts and fake activity.

    You're in the driver seat now, Timbo. Another 20% decline and you'll be getting close to even.

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  95. Looks like wrong way TK blew it again trying to short silver. Shessh how many times must this guy get run over before he learns you can't stand on the tracks when the G-train is a comin.

    LMAO

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  96. It's funny Gary how Japan has the biggest government debt of all yet it's currency is making 12 year highs. Another reason I take cues off of price action and ignore faulty analysis.

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  97. Justin,
    Maybe you should look at price action. Stocks are going up, the dollar is going down and gold just sliced right through $1200.

    Catch a clue buddy. Pretty soon you are going to fall into the same catagory as wrong way TK.

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  98. Sold FXP at the opening since gaps on payroll news should be faded. Will hold FXP a bit. +$280 overnight so far.

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  99. "But the doll hair is supposed to go up in deflation..." LMAO!

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  100. $1200 is the new floor in gold. Get some while it's still cheap.

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  101. Yep, Wrong-way TK is already out in force, acting as if he's not already out of business.

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  102. Score one more for the G-train. Stocks are fading the gap, and waiting to go green.

    I'm actually hoping gold pulls back a couple days so I can add. Either way, I win.

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  103. Gary might have to lower is target on the dollar. It's blownt.

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  104. SPX setting up for a sharp drop again. Bought 500 EPV (short Europe) at 18.22.

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  105. Currencies can be volatile, the dollar and euro are both working off overbought/oversold conditions. But the trends haven't changed and that's all I care about.

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  106. Sold 500SZO at 48.35 (+$100); switched to 1,000 SCO at 12.76 as Prima suggested (Thanks.)

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  107. G-money,

    If you had an extra $20K you were looking to put into bag silver, would you wait a few days/weeks or just do it today?

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  108. I considered doing $10k each in two different transactions-one today, one next week, but I'm a cheap bastard and don't want to pay two shipping fees. :)

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  109. Justin, what do you actually hold in your trades?

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  110. Bought FXP back at 34.73. And I think I am done posting these trades.If the market cracks the next few days, you can assume I covered my recent bunch of shorts (I will be shorting more today as well). Watch China and Oil break. I just wanted to do it for those who criticized and believed I wasn't a "real" trader. No more responses to them (flame away if you like). For anyone else I will post when I see setups.

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  111. o.k.---one more---shorted 300 SPY at 112.31---look lout below!

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  112. Oh shit, the market is falling. What should we do now, Gary?

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  113. RYSBX, SH, FXY (long Yen)

    I did trade a few things on the long side over the last few weeks but the number of setups I generate off my scans in general has fallen way down since May.

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  114. What you should do is buy into the dop of course. We have had no signal that institutions are selling this market. Until I see that happen the odds are heavily in favor of any short term weakness being recovered.

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  115. But employment numbers were horrific. Back to March lows?

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  116. What does that have to do with anything? Don't you think the market knew the numbers were going to be bad weeks ago?

    These things are almost alwasy a fade. By next week the market will have forgotten all about the jobs report and will get back to doing what it was doing before the numbers came out.

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  117. The BoW numbers may be starting to build already. Of course we will have to wait till the end of day to get the final tally.

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  118. Some idiot trolls still haven't figured out the G-train and subs aren't trading, or even invested in "the market".

    Gold and silver is where we're at. we just enjoy watching you get spanked every time you open your troll hole.

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  119. Gary, how do half cycle lows work? are you expecting a 3 or 4 day correction soon? I missed the bottom and don't like to add on strength, especially when gold has been up like 8 days in a row.
    -tom

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  120. Gary,

    Any chance of looking at some of the charts of the stocks you recommend in the weekend report (e.g., GDXJ)? Speaking of GDXJ it isn't participating much today in the move by the miners. But it does seem like it is finding some resistance at the bolinger band and of course, like many of the others, it has a gap from earlier this week. Would love to see your thoughts on some of the specific names in addition to the sector.

    Thanks!

    Steven

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  121. The gold cycle is short enough that it often doesn't have a half cycle low like the stock market does.

    The conundrum that traders and investors have is that they can't make thenselves buy into weakness and once the up trend becomes obvious it's already overbought.

    This is why I wasn't worried about buying into the dip last week. I knew gold was so deep in the daily cycle that a bottom was very close. Now I'm in strong hand status and I don't have to fret about chasing.

    Let me point this out though. This is only the second week of the intermediate cycle. There should be 12-20 weeks of rising prices ahead for gold. Does it really matter if you chase a little bit at the beginning?

    Is trying to time the perfect entry worth getting left behind if gold doesn't pull back?

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  122. Steve my thoughts are "it's a bull market"

    Take your best shot and then go "Old Turkey"

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  123. http://www.zerohedge.com/article/guest-post-why-today%E2%80%99s-deflation-won%E2%80%99t-kill-gold

    Get it while you can, bitchez.

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  124. Man what a strong rally off the low for gold... volume was so weak. MACD divergence on the weekly still in play :)

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  125. Then keep your money in paper, bitchez.

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  126. Better to own a bank CD than to go with silver which hasn't moved in over 5 years.

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  127. I think I'll stick with my silver. I have plenty of patience :)

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  128. Speaking of silver. I know silver goes nuts, but is there anyway of bringing silver into your SMT reports on a more consistent basis. I think many of us have started to invest in this metal or miners of this metal to warrant some value here. But I am not sure if it is possible. Silver is pretty erratic, and the only real tool may be the silver/gold ratio.

    thanks

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  129. Gary: does Gold need to close over 1204 or does the print above it do it for you regarding a higher high? If so, I believe there is nothing else you need to see to have full confidence that the low is in, right

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  130. Gary,

    It sounds like you think you've timed this latest dip in gold perfectly, but in my opinion I think you're too early. I've seen this happen countless times over the last 8 years I've been involved in the gold sector. I even fell prey to buying too early myself a few times and had to learn the hard way after seeing it happen.

    Simply put I think we need to spend some time under the 200ema to put a real bottom in the miners and gold. Especially after some stocks reached 10 bagger status in the last rally, you just don't get another big rally after that without some washout and consolidation periods.

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  131. Justin, you might be right even if you're 1 year too early. Check this out:

    http://www.seasonalcharts.com/future_metalle_gold.html

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  132. Justin: On what basis do you claim we need to spend d time under the 200 day average? How many times has that happened in similar situations? What study supports your claim? Without hard data from you I believe Gary. After all, he has called a numbed of bottoms and this time said gold would hold at 1155. It did. You may be right but supporting evidence, or your track record, would need to be provided for what you say to be at all convincing. Anyone can claim "the market will do this or that." Doesn't mean much. You simply believe more correction is needed. maybe yes and maybe no. In a bull market the correction sizes can be quite small.

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  133. Yeah, a track record like DG has provided. He shorted the hell out of oil and it's getting crushed as we speak.

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  134. Well unfortunately I can't see into the future so I just have to use the tools I have available. The average length on intermediate cycles is about 20 weeks. This has stretched a bit since the Nov. 08 bottom and now runs about 23 weeks. The long end of the timing band is 25 weeks with the vast majority bottoming by then.

    Last week was the 25th week of the cycle. Gold has now put in a weekly swing low and is currently back above $1200 and has reversed the pattern of lower highs with today's move.

    At this point I just don't see the point of waiting any longer. Especially with the dollar now due to head down into the 3 year cycle low. Every C-wave advance has ultimately been driven by a major leg down in the dollar.

    Gold also broke below the May pivot like I was expecting and it immediately reversed, a strong sign that smart money was buying what dumb money was selling.

    And to top it off we are now heading into the strong demand season.

    I don't know what more I should wait for.

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  135. Thanks, anaon. And China. And said we'd be down over 100 right away and we are. And GDX, and OIH. And the general market buy last Friday... I am not bragging, I am just trying to build credibility so I can help people trade and so my comments will be taken a bit more seriously. Good arguments can go either way and there has been lots of intelligent discussion, but the proof is in the pudding (where's that guy who told me he'd eat crow and apologize if I showed I could really trade and was not a charlatan?)

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  136. Nap Boy here getting ready to rest up for the weekend. Gotta catch some zzz's.

    I'm hoping gold gets down to $1180 to put more money to work. Somebody wake me up if it does.

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  137. DG:

    Every major gold and HUI rally since 2001 has started below the 200 ema. Pull up a daily chart, stretch it back 10 years, and take a look.

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  138. Just wait until the pensions beg for bailouts. They only do two things with the money, distribute some to pensioners and invest the rest to play catch up for a lost decade. I wonder if that will be deflationary?

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  139. Instead of worrying about that (and other theories) I'll just take my cue from the market.

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  140. Thanks, Justin. Very interesting. I will look at that over the weekend. Thanks. Then it becomes a "weight of the evidence" kind of thing. We have had a lot of one-time events this past three years. What you say has value, but we of course could start the rally off a shallow decline, even if it hasn't happened in the past nine years, especially if we are about to go parabolic. Interesting, though.

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  141. Every major rally has begun after a B-wave decline. Most of the B-waves have taken gold back to or slightly below the 200 day moving average.

    This one did also. The last B-wave bottomed in Apr. 09 at 860. Which was right on the 200 DMA.

    All in all I don't see anything different this time than any other time except the consolidation phase between the first and second leg has lasted longer. But then the bigger the consolidation the bigger the rally that follows so a large consolidation isn't necessarily a bad thing.

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  142. The Feb. low this year also included a few weeks below the 200dema.

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  143. A phony bounce. The overbought extremes have just barely been reduced. I bought more FXP at 34.75 into this bounce. If they firm up into the close I will hold, but I bet we break again. If they rally without declining first it'll just set up a renewed decline for tomorrow. Once they get this overdone there's no way out but sharply down for at least a day or two.

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  144. Curious, what to you mean by overdone. All the short term indicators were neutral at the beginning of the day and a few even moved into oversold during the decline.

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  145. I prefer not to share the stuff I use to calculate that as I don't want it to get too popular. It's not the popular overbbought/oversold stuff which obviously, as you said, was neutral and missed this drop. My stuff called for a decline and we got it immediately. It also works on sectors which is why I called out oil. This rally into the close should be followed by renewed decline tomorrow or the next day. The stuff I use is about 85% accurate.

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  146. One other thing, Gary. My stuff is not super-short term oriented because I am not a day trader. I like to hold two days to to month. I am not trying to catch intra-day moves, but instead good entries so I can become a strong-hand multi-day holder. Would have been nice to catch the bounce here, but i expect another sharp down day tomorrow. If not, I use my stops and will get out with very little damage. If it works, it's another some-odd thousand in the bank.

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  147. And by tomorrow, you mean Monday, DG? ;-)

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  148. How can you only win 30% of the time if your system is 85% accurate?

    Your system sounds more like a Bollinger band crash trade, which wins quite often but tends to produce small gains.

    The last four trades you've posted have all been one or two day trades. I think?

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  149. I trade using several things. Frankly I'd be better off probably if I didn't. The whole-market call (the SPY and such trades) are based on an actual system that's been backtested for 30 years. The buys are a little over 80% accurate (that is there's a 1% immediate move) the Sells are less accurate but still pretty good. The sector calls (oil, China) are based on my overbought/oversold stuff. I also use charts and such which i probably should use since they are not as good, but I hesitate to bet too much on one thing. I am cherry-picking the trades I post. I win probably more than 30% b ut surely under 50% because of my tight stops. I am having a very good year and will loosen the stops as i am way ahead. this will probably increase my %age of winning trades. I once lost $600,000 six months when i was a young trader and do not want to do it again. Whence the tight stops that lower my win percentage but reduce my risk. The two systems are more accurate than my trading makes it seem due to stops.

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  150. I will say that it's probably a bit early for stocks to head down into the next daily cycle low and the dollar still has at least 1 maybe two weeks before it's due to bottom. A weak dollar should act to support the market.

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  151. WOW! That was humdinger of a rally! Kinda makes me feel sorry for the shorts. They just can't catch a break. Well, G-rok tried to warn them.

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  152. The shorts probably covered to get out of the way of another manic Monday :)

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  153. Good thing stocks weren't open another 20 minutes or we might've closed up 2 or 3%. Shorts got knocked out!

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  154. The Fed waited until commodities closed before they did all the buying. They didn't want those screaming higher also.

    Monday's open could be positively bonkers for metals, just like it will be for stocks.

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  155. Sorry for the shorts, eh? It's highly likely we will have a 150 point down day by Wednesday of next week, if not on Monday. The rally was the worst thing that could have happened for the longs. If we had stayed down and then had a day or two of drifting lower it would have been over, but now...we'll see. But remember this is only on a trading basis. Intermediate term the market looks o.k.

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  156. http://inflation.us/videos.html

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  157. I'm not long stocks, all I said was shorts will be smote on Monday, after seeing what happened this pm.

    I'm only long GOLD, thanks to the G-TRAIN.

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  158. Gary-

    Is the weekly swing low on gold confirmed?

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  159. Stock shorts got SPANKED! It's still not too late to take advantage of Gary's promotional rate, but the window is closing tonight.

    If they have any money left at all, I'd encourage them to sign up.

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  160. All I can say is I am glad to see guys like Gary UK, DG, and Justin, trying their best to justify their existence. It won't work, but at least they have conviction. Gary, you are a patient and wonderful person to try and help these folks out. You did me, and for that I am forever grateful. I know I did not get much of what your rational messages say for a good while, but I do now. I feel for these guys because I have lost money like they will. Keep up the good work! The number of us that appreciate it are big, I am sure of that.

    Thanks Coach.

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  161. What ever happened to Gary UK and troll boy???

    Oh that's right, they went broke trying to short gold and the stock market.
    LMAO

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  162. Hooray .. gold closed $10 above your required limit to signal a weekly swing low and int cycle bottom!

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  163. Oh and ......... just made it with the breaking of the pattern of high lows and lower highs by one dollar.

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  164. Some good comments this week. However, I see where some are holding leveraged short ETF's more than a day or two. Bad idea. You will lose money over time even if the market goes the way you think it will.

    Bold prediction - The next time we trade past SPX 1121 on the way down will be the last time we see a number that high on a weekly close for many, many years. Fractals my friends.

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  165. I've got to say I think the market is controlled by fundamentals, sentiment and cycles not mathmatics.

    I can't count how many people have predicted the end of this rally based on one tool (usually something of a technical nature) while completely ignoring the three most important tools.

    BTW the fundamentals of this cyclical bull are most definitely still intact. This bull has always been about liquidity and nothing more. The recent 2 month collapse in the dollar seems to be saying that Ben is still supplying plenty of liquidity.

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  166. Might be slicing it a bit fine here, but weekly swing low for $GOLD happened to coincide with a gap fill on the weekly $GOLD:$XEU. Dollar buyers are not the only customers for gold.

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  167. Getting out of real analysis...but doesn't anyone else get the feeling that QE2 is on its way? Again the week-end here, so not to be treated beyond using your own brain, but I have the strong sense that we are setting up for another round of printing.

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