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Monday, January 24, 2011

50% PLEASE

I've noted in the nightly updates that gold is now deep in the timing band for a daily cycle low. My best guess is gold should tag the 38% Fibonacci retracement before bouncing out of that short term bottom. 

However the stock market still hasn't moved down into it's yearly cycle low yet.Both gold and stocks are now due for a major yearly cycle low. This is a much higher degree correction than a daily or intermediate cycle pullback. So the corrective moves in both gold and stocks should be very severe. I would be very surprised if both don't correct at least to the 50% retracement.

 

Notice on the gold chart how the rally out of the yearly cycle low in the dollar halted (temporarily) the C-wave rally in gold.

The dollar is now moving into the timing band for another short term bottom. I expect the rally out of that coming bottom to drive the final leg down in gold and to power the move down into the yearly cycle low for stocks. 

While I fully expect gold to bounce off the 38% retracement I doubt that will be the end of the correction. A yearly cycle low usually has to do more damage than that, especially if it's coupled with the massive selling pressure of stocks also moving down into a yearly cycle low.

Those that want to speculate could enter precious metal positions at around $1325, but be prepared to get stopped out if gold dips back below that point next week on it's way down to $1290.

Personally I'm going to wait until I think the stock market has bottomed before I'm ready to jump back into heavy positions.

267 comments:

  1. Gary,

    We are in week 30 of the current intermediate cycle for stocks right?

    This seems pretty deep in the timing band for a bottom. If the bottom of this int cycle is also the yearly low, then there is not much time left. If what you say is true and yearly declines are severe, we should expect a real doozie!

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  2. It'll be interesting to see where SLW finally bottoms in this decline.

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  3. They have lasted up to 36 weeks before.

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  4. Since we should be patiently waiting for pms to bottom(small short-term counter trend trades don't count), you should post your tournament pics to entertain the troops.

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  5. Oil has made a lower low today. As soon as the banks and tech join the party the market should be on it's way down into the yearly cycle low.

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  6. LOL I didn't take any tournament pics this time. I was busy lifting and forgot to pull out the camera.

    I'm sure people can find better things to do than look at pictures of an old guy lifting weights.

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  7. An interesting post written by Carl Futia on his website:

    I was asked by a friend what I thought about the US dollar and the Feds policy of quantitative easing (QE2). Here is my e-mail reply:

    Catherine:

    I think Bernanke did exactly the right thing when he pushed the Fed into QE2. Moreover, at least so far, QE2 is a success. How do I know? First, the dollar index is going down (and I think it has a good shot at 65 - but when QE stops the dollar will rally, and rally big time). Second, the yield on the US 10 year is going up while the tips spreads are pretty much unchanged. This shows the bond market is expecting more economic growth, not more inflation. Third, the US stock market is going up, also reflecting expectations of higher growth.

    QE works by inflating asset prices (stocks, commodities, real estate and other real assets) which rise initially because investors re-balance their portfolios after they sell assets to the Fed. But rising asset prices encourage their production (real investment) and also make people more optimistic about the future (more bullish "animal spirits" to borrow Keynes' phrase). These last two effects boost economic growth if there is slack in the economy as there is now.

    Carl

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  8. Whatever! Old? Hardly. You're in better shape than most 18 yo. Of course, the whole diet and exercise thing seems pretty extreme to me.

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  9. Apparently Carl wasn't paying attention when the last Keynesian experiment came apart at the seams in 2008.

    Maybe like the Fed, he thinks the problem was in the size of the dose not that we were using the wrong medicine.

    I expect Carl will get another rude awakening sometime in the next year or so when this Keynesian experiment flops and unleashes an even bigger catastrophe than the last one.

    Some people just never learn no matter how many times they get punished. (sigh)

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  10. Futia is smart guy and very successful at trading the markets, so I wouldn't dismiss his analysis of QE II.

    However, I keep coming back to the selective "benefit" that QE II provides: It helps those who are financially well off, at least well off enough to have a portfolio of stocks. Turns out only 1 in 3 US households have a stock portfolio worth more than $10,000. So doesn't that mean that 2/3's of US households not only do NOT benefit from Ben's QE, but also get to reap its negative effects, namely increased inflation. Moreover, those who live on fixed income lose out. And those who are retired and have their nest egg invested in interest bearing treasuries, savings accounts, or other conservative investments are also losing out.

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  11. Gary,

    For whatever reason, you seem to think that anyone who doesn't share your point of view is an idiot who is obviously wrong. There is no such thing as certainty in the markets.

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  12. $ plummeting pm's sitting still. What will it look like when the $ rallies?

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  13. funny that Futia list "the dollar index is going down" as one of the benefits of QE!

    That is a benefit if you're a corporation selling your products to foreign markets, but for the average American, that would be a negative effect, no? Imported goods now cost more and spending time in a foreign country also costs more.

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  14. David,
    History is crystal clear on this one. Printing money has never fixed the problems we have...never. Sometimes it will offer a brief reprieve in the short term but not once has it ever solved the problem in the medium or long term.

    We got a front row seat in the Fall of 08 as to the ultimate outcome of this strategy.

    So do I think that repeating the same thing again only larger and expecting a different result is stupid?

    Sure I do.

    We need to learn from our mistakes not repeat them over and over.

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  15. I just don't see how commodity price inflation creates economic growth except for the big resource companies.
    At least for me, the higher my bills get the less money I have to spend and the less I spend because I am preparing for higher costs. Seems businesses, especially small ones, will do the same.

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  16. PC,

    couldn't you make the argument that the lower dollar keeps Americans local when traveling so the dollars stay here.

    American made products are more competitive in the market place.

    The corporations that sell goods overseas employ people locally.

    I guess it just depends on how you see the glass (half empty, half full)

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  17. Curiouser and curiouser to me. In DeMark land, we are in Week 3 of a 1-4 Week Sell on the Dollar Index. I didn't think Gold/Silver would be joining the party, but I guess Euro's problems are solved (again!) As reported last week, Gold futures qualified a down break level at 1350 last week. Kevin Depew on the Minyanville Buzz and Banter (free through TD Ameritrade Research and Ideas) shows this is a significant trend break. From this, we should get a full Daily Buy Setup of 9 bars recording sometime this week, then followed by a complete 13 day Sequential countdown (non-consecutive days, however), so we are looking at least 3-4 more weeks of Gold downside before a buying opportunity will emerge! This corresponds pretty well with what Gary is showing in this post. Will stocks join the downside pity party? Depew has pointed out there is at least 4-5 more weeks for exhaustion to play out in SPX - we shall see. As a reminder, I am still looking at a dollar "collapse" into DXY 72.5 - at that point, the complexion of this game will change...only 7% from here!

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  18. If inflation equaled economic growth then Zimbabwe would be the most prosperous country in the world.

    Sorry folks just counterfeiting dollars isn't prosperity...it's theft.

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  19. I'd keep an open mind about that expectation for gold and stocks to find a low together. Only 4 of gold's last 13 intermediate cycles have bottomed within a week of stocks. The last two lows have trained us to look for such congruences, but a longer history does not support that view.

    I would agree, however, that prudence should stop a trader from getting too aggressive without seeing an equity correction. I would certainly stay away from time-sensitive holdings in that case.

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  20. Gold can march to it's own beat. But an intermediate cycle low in stocks almost always bleeds over into the mining stocks, no matter what gold does.

    But yes these yearly cycle lows are tough especially when they are closely timed. More curveballs :)

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  21. Gary,

    How long can this market stretch before it finally starts to correct?

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  22. Europe may have problems, but their debt is nowhere near the U.S. Surprised Germany is hanging their population out to the wolves. Politicians are politicians though.

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  23. Well, as we know, there's a big difference between the market and the economy. Futia may be a savvy trader, but I'll rely on better sources for ECONOMIC analysis. Such as John Hussman, who is not a trader (obviously, given short term results) but a very good economist.

    It's important to make this distinction. Futia just spews the same nonsense (IMO) that most of Wall Street does WRT QE, etc. It's well disputed by real economic analysis that is sustained by long term results.

    All that said, I don't know what Futia's longer term investing/trading results are, so I'll reserve comment on that.

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  24. I decided to hedge a portion of my brokerage account for a downside move. Any comment on ZSL (double short silver) for that purpose?

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  25. Why would you want to short a bull market and especially after it's already made a large move down.

    If you want to short something why not the stock market which is terribly extended and still in a secular bear market?

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  26. Could we see 1300 on the S&P here before we rollover?

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  27. Well I thought you were still expecting stocks to take a pounding as we head into the yearly cycle low. Will that not feed over into PMs and PM stocks?

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  28. As I noted in the post and in the brief weekend report the dollar is just now entering the timing band for a daily cycle low. Once it bounces out of that short term bottom then we should see the correction begin in earnest.

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  29. Greg,
    Yes but I still wouldn't trade against the secular trend. What happens if gold decides to bottom here and explodes higher and the miners decide they don't want to pay attention to me and rally anyway despite the stock market declining?

    You will just end up throwing away money on your hedge.

    Hedges are for large funds that can't get in and out easily without moving the market.

    If you are worried about further draw downs then just sell. There's no need to add another positions to manage plus pad your brokers commissions when all you have to do to stay neutral is hit the sell button.

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  30. I still can't get over Futia's call most of the year last year for silver to go to 12. (I think the was the number...it was an insanely low target) He lost me there.

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  31. Onlooker,

    I believe Futia does well in his long term accounts too. His book re contrarian trading outlines his approach, but it's very long term and pretty much holds to the view that over the very long term stocks will go up.

    Futia may not be an economist in your opinion, but he does have BA in economics from Yale, a masters in math from UC Berkeley, and a PhD in mathematical economics also from UC Berkeley.

    'Course, that's the problem with the whole field of economics: rarely is there any kind of consensus, for every economist who says QE II will save the day, there's another one out there who says not only will it not work, but it will cause more harm than good in the long run.

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  32. pima

    Sorry, mea culpa, I talked out of turn on Futia's credentials. I admittedly based my opinion on what I think is his B.S. view on these economic issues.

    I should have stated things differently as there are clearly a lot of "real" economists out there who are full of $#it, and have gotten things terribly wrong over the last decade or two (at least). But that's a long and dragged out discussion/debate I'm not in the mood to get into here.

    Suffice it to say I think his opinion that QE and other mainstream monetary policy and practices, is the panacea that he apparently thinks it is, is crap.

    And as Jayhawk pointed out, his trading calls aren't all that great either, apparently.

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  33. Someone on here mentioned MDW some time back. Last Thursday when gold got smoked it started going up, and is up 20% from Thursdays low. Nice volume for 1/2 day... MAYBE a future over achiever???


    IVNRT - that was a pretty month

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  34. Onlooker,

    I believe you will turn out to be right re QE II. PM's are the reason most of us are here and most of us who are playing this long term bull in PM's think that QE will ultimately cause more harm than good. I think both you and I agree on this point.

    Futia is a smart man, he does miss on some calls, but that's trading, no one gets them all right. He makes money over both the short and long term, though, and that's the real measure of success for a trader, right? Not whether they get a lot of calls right, but rather what their bottom line tells them.

    Personally, I respect Futia's work and his success as a trader, but I have not adopted much of his style to my own trading. Maybe in the future, maybe not.

    In the meantime, I prefer to play this bull market in PM's.

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  35. Yes I was talking about the very long base on mdw.

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  36. yes Brian

    I thought it was you or Steven.

    also I think it was one of you that said you followed me into SOLF and stayed in it. It (and all solars) look good today- volume wise too.

    LDK, SOLF, SOL, CSIQ, JASO

    I still own Jaso and SOL

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  37. Looked at that MDW again on a 2 yr and 1 yr weekly chart. Actually looks very good.
    Last week it had 2 million volume FOR THE WEEK ,and today almost a million already near noon.

    anyways, chart looks good.

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  38. I'm very bullish on the market this year.

    The superinvestors are quite bullish (while some are cautiously bullish) on the market this year as well, including David Tepper, George Soros, John Paulson, Bruce Berkowitz.

    Hard to bet against those guys.

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  39. This comment has been removed by the author.

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  40. This comment has been removed by the author.

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  41. From that Citi analyst:

    Despite our overall bullish view on precious metals due to the longer-term backdrop of paper
    currency debasement, Silver’s triple-momentum divergence reversal after exponential gains
    suggests a substantial pull-back.

    Both the head and shoulders neckline break and the 38.2% retracement of Silver’s most recent upmove suggest that Silver will likely trade at $25 and possibly even extend towards the 200 day moving average presently at $22.08.

    While this would be an aggressive correction it would not necessarily change the bullish trend.

    38.2% retracement of recent uptrend = $25.00

    50% retracement of recent uptrend = $23.00

    200DMA = 22.08

    What are people's thoughts on where silver will bottom? We think gold will bottom somewhere between $1290-$1330 but what about silver? Any educated guesses out there?

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  42. SLW just bounced off the 50% retracement mark @ $30.4 (rally started at $17.5 and went to $42.3)

    could be a good bounce play for those interested..

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  43. Looks like Beanie just called the high for the week. Thanks buddy!

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  44. whats a decent strategy for buying at the next gold bottom? gdxj? certain miners in particular?

    are there any consistent outperformers or is this a crapshoot?

    thanks

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  45. Back of the envelope math. If Silver declines 2:1 gold and gold down to $1,275 has Silver in the $24.50 range

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  46. Gary,
    (or others who will share)
    I am considering buying physical gold and silver. What is the best way to hold it; Coins vs bars? and if coins, any preference on which ones?

    Thanks for any help.

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  47. Poly,

    That would be interesting if gold falls that low but I don't think Gary believes it will get there (nor does Doc). Of course anything is possible. The two variables are:

    1. How far gold falls

    2. Whether silver exhibits relative strength or not (maybe the ratio will be 1:1 or at least something less than 2:1). Keeping in mind that Gary astutely noticed silver's relative strength on the last IT in July which is why he thought it would outperform.

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  48. Who knows! These intermediate lows can or often bottom on massive final drops, intra-day these targets are very possible, IMO.

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  49. Dan coins carry a high premium on purchase, silver is sometimes over spot by $4, gold coins $70-100 over. If someone actually has to buy bread with pm I am not sure how the store owner would react to a gold/silver bar as opposed to a coin...?

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  50. Dan,
    I like American Eagles for gold and 100 oz. Swiss bars for silver. I have noticed lately gold and siver has a higher premium on some sites. Last time I bought gold they sent me buffalos instead of eagles and I returned them. It is just a preference to me.

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  51. In gold I would prefer Buffaloes as they are purer gold
    99.99% pure gold over the 91.67% gold used in the American Gold Eagle
    Silver --I prefer rounds or bars.

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  52. Folks,

    I first ran across Carl's blog 4 years ago (2007). At that time, he was calling for a super move up to complete a 3 peak and dome formation. When the corrections started, every dip was a bottom call. He did this for almost 12-13 months until September of 2008 when the Dow was at 7,700. He didn't change his stance until a staggering 6,300 DOW points!

    He was also one of the biggest bear on Gold & Silver. He 'tried' to call a top at 600,700,800,900,1000, 1100, 1200,1300...it was until recently he changed his thoughts on gold going higher. He essentially was wrong for 600-800 points.

    Ask yourself this. How in the WORLD could he had done well in which he was SO wrong in one of the nastiest bear market in history in equities and bull market in PM?

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  53. March 2008
    http://carlfutia.blogspot.com/2008_03_01_archive.html
    "I think the next development will be a rally from current levels to 1390 or so."

    June 2008
    http://carlfutia.blogspot.com/2008_06_01_archive.html
    "Spiders - September S&P E-mini Futures: The market is in a trading range which I think will be followed by a rally to 1500. Today support is at 1300. From that level I think we shall see a rally to 1330."

    september 2008
    http://carlfutia.blogspot.com/2008_09_01_archive.html
    "Spiders - September S&P E-mini Futures: I think the e-minis are headed for the 1160 level. From there the market should turn up once more and a rally to 1300 should begin. "


    November 2008
    http://carlfutia.blogspot.com/2008_11_01_archive.html

    "Spiders - December S&P E-mini Futures: I think a rally to 1000 is underway. The Next upside target is 925. Support is at 840. "


    January 2009
    http://carlfutia.blogspot.com/2009_01_01_archive.html
    "March S&P E-mini Futures: Downside target for the e-minis is still 820-25. The market has dropped as low as 833 this morning but then rallied to 846.50 after the GDP news. A move above 850 will tell me that the drop from 876 is over and that the market is headed for 900 and then for 1000. "

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  54. If you find this amusing, have a look at his Gold call from 2007 to June 2010.

    April 2007
    "GLD - April Gold: I think that both GLD and April gold have begun an extended decline that will carry gold well below 600. Resistance in the futures is still at 665."

    June 2010
    "GLD – August Gold: The odds are that the market will continue upward to 1320. I still expect to see 875 before 1400. Support stands in the 1160-70 range."

    With all those academic credentials in economics and mathematics, he was down right AWFUL.

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  55. Gold/Silver showing much weakness, more so in light of dollar and equities. All the miners starting to get deep into over-sold and unloved territories.

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  56. Gary,

    Would you still be heavy silver whenever you re-enter if silver isn't exhibiting the same type of relative strength as it did over the summer?

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  57. Eric H,

    I used to read Carl´s blog in 2008. He made a lot of money, even though his bias was way off. He published his trades real time, you can check out his blog entries in 2008, they all have time stamps, plus I was reading them at the time they were made.

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  58. Hi Gary,

    Welcome back!

    Once the low is reached within the next month, would you think options to be appropriate at that time?

    Thanks!

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  59. If anyone has the itch to trade gold futures around the clock b4 Gary's signal but doesn't want to take on a lot of leverage, check out the micro gold future ticker MGC. You can trade different months and it tracks the big contract very well, while being only 1/10th the size.The bid/ask spreads are not bad at all. IB has it, and I believe CME is waiving commissions till April.

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  60. I agree with Gary that hedging the market is only useful for large funds because they can move the market by selling a large position.

    Small investors don't have that problem so it's more efficient to pick a direction and stick with it or get out.

    FWIW, I don't agree with the "holding a core position" philosophy. That to me is the same as hedging. The only possible reason to hedge might be tax avoidance.

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  61. HUI making new lows for the move down. Licking my chops, but still too early!

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  62. SVM has been taking one helluva beating...13.5 to 9.5 already

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  63. Hi guys, 1st comment here, nice SOS on IWM today so far.

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  64. I would not use options at this time. Wait till the next A-wave.

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

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  65. Gary, as you said on your posts, we should be starting a new daily cycle on Gold, no ?

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  66. Gold hasn't put in a cycle bottom yet. It has to put in the bottom before the next cycle can begin.

    I do think the next cycle will also be a left translated cycle and move down one time before the intermediate cycle bottoms.

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  67. In what day are we in the present daily cycle ?

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  68. I updated the cycle count chats on the website.

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  69. EricH,

    Futia's trades are public record on his blog. He was profitable during those years of "bad" calls.

    The thing is, he doesn't care whether his calls are "right". He cares only that he makes money. And he was able to do that even when his overall market stance was 100 percent wrong.

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  70. Gary,

    Another $40-$50 drop over 3-5 days is certainly not out of the question. Under that scenario, couldn't (shouldn't?) that represent the daily AND intermediate cycle bottom? Wouldn't it qualify nicely in terms of duration and severity?

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  71. Just curious is Carl a day trader? That's about the only way one could make money by trading against the trend, especially a trend as violently strong as the bear trend was in 08.

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  72. Poly,
    If gold were to tag $1293 in the next 4-5 days then it probably would mark and bottom. I doubt we will see that strong of a sell off though.

    It's probably more likely gold tags $1320ish bounces for a week or so then gradually moves down to $1295 in the middle of Feb.

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  73. Gary,
    Maybe your next great industry will be coming on line soon. A pair of Italian scientists say they have discovered nickel/hydrogen cold fusion with a byproduct of copper.Not only do they claim to have discovered the process, but they have the units ready to ship in 3 months!

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  74. Energy isn't going to be the next "new thing" but we do need to cure the energy problem before the next new thing can begin.

    I expect it to come from the biotech sector.

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  75. This comment has been removed by the author.

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  76. I expect a final cycle that rolls over from say $1350-60 to $1290 would be scary, especially for anyone holding PM positions.

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  77. Carl is not really a day trader. His short term trades, which are the ones he published on his blog, were mostly short swing trades. I would say that he cuts his losses pretty fast, so basically when he´s wrong he´s out of the trade on the same day. But when the trade goes his way, he usually holds it for 3-5 days, sometimes even more.

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  78. Gary, in the next gold daily cycle, you expect a left translated and shortened one, right ?

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  79. That's my current expectation. If the pattern of lower lows and lower highs is broken though then that expectation will go out the window.

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  80. Just read this

    The immediate catalyst for the unwind of the SFP is that the Treasury will most certainly breach the debt ceiling by the end of March unless it gets the benefit of the $200 billion buffer, which counts toward the total debt issued by the UST. However, what that also means is that the US stock market is about to become awash with another $25 billion in suddenly free cash every single week, until the entire $200 billion SFP buffer is depleted. In other words, take the liquidity impact of POMO, which is roughly $25-30 billion a week, and double it! We are confident the US Treasury will announce that beginning with the week of February 14, it will no longer roll maturing 56-Day Cash Management Bills, which means that for the ensuing 8 weeks, one on every single Thursday, there will be a total of $200 billion in incremental liquidity flooding the market, and probably sending stocks, commodities, and everything else that is not nailed down into the stratosphere all over again.

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  81. Gary, i know and you already told that it´s hard to guess, but i ask anyway. Where do you think silver will be when gold bottoms ?

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  82. $1327-1330 on Gold should be interesting. Bunch of stuff converging on that level. The 38.2% retracement (1328 - as Gary has mentioned), an important low from November (1330), the bottom of a channel line (around 1327), and the 138.2% price extension of the previous down swing.

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  83. How about if I just tell you when I think the bottom has arrived.

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  84. Bob,

    May I ask where you read that info?

    Thanks.

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  85. is anyone else buying the 150sma tag on gold when and if it comes?? right now it stands at 1305.8.

    Could be any day now

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  86. I don't think I would use the the 150 as an exact measuring tool. Gold could dip $10 under that, bounce, and it would still look like the 150 halted the decline on a long term chart.

    Too many people take these levels as exact points when in reality one should probably draw the line with a fat crayon.

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  87. LONG gold futures for a bounce here. Stop on the low 30 min ago.

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  88. Interesting "cycle analysis" from "The Chart Store" via the Big Picture blog.

    http://www.ritholtz.com/blog/wp-content/uploads/2011/01/1-21-11-SP-Cycles-Table.gif

    Shows the cycles from bottom to bottom in number of weeks Of the 18 Cycles completed since 1932 (79 years) the average cycle has run 223 weeks, or 4.28 years.
    Fit's your 4 year (208 weeks) S&P cycle well.

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  89. FWIW, both gold and silver are in the process of embedding but on the DOWNSIDE. The theory here is that the current trend (down in this case) is locking in and getting stronger.

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  90. We are not at all seeing what normally happens on this blog at intermediate lows. This thing may have a good ways to go yet.......

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  91. lol tells us what happens on this blog at the lows?

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  92. Lots of trolls spouting death to gold. Last year one fellow was threatening to head over to Gary's place for a toe to toe (obviously wasn't the intelligent type). Much venom for sure. Not a bunch of folks eager to buy I can tell you that.

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  93. Doug Kass is calling for 1050 on the downside. Alot of trolls follow this guy and will not buy the bottom when it comes much sooner.
    Who would be crazy enough to challenge Gary toe to toe? he will get snatch lifted into the air before he can do anything to Gary.

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  94. Gary: You often say that only the SPY's have predictive value as a SoS or BoW indicator, but you have also said that you have never studied it on almost anything else...? What have you looked at, and if not much else, why are you sure only the SPY's are worth following?

    Re trolls: we won't get that with the anonymous posting now rejected.

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  95. When HASN'T Beanie been very bullish on the market for the current calendar year?

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  96. DG,
    I looked at the QQQQ extensively and it had no predictive value. Same for the DIA. I've looked at a few of the bell weathers like AAPL, AMZN, XOM and they didn't seem to have any predictive value for the respective stocks.

    I haven't really looked at GLD, perhaps I should, although wasn't someone going to do that?

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  97. Gary,

    I have a question about miners as opposed to gold (and silver) prices correcting.

    If, during this correction, a silver miner regresses to the mean and approaches its 200 day moving average, is it time to start buying, or does 'regression to the mean' sometimes mean 'regression to below the mean' and I should wait for the correction to continue?

    One of my favourite silver miners, 55% above the 200 dma in early December, is today less than 10% above, as an example.

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  98. Usually it's better to just wait for gold to bottom.

    At some point individual miners will probably start resisting the decline but I doubt they will make much upward headway until the intermediate trend in gold reverses.

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  99. Thanks, Gary. I will resist (though must admit have added a little over 35% core, and may sell into the bounce to wait it out).

    By the way, regular posters, I have been avidly reading this great blog, and appreciate the discussion.

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  100. If you're antsy to buy then it's probably too early. When you can't buy that's the bottom.

    ReplyDelete
  101. I think last Feb's low got nasty here on the blog because Gary stayed invested much longer and many got caught in the brutal correction. This year, he pulled the plug early and got everyone out safely.

    ReplyDelete
  102. Off topic:

    But for those who did not see the Golden Globe's opening monologue by British comedian Ricky Gervais, it's a MUST SEE!!

    http://www.youtube.com/watch?v=BvHXzP2SpLA

    ReplyDelete
  103. Another must-read from John Hussman:

    Sixteen Cents: Pushing the Unstable Limits of Monetary Policy

    He does a great job of showing how the Fed is painting themselves (and us all) into a corner. And thus why their whole policy approach is doomed to fail, and why inflation is gonna come.

    ReplyDelete
  104. I love Hussman's weekly commentary. It would be tough to invest with him though, because he invests based on how things should be and that hasn't worked lately.

    ReplyDelete
  105. Just scanned the large caps. Somebody forgot to tell IVN there was an intermediate correction going on.

    ReplyDelete
  106. Gary: I believe Pima did look at GLD and he said it called a number of intermediate tops. This may make sense because SPY is the best hedge for the SPX while other stuff is unnecessary. GLD would be a good hedge for PM's, no?

    Someone on this blog posted the chart below: Your thoughts please?

    http://img524.imageshack.us/img524/7639/goldsos.png

    ReplyDelete
  107. Gary,

    You said, "If you're antsy to buy then it's probably too early. When you can't buy that's the bottom."

    Do you ever get antsy to buy? Or have you managed to train that out of yourself? How do you manage your emotions?

    ReplyDelete
  108. Could be tomorrow we hit our fib target of 38.2 %.

    I will buy a few shares and play the bounce.

    I see GDXJ hit the gap at 32.0 and SIL at 21.0

    ReplyDelete
  109. Silver major support only 30 cents away @ 26.475 bounce or plummet...

    ReplyDelete
  110. I have to admit based on the gold chart, that gold is about to fall off a cliff. Meaning it would not surprise me to see gold hit 1300 in one fell swoop tomorrow

    ReplyDelete
  111. DG,
    I guess it would be tough to tell unless one knew what the rest of period looked like. A bunch of little nothing 5 million SoS doesn't really make me want to sit up and take notice and if they are occurring all along the time line then they are probably meaningless.

    When I see a huge -370 though that does catch my eye. But it seems to be very rare. So all in all I'm not sure we are going to get much of an edge in real time by trying to add up a bunch of little 5-20 million days.

    ReplyDelete
  112. Bede,
    Well for one I don't just pick an oversold condition and buy hoping that will turn out to be the bottom. One needs to at least have a swing low before any bottom can form.

    I've said before I usually like to see some kind of major technical level broken before I try to pick an intermediate bottom. Then as long as we are in the timing band for the daily cycle low I just take my position and hold on even if I don't time it perfectly.

    AKA I would never stop out of an entry on day 25 of a daily cycle. It's too deep in the timing band for a low. If I have to weather a draw down for a few days so be it. I just figure I'm "close enough" at that point.

    ReplyDelete
  113. Both the xau and the hui are within a hairsbreadth of their 200dma.

    Is there any significance to this? If we are investing in the miners, should we be keying off their moving averages instead of the metals themselves?

    Could it be that the miners have already priced in much of any coming decline in the metals?

    ReplyDelete
  114. (cont'd)

    OR, if the $hui and $xau punch decisively through the 200dma, does this signal that something more ominous is afoot -- the "D" wave?

    ReplyDelete
  115. I prefer to wait for gold to bottom. Miners can easily move below the 200 DMA like we saw last year.

    What I would look for is the miners starting to resist going lower even if gold declines. That would be a sign that a bottom is approaching.

    ReplyDelete
  116. Hi Gary,

    Given the expected severity of the upcoming intermediate correction in the PM market that may take the HUI down to the yearly low, how is it expected to affect the upcoming C wave (in terms of timing and return). And if this does indeed mark the top of the equity market and the bear market resumes, it is likely that it'll simply negate the C wave in PM related stocks? Your comment much appreciated!

    ReplyDelete
  117. Only if the 3 year cycle low in the dollar is negated. And it certainly doesn't look like that is going to happen at this point.

    ReplyDelete
  118. Gary,

    Yes, I just checked the 2-year chart of both indexes and it seems they overshot the 200dma by about %5-10 at the bottom last year, and I would expect the same this year.

    So it looks like we can expect a trip to about XAU 180ish this time. About %10 lower from here.

    ReplyDelete
  119. Gary: You may be correct on that, but honestly, with all the time you've spent studying gold, its cycles, and how it trades, and the great work that has resulted from it, I am surprised that you have never really sat down and done the analysis and studied the SoS for GLD numbers. Maybe they are more cumulative than SPY. Who knows without looking? Please understand that's not a complaint as you do great work, but you already like SoS type analysis, and have studied it for all those other items (Q's, DIA, etc.) so...?

    ReplyDelete
  120. I guess I would have to ask what's the point? I can usually get pretty close to tops and bottoms with cycles, sentiment and regression to the mean strategies.

    I don't think the SoS data is going to improve my timing any, certainly not when it's as vague as 5 to 10 days of smallish SoS days over several weeks.

    So am I going to quit watching Stana Katic on "Castle" to do research tonight?

    Probably not :)

    ReplyDelete
  121. Has anyone posted a link to this Graham Summers article yet?

    http://bit.ly/e3efvv

    Money quote: Gold has formed very ugly technical patterns both in the long-term and the short-term. In the short-term we have what looks like a dome top forming. . . This is one of the cleanest dome top patterns I’ve ever seen. The downside target for it is around $1,250… which coincidentally lines up the Gold’s long-term chart pattern target as well.

    Let me be blunt here. If Gold falls to $1,250 per ounce and Silver falls $25 per ounce it’s time to BUY WITH BOTH HANDS.

    ReplyDelete
  122. if gold falls to 1250 silver will definitely be in the 22s..

    1300 gold and 25 silver looks more feasible...

    ReplyDelete
  123. Someone posted a link to Peak Theories recently. Thank for that, whoever it was.

    Abagail has some really wonderful commentary and she thinks it is either a diamond top or a dome top also.

    Gary, congrats on your tournament. Keep exercising everyday. Jack LaLane lived to a very healthy 96. Just think of how many bubbles you could get us through in that amount of time.

    ;-)

    ReplyDelete
  124. Cute Gary. But sometimes things aren't clear. For example (and just hypothetically), when gold made its higher high and we got that "buy back in" curve ball only to get stopped out shortly thereafter, had GLD's SOS been huge it might have slowed you down. For me I was slowed down by the $BPGDM being over 90, and its having an excellent track record as an indicator. You of course do great with sentiment, cycles, and regression to mean, but you use the same things for stocks AND add SPY SoS as a factor. That could be done for gold as well---sentiment, cycles, regression to mean...and SoS on GLD, just like stocks. O.K., I'm done with this topic. Thanks for putting up with me.

    ReplyDelete
  125. Wow, London laying the smackdown with gold under 1325. Should be a very interesting day!

    ReplyDelete
  126. So we hit our 38% fib target of 1325. We just might open lower today with a gap down. This may be the potential swing low we have been waiting for.

    ReplyDelete
  127. A REQUEST TO ALL SUBSCRIBERS

    Are there any UK based subscribers/followers here?

    I would welcome some conversation with UK based traders, especially about putting a basket of junior miners together as I don;t have easy access to GDXJ.

    If anyone is interested in setting up a discussion group or something, let me know.

    Ta.

    ReplyDelete
  128. Strellsy (TA)

    I am in the U. S. , but I just wanted to mention that in putting together a small basket of juniors due to your situation-you may get some good advice on quality juniors from some members who have looked into individual companies.

    Also , you may want to mention your 'risk' desire. Some of them are producers, already pulling gold/silver/etc out of the ground. Riskier ones are just explorers. They drill for results and if they fail to find minerals, sometimes experience unusual selling .

    Some juniors to research are under U.S. Tickers...maybe they are available to you??

    SLW , PAAS , HL , AXU , NG

    EXK is a good producer with record results (Endevour silver)

    and what about SIL (Global X Silver Miners)?

    No recommendation here, except to do due diligence :) hope that helps as a start.

    ReplyDelete
  129. From sentimentrader this morning:
    Rydex mutual fund traders have heeded some pundits' suggestions to pare holdings of Gold, with their assets in that fund dropping by more than 40% over the past few weeks.  If history is any guide there, the metal shouldn't be subject to much more of a decline before a rally attempt.

    ReplyDelete
  130. I'm seeing $1325.60. An almost perfect tag of the 38% retracement. Gold should rally here at least for a few days.

    If it takes the form of a bear flag then we can probably expect one more leg down in a couple of weeks.

    ReplyDelete
  131. Gary-

    For those of us who weren't around in 2008 & didn't watch your calls then, I'd love to hear how you played the gold cycle that year. When did you get out, did you go to a core, when did you buy the panic sell off, etc...

    Also, did you have the subs short? What did you all buy.

    Just curious.

    ReplyDelete
  132. DG,
    FWIW here are the reasons I added back. And even if GLD had seen heavy selling I don't think in real time it would have offset the positives.

    First and foremost the dollar broke down and made a lower low.

    Gold made a higher high.

    Gold appeared to be consolidating in a triangle continuation pattern.

    Silver broke out of a triangle consolidation/continuation pattern.

    Many juniors were breaking out on very heavy volume.

    The stop wasn't very far away if I was wrong.

    Given those conditions in real time I would have to make that same decision every time even if a large SoS day popped up.

    ReplyDelete
  133. Jay,
    I sold all gold positions at $975 in preparation for a D-wave. I could have waited a bit longer but I was getting ready to go on a three week climbing trip and knew I wouldn't have access to the internet for days at a time.

    Was too early getting back in. Expected the B-wave to bottom at or around the 1980 high of 850. Didn't expect the massive selling climax in the fall of 08 which in hindsight we now know was the 8 year cycle low for gold.

    ReplyDelete
  134. I'm really not questioning the buyback. It made perfect sense to me. If every trade worked you'd own the whole planet by now and be insufferable! My observation was just that you use SoS for stocks, so maybe it would be useful for gold as well IF it works, and if so the time spent researching might be well spent. Maybe you feel you have enough indicators for gold already and it'd be superfluous, but there are even more indicators for stocks and SoS makes the cut for that asset class.

    ReplyDelete
  135. Well we have a start with the chart you posted. I'll keep tabs on it from now on and see if it only shows up at or around tops and bottoms.

    ReplyDelete
  136. Jay

    are you going to try to play the SLW gap fill?

    not

    ReplyDelete
  137. Most of the silver miners heading towards 62% retracement of the move from July (PAAS, SSRI, HL, SVM)

    NG actually hanging pretty strong.

    SLW right at 50% gap fill area.

    Most of these charts look like dog crap. Ugly. Don't pull up a monthly chart on any of these--Nasty bearish engulfing candles across the board.

    ReplyDelete
  138. Notgreedisgood-

    Your name gives me guidance on that play--I think I will pass! Massive downside momentum right now on all these.

    ReplyDelete
  139. @Jay

    well if you want to know, I decided to go against my principle and play it, considering that before this downdraft, i exited even my core position

    not

    ReplyDelete
  140. I don't think that's a bad call at all.

    It looks like the HUI is at a key level for a bounce too.

    ReplyDelete
  141. NOT...

    You are NOT alone :)


    GDX is exactly where I thought I would dip my toes in , play it as a bounce BUT decide later if I want to sell on a light volume bounce or hold on.

    Some of these have heavy volume (panic-like sell off). I am looking for a bounce , and maybe come back down and retest these areas ( shaking out any who buy this bounce)

    ReplyDelete
  142. i am actually scared to buy now after this bloodbath...the bottom must be coming

    ReplyDelete
  143. AG-First Majestic-

    WELCOME TO THE BIG LEAGUE! Nice sale going on there. Down 60% since Dec 15th.

    ReplyDelete
  144. I'm not playing any of them, but you've got to think that these are due for a good bounce. $GDM dipped well below 200dma today and $HUI up on 200. $BPGDM now at 40%.

    Caveat being the famous "it can always get worse"

    ReplyDelete
  145. Anyone who thinks the gold bull will end in a bubble should read this article over at USAGOLD by Michael J. Kosares. "How Gold Became Politically Correct". It's likely physical gold will plateau at an extremely high price relative to paper currencies and not fall back.

    http://www.usagold.com/amk/newsletter0211.html

    ReplyDelete
  146. Of all the indicators, the thing that seems most predictive of the stock market lately has been the seasonal tendencies.

    On that note, we're in the January end of the month bulge.

    Each of the next six days has a bullish bias, and the six days combined are 19-3 when the S&P is up at least 2.5% since Thanksgiving.

    ReplyDelete
  147. Boy, stuff is really lining up: $BPGDM below 40 is usually required for a bottom after a 90 reading and we just got it, Rydex PM traders have bailed out; COT has finally turned positive; SIL just showed up on one of my buy screens; we are near $1300. Gary, if you nail this next bottom I will mail you a whole live chicken (nothing but the freshest ingredients for your next burrito!)

    ReplyDelete
  148. Perhaps the market is so small in gold that you will never see the eye catching BOW SOS numbers you would on the SPY. Being trained to look for eye catchers, these on gld may seem unimportant, but really could mean something. Last week every bounce seemed to be met with small SOS.

    ReplyDelete
  149. My work is telling me the bounce out of these lows might be weaker than we'd hope. Although I like the prices of many miners around here, the short term upside is not worth playing, IMO. Sticking with core for now and will plan to buy after the next pullback from an expected weak rally.

    ReplyDelete
  150. just an observation..

    on a 5 day chart , HL and AXU and others seem to have exploded down w/volume last Thursdays sell off in gold.

    Easiest to see on a 5 day/30 minute chart HIGH VOLUME sell-off. Then a sideways bounce/consolidation.

    Today , a rapid sell-off on LESS volume,and it feels like a quick sell, then accumulate, because price down doesnt match the high volume . It looks like buyers are buying the sellers stocks.

    Bought some AXU , EXK , HL...for a trial run

    ReplyDelete
  151. I just bought my first PM item since $1400 (I have been out as i am not "core holding" believer). I bought a very little SIL. If we bounce I will likely flip it; if we don;t it's a tiny start on a large position.

    ReplyDelete
  152. If one wants to play the bounce along with the small possibility that gold will bottom at the 38% retracement then now is the time to jump in.

    Buy and put a stop under today's intraday low.

    ReplyDelete
  153. IVV & SPY at the top of "Buying on Weakness" on WSJ. Does that mean we don't see a trend down day?

    ReplyDelete
  154. Real time 60 minute Gold chart:


    http://tinyurl.com/60mgold

    ReplyDelete
  155. It almost feels scary enough

    DG..if you dont have a core position, then you have a lot of play money down here...that alone must feel good :)

    My core was light because I was trading with a % to build it up, but its starting to 'feel' to me that even a bounce, then a SLAM DOWN back to below this area could be a successful retest, and then the low.

    Looking at the GDX and HUI retesting their breakout area , quite oversold , and sentiment down.

    BUT ESPECIALLY C.O.T. levels (short gold)at a 2 yr low!! I NEVER bet against them.

    ReplyDelete
  156. Personally, I've never found Bow or SoS to be of much use in trading, other than possibility a confirming indicator. I don't even look at it anymore.

    ReplyDelete
  157. OK, once a junkie, always a junkie. Picked up some SIL @ $21.00, stop at $20.79.
    Looking for a $2 pop sound about right to you boys?

    ReplyDelete
  158. One thing that leads me to think the metals could have one or more downdrafts still ahead is that the $CRB remains elevated on the weekly charts. If the other commods start to come in short term (for a month or so), it could stifle the upside in metals.

    ReplyDelete
  159. POLY

    I like it, looks right to me on a 5 day chart too,just watch the bounce if thats a 'trade' to, because on a 5 day chart, the last bounce out of Thursdays slam was quite weak/sideways

    but take it for what it's worth...

    ...you re getting advice on your addiction from another junkie :)

    ReplyDelete
  160. Gary,

    What if we don't bounce here and just keep going down. How would that change your overall thinking/strategy?

    ReplyDelete
  161. Yahoo finance headlines: Gold Prices Hit 3 Month Lows.

    I'm guessing we're in for a rally in gold starting today. We're in the timing band and the media is making noise about how gold keeps going down.

    ReplyDelete
  162. Alex: Yeah, I am virtually all cash and trying not to drool on myself quite yet. I am down 1.5% in gold and 1.5% in my other trading for the year, which hopefully will take about two minutes to recover once the PM bottom is in (hopefully---and assuming we get it near right)

    ReplyDelete
  163. POLY

    If you're reading this

    SIL on a 1 day chart 15 minute time frame is going down to retest that EXTREME volume low (132,000)for the day...and its retesting on 38,000.

    This is very positive, I hope you dont get stopped out.

    ReplyDelete
  164. DG

    You are in a good position to follow Gary and play it safe and still make some killer money I.M.H.O.

    If this bottoms here, bounces and crashes back down for a retest, you can load up the boat...very nice.

    Even if it bottomed and took off now, bottom in...you re entry will be sweet with the size of the coming run.

    ReplyDelete
  165. Yeah we're all junkies and it's been to a long overdue PM's fix :)

    Might get stopped here, fine with that considering the recent carnage, but got to say that gap down from last Thursday at $23.38 looks attainable.

    ReplyDelete
  166. SLW plunged thru the gap... i wonder if someone is trying to run the stops... either way i guess i was a tad early, or totally wrong about SLW :(

    not

    ReplyDelete
  167. wow, SLW busted right thru 30, now about to go below 29... who'd a thunkit?

    ReplyDelete
  168. Well, I couldn't help myself. I took a 10% position this morning between SIL and GDXJ. Seems like a fairly low-risk bounce play - gonna put a stop under today's lows and see what happens.

    I was 100% cash until just now.

    ReplyDelete
  169. What website do you guys use to track real time gold prices?

    ReplyDelete
  170. Looks like the possibility of a daily swing high on SPX today...

    ReplyDelete
  171. Gary/anyone,

    One thing I've been curious about lately is the iShares S&P 500 (IVV). Why would this show up on the BoW/SoS lists and not SPY?

    ReplyDelete
  172. Interesting article here about the bond market and impact of liquitidy flows on gold.

    http://www.321gold.com/editorials/thomson_s/thomson_s_012511.html

    Would be interested in hearing your views on this, Gary.

    ReplyDelete
  173. Done,

    I have a TOS account for my trading. All charts are real time there, so I can look at gold and silver futures as well as stocks and etf's

    ReplyDelete
  174. Done,

    I use Kitco for tracking the spot price of PMs. I see it mentioned the most on here.

    ReplyDelete
  175. Jaywawks

    I got 3 letters for you

    R-B-Y lol

    ReplyDelete
  176. To track gold/silver and the US dollar I use http://goldprice.org/live-gold-price.html

    You can click the pin in the right hand corner to create a full screen window and also chart MA on it. Very versatile, and no adds if you use the pin.

    ReplyDelete
  177. Strellsy: There are tons of articles like this. It's why trying to figure out how the 10,000 forces at play in the world economy will interact is not easy to do. Cycles and sentiment govern what happens. If people get bearish enough on an item it must go up. He may even be right, but maybe the bind collapse comes after gold hits $1600. Who knows? If we make a swing low in the timing band for a bottom, and sentiment has turned cold, you buy, and put a stop below the low if you want. Reading this stuff can drive you crazy...or scare you into not buying when you should. My two cents.

    ReplyDelete
  178. Kevin Depew highlighted on today's Buzz and Banter the techical damage in DeMark terms that has been suffered in some of the bigger gold mining stocks, specifically ABX and GG. Both stocks are on bar 7 of 9 down on a DAILY buy setup, so should see a reaction Friday to Wednesday to the upside. However, they have both qualified down breaks, which means that there is more selling to come after the 1-4 bar reaction. As the down break implies a full Demark sequential countdown for a buy, there is at least 3 weeks more to even consider looking for a bottom other than a short-term trade. Smita Sadana on the Buzz also looked at GLD today - seems like it has a date with the 200 day moving average...

    ReplyDelete
  179. Gary: Congrats on the weekend win!

    I believe there is an FOMC announcement tomorrow...Maybe we spike higher immediately after it, and then the fireworks start on the downside.

    It sure is a test of patience waiting for the PMs to bottom.

    ReplyDelete
  180. Continuing from previous post, maybe a tag of 12000 on DOW before plunge?

    ReplyDelete
  181. Today, SLW has ~3 times the daily volume

    ReplyDelete
  182. Its going to be a grind working through all this overhead resistance. I expect that the second phase of this C wave will be a lot more volatile than the first.

    ReplyDelete
  183. Gary,
    Any chance the State of The Union address will move this market?

    ReplyDelete
  184. It usually doesn't. So far this just looks like a normal topping process. Once a critical support level is broken it should accelerate rapidly. I expect that level will be 1260.

    ReplyDelete
  185. That Steward Thompson article scared the crap out of me. I think he's got a point there...could very well happen that way.

    He's not the most crystal clear communicator--but what I think he's saying is the bond market meltdown could trigger massive money flows in out of the "inflation" trade--at least for the short term. I was looking at the previous C waves and noticed Gary said they were 12 & 18 months. This one started at 864 in April of 2009 and is 20 months old. If Dec was the top of the C wave, a 62% retrace would take the POG to 1084, right to Stewart's IHS neckline back test.

    I guess he's saying the banksters want gold bugs to puke up their shares so they can put them cheap.

    ReplyDelete
  186. Jay,
    You probably should pay less attention to articles and more to the three year cycle low in the dollar. As long as that is ahead of us then the odds are very high that gold still has one more leg up.

    Gold is just doing what it always does about every 25 weeks or so.

    If gold even gets close to the 1265 breakout level every hedge fund in the world and central bank is going to be buying hand over fist. I know I will.

    Bottoms aren't about technicals. Bottoms are about big value investors coming into the market.

    ReplyDelete
  187. DG / Strellsy (Stewart Thompson)

    I am with Dg on this one. I actually read that report and saw his chart called "Death og gold chart" and I noticed that the LAST 8 months on that chart went straight down...from say AUGUST TO NOW. GOLD has done what from AUG to NOW?

    As DG said, Maybe it COULD...POSSIBLY end as he said, but when?? Maybe its the D-Wave that we expect anyways.

    I think that what he has MAYBE overlooked in his report ( Oddly he is very bullsih gold, just writes that its got a death blow coming)...He thinks China is going to stop buying? He thinks Russia ( that just announced Increased buying), will stop? India, etc...

    Thanks for sharing the article, I found it interesting too. I just wanted to put a Gold positive spin on it.

    His Chart is from 1996 to 2011 (15years)and in the plunge of the last 6 months, he warns of death to gold, yet it has surged during that very time.Support is below and its a ways off... HHMMM??

    ReplyDelete
  188. Alex-

    RBY-you still in? Glad I dumped it right away. I'm tired of trying to be cute. Will just wait until things are cleared up.


    I noticed 2009 HUI & GDX peak in December suffered a 30% drop from it's high points to the Feb lows.

    If we repeat-HUI 418 & GDX 44-45.

    Gary-hope you are right.

    ReplyDelete
  189. Gary,
    if the D wave is happening right now would 1150-1160 on gold be in the ball park of "scary targets"?
    Thanks

    ReplyDelete
  190. Jayhawks

    Dumped RBY ( later than you, got out with a loss as it crossed the 20sma).

    I did some buying today for a number of reasons...( EXK, AXU, HL)-- I am thinking (COULD BE WRONG DG!) thinking that we may bottom , bounce ,and retest this area ( or not). So I am in looking for a bounce , and will sell if volume dries up.

    If the mkts tanked from here, I am willing to hold as 'core added', since my core was light at this point.

    ReplyDelete
  191. All the D-Wave talk is a good sign :)

    ReplyDelete

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