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Wednesday, January 5, 2011

HUGE MISTAKE OR GOLDEN OPPORTUNITY?

Let's face it almost every trader or investor dreads a draw down. Traders do everything they can to avoid them, even if it means they drastically reduce their ultimate gains.

It looks like the stop at $1361 will be hit and gold will begin the trip down into an intermediate low. I get the feeling that many traders assumed the stop was there only as a token gesture, but really had no chance of getting hit.

I'm also afraid that despite my many many warnings that too many traders took on way to much leverage. They never really planned on gold hitting the stop. When it does they are going to take a much larger loss than they planned on. I suspect they didn't plan on a loss at all. They planned on huge profits.

If you are one of these people let this be a lesson. Always plan for the worst and hope for the best.

Now is this the end of the world. Was it a huge mistake ...or is it a golden opportunity?

Without a doubt it is a golden opportunity! As soon as the stop is hit traders can return to a minimum core position and build up dry powder because there is going to be an amazing opportunity in the not too distant future. An opportunity that has the potential for 100%+ gains this year, just like last.

We've yet to see anything that looks like a final C-wave top so I think we will see one final leg up after this intermediate correction has run it's course. By triggering our stops we now have the opportunity to re-enter at lower prices for a much larger ride up.

Look at the chart below and ask yourself does it really matter if one gets stopped out for a miner (sic) loss if it enables one to re-enter at the cycle bottom and ride a much larger final move higher?


Personally I'll be ecstatic if I get stopped out of positions. It will virtually guarantee another hugely profitable year this year despite the fact that it may start out a little rough.

503 comments:

  1. World Bank issues its 1st yuan bonds in Hong Kong

    http://finance.yahoo.com/news/World-Bank-issues-its-1st-apf-4275187563.html?x=0&sec=topStories&pos=5&asset=&ccode=

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  2. Gary:

    Continuing from the previous post: Clearly my education is not complete!! Need to do more work! thanks for the Big Picture post!

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  3. Chinese should be buying hand over fist here.

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  4. As mentioned before, I am not selling. 100% invested, above 50% in metal bullion at this point. I will be adding leverage if Gary's cycle analysis does as it does best and predicts a nice bottom in order to add with. Otherwise, simply riding the bull into the trenches. I feel like I am on a roller coaster at times, I am just going to buckle in and go for the ride.

    From a previous post from DG, bring on the troll meter. We may need some entertainment. lol

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  5. I see 1364 and we are recovering...
    I wounder if this was orchestrated to scare people.

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  6. Gary: I notice that you do not adjust your portfolio %ages based on what is being held. That is, long 5% SLV counts as 5%, and long 5% AGQ counts as 5% even though it's a leveraged fund. Being long 100% AGQ is pretty different from being long 100% GLD. I guess I don't really have a question just a comment that this approach seems perhaps not best.

    (also I posted a stat from sentimentrader on the previous string that never showed up. Maybe it got spammed?)

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  7. Gary, isn't this basically exactly what you called a month ago, just stretched? A third trip up to test the highs before a drop into the intermediate low? Only difference I see is you had us buy into the bounce instead of sell into it.

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  8. DG,
    Not so good on the downside but wonderful on the upside :)

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  9. P,
    Yes gold threw me a curveball with the big rally last Tuesday. It should have broken down from the crawl but instead it launched off the 50 DMA like a rocket. Completely fooled me.

    It looked like the dollar was ready to drop into a final daily cycle low which should have propelled gold to new highs.

    No such luck :(

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  10. Tough call, no doubt. Hard to do this in real time, with accountability. Easier to poach from the sidelines after the fact.

    As for the stock market, I think we may see some more volatility and bucking up and down before it breaks down significantly. That's generally the play book. As for now though, all news is good!

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  11. Gary,

    Seems likely the move down in gold could be the beginning of the move down into the yearly cycle low. This cycle normally runs a little less than one year and the last one was in Feb, 2010, so we're due for one anytime in the next few weeks, right?

    Would we expect a yearly cycle low to be a deeper correction than an intermediate cycle low?

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  12. Thank goodness my carabiners are attached. lol

    Gary, that word was on Jeopardy show last night.

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  13. Hi Gary,

    If one wants to go short here...what would be a good entry point or what level needs to be breached?

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  14. Thanks for the big picture reminder Gary! I got stopped out at last week's breakout. Lost the paper profits, but core is still in tact. My vacation home will have to wait a few more months. : )

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  15. Nike,
    I don't sugges one short in bull markets.

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  16. Fergie,
    I was rooting for you.

    I was hoping I would get a burrito as a reward :)

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  17. I was going to offer an invitation to the new hacienda, but a burrito is even better. You're cheap!

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  18. Gary,
    the stop hasn't been hit yet, so why do you talk as if it has? Are you out of your positions yet before hitting that mark?
    Basil

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  19. Gary,
    if this will turn into an intermediate correction, do you still think that the dollar will hit it's 3-year cycle low this spring?
    Basil

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  20. Noticed GDX tagged the 38.2% Fib line and has bounced. Also forming a nice hammer.

    http://www.screencast.com/users/Jayhawk1991/folders/Jing/media/d50adc3d-049d-4f49-b3e5-967624cc1036

    Other intermediates have gone down to the 61.8%- or 53.25 right now on GDX. My theory is still that our intermediates will continue to be mild in the context of the global monetary mess.

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  21. Fergie,
    Can I have both? An invitation and a burrito? :)

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  22. From sentimentrader.com: when gold drops 2% within 1% of a 52-week high, gold is down the next 1-2 weeks 72% of the time. The 2% drop has happened 25 times since 1975.

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  23. Basil,
    Still waiting. I have set a trade trigger to activate if GLD tags $132.50.

    The dollar is a tough one to call at this stage. It should bottom in March or April as that would be 3 years. But if it rallies during a stock market correction then it might end up being a long 3 year cycle that stretches into next fall.

    A few three year cycles have run 3 1/2 years. The normal duration is 3 to 3 1/2 years.

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  24. This market refuses to give in despite what the USD dollar does, so I think our gold 'correction' will be mild unless the SNP tanks.

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  25. The market is due for a yearly cycle low soon. The question is whether or not the Fed can continue to keep it levitated despite overwelming sentiment extremes and a cycle low that is due.

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  26. Sure! Pick off this next bottom and you'll have base camp for your next climbing adventure. At this rate of market gaming, you maybe doing ice climbing in the winter though.

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  27. Gary,

    What about gold with respect to the yearly low? Is it likely that gold could be moving into its yearly low? If so, will that move down likely be deeper than your average intermediate low?

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  28. PC,
    Yes this should be a yearly cycle low for gold too. When and if the stock market corrects it will likely add pressure to gold like it did last year.

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  29. Hey Gary, assume your stops trigger, and the gold price then reverses, when do you reenter new positions?

    Thanks

    Personally, I am holding through to the D Wave, I am tilted with juniors, gold, silver, and uranium. Big boys with cash will keep those prices higher than a normal correction.

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  30. Bob,
    That's the kind of whipsaw I don't want to consider right now :)

    We'll tackle that one only if it presents...let's hope it doesn't.

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  31. currently, this bull is making me feel like another bull that was very good at throwing anyone who attempted get a long ride. check out http://www.youtube.com/watch?v=SraIAmCL_ok

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  32. If the Dow can close up today we'll get another 4 day corollary on the first down day.

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  33. Gary, what's a 4 day corollary?

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  34. The explanation is in the terminology document.

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  35. I think I will go ahead and convert AGQ to SLV here as we've had a nice bounce off the bottom.

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  36. Gary, since you will change AGQ to SLV, you think $1361 will be broke soon ? Or there is an another explanation to your portfolio change ?
    Thks

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  37. Folks are sure pumping up the premium in PSLV today. It's up about 3+ percentage pts today to about 15%. Not a day to buy that as it's been running at about 10% I believe.

    CEF is actually letting out some premium over the last several days. Sits at about 7.7% by my calculations here. Down about 2 percentage pts since Dec 30.

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  38. Gary, very nice write-up. I noted much the same in my Member letter yesterday when I wrote that I was never so happy to lose a few grand. There is a lucrative opportunity lying 2-4 weeks in our future.

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  39. I just noticed the pun opportunity. I'm getting slow in my old age.

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  40. Stock shorts continue to get spanked. The equity bull just won't quit!

    Like G always says, never short a bull market.

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  41. hello Gary,

    So, do you think that GOLD is going to rebound from here?

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  42. I doubt it will recover and put in the final leg up before going through an intermediate correction. Not after yesterday's action.

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  43. thanks for your prompt answer Gary! I feel the same, but with this market, I am starting to lose my senses ( I am getting old as well...faster than you as I don't rockclimb!! but my girls do!!)

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  44. Is anyone using this up move to lighten up? I'm debating...

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  45. Gary - Whats your outlook for the stock market? Is your "water fall" decline in play still?

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  46. I'm debating trimming positions too.

    Or is this yet another head fake?? It's starting to feel like the opposite end of the dollar action last week which resulted in me raising my stake up from the core.

    Talk about whipsaw action...

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  47. I think gold cannot break above 50MA if this is an intermediate correction.

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  48. JC,
    That went out the window when the S&P refused to correct two weeks ago.

    The coil should reverse soon (probably next week) but I'm not confident enough to bet on it.

    Let's face it the Fed is going to dump billions and billions into the market trying to keep it elevated. Ultimately that will backfire horribly but who knows how long the party will last before it all comes crumbling down.

    Now you see why I don't short bull markets.

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  49. gary , $usd going higher or lower from here? i still think it is going lower??

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  50. It should go lower but I wouldn't bet on anything when it comes to currencies. Too much Central bank intervention going on.

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  51. OEX options: 2 calls to every put today.

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  52. Hi Gary,

    If the dollar goes down from here...will gold follow the dollar?

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  53. Bull flag on the /DX 60 minute chart.

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  54. Jayhawk91,

    Are you still holding all your positions from yesterday?

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  55. For now. This gaps downs are killers though. You start to see a chart recover and then slam, down again.

    Mini H&S on gold's 5 minute chart shows it going back to 1364. /DX flag broke up.

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  56. gary,
    just let you know, gold is not the only commodities went down the last couple of days.

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  57. since everybody has been discussing time frames as of late.

    I thought this article would be good for the blog

    http://theevolvingtrader.blogspot.com/2011/01/time-frames.html

    Hope everybody enjoys

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  58. ROD-

    What are you gonna do?

    Seems to be the selling is cooling off, overall market looks strong, 1161 didn't break, HUI summer trend line still hanging in, key fib levels tagged. I'm thinking a few days of a relief rally and get a better exit.

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  59. From another site-

    The top three picks in the GDXJ portfolio of precious metal junior miners are now three silver miners:
    1) Hecla 4.76%
    2) Coeur d'Alene Mines 4.14%
    3) Silver Standard Resources 3.74%

    Those three (mainly) silver miners have been in the GDXJ portfolio since the start, but more shares were purchased over the last quarter and the stellar rise of silver propelled the trio to the top of the list.

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  60. Hi Gary,

    I need your help as your analysis is pretty good...so far, since Ben pulled the trigger, gold and stocks went up together...now, with the good adp number, gold and stocks are diverging...do you think that we could see the divergence continue and gold take a beating while stocks sky rock?..

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  61. Gary said... "As an example when gold bounced hard out of the Oct. 08 [...] That intermediate cycle had to be re-phased. "

    OK, I analyzed this last example. The first elements of pattern I extract from the situations which you characterize as "re-phasing" and I looked at would the something like this.
    A 'cycle' is the expectation of a low in a certain time band. The congruence between candidate lows and the respective time bands represents the 'phase' of the cycle. The 'phase' thus expresses the approximate constancy of the periods of time, and it is this _idealized_ regularity which allows one to speak of 'cycles'.
    However, on situation, the cyclical expectation is negated by the subsequent price dynamics. Usually, this happens after well into the next 'cycle', when a new lower low is achieved. This shouldn’t happen too late, for in this case, one would just talk about a new cycle. In order to proceed forward with the right count of periods, one is obliged to revise the period (day, week) count _of the current_ cycle, the cycle one is currently in: to 're-phase' it. Thus, the 'rephasing' is a 'resetting of the counter' of the current cycle. The result of the operation is that the previous cycle will appear stretched or shortened.

    You seem to endorse only the application of the concept (and of the operation) to the current cycle. You do not revise prior cycle counts, in order to obtain a “better fit”. The previous cycle just acts as a sort of buffer, getting longer or shorter, as the operation of ‘rephasing’ leads to. Which makes sense, upon a first inspection. I will have to look to your counts preliminary to the cycle rephasing episodes, but in order to do that, I will have to dig your reports from the epoch. And I never seem to be able to muster enough time for the historical part of my research…

    @ thedocument: I noticed that you are around. Perhaps you will want to help Gary explaining cycle ‘rephasing’? Thanks.

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  62. Jayhawk91,

    Hope you're right on PMs moving up here a bit more as I would like to reduce some of my "over-price" PM holdings too. Using tight stops just in case.

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  63. Gary/all,

    What does a swing low/bottom look like? i.e. What would it take to make you go long GLD/SLV/GDX?

    Seasonality says gold goes up thru March, and w/Ben still printing, I can't think of a fundamental reason why gold would go down here/now.

    Right now I see a lot of concern on this blog, that GLD might go down - indeed, gold has made a lower high, but it's not made a lower low yet. GDX has. But sometimes GLD leads GDX, so GDX's action to me isn't a predictor of GLD. GLD has it's own legs now.

    Today were seeing hollow red's in GLD/SLV/GDX, and SLV has a hammer to boot. Maybe a bottom?

    I'm just saying that though GLD may go down here, it could also go up.

    If so, what do we look for? What does a swing low bottom look like?

    Thanks much

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  64. Rebounds like today often happen the day after gold initially starts sharp moves down. Look back on some charts if you want.

    Frequently the move down resumes strongly by the following day (tomorrow).

    What we are seeing so far is pretty violent emotions and whipsawing in both directions. And we are only in day 3 of the new year.

    This is going to take another few days to stabilize and clearly show direction on this stuff, in my opinion.

    If I had to bet, I'd say the metals are going lower just because of the action yesterday and today (even though today has recovered...like i said...it's a pretty common pattern when moving to the downside). But I don't have to bet really, so I'll sit out with core for now and let things settle.

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  65. Hopefully this doesn't turn into a textbook case of why you should always "stick to the plan" rather than get emotional over a potentially small drawdown to the stop.

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  66. I am virtually 100% cash everywhere. Cut back on my shorts, virtually out of bonds (that was fun the past two years), out of PM's. Man, the Fed really is making things silly. I have always hated blaming things on "outside forces" but all the markets look goofy to me. The VIX just hit a 39 year low on the 20-day average! Lower than the dot.com bubble after adjusting for the new way they calculate the VIX. I have been buying intermediate bottoms in bears and shorting intermediate term tops in bulls for decades but, man, when we get a trend going these days it just doesn't end. It's cash for me...but now I am especially looking forward to the PM bottom!

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  67. Sophia,
    No the stock market will correct and when it does it will be vicious. The further anything gets stretched the harder it snaps back. The Fed is stretching all the cycles to extremes with it's foolish monetary policy. It's why the rally into Apr was so powerful and why the summer correction was so severe.

    The Fed is at it again. This will again lead to an extremely severe correction and maybe even to the start of the next bear market.

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  68. William,
    The correction in gold has nothing to do with fundamentals or people exiting the so called fear trade. What a load of nonsense that is.

    This will just be a profit taking event the same as lat Feb. and last July.

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  69. DG,

    Usually when markets are reluctant to move down even though a preponderance of indicators are signaling a correction, I try to concentrate on the dogs that haven't barked. Usually, when one of those finally capitulates, the correction gets under way.

    Last time it was the Rydex ratio that was late to the party, and when it got high we got the down move, but that's not the one this time.

    I've got my eye on the 15 dma of the OEX, which is getting close to giving a bearish signal.

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  70. TZ,

    I'm curious about your core position. After all the lectures on how much more advantageous futures are, in what form are you holding core ?

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  71. Gary-

    You seem pretty convinced the intermediate is here--why not just go to core now? (Doc pulled the plug instantly yesterday on his newer positions).

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  72. Gary,

    If this proves to be the intermediate correction, will we date yesterday, January 3 as the start of the correction, or December 6?

    I ask because these corrections have usually run about two months. If this one started on December 6, we could expect a reversal by early February.

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  73. There is one thing that´s getting me worried about the future of PM and commodities bull market - The inflation trade is getting really crowded. 2009 and part of 2010 was all about deflation, but right now everyone talks about inflation, and things like "Don´t fight the Fed". Everyone knows that PMs can only go up on the long term because the Fed is commited to printing money. Right now all of this is very common knowledge, and I really don´t like this.

    When I hear the mantra of not fighting the Fed and central banks, I think of George Soros. In his book The Alchemy of Finance he talks about how the central banks are the worst traders in the world, and that taking the other side of what they are doing is usually an excellent trade. He made a fortune fighting the bank of England.

    Maybe a deep correction in commodities will get people talking about deflation, I hope so. But I am not so sure.

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  74. David, The correction started on Dec. 7. Early Feb. sounds about right for both gold and stocks.

    Jay,
    I may sell more into tomorrow if we get a further bounce.

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  75. David,
    The CRB has already passed the half way point in this 3 year cycle. This is already a right translated cycle. That is usually a sign of a bull market.

    When we really need to worry is when people are standing in line outside the local coin dealer to buy gold. Once that starts we have about one year to step on the gas for all she's worth then it will be over.

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  76. Wes: I can't believe I won't be back shorting this thing at some point----the numbers are too ridiculous---but I'll probably wait for some price confirmation; break and weak bounce. Post when you take a shot.

    David K: A fair point but it seems to me that a powerful bull like the PM bull will end with tremendous exuberance. No one ever asks me about buying gold. At the SPX top in 2000 everyone was talking about stocks. At the housing top in 2007 everyone was talking about real estate. Both items were on magazine covers. Right now gold is only marginally in people's awareness. Seems like we have a long way to go. Which of course says nothing about nasty corrections, just that the party ain't over.

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  77. Thanks Gary...I was hoping to unload in the AM on some short term strength. Gonna have my finger in the trigger as this could be a quick gap up & roll over deal.

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  78. Gary,

    I know it sounds like more "work", but it would serve your service well to have a dashboard of sorts on your secure website that listed the current cycle dates and day counts, your current portfolio in actual holdings (this could be a ratio if you need to mask actual holdings) and pending trade triggers. It wouldn't take much at all to maintain, just an idea.

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  79. Hmm interesting idea. I'll ask the programmer about it.

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  80. TZ:"If I had to bet, I'd say the metals are going lower just because of the action yesterday and today (even though today has recovered...like i said...it's a pretty common pattern when moving to the downside)."

    IMO, we still haven't reached $100 down from the high. There are still newbies and weak hands holding on.

    Sinclair's site has gone dead silent on hyping gold for the past 2 days. Interesting.

    The price move today was around 15 points down, which is a medium sized day relative to yesterday.
    This creates massive indecision.

    The norm as you say is 3, and I'll say 3 to 4 days of down direction, with the possibility that tomorrow will be slightly up and then a major and final break "down", or just a clean out capitulation.

    Without seeing 1325, IMO, there is still "hope". If we don't see it soon, the canker of weak hands will still be present.

    The retracement of 650-1425, a move of 775-800 pts, at a fib number in the low 40's would be 320 points off the high, and high 30's would be 280-300 pts off the high. That brings us to MLMT's number of 1150.

    I'm looking for a shorting position as the market inches its way back up, bringing in many new gamblers who hope for the halcyon days. It's 1378+ and I'm waiting. The pain is real and the paint is drying.

    It would be easy to scare the weak hands to unload their positions here and into weakness.

    Today's long move, instead of compression, let some steam off; so the move down won't imo be spectacular but would clean house.

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  81. I second Poly's dashboard recommendation - especially with regards to cycles. Thanks Gary.

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  82. Poly, I like that idea. I lose track of some things that are important in the big picture -- how far we are in the daily, intermediate, yearly, 3 yr cycle and so forth. I know they are subject to revision (the short term ones anyway), but it's good to get a context for what to do when the market gyrates as it has of late.

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  83. Just an FYI, for those of you speaking of weak hands, a 30 dollar drop usually results in margin calls. If a move like yesterday (8th biggest one day drop since 1975) didnt result in a major break the following day, it simply means most of the positions are held by stronger hands which arent as easy to push around.
    With silver having higher margin requirements installed recently, its almost impossible for the little guys to get in (thank god) and thus some of the volatility has been withdrawn.

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  84. I'm not an EW'er, but ... the daily $USD move from June to Nov shows 5 waves down - could be a major wave 1 down. Then, from Nov to now looks like it could be an ABC correction, w/Nov to Dec as A up, and now we're in B flagging down, w/C up - the length of wave A is 1 month, so that could mean C is also 1 month, leaving us w/the $USD topping in the major wave 2 up in Jan end or early Feb. This matches the timing you're thinking of Gary.

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  85. Gary (and Doc)

    Just a reminder of a member comment in thedocument.com some weeks ago (sorry, forgot his name, I'm paraphrasing here): if an intermediate low for gold is indeed ahead, is seems unlikely it would find it's lowest point at the 200 DMA, currently at about $1260. Instead, check out the 150 DMA, currently at about $1300: all deeper corrections since July 2009 have bounced off that 150 DMA level, none has ever made it to the 200 DMA. (In the earlier April 2009 correction the 150 and 200 were crossing, i.e. at roughly equal levels.)

    So better keep an eye on that 150 DMA.

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  86. Couldn't stand my half empty memory, so I went searching and found him: credits to Signals for spotting the 150 DMA, on December 7 in thedocument.com.

    (Guess you're the same guy here at SMT, Signals?)

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  87. Jobs Friday this week, one of, if not the biggest market mover and sentiment changer on the calendar.
    Could the massive ADP number and 10yr high sentiments be setting us up for a Friday intermediate top?

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  88. Either that or the start of earnings season. One or the other should put in the top.

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  89. Just wanted to thank you (and Poly, who read my mind) for the cycle count link on the premium page.

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  90. Gold miners bullish sentiment down to 73%. It's only been lower just a day or two since September 14th. It's still a bit high, but down significantly from the 93.3 reading in mid November.

    Also, I recall that on the flash crash day last May, PM stocks had a ferocious rally. However, they got hit I think the very next day.

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  91. Anyone have an idea where silver will fall to? On the(3yr) chart there is 3 support points at @ $19.50 level. Or do you think the 200 mda will hold?

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  92. What difference does it make? one doesn't pick bottoms by targeting a level. They pick them by looking for a swing low in the cycle timing band for a bottom.

    In the precious metals market gold is the driver. So whenever gold finds a bottom so will silver.

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  93. Gary:

    about your last post, i think i know what's "wrong" whith the cycle counting in dollar. I would like to discuss it with you if yu like. Sorry for my bad english:



    Dollar index is not a market in the pure sense of the word. It is a basket of markets.

    Now, imagine you have a room full of people who are talking each other in pair.

    You are at the entrance and pretend to listen and understand what everybody is saying. You cannot do that in detail.
    Of course, you can listen at the 2-3 nearest pairs, or the 2-3 who talk louder.
    Sometimes a new guest enter the room and they all stop talking. This is the moment when you can say CERTAINLY "everybody is NOT talking".

    In my opinion, in usdindex you can grab the BIG cycles, because they force the pairs to syncronize, but smaller cycles, even daily ones, are "noised" by the behavior of the different pairs composing the index.

    If you look separately at EUR/USD, or USD/JPY (these 2 are enough couse they are the heavier in the basket), there are no strange patterns.

    Euro has done a half daily low 26th december , and now is finishing the second half, so it lacks about 6-9 days (about thirty "5 hours" candles) to close a daily cycle. And it is still where it has begun, although making higher lows.

    http://www.forexpros.com/charts/real-time-forex-charts

    There's a clear trendline between the lows. THIS is the trendline to watch for breakout. If it go lower, we will have a failed intermediate on EUR/USD. That can drive the "true blood" intermediate corrections on stocks and preciouses.

    If Euro can manage to close the daily cycle mantaining a pattern of higher lows, the next one will shot it up to 1.40 at least.

    It's 50/50 now. But there will be plenty of time to full leverage on long or short side. And move accordingly to the related market.

    Me, i give 51% to the short bet, because it fits better whith gold and stock cycles, with heavy decline starting in few days.

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  94. P.S.: of course intermediate cycle on EUR/USD can fail even tomorrow.

    That's why i think it fits.

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  95. I think one of my post has disappeared... OMG it was a huge one :(

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  96. just thought I would ask. . Since you thought gold would test the 1265 break out area.

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  97. The Republicans will make a show of refusing to raise the debt ceiling for the benefit of the rubes in the Tea Party.

    This could certainly spark a brief panic in the bond market, tanking stocks before the whole charade is abandoned and the debt ceiling is raised again.

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  98. Gary: The cycle count page is a great addition. Thanks!

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  99. Yeah DG, I'll second that for sure.

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  100. @ LowTax: I appreciated your discussion of yesterday. The prognostic results can indeed be improved, without asking for a “full proof” method. Here are some thoughts, in case you are inclined to pursue your inquiry independently:
    1. “Europe” is not an external factor as the North Korean bombardments, etc. The euro _is_ the DXY, more than half of it, and it is the DXY that one uses when pondering about the fate of gold, not “the dollar”. I argued previously, in real time, that the DXY cannot move in the way expected here, because the euro was not supporting such a scenario. I would not repeat what I already wrote, but add some corroborating factors which one may want to keep under observation in the future. While the DXY was here expected to plunge, the euro made only a marginal move against the dollar (as seen on the chart of the forex pair, EURUSD), while _loosing ground_ to other major currencies such as the AUD and CHF. This indicated significant overall weakness in the euro, to be reflected in its attempted move against the dollar. At the same time that the DXY made the marginally lower low of December 31 at 78.77 (versus 78.81 on December 14), the ProShares UltraShort Euro (EUO) did not (20.12 versus 20.11). EUO may be useful to keep an eye on, apart from the EURUSD, as an independent benchmark for the market sentiment towards the currency.
    Therefore, no euro rally, no drop of the DXY, no plausible continuation of the gold rally.
    2. The determinant factor of the flow of _investment funds_ money into gold is the interest rates. Since Gary has an idiosyncrasy for this relation (“Rising interest rates have nothing at all to do with gold. Gold is simply moving down into a daily cycle low. It's nothing more mysterious than that”, November 15, 2010, goldscents.blogspot.com/2010/11/im-not-buying-it.html), there isn’t much discussion about it here. Since Nov 04, the trend for bonds has reversed. The first peak of the current triple top of gold has been reached on November 9. Since then, yields go up, and gold goes sideways, and now down. As P. Hussman said, the gold bull community seems to not have realized that the rug has been pulled from underneath it… But, even without deferring to his authority, one could simply go at EquityClock.com and pull out the seasonal charts for gold futures and the CBOE 10-year T-Note (or take a look at my work on it http://www2.picfront.org/picture/sAqu8XdOjK/js/TheRefundingCycle.Goldvs.TreasuriesSeasonality.png NB it is not the seasonal factor which matters at present, but the character of the relationship).
    It is true, interest rates dynamics cannot be used for short term trading purposes: but when one has a nearly three months long drop in bond prices, one should be very skeptical about any furthering of the gold rally
    3. Interesting observation you made re. money out of stocks supporting the dollar: we are used to consider here that the causal relation is dollar up-stocks down, but the reciprocal is also true (the fact that at any time all the shares are owned by someone is irrelevant: they are owned at lower prices, therefore the price differential is in cash – while, of course, the said cash having changed pockets meanwhile…).
    4. David Kafrick raised today the additional concern about the inflation trade in commodities and its potential impact on gold. I also happen to ponder upon the issue, especially that the commodities trade is pure speculation, as it is reflected by the juxtaposition with real economic activity, for example, measured by the Baltic Dry Index, which today dropped bellow the July 2010 low (at the peak of the recessionary angst, just before the talk about QE2 started): http://stockcharts.com/h-sc/ui?s=$BDI&p=D&st=2009-07-06&en=%28today%29&id=p50171409340 Look at that overhang, and then say that it doesn’t matter…

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  101. C,
    I think if you will break up your comments into smaller pieces you can probably stop getting flagged as spam.

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  102. Gary, I do not think it's the length. The other message, two days ago, was actually very short. I believe Blogger flags as spam comments which contain multiple links, which is primitive indeed, since this is the only reference method on the web.

    ReplyDelete
  103. Or maybe just condense his thoughts.... You ought to make the blog like twitter. 120 characters and you are done!

    ReplyDelete
  104. You might try creating a link instead of pasting those long URL's. I doubt anyone even bothers to click on them.

    And your posts would be much more readable if you would shorten them and use paragraphs.

    And split different ideas into another comment would help to shorten each post.

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  105. C,

    The stocks were purchased and sold for exactly the same amount of money. Please explain "the price differential in cash".

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  106. Interest rates are completely meaningless to gold. What is the rate on the 10 year? 3.5%? The rate of return on gold every year since the bull began has crushed those meager returns.

    No one in their right mind would quit buying gold to invest in a bond that returns less than the rate of inflation.

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  107. Gary,

    Thank you for the cycle count charts on the premium site. It really helps visualize what's going on.

    I started with your service on September 9 and immediately made investments based on your advice. I got out of most of it on December 6.

    Looking at that on a chart is remarkable.

    Thank you for your excellent work.

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  108. contulmmiv

    An awesome free tool to shorten URLs.

    http://bit.ly/

    ReplyDelete
  109. David says "The Republicans will make a show of refusing to raise the debt ceiling for the benefit of the rubes in the Tea Party. "

    LOL! as opposed to the rubes that voted for Obama's change. LMAO!

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  110. @ GGuy: I agree with your reading, although I believe that if the trendline you mention gets broken through, that would be more meaningful. The first target area would be 1.25-27, but I believe the range of the movement could be to 1.22-23.
    @Wes: both stocks and banknotes are goods. When people sell stocks, they implicitly signify that they prefer to hold banknotes. That's what the price drop ultimately means. At that particular moment, they value more the banknotes, the demand for which increases, thus pushing their value up.

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  111. Poly, I like your dashboard idea too. I keep getting confuse on the count.

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  112. Anyone who buys what a politician is selling is a rube.

    The Tea Party just takes it to the next level.

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  113. Another real life example of inflation-- http://www.zerohedge.com/article/big-media-finally-case-amazing-value-deflation-inflation

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  114. Gary,
    What did you mean in the nightly report at the end when you said that "our stops got hit"?

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  115. I should have said I assume our stops will get hit.

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  116. Re: "Rubes"

    From Karl Denninger:
    Told 'Ya So: Tea Party = DOUCHE NOZZLES

    It took less than six hours for me to be able to wave the "told 'ya so" flag:

    An early push by New Jersey Republican Rep. Scott Garrett to add some “teeth” to the GOP’s new Constitution rule requiring every bill cite its specific constitutional authority failed in a Republican conference meeting Tuesday.

    What was the rule? That you couldn't claim "general welfare" or "necessary and proper" as justification - you had to point to an actual enumerated power.

    The very so-called "Tea Party" and "Conservative" members of Congress could not even agree to cite a specific clause in The Constitution that enabled legislation to be brought to the floor.

    Oh, it gets better. Read the rest here:
    http://market-ticker.org/akcs-www?singlepost=2342711

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  117. David...you support raising the debt ceiling...why?

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  118. @contulmmiv....I don't mind the long posts, but it would be easier to read if you could make paragraphs.

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  119. Gary,

    Was the trough to trough for the SPY from late August to mid-November right around 58 days? So that one exceeded the average daily cycle time for stocks by 45%?

    What is the longest and shortest daily cycle in stocks you have recorded?

    Curious do you have a 10-year journal tracking cycles (I thought I remember you saying you got really involved in the markets right around 2000)? I'd buy a copy for $500 if so. ;) (would save me a lot of time)

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  120. Natanarchist,

    Supporting or opposing raising the debt ceiling is beside the point.

    The the point is that Republican opposition to raising the debt ceiling is just a pose. They will put it to a vote, but they'll be happy to LOSE that vote, because they have no serious plans to reign in the debt. Their only interest is in retaining the tea party support.

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  121. IMO GLD makes a trip back to 136.2 soon - but this may likely happen after 1361 is taken out on gold futures. Once GLD makes this trip, I expect it to close around 136 or so and have a massive gap down the next day.

    No matter what the underlying you are dealing with, in intermediate downturn, the price patterns are *similar*.

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  122. Also, if you don't mind, what are the ranges, longest and shortest daily cycles for gold and the USD? That would give me a better picture of possible possibilities.

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  123. got it bebe..I'm for starving Leviathan anyway. I have zero faith this will ever happen. we'll just collapse first and start over. Human nature and all.

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  124. Nat,

    If we don't raise the debt ceiling, the US defaults on its debt. Global economic Armageddon ensues. The Tea Party types -- many of whom are dependent on unemployment, social security, and Medicare themselves --don't understand the implications of this.

    I don't like the idea of raising the debt ceiling any more than anyone else. What would be preferable is actually doing something about the growth of the debt itself. But this will happen only as a result of making difficult, politically unpopular choices, which is why it's unlikely to happen.

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  125. Interesting chart from http://quantifiableedges.blogspot.com/

    Here's the link:
    http://img832.imageshack.us/img832/7169/picture1onu.png

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  126. (continued)

    In the absence of any real effort to get our debt under control, you will see more and more phony symbolism of the type the GOP is peddling.

    This allows them to run up debt and campaign as anti-spending at the same time. The Tea Party buys it, because it allows them to feel outraged while still suckling at the government tit. Symbolism substitutes for action, because no one even knows the difference anymore.

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  127. Gary,

    In tonight's update, you had stated " I will go ahead and reduce the rest of my positions tomorrow, especially if gold is up." So are you going back to a 50% core position? Thanks

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  128. Thanks Gary for your daily cycle count. Very useful.

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  129. The surge in the days just before new years eve was covering and taking accumulated short losses in the commodities for tax reasons. Similarly taking profits just after 1/1 because of the same tax reasons.
    Due to the large gains in commodities in 2010. When this dip starts the day after new year, some bells should start ringing. Also when the surge up happened just days before new year.

    Then this PM selloff is natural and not the start of a decline. I would have been more worried if the decline started around 15th of january (like last year), but when it starts the day after 1/1 it can't be a coinidence. Not knowing about this tax phenomens before and after new year some have gotten whipsawed back and forth lately.

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  130. leilani, i think gary has reduced (or will)his position to 35%.If i'm not wrong.

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  131. Bebe,David;
    You should reconsider who's position is a "pose" and who is playing politics. In 2006, the last time we had a stand alone vote on debt limits here is what Obama said.“The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. Government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. … Increasing America's debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”
    Obama voted AGAINST raising the limit then.
    What has changed?

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  132. Gary-

    Kudos on the daily Cycle count updates - nice add to the site.

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  133. Raising the debt ceiling is just another type of default. It's just an attempt to delay taking responsibility long enough to get far from the problem before it blows sky high.

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  134. It's cute how people try to make sense of what politicians say and look for and find self-contradictions. They will say whatever needs to be said in order to get re-elected. If they have any interest in the welfare of the country it is lost into thinking that if they get back into power they can help things get better. Many probably don't even get that far. If they really wanted to solve our problems they could, but then they'd get voted out by the public who selfishly also wants stuff just for themselves (ever see a union say, "You're right. Times are tough. Let's cut our wages along with everyone else.') So it's kick the can down the road and let the other guy make the tough decisions and get booted out. Makes no difference whether it's a Dem or Rep, they just pander to different groups to get reelected. Very sad, but until people actually care more about the country than about their own pockets, we get this (don't hold your breath). Unfortunately the politicians who actually do care don't get very far because you need to pander to move up, so the ones who wind up with real power are complete prostitutes.

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  135. "Religion and Politics", enough said.

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  136. I agree with trond56. The main reason gold and the dollar were not doing "what they were supposed to do" was massive tax related money movements.

    Just another example of how government interference plagues us and our markets. We are not free and neither are our economies. Far from it in fact.

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  137. It seems to me that "sticking to the plan" makes more sense at this point than shooting from the hip.

    When I see 1361 is when the trigger gets pulled. I should have waited until we had a clear indication of an uptrend (higher high) before bagging AGQ @ $156.

    I think trading on emotions rather than rules is a big mistake.

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  138. Redwine,
    Waiting for "confirmation" just means one takes a bigger loss.

    Gold could have made a higher high and still rolled over into a left translated cycle. If you waited to buy when the trend was confirmed you would just have a much larger loss.

    The reality is that every once in a while everyone is going to get caught. No matter how good you are the market is always going to sneak a curve past you from time to time.

    I learned a long time ago not to second guess myself. I make my decisions as best as I can in real time and if they turn out to be wrong I recognize it as quickly as possible, correct it, and then get back to work making money.

    That's the best anyone can do.

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  139. BTW gold was making higher highs.

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  140. Gary

    If historic chart data indicate the odds of continuing uptrends/downtrends based on certain criteria, higher highs and higher lows for example, it seems the odds only apply if those criteria are met. Anything else is pure gambling based on "do I feel lucky".

    Am I wrong on this point? How do you keep the odds in your favor if not by trading based on rules?

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  141. The action (3 tops) the past 4-6 weeks is very similar to the action we witnessed the last time we starting into an intermediate decline in gold.

    Take a $gold chart from Mid May to mid Aug 2010, what do you think? The big $40 plunge on July 1st confirmed it all, similar to the Jan 2nd drop this week.

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  142. Red,
    Gold was making higher highs. That was the basis of my purchase.

    Now The HUI is already making lower lows. That's the basis for selling. In hindsight I should have just done so the minute the HUI made a lower low instead of waiting.

    It's not that big of a deal as it's only a few percentage points that will be easily recovered during the next run. But I made the mistake of waiting for gold when I should have switched the trigger from GLD to GDX.

    The stupid thing was that I posted exactly that on the website and then didn't act on what I had already recognized.

    Just goes to show you even old pros can do something stupid from time to time...and I doubt it will be the last dumb mistake I make in this business.

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  143. The problem I have with a stop at 1361 is the possibility of just a whipsaw. Gary has commented he didn't think the $HUI would ever go below 500 again for the rest of the bull market (about 55 on GDX). I happen to agree with that statement and GDX is approaching 57 now as we near the 1361 stop. So there isn't much value in trying to game those 2 points on GDX and it does seem reasonable to have a pullback to that level to test that breakout. FWIW, gold looks like it is in a sideways consolidation to me and just working on throwing people off the bull. I sold a little but am mostly old turkey here, mt biggest fear is missing the move up, just a typical gold bug.

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  144. Gary

    I was thinking of the 12/6 - 12/7 high of gold (which you called perfectly by the way) not being broken as a confirmation. I know the dollar broke down but it seems like a confirmation was in order before such a huge trade. Especially during tax adjustment period.

    I'm not blaming you by the way. You gave fair warning. My fear told me to wait but greed got the better of me.

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  145. tomorrow's big jobs number may bring down the dollar.

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  146. Red,
    And if the trade had gone the other way like it was clearly set up to do, you would be patting yourself on the back knowing that you spotted the warning signs that were telling you to get back on the bull quick.

    Shoulda, woulda, coulda.

    I trust that given what I have to work with in real time I will always make the right choice.

    Sometimes the market won't agree with me, and since the market is bigger than me I defer to his judgement but I never question a real time decision.

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  147. Does anyone have comments which way the market will go tomorrow after the job numbers?

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  148. I'm out now, let's get em next time.

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  149. Sold most of mine in last nightn aftermarket. Starting to look like a good decision here now.

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  150. Lost 5% ... no big deal compared to what I made last year.

    Time to focus on the next move.

    And, BTW, for those who hope/wish that Gary could be perfect ... when that begins to happen it will be time to find another way to invest.

    Thanks for last year Gary and let's hope for another one even remotely close.

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  151. Gary, Are you now back to a minimum core? Or are you still try to sell more into strength

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  152. I got out of AGQ yesterday and the rest early after the open

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  153. Gary's 1361 stop still hasn't been hit. Seems like a low risk entry to me for gold futures (stop at 1360) .I am addig mining shares here.

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  154. If this was day 20 in the gold daily cycle I would probably agree with you but it's day 14. That's probably a very low probability trade.

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  155. Miners are now way over sold, short term.

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  156. If the HUI closes the day here it will trigger a Bollinger band crash trade. I expect it would only result in a temporary bounce though and not the final bottom.

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  157. I just sold to core and sure enough it is coming back up. UGH!

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  158. I knew I couldn't stand being almost out of shorts. Bought some FXP (China shorts) at the close yesterday, but not much. I hope to get some sort of a tape clue because this thing is going to break bad once it gets going. I agree with gary that these levitating markets that go way longer than they should end in min-crashes (like last May). When I am losing I just trade smaller and smaller with each successive trade and look to add to positions once I'm in the black. This thing ain't gonna drop 800 points without me getting a good chunk of it!

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  159. Todd,
    The goal is to get out of the way of an intermediate decline, not time the perfect exit point. The sector should be much lower in the weeks to come. Does it really matter that you didn't guess the exact intraday top on Jan. 6?

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  160. By the way Gary, I will be re-subscribing in the next couple weeks. I think I was one of your earliest subscribers back in Dec. of 08. While I don't trade like anyone else in the world I find your perspective a very valuable tool. Keep up the great work.

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  161. Thanks Gary. I just wish I would have sold yesterday with you. I am trying to follow your lead on everything. I tried selling in after hours and had an opportunity of selling at 144 on AGQ and then thought would if Gary is wrong. Didn't stick to my plan.

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  162. I'm not convinced the 50 MA's on SLW or SIL will provide too much support, as the $HUI index blew right through it's 50 MA.

    We could be getting close to a temporary bounce, but I'm not trading that from the long side as it might only last a couple days. I'll just remain patient for now.

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  163. " Gary said...
    I got out of AGQ yesterday and the rest early after the open"

    Are you 100% cash now?

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  164. Just back to a minimum core position, which is a little smaller this time because I'm more confident an intermediate correction has begun.

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  165. Gold's got heart!
    Putting up a good fight.

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  166. Since I am a semi guy, so i am 1/4 sil, 1/4 soxl.

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  167. dxy hit 80.82, just barely, it touched 80.83. Swing high, baby. What's better than a PM correction? Anything, really? X-Mas all over again. C'mon 1361.

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  168. Dollar has just perfected a Demark Weekly Sell Setup. This means there will be a 1-4 week bar reaction to the downside in the dollar, starting next week Now unless the correlations are not what they have been, this should mean we should see some upside in metals, stocks, etc. However, the major stock indices are in the midst of sell signals, reaching upward exhaustion. Silver and Gold are in Monthly Sell Setups themselves, good through April. Looks pretty muddy to me, but I wouldn't be too short here or even sell your gold/silver/miners right now. Surprises are to the upside, and the jobs number tomorrow might be a doozy.

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  169. Here is another great article/interview that I just watched.

    Great thoughts and insights

    www.bigthink.com/ideas/16743

    Hope everybody enjoys and let me know what you guys think

    J

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  170. GDX looks like going to have to test 53.3.. , just like Feb, 2010.

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  171. Something is definitely odd here. Why would the dollar be rallying so much in the face of the jobs info this morning yet the metals are at least somewhat holdng their own in light of th fact that the dollar is up big.

    http://www.marketwatch.com/story/treasurys-up-dollar-pares-gains-after-claims-2011-01-06-83530

    This was from this morning. The dollar then took off.

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  172. Dollar not the only driver of pricing, little thing called demand still plays a role...

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  173. How is this Demark signal constructed?

    It seems to be some kind of oscillator. Oscillators are great for markets locked in a range but worthless during a strong up or down.

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  174. The EURUSD has been stuck in a huge trading range - 5 cents - for more than 1 month. It has rotated through this trading range several times. Once it breaks up or down, a huge directional move should follow. If it breaks down it will be really scary for all risky assets.

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  175. Three is not a number. We have a double bottom in gold.

    What are the odds it will hold against a triple top?

    The target imo, is still $100 off of the high, $1325.

    I'm looking for another shorting entry point.

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  176. steve,

    jobs report is suppose to be good tomorrow so the dollar should or is going up because of it. gold/silver still hanging tight because of the remaining open interests in the comex.

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  177. Gary; On DeMark

    See here:
    http://www.marketmulticycles.com/marketmulticycles5.htm

    and here

    http://www.kimhusebye.com/images/DeMark_Indicators_19_May_10.pdf

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  178. Nat,
    That's what I thought an oscillator that tries to determine an overbought condition to sell and vice versa.

    Seems like it's pretty well known. (may be discounted) I wonder how well it has performed in Ben's ultra liquidity driven market.

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  179. well I don't much about it. I just googled the name Demark and started looking at the links. sped read...(you know Eveleyn Woodhead sped redding course..haha..if you know where that came from)

    Apparently the basics of the system are well known. And available to anyone. Seems its just another tool of technical analysis at least that is how it is described.

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  180. Gary-

    Can you give me the last 2 intermediate starting points and end points. (Not this last one from the summer to Dec.)

    We have weathered a major part of this correction already it seems. HUI is on the 38.2% retracement. I've noticed that gold tends to retrace 50% of it's intermediate run, miners will dip down and touch the 61.8 line during the yearly cycle bottom/intermediate lows. (Around HUI 493-200DMA area--GDX is 53 at this price point).

    Could bounce around here though for a spell. The overall market corrects and these will get swept down to the 61.8 for sure.

    http://www.screencast.com/users/Jayhawk1991/folders/Jing/media/ea0e0c5a-92fc-441e-9929-4a68c809ea65

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  181. Cycle count charts are on the website now.

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  182. I would look for a more significant bounce once gold enters the timing band for a cycle bottom. That's still at least a week away.

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  183. Gold's done for. Forever.

    The stock market is where it's at!

    Look at gold correct an equities hold their own. That's thanks to the awesome increase we've seen in employment recently.

    I'm so happy the economy is back on track. Life is good.

    All j/k of course. God I love propaganda, aka BULLSHIT. Makes for an entertaining market...

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  184. What's the dumb money confidence at now, still nose-bleed territory?

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  185. We could still have a few higher days ahead of us. Who knows?

    Look at SM buy Russell and a little SPY today. Tomorrow's report could up us tomorrow and for a few more days. Gold already correcting severely though is a tell-tale sign of the intermediate delcine. Also check out the swing highs in retail, amongst many other sectors and the dollar's SL of course.

    SoS a lot recently in emerging markets, where else to put your money right now besides shorts, cash?

    I honestly don't think the corrections will be severe as everyone here is thinking. I also think the market has another leg or two up and DEFINITELY, 100%, we'll see QE3 in the not too distant future.

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  186. Real inflation this year was 7%. I'm told in 2011 it will spike to 21%. Gold and silver will go nuts. That's of course after they go nuts to the downside here. SIL is getting creampied!

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  187. Gary .. miners are down hard hard over last week .. I want to buy but I'm scared .. that's when you say we should buy - when we're too scared to buy: Is it time to buy?

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  188. Thanks Gary-I was hoping to got back a few more cycles than those you listed.

    (I think I see it, but the I-cycle from late 2009--looks like it started in July and peeked in early Dec as well. HUI actually went through the 61.8% level on that move (last Feb). The next intermediate gave us a 50% HUI retrace.) I know we will wait for price action, swing lows, etc. but I like to ballpark target zones and watch for things like the MACD to start to flatten on the daily charts in those areas

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  189. Bruce,
    The time to buy is when I'M scared. I'm not there yet. Not by a long shot.

    We have at least 3-4 weeks still.

    Robert,
    It's exactly when people begin to think any correction that creates the kind of sentiment that produces the worst corrections. This one may produce enough bullish sentiment to drive stocks below the July bottom.

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  190. Personally, I'm not buying anything just to catch a 2 day bounce (if that).

    ReplyDelete

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