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Tuesday, October 5, 2010

HISTORIC BREAKOUT TO NEW ALL-TIME HIGHS

The miners have now joined gold and silver at new all time highs. (Well silver isn't at all time highs but it is at bull market highs.) The entire precious metal complex is now trading in a vacuum with no overhead resistance. This is the only sector in the world that can make this boast.


Needless to say this is a very bullish configuration and one that should lead to massive gains the next 6 months as the dollar collapses down into its 3 year cycle low.

The risk now isn't that we may get a pull back, although we certainly could. No, the risk is that the miners may never trade back below the breakout level again for the duration of this bull market.

Anyone waiting on a pull back to enter runs the risk of missing the entire move because they couldn't adjust their thinking from trading range mode to break out mode.

163 comments:

  1. Nice call Gary. Not only has your advice allowed me to accumulate some fabulous gains but over the past year, I've been able to enjoy my life rather than watch the damn market every day!

    Cheers Mate

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  2. Gary,

    At the close today I gritted my teeth and added a little AGQ to my pre-existing position. I figured, sure, it could close tomorrow down 5%, but it could also close tomorrow up again.

    I remember when AGQ jumped out to $77 I added a "little" more. Well, turns out I should have just gone all in there.

    In eyeballing your HUI chart, I wonder if the market makers might push it down to 500ish in the coming days to spook the latecomers before quickly reversing and rocketing it up past 520 for good?

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  3. The market makers have no control over this. If hedge funds start to buy the breakout then there's a good chance we will never see 520 again. And trust me if the HUI goes to 600 you are going to be saying the same thing about miners at 520 that you are now saying about AGQ at 71.

    Just remember this isn't going to end until the dollar puts in the three year cycle low. Meaningless wiggles right now are of no consequences.

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  4. Gary,

    If gold is in a runaway move, you said we can throw cycles analysis out the window. But do we still use the dollar cycles to guide us?

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  5. I'm going to use the dolalr cycle to try and spot this intermediate top in gold and the final C-wave top this spring. Short term daily cycles are of no concern to me and I no longer trust gold to follow the daily cycles if it is in a runaway move.

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  6. Hi Gary,
    I was wondering if you could give me some advice. I have the following PM Portfolio:
    AGQ 23%
    GDX 38%
    GDXJ 28%
    SIL 5%
    SLV 6%
    My objctive is to get out of SLV and GDX because they have been slower movers. My question is when do you think would be the best time for the conversion? I am worried if I convert now and we pull back soon I will get hurt more on the down side.
    Also, do you think I am ok if I change my portfolio to the following or should I keep some in the GDX?:

    AGQ 29%
    GDX 0%
    GDXJ 41%
    SIL 30%

    Thanks for any help you give me.

    Todd R.

    BTW- I found it very helpful to hear your advice on not paying attention to the daily wiggles and just hold the core position.

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  7. good job Gary, when i woke up this morning and saw my accounts i was overtaken with a sense of euphoria

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  8. Todd,
    I don't see anything wrong with what you have ither than maybe you might want to sell SLV and move it into SIL since AGQ already covers silver.

    I don't think I would get rid of GDX right now with the HUI breaking out to new all time highs. GDX could run 50- 10% in the next 6 months.

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  9. Great. Thanks for your advice Gary.

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  10. Todd,

    Gary gives good advice here. I'll add my two cents here regarding GDX (the "majors"). And I'll not pretend that my thoughts are worth a penny more.

    The GDX (the big mining company stocks) have been laggards in the recent run up. But with this breakout to new highs I'm of the opinion that the smart, big money (hedge funds, etc...) are going to start piling into the AUY's, GG's, and NEM's of the mining sector. These stocks have the liquidity that they need to take big positions. In addition, in about three weeks the bigs are going to start making their earnings announcements. I'll be surprised if the numbers aren't stunning. Starting the last week of October, I think we are going to see day after day of blowout earnings by the PM producers. Any miner making money at $1,000/$14 (gold/silver) is going to be swimming in cash thanks to the recent run up.

    This isn't to say the juniors and exploration plays won't do well. I'm just theorizing that the next few months could be, ah, big for the bigs.

    (If anybody has a contrary take or something to add...I'm all ears!)

    Tudor

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  11. Tudor, You are correct about big player hedge funds looking for liquidity. Most here are looking for the home run from juniors getting taken out by one of these big players. The story is that there is more demand for PM than there is coming out of the ground, so the big miners need supply. Bigs are making great money. Juniors are discovering or have new supply. Lower left to upper right on the chart tells you what companies most people believe have the best prospects.

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  12. By my calculations, the Gold:Silver ratio is now about 59 (1344/22.87). On Sept. 9 it was 63. All of my PM investments are in AGQ, so I want that thing to drop waaay lower.

    So Gary, let's have fun with numbers: If silver went up another 50% from here that would put it at $34.31.

    If Gold "only" rose another 25% from here that would put it at $1,680.

    1680/34.31 would give us a gold:silver ratio of...49?

    Well, as recently as 2008 the ratio got down below 48! Personally I'm hoping for something like 2006 when it got down to 42... : )

    So Gary, if you had to prognosticate...do you think the ratio has a snowball's chance of getting down to the 40s by late November or is that something that would likely take until Spring 2011?

    Thanks.

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  13. The best odds are at the end of the C-wave in spring.

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  14. Gary,

    What's the end game with the ratio? You think Gold/Silver could get all the way down to the 30s like back in the day? (1970s-early 80s)?

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  15. I hold GDX and it's outperformed GLD since the last bottom. What has really outperformed lately is anything related to silver. Silver is more of an industrial metal so it tends to follow the stock market more.

    I suspect if the stock market starts heading down, gold will hold up better than silver. That's just my guess although the silver market is thinner and you can expect more market related volatility there.

    It's all about the fiat currencies and until you see a lot of selling on strength even the stock market will keep rising because of inflationary policies.

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  16. Interesting development. Mish the Deflationist is now acknowledging the message of gold!

    http://globaleconomicanalysis.blogspot.com/2010/10/global-competitive-debasement-currency.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

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  17. This comment has been removed by the author.

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  18. I love this pattern that silver is making, it shoots up to round numbers 21, 22, 23... stalls for 2-3 days then explodes higher and doesnt look back. I think 24 next week is achievable before we dip...if you can even call it that.

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  19. Be fair to Mish. He's been a gold bull for a long time. Just with a different rationale than most.

    I frankly don't know for sure who's going to be right in the end on this 'flation debate. All I know is that the PMs are clearly in a secular bull market and the competitive devaluation game is only going to help fuel it all the more.

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  20. The runaway move call has been fantastic Gary. That 45 degree straight line advance of silver (and almost as straight on gold) is just eerie in it's unnatural look.

    There's no doubt that even though they aren't overbought by a lot of measures, that perfectly straight line advance is what is unnerving many people and bringing out the top callers. Then of course there are those who've missed the move and are paralyzed by it, and thus want to try to talk it down (e.g. Gartman).

    I have to admit that it's been tough not trying to play it by trimming my positions figuring that it just "has to" correct at any time. But I've held fast with the knowledge of the dollar's cycles and underlying fundamentals.

    Thanks Gary.

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  21. GDX has been climbing steeply within a pretty tight rising wedge. Which way will it break?

    Probably down - in time with the dollar bounce, I should think.

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  22. Options question for anyone who can help:

    In mid-sept. with GDX trading at about $54 I was selling the Jan 12 - 70 puts for about $19 giving them about a $3 time value. Today with GDX hitting 58 the puts are selling for about $17 giving them a $5 time value. What changed in 3 weeks to increase the time value? Seems like it should go down as time passes, not up. It does kind of piss me off so yesterday and today I have been selling more and putting the proceeds in SIL. Hope I am not getting myself in trouble. :) Thoughts anyone? TIA

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  23. ....Just for a while though, of course..

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  24. Jesse,
    You were selling deep in the money puts. As intrinsic value goes down extrinsic value will go up. It's one of the reasons why I only buy deep in the money calls.

    Options are very sophisticated financial instruments. I would suggest that if you aren't completely versed in how these things work just leave them be.

    Trust me one will be able to make a fortune with a simple buy and hold plan. There really is no need to get all tangled up in complex option strategies.

    Although your broker will love the commissions he'll wring out of you.

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  25. Jesse,

    Options are priced based on multiple factors (greeks). Time is Theta and it decays faster when you are closer to expiration date.

    My guess is Volatility has increased and that adds premium to the option. When volatility comes out the put options will deflate in price just as fast.

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  26. Jesse

    Are you ready to buy all those shares of GDX if they end up ITM? Just wondering as I've seen people get really screwed over in options when they don't know exactly what they're doing, and why.

    You can get price movement right but lose with options if the volatility premium moves against you, or it doesn't happen in the right time frame. Tricky stuff, with large leverage.

    Of course if we're right and PMs just keep marching up you'll probably be OK. But you're going out on a leverage limb. Be careful out there.

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  27. A much better way to "sell" puts is slightly out of the money and only sell what you are comfortable having put to you. In other words if you would buy the shares at that price anyway then sell the puts at that strike.

    The premium you collect will offset the cost of the shares a bit and reduce your actual purchase price. But then if the option expires worthless you will collect the entire premium.

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  28. Thanks for the input everyone. Increased volatility makes sense for the price movement. I realize I am playing a risky game here but the timing looks right to me. Also, it is pretty easy to draw a line in the sand of $HUI 500, if it breaks below there I bail and won't be hurt much, if at all. Thanks again for the feedback!

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  29. I don't think gold's daily cycles are being steamrolled at all. They are, in fact, still quite clear. Today's is Day 18 of the daily cycle, so we should see a roll into a cycle low within 2 weeks. That decline will probably give mining shares a back-test of their breakout.

    However, I strongly agree with Gary that there is no point trading around these machinations. Unlike stocks which rocket out of intermediate lows, gold rockets into its intermediate highs. This means we will likely see another stage of price acceleration as we enter the next daily cycle... no point risking missing that move over a daily cycle wiggle.

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  30. Selling options is more a way to earn a little income than to make a lot of money. Your profit is capped at whatever you sold for.

    With the metals in a powerful C-wave thrust why would you limit your gains by selling options?

    A much much better use of capital would be to just ride the bull.

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  31. Gary,

    Generally I do sell "puts" as you described. But up here in the "vacuumsphere" I think we get a big move and I want to capture more of it if it happens, thus the deep in the money. I expect to see them go out of the money by spring. To me, it seems like a more conservative approach to adding some leverage then buying the calls.

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  32. Couldn't have sid it better myself Doc.

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  33. Jesse,

    Personally, I favor direct long-side exposure at this juncture because the upside potential is huge given the cycle setups. If you want to sell puts, the best time to do it is at the intermediate low which follows a parabolic move. Volatility premiums will be through the roof and you can often have a profitable trade even if the underlying stocks continues to fall.

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  34. Thanks for the input Doc,

    I have weighed your recent comments as well on your preference for calls at this time in a "C" wave. I am already loaded to the gills on pure long exposure and then some. I have probably been lucky with my use of selling deep in the money puts, but it has worked in the past and it feels like a conservative approach to me for adding leverage. Plus it is so enticing to have cash just come into my account at this time allowing me to buy more long exposure (i.e. SIL). I do realize I have to be careful, thus my initiation of this discussion.

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  35. I should add that I do maintain sufficient cash levels to bail if things turn sour.

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  36. Very interesting. I am seeing all sorts off things trigger that I usually use as sell signals (recently in oil). I am not acting though because this competitive currency devaluation war has me back on my heels. I use historical data like TZ ("7 of the last 8 times X has happened Y has been the result") but this is really getting screwy. We had never-before-seen extremes in March of '09, and we may again to the upside here because of CB panic. Thanks, Gary! Without your gold input and advice I'd probably not be making nearly as much. As a life-long student of the markets I am fascinated by what is happening; as a citizen I am both deeply concerned and sickened by it.

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  37. I'd like to join you guys in Maui, but I'll be printing more paper and working to convince people it's worth something.

    No need for concern, everything is OK.

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  38. DG,
    While you're being sickened by the actions of governments, etc. remember that this kind of stuff has been going on since money was first invented. I think it's human nature to be appalled by the greed of others and yet bask in the fire of our own success when we take advantage of it.

    I'm being a bit sarcastic but as Gary has said before, human nature never changes...even if we wish it would.

    Cheers

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  39. It's only the other guy that's greedy ;)

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  40. I have to disagree, Marc and Gary. It is their JOB to put through policies for the benefit of the country. What they are doing as a result of their lust for power has greatly damaged the nation. My being long gold does nothing to anyone. I guarantee you if I were in power I would do what I thought was best without regard for my own personal benefit...and would probably be tossed out after one term. This the problem with democracy that is money driven.There's nothing wrong with wanting more money. What's wrong is wanting and getting money at the expense of others. There are lots of people who have ethics. They just don't run for office because they'd never even get the nomination. It's not ugly when it's the other guy; it's ugly when it is amoral, whether the other guy or yourself. Who it is is simply not relevant.

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  41. DG,
    Yes, I agree it would be lovely to have those is power be benevolent and forward-thinking. I'm just saying that history doesn't bear this out whether you think it's right or wrong.
    One question, who loses when you buy and hoard gold? You're not creating anything of value so that wealth has to come from someone else.
    (I don't want to start an argument so please enlighten me)

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  42. It does not appear to me that someone has to lose. When an asset goes up in value, there is no loser just because it goes up. You can argue inflation, etc. but those are secondary effects. You can also argue that money is being diverted from a more productive use, but I am NOT arguing that everyone should do the optimal thing in every moment. A politico pushing through a policy they know is garbage because they get votes that way is a little more direct, no? These things are not always black and white, but it's pretty obvious when something is amoral and violates your duty and responsibility. What's more clear: my buying gold, or a politician who sells his vote to the highest bidder?

    And yes I'm well aware of human nature, but these things also go through cycles. Great sacrifices have been made in history by various peoples who were inspired to. Even the U. S. during WW II. Doesn't mean no one cheated, but sacrifice rather than "me first" seemed to be the norm rather than the exception. I wonder what would happen now. We seem to be in a down cycle in terms of personal responsibility, no?

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  43. I've bought back 500 QLD on this weakness.

    I'm about at the point where I don't care whether the stock market goes up or down. Whenever I get to that point, I'm probably holding about the right inventory.

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  44. whenever an asset goes up i would argue that the loser is whoever doesn't hold that asset. if you think as all the assets in the world as tradable goods, as one thing gets more expensive everyone else has to pay more of whatever they have to get it. because we're measuring gold in USD, any time it 'goes up' i think all holders of USD are losers because now their money can't buy as much gold.

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  45. DG,

    Some of the worst criminals are not even elected, like Rahm Emanuel, David Axelrod, Larry Summers, and me!

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  46. Almost forgot my good friends Timmy Geithner and Hank Paulson.

    Where is Hank anyway? He sure made a quick getaway after raping the nation to benefit his former firm, Golden Sacks.

    Oh well, good for him. If nobody will hang him, his cronies deserve the money! :)

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  47. Besides, the whole lying and selling votes doesn't matter. We have Kol Nidre, which allows us to absolve our guilt, as long as we don't rip off our own.

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  48. Dollar sure is looking very weak again today. I think we'll see yet another low overnight or tomorrow. Maybe it'll finally bounce on Fri as Gary has surmised.

    And silver just keeps making new highs. Wowsa My only regret is not being more weighted towards silver right now. But that's only a small regret and I'll get over it. :-)

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  49. AGQ going up 50% in less than 3 months really concerns me. I have a very small position but worry about adding at these levels?

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  50. E,
    You need to go back and look at that chart of the 05/06 C-wave i sent last night before you get nervous and do something foolish.

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  51. ACHTUNG!

    Cramer became bullish on gold and is calling $2000!! Are we in trouble?

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  52. I've got news for you Cramer was bullish on gold weeks and weeks ago. He was dead on with his call.

    That being said I have no doubt we are going to see some kind of correction as soon as the dollar puts in a daily cycle low. Whether that correction will be able to drove gold below $1300 is debatable. I for one doubt it.

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  53. Actually, I was kidding. Cramer called the turnaround in March of 2003 almost to the day and made me a lot of money. The trouble with him is that he is very emotional and if you follow what he writes on RealMoney he overreacts all the time. But if you learn what to pay attention to and how to read him he is actually not bad.

    Anyway, I think a really scary correction is coming, anything that goes straight up like silver is now inevitably comes down hard. Which will be a good time to by more just like last February was a good time to buy more. But boy, was it scary...

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  54. i dont think this will stop until we get close to December. Everyone and their grandma is waiting for a pullback to add more or jump in the market. Why would people sell their positions when there is so much more room to run. I dont see it going below 1320 if it does pull back.

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  55. Gary,

    When the dollar puts in this low, what is your target for the SPX low on the move ?

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  56. I suspect will will see another BoW day close to the bottom. If not then I will look for a swing low that's in the timing band for the cycle bottom.

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  57. If you're expecting the dollar low by Friday, it would seem that with only 27 days now for stocks, a low anytime soon would be way early.

    What am I missing, here ?

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  58. The low in the dollar should mark the top for stocks. Then we should get the decline down into the cycle low for as long as the dollar rallies.

    Since I doubt the next daily cycle in the dollar will be right translated I expect the rally to last less than 10 days. That means the decline into the daily cycle low for stocks should last less than 10 days also.

    Once the dollar bottoms then we will reverse and start tracking the stock market cycle for a bottom as bottoms are much easier to time than tops.

    By spoting the stock cycle bottom we should by default also spot the top of the dollar cycle.

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  59. Gary,
    Once the C-wave ends, and the $$$ puts in a 3 year cycle low, I guess you are expecting a sharp bear market rally in the $$$ accompanied by Gold's D-wave. Once the D-wave bottoms, and the $$$'s bear market rally tops, are you expecting another left translated 3 year cycle in the $$$ coincident with a new A wave in Gold?

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  60. OK, Thanks for the answer. That's a longer (though maybe not deeper) decline than I had been expecting.

    Right now, the stock market could use a move down to rebuild the worry wall.

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  61. Scary!! So in a broad sense, the $$$ goes to the 60's in 2011 and 50's in 2014?? And if these left translated cycles continue then maybe even 40's?? Holy $$$! What in the world will put a floor under the $$$? Debasing all currencies to keep the $$$ afloat?

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  62. We don't know how long the decline will be. It could take 10 days or it could take 5. I know that a tag of 80 on the dollar index would start me buying stocks...if I was trading the markets.

    Mostly because I don't think the dollar will regain 80 before the three year cycle low and probably never again for the duration of the dollar's bear market.

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  63. Nick,
    I suspect the debt spiral we are in is going to eventually prove fatal for the dollar and it will go the way all currencies go.

    It will be a process though that will take years to complete.

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  64. Gary,

    Historically, how accurate has it been to see selling on strength days in major gold miners and indexes, as we saw today in NEM, AEM, and GLD, to forecast a decline in gold?

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  65. The only thing that has any predictive value is the SPYDER's.

    Although everyone needs to be mentally prepared to wheather a short term drawdown if the dollar bounce does initiate a daily cycle low in gold.

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  66. Gary,

    Have you thought about a program to incentivize current subscribers to bringing in new subscribers?

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  67. Gary. Are you suggesting that the dollar will bounce here? On the weekly chart it looks like I has room to fall.

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  68. The dollar is due for a short term daily cycle bottom. The rally out of that bottom shouldn't last very long. 4 to 8 days at the most and then the really damage to the dollar will begin.

    I'm going to go over it extensively in tomorrows update.

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  69. Gary, I'm having some problems logging onto your nightly report this evening. ???

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  70. Check your email. I just sent out a new password.

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  71. Gary,

    In response to...

    "I suspect the debt spiral we are in is going to eventually prove fatal for the dollar and it will go the way all currencies go.

    It will be a process though that will take years to complete."

    If the dollar goes the way of all paper currencies...to zero, how will we benefit from owning metals stocks or etfs in dollars? And, what exchange would one "cash in their metals for?"...land? Grain?

    The most poignant question I have, and ask myself often is...What will be the means for taking the wealth gained/preserved in PMs and maintaining it during a collapse of a society?

    Mitch

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  72. If it appears that a hyperinflation is approaching then we would have to convert our miners into real gold or silver. Thta won't be for years et so no need to worry about that now.

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  73. Why? The Zimbabwe stockmarket was on fire during the hyper-inflation and preserved value in real terms. I remember it was the best performing market (in real terms) during one of the recent years. You can imagine the dysfunctional companies that compose the Harare stockmarket.

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  74. I think it is foolish to think that the USD stands out as being worse than other currencies. The problems are global and currencies will trade within bands. I doubt the EUR will go much higher than 140. It's unrealistic to think that the US devolves into a banana republic while business as normal prevails in Europe and Japan.

    The true breakout for gold is when it disconnects from all currencies and starts to hit all time highs in "strong" currencies like CHF and JPY. The recent development just reflects cycles in the currency market with some QE2 gasoline thrown on the fire to justify traders betting against the dollar. Earlier in the spring the chatter was about EUR parity, flight to safety (USD), deflation, etc. A load of BS, but there is no real justification for the current dollar weakness. In my mind fair value for the USD is about 1.20 vs. EUR and all you are seeing now is relative weakness in a cyclical trend.

    The fact that gold continued to be strong in the spring with the nominally strong dollar (mostly relative to the EUR) was more interesting than the past few weeks.

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  75. Gary--
    Let's say this intermediate cycle in gold tops in 18-20 weeks as usual. That puts us into early-mid Dec, does this line up with your timing of a dollar cycle low? If so, we should see two more daily gold cycles within this intermediate cycle? That's all assuming we aren't in a runaway move where cycles don't matter, but let's assume the do.

    Thanks

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  76. Let's not forget many European countries are now enacting austerity measures so they won't have to debase their currency.

    The US has fully embraced Keyensian nonsense and we have decide to just run up debt however high it takes to keep the party going. So in that sense the US is much much worse off than most European countries.

    Mag,
    Actually 20 weeks is the normal timing band for a bottom not a top. Since we have to allow a few weeks for it to work it's way down into a bottom gold should top prior to 20 weeks.

    However it is a waste of time to try and guess the gold top.

    All we need to do is spot the dollar bottom. I expect the yearly cycle low to tag 71 before finding the intermediate bottom.

    I'm going to go over this extensively in tonight's report.

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  77. Gary, will the meeting taking place with the IMF affect gold with regards to any comments coming out og there. Also, I kept hearing yesterday that there was a big bet being made on the dec 1500 gold options, and that usually acts as a magnet for the price to go there. Any views on that statement?

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  78. If the dollar tags 71 like I think it will then $1500 gold doesn't seem out of the question.

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  79. Since Justin has liked the dollar, I like him.

    Sure wish he'd come back and enlighten the rest of us!

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  80. I wonder if he believes me now about the 3 year cycle low :)

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  81. Look like better than expected employment figures. Jobless claims down. PM gains moderating as a result. Maybe a precursor for tomorrow and a swing low for the dollar?

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  82. What would be a target price to add to GDX or GDXJ over the next couple weeks?

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  83. A swing low once the decline is confirmed.

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  84. Yen continues to strengthen as me and the BOJ battle it out. Did they really think they could out-print me?

    I'm working overtime and loving every minute of it. Just imagine when I start buying gold with my upcoming $1,000 bills!

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  85. can anyone tell me why sil is so strong? all the individual stocks within it look to be down like 3% but it's only down 1%

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  86. Hey Gary! What gives! I thought my account was supposed to go up every day for the rest of my life once I became a subscriber. You newsletter guys are all the same!

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  87. Forgot to add: Gold is going to $600/ounce and the S&P is going to 800. The fact that today is down virtually proves it!

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  88. Everyone keeps asking for dips! Well here you go!
    It will all be reversed in a aday or two...

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  89. Gary looks like Gold has so far corrected $28 from $1365 to now about $1337. Do you still think we will have more correction to go tomorrow?

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  90. Folks wait for the dollar to bounce. We don't even have a swing low yet. Actually we don't even have a swing high on gold yet.

    I don't know if it will happen or not, but I would like to see the dollar bounce to 80 and gold drop to $1300.

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  91. Gold made daily high today.
    Swing low that is today daily low must be made tomorrow or after?

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  92. correct. If gold moves below today's intraday low then we will officially have a swing high.

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  93. OMG gold swing $30 in a daily.
    there are so much panic selling.

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  94. Hardly panic selling. Just profit taking ahead of the dollar bounce.

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  95. USD isnt even up for the day yet...

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  96. http://www.ft.com/cms/s/0/c4e462b0-d212-11df-965c-00144feabdc0.html?ftcamp=rss&ftcamp=crm/email/2010107/nbe/MarketsAfternoon/product

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  97. Gobble Gobble!

    Enough said. :)

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  98. USD may not be up for the day, but it's a big fast rise off the lows of the day. still too early to tell whether that was the bottom, but so far it's looking likely.

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  99. A couple of days back, there was some Greenspan bashing going on here. Thought I'd share this quote of his:
    "The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake."

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  100. Gary,
    Given that miners are coupled to both SPX and the Metals, while the ETFs like GLD, SLV, AGQ are coupled to the metals only, on a % basis, would a better choice be GLD, SLV, AGQ over GDX, GDXJ, SIL in case of SPX tanking? If SPX rises, then GDX, GDXJ will outperform GLD hands down.

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  101. I've sold 1000 QLD into modest strength this morning.

    I think Gary has me spooked about this dollar thing.

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  102. looks like the pullback in gold will be more than 40 bucks. We're down about 38 from the overnight high and no signs of stopping yet.

    Stocks are tanking as well, which is interesting because in the past few months when stocks have tanked, gold has gone UP. Are we seeing a sea change here?

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  103. 38 point one day drop on gold..wow...it's been a while since something like this happened..

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  104. Whaddy'all think? Are we going to get an honest-to-goodness multi-day correction -- finally -- OR is this morning the last whistle before departure for higher prices?

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  105. JPM is meeting with the miners. They are going to start buying physical direct. They need to do this to remedy the current LBMA and Comex situations.

    This will prevent the LBMA and Comex defaults from happening for awhile, and JPM and the other big bankers will get to continue their games for awhile more. I believe the runaway move will not be this time around, but instead, again, a more managed C-wave.

    This is the speculation on the net. I have no hard evidence of any of this besides a meeting JPM set up with HL for November 7th, and supposed other miners stating that JPM as confronted them about buying their PMs direct.

    Just throwing this out there.

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  106. The article I'm referring to:

    http://www.marketoracle.co.uk/Article23232.html

    This HL meeting article can be found elsewhere, I'll post it later.

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  107. In the past there has often been at least one weekly candle down, with a tail into sub-breakout territory before the launch.

    With so much anticipation around this sector, it seems possible that we may not get it this time.

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  108. Article summary,"

    The shorts of ‘paper gold’ at J.P. Morgan [the Fed in drag] are selling the daylights out of the paper market and simultaneously buying exclusive rights to producers’ future production so they can try to fudge their way through an unmitigated fraud and settle a big enough chunk of their bad bets to keep this ‘systemically ruinous’ precious metals ponzi-scheme alive. "


    Here is the HL meeting with JPM link (you'll need to be a subscriber to read, but the meat is in the headline anyways), and correction, the meeting is today!...

    http://www.theflyonthewall.com/permalinks/entry.php/HLid1306515/HL-Hecla-Mining-management-to-meet-with-JP-Morgan

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  109. That was 40 dollar drop on the dot!
    Nice!
    Scared out a bunch of weak hands!
    Gary, your 27-40 dollar drop...is insane! Are you or have you ever been employed by JPM? :)

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  110. "Scared out a bunch of weak hands!"

    I would like to see us close down for a few consecutive days, hopefully drop towards $1,300 to get firmly back into the channel.

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  111. I put on a little more this morning on weakness.

    Watch out, friends! I'm a contrary indicator!

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  112. i added some too this morning, it pissed me off that i wanted to put a stop at 1364 last night but i decided to wait until the morning

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  113. The dollar is fundamentally sound. Trust me, everything is ok.

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  114. Great day in pms gents.

    Scare enough people out of PMS and the long-term story of PMS going up, stays alive for that much longer. All those that were thinking about buying gold are now saying "no freaking way"...Hopefully we can drop for a couple more days and change the opinion about pms. Hopefully get a couple fast money boobs to start saying how gold is dead...get Gartman talking about how gold should be sold and then we have out perfect set-up.

    From a long-term perspective, if everyone comes in now, the gold story is over, and we tag a final price that is not very high at all. Get some nice scare outs, and force out overleveraged hands, and the PM party keeps going. Its all about the final tag price, and the more scare outs we get, the higher that final tag price will be.

    I am not a trader, but from an investor point of view the fundamentals are screaming buy, and the price action is scaring people and traders away. Perfect!

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  115. Well Said Keys--
    Again we are pretty much in sync!
    Sure we aren't related?

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  116. Yes, Keys, you are absolutely right. I have to admit as a trader/swing trader hybrid, it goes against my nature to want something I am long to go down, but I have a chunk of cash to deploy, so I welcome the drop as well (sort of I guess.) Gary is changing my attitude about such things.

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  117. I don't spend a lot of time trying to anticipate a news event's effect on the stock market, but a strong jobs report (which I think Gary has postulated may rally the dollar) may be greeted with a strong open in stocks. I'm thinking that such an event will be (at least initially) received as a positive for stocks.

    If that's what happens, and if the dollar is rallying at the same time, I plan to sell heavily into the strength. I'm even considering an "all out" sale.

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  118. Wes, why would you sell all your stocks? We seem to have a confirmed uptrend, and I do not see excessive bullishness. What's your reasoning here? If the dollar tanks it would probably support higher prices, no? Would your sale be for a trade or an intermediate term flat position?

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  119. Gary: you had mentioned that $40 should contain the pullback. Was this off-the-cuff back-of-the-envelope-scribble stuff and you'll wait for the dollar to tag 80? I ask because we have already dropped $40 from today's high.

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  120. DG,

    I only allow myself a single stock as I just can't see funding my second best idea. This stock is exempt from all my trades. While I own this stock in size, the majority of my money is used for trading QLD.

    It is the QLD position that I am thinking of selling all out.

    After all, if I'm wrong, I'll buy it back. It's not like I have pride or anything like that. This is real money I'll be using.

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  121. Fair enough, but what are you seeing that makes you want to sell QLD? (I always want to either learn something or find a new reliable indicator.)

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  122. DG,

    The (roughly 20) psychology indicators I use are ranked 1 to 6 with 1 being most bullish. They have recently been at a 2, and changed to 3 on Monday.

    My single favorite "short term" indicator is the AAII bulls/bears and this has gotten quite bullish, especially on the 4 week MA I use.

    As to selling strength, I always sell strength. I mean, what else makes sense ?

    When I sell weakness, it means I'm seriously wrong and am stopping out.

    In summary, the market could use a good whack to reset the psychology indicators, which continue to deteriorate.

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  123. This comment has been removed by the author.

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  124. Thanks, Wes. That's what I was wondering about. Have you ever been to SentimenTrader.com? If you like sentiment studies, Jason's is the best there is, IMO. And yes, I also sell strength, and if I sell weakness I am getting stopped out. Yeah, I agree we could use a dip to rebuild bearishness.

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  125. DG,
    $25 to $40 is only if gold remains in a runaway move. As I have said many times I would prefer gold not get into a runaway move because of the sudden crash that typically ends them. It would be best for gold if we could at least get a test of $1300 and really dampen sentiment. Then we will be setup for a much more powerful move into the intermediate top.

    I suspect a lot more powerful than what we just saw if you can imagine that.

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  126. Yes, that makes sense, but I believe I remember a post where you said you had no doubt that we were now in fact in a runaway move. Do I have that wrong, or have you become less clear that we have entered one?

    DG

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  127. Well one could assume we are still in a runaway move and that $40 should mark the bottom of the move. However a $50 move would then signal the end of the runaway move and that the crash phase was impending.

    I don't however think we are even vaguely close to the end of this C-wave much less a crash phase so it will probably turn out that this was only a very strong rally diriven by the initial collapse of the dollar.

    Let's hope we aren't in a runaway move because then we should be able to still use our cycle tool for timing.

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  128. Got it. Thanks. Makes sense.

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  129. Curious as to what will happen if the fed backs down on any immanent easing.

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  130. Mom,
    It won't make any difference. The damage has already been done during QE1. The dollar is going to slide into a least a mini-crisis whether or not the Fed does QE2 but if they are stupid enough to do it again it will just make the dollar fall all tha much worse.

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  131. The more I think about the stock market bullishness, the more bearish I become.

    I've just sold an additional 650 QLD into the after market, with more offered.

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  132. I've sold another 600 QLD tonight.

    I'm just hoping we don't fall out of bed in the morning.

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  133. Sorry Gary,

    I don't understand this statement:

    "However a $50 move would then signal the end of the runaway move and that the crash phase was impending."

    You're hoping for a ~ $60 move down to $1300. What is the "crash phase" that will be impending?

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  134. Runaway moves end in some kind of crash, like Feb. 07 or May of this year. If gold was in a runaway move then the intermediate cycle low would likely come as an out of the blue semi crash.

    A move of $50 or more lower at this point would signal either the end of the runaway move and an impending crash or that this wasn't a runaway move. It was just a very powerful rally driven by the dollar collapsing.

    I think there is virtually 0 chance of a crash with the dollar dropping into a yearly cycle low so it's more likely this was just a really powerful rally.

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  135. The way I was thinking about the fed purchases etc. Is that money was just taking the place of all the assets that were wiped from the housing collapse. Why would that create inflation, if the fed money was just replacing something that vanished?

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  136. Gary,

    I assume you're expecting $HUI to drop below 500. Are you expecting it to tag the 50 or the 200 dma?

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  137. OK Gary, getting a little greedy here: I get your thesis for the 3 year cycle low in the $$$ next year and the C-wave top in Gold. But, what after that, Gold does not enter a D-wave, but continues on its runaway move dropping about $40-$60 on pullbacks? I guess, I am looking for some sort of definition of D-wave (or crash) since we know the definition of a runaway move (about $40 pullback)

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  138. The main reason I have become increasingly expectant of a stock market decline this evening is that I ran the 5 week average of the AAII bull/bear ratio.

    The last three times that the investors were this bullish were on 1/11/10, 5/19/08, and 10/15/07. All were a good time to be leaving Dodge.

    Purists will note that these dates were all Mondays, an artifact of my computer program handling weekly data. The actual dates were on Thursday morning of those weeks.

    A distant fourth place for bullishness went to the first week of May of this year, and we all know how that turned out.

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  139. Bede,
    I wouldn't count on it. That's why I'm not going to lose my position here.

    Nick,
    There will certainly be a vicious D-wave decline as the dollar comes roaring out of that 3 year cycle low. No doubt about it. We will try to avoid that and get back in at the bottom of the D-wave.

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  140. Gary on your Oct 5th report you mentioned that SPX could top when the dollar hits its low. With the likely hood of unemployment rate increasing tomorrow we should see the SPX drop tomorrow and a bounce back from the USD index?

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  141. I've found that the news will mysteriously align with the cycles most of the time or the marekt will find some way to interpret it so it fits the cycles.

    It's getting close to the time when the market needs to start moving down into a daily cycle low and the dollar needs to bounce out of it's now due cycle low.

    I'm guessing the market will find some way to make the jobs data initiate the dollar cycle bottom and the stock cycle top.

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  142. Gary,

    I'm not a gold bug and have no core position, nor do I want one. But I think your calls have been spectacular, and I'd like to place a wager on this next leg.

    Where would I get the most pop? I'm not particularly concerned about losing, and AGQ looks good to me.

    Is there a better choice ?

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  143. Wes,
    That's a tough call without the benefit of hindsight but I would say it will probably be a toss up between AGQ, GDXJ and SIL.

    You can probably toss a coin and have about as good a chance of catching the biggest mover as trying to anaylze it. They should all be pretty close so even if you don't guess right it won't make that much difference.

    For what it's worth AGQ has no company specific risk.

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  144. Okay not sure why my comment was deleted, but okay...no need for me to talk further then, long-winded as I am.

    Happy trading!

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  145. Keys,
    I don't know why blogger does that from time to time. Here is your post.

    Pain is pain. Anybody here in Feb thought a D-wave was on us. And if what we went through wasn't a D-wave and just a period of consolidating, we need to really believe in the big picture, which is the only real picture. After that comes Gary's ABCD, and other tools....why...tools break-down and throw us off. One needs to be able to ride a D-wave without trading out. That may mean a massive 40% drawdown.

    On needs to commit to the big picture, and if an obvious trading opportunity comes it is a bonus. Gary mentions that he would like to exit before a d-wave, but if you get stuck in one you have to be able to suffer through the drawdown.

    Gold has got to be the worst investment out there. The best person in the world is probably the guy that buys gold and never looks at the price, doesn't care, and one day sees a "we buy gold for $5000" sign. Then that guy runs home and sells his gold coin, never understanding the stock market, never understanding cycles, not caring about mouse clicking, etc

    In this way Gold the ironic beast, a bastard of an investment, one I hate, and one that will drive successful traders absolutely nuts, to be smart enough to know how stocks and the economy works, but stupid enough to simply buy gold, plug your ears and sing songs while the beast bucks away.

    This beast is completely opposite of what one would want in an investment. We want gold to struggle higher, not explode higher. We want nobody to know about gold, and for people not to run into it. We want gold to crash at times. We want to hold during these crashes if need be. Stupidity is rewarded for buy and holders in gold, and the smart guys lose their shirts.

    I firmly believe you can’t trade gold. If an opportunity plops on your lap, great, but that is secondary. If the big picture says gold must go higher, then price action is irrelevant. I am only commenting like this, because I have a feeling that many on this blog, from what I have read, are old turkey as long as gold goes up, but a mere 20% drop in pm’s and then they become traders. We all need to believe firmly in the big picture, one I test on-going, and everything is screaming a better and better case for gold.

    Thanks Gary for being a great coach, btw. When I feel my sinful ways coming back, some of you big picture comments really help.

    Gobble Gobble.

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  146. Anyways, I am a little(well..alot) of an extremist so I don't take offence to when my blogs don't fit! Please feel free to delete whenever I don’t make sense. Like now. Lol...Keep up the great work Gary!

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  147. Keys,

    Interesting take on positioning in gold. I have to say that I think your assessment applies to me. I am Old Turkey during an uptrend, but if I can avoid a 30 to 40% downturn, I would like to. However, given that I'm not sure that the downturn will materialize when it is supposed to, I will keep my minimal allotment in PMs...thus far, it has been appx 20% of my funds.

    Gary has tuaght me some things about the nature of cycles, and with the help of his insights I've been able to guage tops and bottoms of intermediate cycles with pretty decent accuracy. I recognize that won streaks end, and that's why I won't sell my position entirely.

    Anyway, currently at appx 80% allocation in SLV, GDX, GDXJ, SIL and SLW. I'll be looking for a swing high on the dollar's next rally to add to my position in SIL (currently smallest).

    I do have strong hand status as I've been in since Gold broke the triangle at 850ish, and adding at intermediate lows since.

    Mitch

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  148. Mitch and Keys,

    I find your posts useful. It helps with the key reasons why I am on this blog - to ride the gold bull without being thrown off. Learning to take drawdowns etc. Really anti-thetical to the usual trading mentality (e.g. looking at oscillators for buy or sell signals)
    The other thing that was useful also was the discussion on spotting intermediate cycle tops and bottoms.
    Hope to see more of this :-)

    Oh and Keys, gobble gobble to you too :-)

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  149. Gary, we dipped below yesterday's low, so the question is how high does gold have to go for this to be the bottom?

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  150. Jobs report out....Really bad...fundamental story for gold is again better. Jobs down by 95,000….private sector up by 64,000. We need to add 100-150 thousand jobs each month just to keep up with the labor force. Real story was the number of part-time workers that want full-time work but can’t get it…this rose by 612,000. Wow!

    http://www.bls.gov/news.release/empsit.nr0.htm

    Builds a better story for QE2...

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  151. Keys and others: I have to disagree (it's a blog after all!) I do believe you can trade gold or anything else for that matter. While it is absolutely true that vast majority of people are not suited to trading, it is that emotion that has people lose, not gold itself. As one example, you have to be able to sell it at $1200 and buy it back with both hands at $1250, if that's what seems right, and people absolutely hate doing that. Further, you may have too do that three times before getting right and then watching gold go to $1500. If I remember correctly, one of the traders in Market Wizards who said "You can throw a dart at the WSJ to pick something, and then decide whether you want me to be long or short it, and I'll still make money consistently if you do that over and over." Impressive. It's all about tactics and risk management. I think Gary's way is easier by far, but I am always nervous that the 40% drawdown turns into 80% because the bull ended and no one knew it (some new gov't regulation during a panic?) Without protecting oneself from drawdowns you only need to be wrong once to severely damage your account. There are lots of ways to play this game, and many more ways to blow it, but I believe you have to know your nature and act accordingly. I for one would never sit through a 40% drawdown. I'd rather make less money per year, have consistent positive returns, and not worry about an "Oh my God" year. Great points and debate, though.

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  152. Aaron,
    Be patient. The open is all about emotions. Wait to see how we close once cooler heads make their decision. If the dollar continues down then I would look for it to find support at 76.50. We will get some kind of bounce out of the dollar and so far we haven't seen it.

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  153. DG,

    Nice thoughts. If one is a trader, the worst thing they can do is pretend to be an old turkey holder...pretend that they have converted. This is the worst thing for your account...you trade out when you should be holding. I am sure that there are some traders, good enough, and with enough disciple to trade gold profitably.....but the question then becomes can they trade better than a buy and hold, or generate the same results with less risk. If one can great and DG you seem to be one of those few....and if I am wrong, meaning most traders can trade gold with success...great. Mostly it comes down to making money (defined as increasing purchasing power)....I know I can’t trade gold, and I won’t bother to try. I get stressed out when I don’t have my positions in for gold…the fundamental story is so strong here, that I don’t want to chase once the general public catches on.

    As per being wrong about the big picture, that is the Achilles heel, one that I look at fundamentally on an ongoing basis. Once I believe that is dead, even if premature, I am out of gold....despite price action. The example of another feather in the hat for gold was the jobs report today….horrible. Tie that in with what the Fed had already said, and QE2 becomes more likely….etc….

    These are my views, and the way I run the race….of course others do it differently, and if it works fantastic.

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  154. Gary,
    The voice of reason, yet so hard to follow :)
    Thanks!

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  155. I'm trying to be patient, but itchin to git me some more gold with the new stacks of paper I printed last night!

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  156. SB,

    You must have had dinner last night with Bill right?

    http://noir.bloomberg.com/apps/news?pid=20601087&sid=aULjL5cs.858&pos=2

    ReplyDelete

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