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Wednesday, February 2, 2011

ENERGY? NO THANKS.

Seems like everyone has now jumped back on the energy band wagon.To be precise energy, solar's, uranium and rare earths. I hear it constantly in the media.

However if something has gone up long enough and far enough to garner the attention of the media it's usually closer to a top than a bottom.

For instance, the oil service ETF is now stretched 33% above the 200 day moving average.


One has to wonder how much upside potential is left after a 5 month rally.

What I don't hear anyone talking about anymore is gold or mining stocks (unless it's to tell us that the bubble has popped).

While virtually every other sector has gotten extremely stretched above the mean the precious metal sector, the only sector in the world that is still in a secular bull market, has quietly moved down into an intermediate degree correction.

So when you hear the countless analysts spouting nonsense about the gold bubble bursting, or the fear trade coming off, or any number of ridiculous reasons they dream up for why gold has moved down, you will know the real reason for golds pullback is nothing more complicated than the average run of the mill profit taking event. An event that happens like clockwork about every 20-25 weeks on average.

These intermediate degree corrections are the single best buying opportunity one ever gets during a C-wave advance.

Also in the bullish column, sentiment in the sector has now reached bearish extremes. Even better is the fact that most of the sector has pulled back to long term support, and or tested a major breakout level.


The upside potential in many of the mining sector ETF's and bell weather stocks is now huge, even if they were just to get back to the recent highs.




One has to ask themselves whether they think the profit potential is biggest in a sector where everyone is falling over themselves to buy. A sector that has already had a huge move and is incredibly stretched above the mean.

Or if the odds might be better buying a secular bull market that has experienced a nice pullback. A sector where a return just to the old highs would already constitute a huge gain, not to mention gold should still have one more parabolic move higher this spring as the final leg of this two year C-wave finally tops out.

My money is on the area where no one is looking. 

Buffett said it best. "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

205 comments:

  1. Reposted from previous thread.

    Chinese Gold Demand Stuns London & Hong Kong Traders

    "‘The demand is unbelievable. The size of the orders is enormous,’ said one senior banker, who estimated that China had imported about 200 tonnes in three months.”

    "I think the key here Eric is that inflation is roaring out of control in Asia, particularly in China. While the western monetary authorities are doing their best to convince their citizens that inflation is not a serious problem, the reality is quite different. To quote Bernanke, ‘Fear of inflation is overstated.’ The citizens of Asia and other regions are not impressed with such statements. Those people have been buying gold and they will continue buying gold as long as inflation is alive and well and I see no end to that in the foreseeable future.”

    http://preview.tinyurl.com/4ua5yj3

    ReplyDelete
  2. http://slopeofhope.com/2011/02/gold-index-short.html

    Short gold stocks!

    Tim says so.

    ;)

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  3. I have no earthly idea why Tim does this. I'm sure he can count the cycles as well as me by now, so to short gold after 27 weeks is ...suicide.

    Well unless one thinks gold has entered a bear market. Although even then one is virtually guaranteed to get caught in the bounce out of the intermediate cycle low.

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  4. @Bede..that's interesting. China being the largest producer and still importing. It is also the start of the Chinese New Year and strong seasonal time.

    Interesting that Gold hasn't moved as much just due to the Egypt/Middle East situation.

    Anyway, Gary, from COT report open interest has been falling. isn't the COT good at spotting bottoms (within a reasonable time frame week or two) or is it the other way around?

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  5. Nat,
    You are exactly right. The big drop in open interest and 100 on the Blees rating is incredibly bullish.

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  6. Gary,

    Thanks for pointing out the 3 year chart of the $HUI - it sure looks tasty. It looks eerily similar to silver's 3 year chart just prior to the parabolic move of the past 5 months. Do you believe that the HUI has something similar in store for us?

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  7. Gold is not a short at this point, and neither is the SPX. Negative sentiment against the market moving higher is still very strong. Bears are sure they got the top nailed. Bulls are afraid to buy.

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  8. Sentiment is a long way from being bearish.

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  9. Re: Tim K--

    I get the sense that the guy honestly doesn't think the precious metals have good fundamentals. Who in his right mind shorts the strongest, hell, the ONLY secular bull in the world just for jollies?

    Either that or he is primarily an entertainer...

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  10. This is great...another writer saying Gold is NOT the place to be (unless I read that wrong)


    http://www.safehaven.com/article/19859/gold-and-precious-metals-its-time-for-a-breather

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  11. "Either that or he is primarily an entertainer..."

    Hmmm, you may be onto something. :-)

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  12. Gary, good report tonight. The charts look far better than I had thought.

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  13. Gary

    Your sentiment link didnt work for me...tried twice , but it says it's a subscription page and needs a password.

    Does this link give the same numbers (or close) that you referred to?

    http://www.aaii.com/sentimentsurvey

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  14. The intermediate score is much more than just an investor survey. It's a combination of 14 intermediate term sentiment gauges.

    At the moment it's just slightly below extreme bullish levels.

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  15. Norcini mentions many of the things I just did:

    http://jsmineset.com/2011/02/02/hourly-action-in-gold-from-trader-dan-400/

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  16. It is my belief that the sentiment indicators out there won't be very useful in this bull market, where many mom-and-pop are still out of the market since early 2009. This is why all of the indicators have been wrong and those reading them never suspected this market could have lasted this long (2 years) and still going. The sentiment indicators are essentially broken (until the retail investors get back on board) and those who continue shorting the market will continue to be shocked and awed.

    I suspect that will be the case for a long time going forward. And I also suspect most traders have gotten the premise all wrong. They think we're in a secular bear market since 2000. When the premise is wrong, further market analysis can only be mediocre at best. Very few people have considered the possibility that we're still in a secular bull market that may still have a decade left in it. They won't realize that until the Dow gets to 20,000. And when the Dow does get to 20,000, it is undeniable proof that we're still in a multi-decade secular bull market.

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  17. A decade-long bear market is by definition a secular bear market.

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  18. DG,

    Did you get a short signal on stocks today? If so, did you take it, are you short?

    Even though I think the big top is ahead of us--March or April--it's possible we could have a 50 point pullback in SPX beginning now or by the end of the week. Maybe your system nailed a short term top?

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  19. A secular bear market is basically a long period of P/E compression.

    Since 2000 the P/E ratio has come down from 42 to roughly 17.

    Secular bear market take valuation from extremely high levels to extremely low levels.

    We are a little over 10 years into that process.

    Eventually the market will return to ridiculously cheap valuations. That will be the time to buy and hold for the next secular bull.

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  20. We didn't see a PE compression to historic lows, like PE 7, even during the thrashing we got in 2008-2009. And now the market continues to pull higher, expanding PE. Typically, secular bear markets end in extreme PE compression. We're not getting that. It's probably because we were not in a secular bear market.

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  21. No it's because secular bear markets usually last at least 15 years. This one is only 10 years old. We have at least one more leg down in this bear market, and maybe two if the Fed doesn't come to it's senses soon.

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  22. Gary,

    Considering where the market is today, I seriously doubt there is more downside to the market, a la March 2009 lows. If we were indeed in a secular bear market since 2000, the serious throat-cutting collapse we got should have at least pounded the PE to the ground, near 10-12. Then we bounce some and then the PE gets pounded down again. We stopped at around PE 15-18 back in March 2009. Since then, the market has rallied for two years now and expanding it PE once again.

    If I were a bear, I would be saying to myself, "Something is not
    right about this market dynamic."

    The reason something is "not right" is because the last 10 years were merely a rest stop in the multidecade secular bull market that is still ongoing.

    ReplyDelete
  23. Beanie,
    Do me a favor and look at a chart of the 66 to 82 bear market and tell me if you see anything different today than then.

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  24. Hell would be sitting at a dinner party between Tim Knight and Beanie.

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  25. Then there's Martin Armstrong who explains how capital flows will move into stocks out of bonds. This article says DOW could hit 18000 plus by 2016.


    "So You Thought Stocks Only Go Up in Boom Times?"

    http://www.martinarmstrong.org/files/So%20You%20Thought%20Stocks%20Only%20Go%20Up%20in%20Boom%20Times%2010-31-2010.pdf

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  26. Many people were fooled multiple times during the 66-82 bear market also. The Dow even managed to make marginal new highs several times convincing everyone that a new secular bull market had begun.

    We heard this quite often in 07 especially from Beanie. I even saw analysts manage to manipulate the data to show that the market was undervalued at the 07 top. Professionals that had been in the business for decades even bought into the hype.

    However all along I was saying that it was only a bear market rally.

    Who was right and who was wrong?

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  27. Gary,

    great points.

    I would not rule out however that Uranium and Rare Earths are starting bull markets. Something's got to start a new bull market every once in a while, right?

    :)

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  28. Here's a different link to the same:

    http://www.scribd.com/doc/41158651/So-You-Thought-Stocks-Only-Go-Up-in-Boom-Times-10-31-2010

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  29. Does the market look like it's going to crater any day now?


    It looks very ominous.

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  30. Energy led the last bull market. It's sorely underperformed during this entire bull.

    The fact that everyone is now trying to jump on board a sector that clearly has impaired fundamentals and whose time in the sun has already past is more indicative of a major bull market top forming than one beginning.

    The energy bulls are making the same mistakes the tech bulls made from 02-07. They are living in the past. The leaders of the last bull market never lead the next one.

    The world will now be locked in an on again off again recession for years. The demand side of the equation is impaired in the energy sector. The only thing holding oil up is the Fed's printing press.

    Personally I like to buy the market leaders not yesterday's news.

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  31. There's a small gap at 19.18 on SIL. It would not surprise me if the hedgies drive under 19.0

    It's going to be very scary buying at those levels!

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  32. I was going to ask the same thing. The market just continues to make new highs day after day. How is that ominous?

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  33. basil,

    Looking at the major indicies, they are forming a topping pattern.

    Shooting star on the DOW waiting for confirmation.

    Miners showing bear flags.

    The dollar ready to bounce?

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  34. I meant evening star on the DOW

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  35. What does a topping pattern look like?

    Because we had those narrow range days last week. The week before. The end of Dec. the middle of Dec and the beginning of Dec.

    Plus the dollar rally when it comes could last all of three days. Certainly less than 10.

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  36. Bearish harami on the SP500

    also showing divergence...

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  37. Again I would point out we've had a momentum divergence in Oct., Dec. and most of Jan.

    What makes this any different than the last 4 months?

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  38. Tops are almost impossible to pick. It's why I suggest not trying as long as we are still in a bull market.

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  39. Right Gary,

    I have stayed away from the general market.

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  40. Pima: My sells are not as good as my buys. Having been wrong in previous top calls I trade small now until I start being right. I shorted FCX and FXI today.

    Beanie: Have you heard of jeremy Grantham? He is arguably the best long term investor there is. Has been for decades. He says the U.S. market is extremely overvalued and expects a poor return for the next ten years. You ought to check out his work. He ranks about ten assets classes at the beginning of each decade as to how they will preform the next decade (Foreign stocks, SPX, commodities, all kinds of stuff.) This past decade he got ALL TEN IN ORDER (except he reversed #'s 7 and 8 I think). Amazing! Best not to argue with his valuation models. If we get hyper-inflation maybe the market rallies, otherwise it's not the place to be according to him.

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  41. DG,

    Jeremy Gratham had been pretty good, but even he was stumped by this bull market. He thought it was done by end of 2009.


    Gary,

    You may have been right about a 'cyclical' bear market back in 2007 but I'm pretty confident that you're wrong about a secular bear market and you're certainly wrong about the market heading to new lows within the next 1-2 years.

    You made the assumption that 2000 was the beginning of a secular bear market. Naturally, after that, you will call EVERY rally as a bear market rally, because that fits with your original premise of a secular bear market. That's what secular bear markets do; they eventually annihilate all cyclical bull markets. I don't know if you actually called the start of another bear market in 2007. If you assumption is that 2000 was the start of the secular bear market, naturally every bull market is a cyclical bull market within the context of a secular bear market. You could have been calling tops in 2004, 2005, 2006, and 2007. I'll give you the doubt that you called the bull market top in 2007. Regardless, it is meaningless to me because to me we're still in a secular bull market and 2007-2009 is just a cyclical bear market for the bulls to take advantage of.

    My premise is that we're still in a secular bull market that started in the 80's. Naturally, true to my premise, I would recommend these bear markets as buying opportunities. Because I see when this secular bull market finally ends, the Dow will probably see 36,000.

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  42. Beanie: That's it? "He's pretty good?" He wasn't "stumped" that the mkt went higher in 2010 because he doesn't make short term calls, though he did maker a guess in 2009. He missed the rally in 2006-2007 too, but turned out to be pretty right when he said we ere dramatically overvalued. Best to have listened to him and gotten out a year early. And that's what he is saying now. Those who ignored him in 2007 regretted it. Those who are bullish now will regret it as well according to him. Yeah, he's "pretty good." Perhaps that's a euphemism for "the best ever."

    ReplyDelete
  43. Gary,

    I'm long miners alongside you for many reasons, but was wondering what you thought about seasonal charts that show gold entering a relatively weak time of the year?

    I'm not at all nervous and remain at 60% invested, but ask if you factor seasonality in at all?

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  44. The 03 C-wave topped in the spring. So did the 04, 06 and 08. So I'm not sure where they get this seasonal weakness data from but it certainly isn't from history.

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  45. Secular US stock market bull or bear? Look no further than short term real rates for the answer to that one. FRB policy = negative short term rates. Gold is the ultimate beneficiary of this policy, not financial assets. The relative performance of gold versus US stocks since 2000 is the proof in the pudding.

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  46. I suppose you're right, as most of the data (2/3) comes from the 1980- 2000 secular bear mkt.

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  47. Beanie,
    Have you ever compared the Nasdaq chart to the Nikkei? The Nikkei period from 1987 to nasdaq early 2000's in particular? I'm not sure what your definition of a bull market is, but those 2 charts most certainly are NOT to me.

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  48. Beanie,
    You never answered my question.

    Pretend for just a second that you can't see into the future. Now compare a chart of the 66 to 82 secular bear market with a chart of the last 10 years and tell me if anything looks different.

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  49. It seems DXY may be doing a swing low, but the day is young...

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  50. Beanie, Gary,

    Both of you are analyzing your side of the debate in a vacuum. You can't compare the current backdrop to past historical cycles without taking the interest rate backdrop into account. In other words, you have to look at how the risk-free rate of return factors into the equation as the cycle itself plays out.

    Back in the 66-82 period, we had a backdrop of rising rates. That had a compression effect on PEs. The past 10 years have been different, which would help explain the higher PE bottom, and the stubbornly bullish market (QE and manipulation theories aside).

    If you want to analyze past market performance to present in a vacuum, go ahead. But don't expect your analysis to spit out anything sensible that you can hang your hat on.

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  51. Gary and subs.....

    I have a question. I suppose some of you read the Harvey Organ Blog. I read it since a few weeks ago. Harvey insists over and over about the risks ETF´s SLV and GLD may be have, since they don´t have the physical MP´s they should have. So, these ETF´s maybe default in short therm.

    I would like to know what you think, especially you Gary, since you also invest in AGQ, ETF a little diferent because it invest in options or futures contracts, but what can we expect about that, an especially in AGQ (i have this ETF in my portofolio) ?

    Thks.

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  52. Gary,

    The probability for QE3 or the continuation of QE2 seems to get more and more likely, although not absolute in my thinking.

    What do you think, with your cycles analysis, will happen to any sort of timing events if QE3 were to happen? Would it stretch the C-wave or decrease, soften a D-wave or more intense, increase an A-Wave? Shrink waves, …or whatever..etc.

    The fed has already thrown gas on the fire, QE3 is like the FED shopping for jet fuel!

    Any monkey wrenches? Perhaps you have taken a MMT approach...I know you are being swayed(kidding of course!)

    cheers

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  53. Carlos,

    My 2 cents about ETF´s:

    I would never trade/invest in them. Maybe only the SPY. Too much risk, at least from my point of view.

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  54. Gary, good morning,

    You said ( rightly) that Silver was giving us an indication of stabilisation and bottoming process...Gold seems to have turned the corner this morning as it opened strongly for the first time in a few weeks...What is your initial target for the rebound? Thanks for your advice....

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  55. If anyone owns individual miners and happens to own FRG...

    they are up $4.00 in pre market. I sold FRG in Nov :(

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  56. Keys,
    I think that QE2 is going to wreck havoc in the currency markets very soon as the dollar moves down into the 3 year cycle low.

    Countries around the world, especially the ones holding our debt, are going to revolt as the dollar to crumble. They will start selling treasuries and rates will start to soar.

    The Fed seems to think that they can magically fix everything by just printing money. Unfortunately there are always consequences. Action and reaction.

    We had a front row seat to the last experiment when Greespan's printing spree ultimately caused the credit markets to implode.

    Bernanke will cause the currency markets to break.

    The bottom line is nothing good is going to come from trying to get something for nothing.

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  57. AHHH...

    Newmont mines need more gold and ate FRG up :)

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  58. David,
    First off explain how we could have two bear markets in a declining interest rate environment if you think that is important.

    Most of history would suggest interest rates as long as they aren't at extremes are meaningless.

    And now we are in a rising interest rate environment as the 30 year secular bull market in bonds has come to an end. Does that mean the market is free to now move down into a secular bear market bottom?

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  59. ECB gave dovish guidance and the Euro fell and the miners spiked. Yeah!

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  60. David,

    What kind of risk are you talking ? Flutuation or default ?

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  61. Carlos-

    Depends on what you're trying to achieve and what you believe will happen in the macro environment. If you are worried about the price of paper and physical Gold will decouple (increasingly higher premiums over spot) in the foreseeable future, you may want to trade paper backed by physical (CEF, PSLV, etc.) I think that's a liklihood, but not in the near term. So I'm comfortable trading 2x ETF's that track Gold and Silver...but only for trading.

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  62. Carlos,
    Despite the many conspiracy theories the evidence is that GLD does have the gold to back the ETF.

    Besides how many of you are planning on exchanging your shares for physical? If not then as long as GLD matches the percentage move in gold what difference does it make?

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  63. Carlos, Gary doesn't buy the conspiracy, I do and there is a nice alternative, SLW. They are a holder and a buyer of silver at deep discounts and rise in step with silver.

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  64. Sophia,
    I've outlined several guesses as to where I thin the final C-wave top may end in the nightly reports. You can just browse some of the weekend reports and find the info

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  65. I prefer to own the companies that have the metal in the ground, with market caps under $3 billion or so.

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  66. Ok, thanks you all for your answers. I only have AGQ at the moment. I will keep it till the end of C-WAVE. After that i will diversify as Gary and many of you do.

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  67. So we love being contrarian, right?

    Just look at these charts, you dont even have to read the article...We have the GDX down 10 pts now from its high now. This guy says we are half way down...calls for GDX retest of AUG low near 46 or 47 area!

    http://www.thegoldandoilguy.com/articles/do-i-see-lipstick-on-a-pig-or-is-the-stock-market-and-gold-still-going-up/

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  68. Got to get going but thanks for the input Gary.

    I am under the impression that you believe the crap will hit the fan before the FED even has the opportunity to get to QE3... and I hope you are correct, the longer the market allows Ben to continue with his insane programs the worse the final blow will be. I see things as you do, but I think my timing lags yours a little....I hope you are right about the sooner than later purge! I guess any QE3 program announcement will only double the problems in the markets!

    I am hiding under my rock for the day...luck all.

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  69. Gary,

    My take:

    1. I don't disagree that we are in a long-term bear market. When short-term rates or headline inflation begin to rise...lookout.

    2. History clearly shows that PEs can contract aggressively in a rising interest rate environment. Just take a look at the PE contraction from 1966 to 1982 (using your example). You don't find that significant?

    In light of the above, I doubt we will see the next leg down until short term rates begin to rise OR headline inflation picks up. The Fed (and the treasury) has no exit strategy for such a scenario, and the next leg down in the stock market could be violent.

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  70. Alex,
    Chris has been consistently wrong about gold trying to call a top way back in Sept. Ouch!

    I think he's going to be wrong again, certainly about the dollar.

    He would probably do himself a favor and learn a little cycle theory instead of trying to depend solely on charts.

    It's dependence on charts that gets the average retail trader in trouble, because at tops and bottoms the charts are going to be saying the trend continues.

    It's why the dumb money index is usually pretty good at spotting turning points.

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  71. Carlos and others: My thought on the PM ETF's is that even if they do blow up due to fraud (very unlikely) it will happen during a D-wave. That kind of stuff always happens during a bear move. As long as you get out for the D-wave it won't mater if the 1% chance they are crooked comes to pass. Enron, etc. all happened during bear moves because that's what causes the pressure. The other thought is that with Paulson, Soros, and some of the other great hedgies long GLD, it seems unlikely they have not done due diligence.

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  72. Gary

    I agree...and thats why its hard to buy a bottom :)

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  73. Thanks DG. Apreciate your thoughts.

    SB - Can you tell us what´s your portofolio made of ?

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  74. I don't read Chris Vermullen (goldandoilguy) any longer. Never found his work useful, and usually was nothing more than an "I told you so", after the fact.

    He's not terrible, but provides no edge.

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  75. It´s hard to buy near the bottom and sell near the top if all you know about charts is what you´ve read in Bulkowski and Edwards and McGee.

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  76. This is from Fortune --
    Here are the 6-month price percentage moves in some of the things people need to live with:

    Cotton = +125.7%
    Sugar = +82.6%
    Corn = +59.0%
    Coffee = +41.4%
    Rice = +40.5%
    Oats = +36.6%
    Copper = +36.1%
    Lumber = +33.8%
    Oil = +25.1%

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  77. The Shiller PE for the S&P was 42 in 2000 before the 2001/02 cyclical bear; it had declined to 24 by 2003. It had risen slightly to 27 in 2007 before the 2008 cyclical bear, before declining to 17 in 2009. Last year it rose to 21. It is definitely following the pattern of PE compression in secular stock bear markets that Gary is referring to. The next significant PE decline will occur in the next cyclical stock bear market, if the pattern holds (which I personally am certain of). The term secular refers to a very long term trend.
    I agree with Dave that rising ST rates will coincide with the next cyclical bear, that relationship is etched in stone.

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  78. Bernanke is calling a meeting at 12:30 today. Highly unusual for the Fed to do that. He must be coming up with more lies today to save face.

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  79. Shalom

    I like all your picks ( and what happened to FRG this a.m. could happen to any of those I imagine.

    I have a really good feeling about EXK, because they have had record profits and production quarter after quarter with a solid future.

    I realize its not over $10 yet, maybe that's why...but SLW was $5 ,2 yrs ago ;)

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  80. Gary,

    Just to answer the other point you brought up in your last post regarding the current bear market in a falling long-term interest rate environment.

    1. The fall in long-term rates from 2000-2010 pales in comparison to the fall in the 1982-2000 period which propelled the market toward lofty valuations into the final blowoff in 2000.

    2. While long-term rates did continue to fall between 2000-2010, the Fed aggressively began to manipulate short-term rates in 2002. This resulted in creating two bubbles, the latter of which we are currently experiencing through renewed artificially low short-term rates.

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  81. With FRG up 40% on the takeover, we now have the catalyst to keep miners strong in the face of a weaker overall stock market, should the cyclical bear return.

    Out of S&P, and into miners. :)

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  82. Why do you people insist on feeding the troll? It's clearly an exercise in futility with a person who's either being willfully ignorant about the market cycles or is a *bleep*.

    Feed 'em and they just keep coming back!

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  83. Bond yields were consistently moving higher throughout the 60's 70's and into the early 80's. That didn't prevent the secular bull market from 32 to 66 from continuing higher into the final top in 66.

    Surging interest rates also didn't prevent the 4 cyclical bull markets during the late 60's and 70's.

    History is pretty vague on the whole interest rate bull/bear market correlation.

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  84. I've always believed bull markets were driven by productivity gains (internet, personal computer, automobile, plastics, electronics) or lack there of in bear markets rather than interest rates.

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  85. USD swing low, GDXJ outperforming -due to FRG?

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  86. Gary,

    The yield on the 10-year treasury was south of 5% going into 1966. It rose to 15% by 1982.

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  87. "I've always believed bull markets were driven by productivity gains (internet, personal computer, automobile, plastics, electronics) or lack there of in bear markets rather than interest rates."

    I'm a big believer in the productivity argument too, but not to the exclusion of all other variables.

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  88. My point was that bonds were in a long term bear market (rising rates) through a big chunk of the 32-66 bull market and despite sharply rising rates we still had 4 cyclical bull markets in the late 60's and 70's.

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  89. Early yet BUT..

    Ng has very robust volume ( 1/2 million in first 15 minutes) and is up 30 cents

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  90. $Store- Interesting about the Bernack meeting at 12:30. One of my nightmares is him verbally pivoting to a more hawkish stance on continuing QE to avoid being shellacked by Ron Paul (round 1 is coming later this week, I believe). This would pummel equities and crush PMs. I do not think the Fed would actually desist from QE, mind you, but he could try to manage the optics, creating huge volatility.

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  91. Morning All!

    Gary, Richard Russell is calling the DIA equal to GLD now, saying that people will run there for safety, away from sitting in cash.

    DOW 30 has been bleeding upwards. What do you think he sees?

    Tom

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  92. Gary: A rise in interest rates does not have predictive value, but a negatively sloped (or positively sloped) yield curve does. That's because the shape shows how aggressive the Fed is in force-feeding money into the economy which, as we have seen, matters a great deal. Like all indicators "rising interest rates" is way too vague and non-nuanced to tell us anything. It needs to be analyzed in more depth than a cursory study would allow. Just like cycles: a cursory glance would convince anyone they do not work, but careful study shows their value. It'd too easy to dismiss things out-of-hand without really looking at them, IMO.

    By the way, I shorted some SPY on that little rally into positive territory based on my sell signal last night. No gap risk till tomorrow now.

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  93. The Richard Russell bit is certainly a strange one. I admit I haven't seen his actual words as I don't get his newsletter, but I'm beginning to think the old guy is losing his marbles.

    Last year, at the market bottom, he was crowing that we wouldn't recognize the world BY THE END OF THE YEAR. Now he's saying, "buy the DJIA." Bizarre. Entertaining, but he's no doubt rather useless these days.

    I know the man has a good reputation and is rather revered, but it seems that he may be essentially a one-hit wonder based on his calling the '74 market bottom.

    But I admit to not being a regular follower and that he may have given valuable advice over time.

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  94. Gary, those cyclical stock bulls are highly correlated with cyclical bulls in treasury yields. Treasury yields didn't go up in a straight line in the 60s and 70s. The swings were particularly violent in the T-bill.

    Same issue with the 2002-2010 period. The T-bill swings this decade have been among the most violent.

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  95. I still think we're on script (similar to the Apr-2010 event) for a significant decline. The April decline took many false starts, sharp drops and retracements to the high's, to the point where everybody gave up.

    Now all of a sudden even the perma- bears are making excuses for not rolling over.

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  96. Polly,

    It wasn´t just in April that this kind of action happened. It happens in almost all significant tops. Tops in the stock market are made up of trading ranges.

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  97. David, I agree.

    Last week I pulled up the current and April charts and found 10 consecutive days that matched Verbatim! The same exercise today shows 15 exact matching days, rather uncanny. Tomorrow would correspond to the first waterfall day in April.

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  98. Gary,
    What is the shortest you've seen a gold cycle?

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  99. Bounces in the S&P can be shorted today, at least for the day. Won't know if shorts can be taken longer than that until later.

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  100. "Tomorrow would correspond to the first waterfall day in April."

    Tomorrow would actually correspond to May 4th, the first day of the final waterfall.

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  101. A daily gold cycle, I meant to say.

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  102. As Gary points out, these trend lines get blown out all the time, especially in the mining sector. But, I've noticed a nice channel since they miners gathered themselves after the epic crash year. I like to look at the weekly big picture and have rough zones that we saw price find support resistance. Looking at the weekly closes, this channel has held up pretty well on GDX along with the HUI. The 50 weekly MA is right there too.

    http://www.screencast.com/users/Jayhawk1991/folders/Jing/media/58479caa-4201-4538-9d2b-b565b74572a6

    On the HUI, the weekly could not close above 500 until last Sept. Then we got a test & successful close above the line in Oct...Now on this move down the area holds. So far so good. Perhaps it's me forcing my bias on the chart, but I thought it was cool.

    http://www.screencast.com/users/Jayhawk1991/folders/Jing/media/e7ac2ef9-7d1e-4c7f-b4b8-aed7287c2530

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  103. Onlooker,

    I tend to agree with your assessment of Richard Russell's calls. He has been on the wrong side of the market at major junctures these past few years.

    I put him in the same one-hit wonder camp as Robert Prechter, although I think a lot of Russell's analysis over these past several decades is grounded in better analytical tools than Prechter's Elliott Wave theory.

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  104. Perhaps my 12:00 speech will give us the oppty if we don't get it sooner?

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  105. V,
    Maybe 15 days.

    Folks it would be a lot safer to just wait till the dollar's three year cycle bottoms before trying to short the market. Right now you are trying to catch a small dollar bounce in a market that is in the process of collapsing down into a major three year cycle low. Even if you finally get lucky the bounce may only last 3 or 4 days and if you don't exit in time you end up sling again.

    IMO the risks far outweigh the reward or the many false starts.

    Just be patient and we will eventually get to a point where one can take a short position and hold it.

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  106. Bernanke didnt "call a meeting", he is going to be the guest of the National Press Club luncheon. You can watch these often on CSPAN with all kinds of people. It's just a regular PR move like all the rest

    http://blogs.wsj.com/economics/2011/02/03/bernanke-meets-the-press-today/

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  107. I hear you Gary with regard to the USD, but that isn't a factor in my trade decision on the short S&P signal. Currently, it's just a very short term . I'm not calling an overall market top as yet.

    Focus is still on the miners long (adding at lower levels), but I'll take my S&P's short too, regardless of the dollar.

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  108. Of course if Bernanke says something wildly off plan it will move the markets, but he'll probably say the same stuff he says in front of congress and everywhere else. You know all the talking points.

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  109. I don't care about Bernankes meeting or whatever, either, just that it might be a catalyst for a bounce to get short.

    Could not care less, and didn't even know he was going to spout any BS today. :)

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  110. I was commenting on the guy earlier who said he had "scheduled a meeting" like there was some kind of emergency announcment.

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  111. JAYHAWKS

    I agree, and both charts are solid. I agree UNTIL the charts reflect a change...Last Feb the channel was broken a bit, but it was a shake out...so I like Gary said once---draw the trend line with a crayon and relax when it comes to the wiggles. (no quote)

    The trend lines work until they dont...MAYBE they reflect where the big dogs see VALUE in P.M. and start to accumulate.

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  112. Interesting article as to why the presses may be continuing full tilt. Apparently, China's power consumption (a real time indicator of economic activity) fell throughout 2010.

    http://www.zerohedge.com/article/niels-jensen-asks-if-plunging-chinese-power-output-indicative-dramatic-economic-slowdown

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  113. Carlos and All,

    If you buy shares in PHYS, you can exchange those shares for physical gold. The catch is you have to go to the vault in Canada and you have to claim 400oz at a time :-)

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  114. TZ: Thanks for clarifying the previous Bernanke "meeting" post.

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  115. gary,
    do you see SLW (SIL) come back to re-test 150 DMA before move up??

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  116. I have no earthly idea where gold or silver are going tomorrow or next week.

    If they go up I'm fully invested and positioned to take advantage of the move.

    If they go down I'm not leveraged so I can't get a margin call and be forced to sell at the bottom.

    If they do go down then I will use that dip to start adding in some leverage.

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  117. Jayhawk, Put silver on a weekly chart back to 02. This last move put it back in the channel from the 08 fall, and this pullback just came down and retested the bottom channel line.

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  118. So when you get a gift like FRG, do you sell immediately or take the new company shares and cash. Seems to me with the cash component being almost equal to the current price, waiting for the close of the deal might be reasonable.

    Any thoughts would be appreciated.

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  119. Prices continue surging worldwide:

    http://online.wsj.com/article/SB10001424052748703652104576121852134742690.html

    10yr rates breaking higher out of a long consolidation

    http://stockcharts.com/h-sc/ui?s=%24tnx&p=D&b=3&g=0&id=p18809758925

    you can watch bernanke live if you want today here:
    http://c-span.org/Events/Federal-Reserve-Chairman-Discusses-the-Challenges-of-the-Economic-Recovery/10737419365/

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  120. Shorting the Dax right here....

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  121. ‘The Buck Stops Here,’ says the consumer to the gas pump. “Literally!”

    http://apeakunderthehood.blogspot.com/

    Fun Read with good insight

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  122. DeMark update from Kevin Depew at Minyanville:
    We have perfected a weekly sell setup on the SPX, so 1-4 bar week downside reaction possibly starting next week. But we are on Week 11 of a potential TD Sequential 13, so a couple more weeks left in that which requires higher prices. He reminds "markets top on good news, not bad, so stop looking for negative catalysts" i.e., maybe Egypt solution will cause stocks to sell off.
    On the MONTHLY chart, SPX is on bar 6 of a potential sell setup. If the count continues, this requires the high of April and/or May to exceed the high of February AND March. So, any correction coming from the WEEKLIES above will be brief and within 10-12%.

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  123. Smack down (again) in gold this morning was pretty nervewracking again.

    I think that should be the last one if we are going higher. This move up should be it.

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  124. http://finance.yahoo.com/q/op?s=gdxj

    Anybody knows how to read this table? Is this option table tell us the direction of GDXJ?

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  125. 92000,
    I know you would like to find something or someone that can give you a guarantee that the bottom is in and you won't have to weather any draw down. Unfortunately that indicator just doesn't exist.

    At some point one has to make a plan and then follow it. I've told everyone my plan. If that doesn't work for you then sit down and come up with one that does.

    The most important thing is to then follow the plan.

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  126. It looks like we are breaking out and "recognition" move is starting.

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  127. p0m0 ends next week. In all likelihood this is when a correction will occur in stocks.

    If you saw the news the other day someone in the Fed was already talking about June QE3- I believe it was Reuters. That's why I don't think the bear market will begin just yet, and after a correction I still think we'll see higher highs until it all comes down.

    If we do get a correction after next week who knows what that will mean for gold/silver? You'd think though if everyone is pulling money out of the markets and they're not going into the dollar that they'd find a home in PMs. Just conjecture.

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  128. Miner ETFs leaving AGQ in the dust today...fine by me.
    : )

    Congrats to all FRG owners. Hey Gary, get out your crystal ball and tell the members who the next junior to be bought will be. What, you don't have a crystal ball?! What do we pay you for, man? ; )

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  129. The miners are a sight to behold! ES futures, not so much. :)

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  130. I was told too that end of February is more Euro nation debt problems. This would mean lower Euro, higher dollar at end of Feb.

    I don't know if this will play out but I wouldn't put it against the dollar to do so. There are no guarantees in this business :)

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  131. I am up to 50% of my final PM position. Bought some this morning in the weakness and more few minutes ago when $HUI cleared 121.40

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  132. Alex,

    thank you for NG

    it's been stuck right under the 50day MA for a month now...

    stuck under it today again..

    hopefully it breaks through the 50 day MA soon

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  133. Bought silver futures before the pop higher. 7x leveraged on gold and silver and HOLDING.

    That's it for me for a while. I just need to sit from here on out, likely for weeks, before a possible adding point. (Leverage goes down quickly as you get gains.)

    Boy I needed this. The whipsawing of the last week has been horrible in almost taking out my gold position (this morn) and causing losses trying to get into silver.

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  134. My buddy was in a tele-conference meeting ... thought he had his phone on mute.
    When gold finally cracked 1350 .... he says "it's about f_cking time"!

    Too funny.

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  135. Wow, gold just exploded through my system's buy stop at 1344 and went sufficiently high enough to have a stop in place now too.

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  136. Alex,
    "If anyone owns individual miners and happens to own FRG..."

    Yep, I own a lot of FRG..up almost 40% today. Getting bought out..sweet..Another stock I own must also be a tempting buyout target..Coral gold is up 24%..So glad to be Old Turkey :)

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  137. Good luck TZ. This is a great...and sometimes nerve-wracking---game!

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  138. I feel like Ripley blasting the Alien queen out the airlock.

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  139. Funny how PMs decided to shoot up basically right before Bernanke started speaking.

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  140. Sorry I meant lying, not speaking...

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  141. Ya got balls TZ. My conservative ways wouldn't let me buy more than 1 GC contract per 35K.

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  142. NIKE

    Yeah, it looks like today will take out the 50 finally! Volume looks good on NG too...

    Golden Lion-

    I was seriously hoping someone on here had a boat load!!

    I sold mine while back and was going to re-enter, but NG and EXK got to my buy point quicker..

    Good for You-THAT was a quick 40% :)

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  143. Brian,

    I'm keeping my FRG for the cash and stock. Think I'll see if I can get the cash in CAD.

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  144. Gotta love the FRG premium and what it means for the group. Not too many +40% takeovers these days.

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  145. Alex; For completeness sake---covered my FCX when it reclaimed the 50 DMA. Glad it was down while PM's were up. the best kind of hedge! Plan to hold my China short for a while at least.

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  146. It's unbelievable how fast the BDI is collapsing, down another 1.8% today- Approaching 2008 lows! International shipping demand must be getting squashed.

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  147. Gary,

    I bought the AGQ breakout this morning.

    While I don't agree with your reasons, I guess we agree on direction.

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  148. My reason is a secular bull market.

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  149. I hate to spoil the mood but let's remember that people are dying right now because of all this. Gold's rise is symptom of a terrible sickness in our world.

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  150. Once again, I have to say Thanks Gary...Bought Gold last night ( a bit too high) but now it is working like a dream and making me back some cash after the dreadful months....

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  151. Another good site for block trades.

    Amazingly it shows over a billion flowing into SPY yesterday in 478 block trades.

    Market Intellisearch

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  152. >It's unbelievable how fast the BDI is collapsing, down another 1.8% today- Approaching 2008 lows! International shipping demand must be getting squashed.

    Although remember this works just like the money supply has lags.

    The high BDI of a few years ago spurred contracting and building of ships. Those ships take a LONG time to build, but they do eventually make it out to sea.

    As someone once said, the cure of high prices is...high prices.

    At least some of the BDI issue is likely due to slow response to the supply demand curve.

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  153. NG --

    Just broke over the past 5 days consolidation on higher volume (5 day/30 min chart)

    It ran hard this fall, and hardly pulled back. Its over it's 50 sma...I would load up here too.

    LOVE AG and AXU also

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  154. Anyone here own NXG? The put/call ratio was over 50/1 yesterday.

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  155. DG

    Nice trade! And now you have more $$$ to grab some more p.m.'s :)

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  156. GARY

    PERFECT Timing on your post this morning!!

    someone could have read it and felt the miners were lagging (LIKE CHRIS VERmeulen :)

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  157. SIL should be up more if the individual miners are any indication.

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  158. TZ,

    I understand that, but that would also mean demand is higher than ever right now.

    We weren't destroying ships! The supply is pretty much only increasing YoY, minus the ones, I'm sure few, that are considered, "outdated". That's unless they've brought new codes to meet in the last year or two, forcing many ships to be considered deceased due to not meeting code, but I haven't heard of this.

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  159. Robert,

    I own NXG. What does that put/call ratio suggest? I don't use those for my trading.

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  160. I would ignore it, look at the volume today, it seems very healthy to me.

    I was just looking at options yesterday traded with the highest put/call ratio and NXG popped up. That obviously means there were significantly more bets on it falling versus rising.

    There were 3953 puts vs. 79 calls traded yesterday.

    That said, that is nothing for a $2 stock. I would completely ignore it but I just thought I bring it up because it was one of the biggest outliers in options trading yesterday when it comes to ratio.

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  161. SB,

    Sugar was down almost 10% at one point today. Still down 4.5%, but had a nice intraday recovery so far.

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  162. I bought FRG on a hunch on tuesday. I've never been happier about a shot in the dark.

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  163. Yes, and a nice shot in the account!! Nice going.

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  164. Jayhawks...I have just 3 letters for you...any guess??

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  165. Thanks. I'm not worried, it's just a tiny position left over from last November.

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  166. shouldn't the market be down more with this rally in the dollar?

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  167. So if I am still about 40% in cash (been scaling into PMs since friday), do I wait for another pullback? I was going to add more PM this morning but things got away from me before I knew it. What are you guys doing?

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  168. Where did this pop come from!

    Is it Bernanke, Egypt, secular bull, all of the above?

    TIA

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  169. Haggerty, UUP is showing a decent sized gap today - UUP usually fills its gaps.

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  170. Congrats, Jennifer, on FRG! Wow, that's quite a move.

    Anyone own TGB?

    It's down 1.5 percent today even though gold and silver is up about 1.5 percent. GDXJ is a screamer today, up 4.47 percent!

    Any ideas why TGB would be down when other miners are up.

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  171. Bede,
    This is how the metals move. They languish just long enough to bore everyone then they take off, immediately get overbought, and if you aren't able to buy into the overbought conditions you get left behind.

    To protect against this happening is why I decided to go ahead and get a full position the other day.

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  172. Jennifer,

    I'm also 60% invested, but will not add after several days up. Waiting for pullbacks.

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  173. do gaps usually get filled right away? Or can this rally for 3-6 days and then come down to fill gap

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  174. Jennifer

    I ,Personally...(THE TECHNICAL ANSWER)

    think they just popped nicely...may be slightly overbought on a short time span...on the stochastics ( I use a 3 day chart at 15 minutes).

    So I am watching some of these expecting MAYBE a small intra day pullback now. They may just go sideways or back bit...but I think LARGE buying will come in at the end of the day.

    (THE SHORT ANSWER)
    ...This looks like GOOD action off the bottom, and I have been Buying to 100% NG and AG

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  175. Thanks for you input SB. I think I feel the same way.

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  176. PIMA

    Yes , TGB is copper mainly

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  177. Jennifer,
    Usually at some point during the beginning of a major move the sector will come back down to test the 10 DMA.

    However that could end up being at higher levels than today and when it happens the intra day move is going to look like a breakout failure. So it will be very hard to make yourself pull the trigger.

    If you think you can overcome your emotions on that day then wait. If you don't want to take a chance then just get in, go Old Turkey, and quit worrying about the daily wiggles.

    There is huge potential at this point even just getting back to the old highs. Probably not the best idea to waste it worrying about trying to time a perfect entry.

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  178. Yeah Alex, I am sitting on the sidelines but I am watching very closely - I hate to buy into a big jump up, but i've done it before, for better and for worse.

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  179. Anyone familiar with Arian Silver Corp.?

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  180. Haggerty - no real way to tell, but they usually get filled within several days. I don't think it matters much though, as Gary has said, the rally in the dollar should be short and weak.

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  181. Gary/Jennifer

    Actually, Garys answer was perfect , because when these start moving off the volume and the big boys put large orders in....The train has left the station.

    Garys exactly right , by the time the do a natural pullback...they could be so much higher , they go sideways or never even pullback to THIS area.Thr Train leaves the station.

    EX...Look at slw from July end thru sept...no big pullback to buy

    I would (FOR MYSELF) at least egt more now...or After 4 today, you may see the Caboose go by :)

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  182. SORRY...Moving 'off the BOTTOM'...typo

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  183. If the dollar closes above 78.28 would that be a swing low for the dollar?

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  184. gary

    are you still expecting a pullback to add leverage? or are you going to add leverage now that the descending trendline has been broken?

    not

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  185. I will add a little either at the close or in the morning.

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