Repost from the end of the last post ________________________________
Alex-
I have that we already are in the 4th Intermediate cycle of this C Wave.
I show them starting in (roughly: April 09 Feb 10 July 10 Jan 11
It seems to me that most of the discussion is on the resolution of this cycle, which is only in its 15th week. And so I assume that you are suggesting that we might add a 5th intermediate cycle to this C-Wave?
Bullion, The BB trade rules require holding for 15 days or until a profitable close which ever comes first.
So yes it's still active but that doesn't guarantee it will close profitable. If there was any pattern that would reduce the odds of a BB trade I would think it would be a collapsing parabola. That's why I'm not willing to take the trade at this time.
At this point I don't feel like I have an edge. Whenever that happens I'm usually better off to just exit and wait for a better setup.
I think that what Gary has decided to do, is probably best for most of his subscribers. Good call Gary. Gold should find support in the 1490s if it makes it that far before reversing to continue up.
Yeah, the chart is interesting, and provides a great deal of perspective. I could easily see testing the bottom of the channel in the D-wave, then the question is whether we break below it like in 2008 (which was a pretty unusual event) or hold it as in the other D-Waves.
On the Intermediate cycle count...I was not trying to poke at your count - rather, I'm working to really understand cycles and so am testing my charts/counts.
Wish people wouldn't just re-hash poor information they hear others post.
If that's a bear flag then people need serious help. A one day small increase after two big days does not make a bear flag people. Give it 3 or 4 days then maybe, but one day, seriously!
Anybody take a look at that BIG bear flag from Jan 28h-Feb2nd....go take a look!
Poly, are you anticipating Gold tests its lows, or straight up from here. If thats the case where would you set stops .... 146 on the GLD ? Its probably is a nice time to go into DGP right now ... good risk/reward ratio
Poly - depends on your TF - I trade daily and above but look for a tight entry on the H4.
Silver is dead. A 30% sell off is not going to be recovered in my view.
The USD will no doubt rally as it becomes the new carry currency in place of the yen. City institutions will be dumping the yen and Jap bonds and Jap Eq's will rally. The yen will weaken and people will need a new carry trade - the Feds will not be raising rates any time soon... so people will be borrowing in USD..
This is only my 'forecast' and could be worth diddly as we all know humans are crap at predicting the future.
Just trade the trend. Go with what the market is telling you - and currently its positioning for a USD rally..
I know your out there, when you become convinced we are in a D wave are you going to play that? If so what are you going to do? I want to play it with 2-3 % of portfolio on SLV puts maybe.
Was hoping to keep adding to my short positions today...guess I'll have stick with what I already have. Very curious to see how the PM stocks react to this. Thye couldn't stay green when gold/silver were up so let's see how they react when they're down.
No I am very far from fully invested, but have enough skin in long gold to profit. No silver here. Stops should be the cycle low, but looking at a test of $1,500 would be reasonable.
Gary at one time you mentioned playing a sector that you thought was over stretched during the Dwave. Is there anything out there your thinking of playing?
The last thing I want is to wake up one morning after shorting silver to find it up $5-6/oz, sitting on losses AND not in position for the re-emerging uptrend in the secular bull.
I would say plenty of holders of Silver who rode it down to $33 are dumping today, getting back some of those losses or paper profits. Could be a couple of days of this. Maybe we form a bull flag :-)
Confidence in long Silver has gone - the gold silver ratio showed that silver was way out of kilter with gold. The question is how long will the usd bounce be?
Long USD is such a contrarian trade it must work!!
"to wake up one morning after shorting silver to find it up $5-6/oz,"
At this stage of the game, i think there's a greater possibility of a 5-6 dollar gap down in Silver than up. There are simply too much overhead resistance.
Gary, 2nd time in 2 weeks you're decide to SELL the next day only to see another big gap down in the morning. Ever thought about having a futures account? One could had hedged their position last night instead of waiting for the open.
Gary in your previous post you mention the BB trade having 90+% success rate. Have you back-tested it to come up with that figure, if so how extensively?
Relatively new subscriber, just sold all positions. Hugely disappointed given the months of build up for "the biggest profit making potential of the decade" that leaves me in the red. Mind boggling. Am I allowed to whine? I think I paid enough to. :) If I've learned one thing it's to discount the apparent certainty of predictions and read in more risk into every position I take.
Aaron, Yes but I'm allowing enough time for a D-wave to run it's course. I really doubt gold would be able to correct the largest and longest D-wave of the entire bull market in only 4-5 weeks. More likely would be 8-10 weeks.
If that's the case then it needs to get started soon. Silver and the miners are saying it's already started. Gold's weekly chart is saying it's begun.
Sorry to hear you ended up in the red, but welcome to the blog anyway.
There was a lot of exuberance and certainty in these comments as silver and gold were going up over the past couple of months. That in itself should have been a warning flag to us all (and will be for me in the future!).
You're right, there are no "sure things" in this field, and one should always be cautious and consider that the forecast could be wrong. However, cycle analysis does give us an edge if we use it correctly. As a result of what happened here last week, I will use the following guidelines re cycles:
1) The time to be aggressive is at the intermediate cycle lows. 2) As we move later into an IT cycle, that is NOT the time to be sitting with 100 percent position, or worse, a leveraged position. 3) Runaway moves are rare to non-existent. Don't bet on one being in place. What's more likely is that the current daily cycle is just stretched.
Stating the D-Wave needs to get started soon is pure contradiction and fits the bias we all debated last night. 10 days ago we had a full daily ahead before any D-Wave began. The fact is the cycle can run from 20 to 30 weeks, that is 2.5 months, there is absolutely no basis or reason why it must start now.
I would be reluctant to short anything before getting confirmation that the bear has returned. I don't really see an edge anywhere at this time, at least not an edge that is appropriate for most people.
For those willing to take on large risk I did suggest a play last night in the aggressive portfolio but I will not discuss that here.
Poly, Any daily cycle can be right or left translated. We got a swing low this morning and it reversed. It's entirely possible that the cycle has now topped and is heading down into a failed and extreme left translated cycle.
That is what we should expect if a D-wave has begun. We won't know for sure unless last Thursday's low is taken out.
But like I said I don't feel like I have an edge right now so I'm going to take my ball and go home. :)
Commods selling off now. Short Wheat as well based on daily shooting star yesterday. I think we will be off to new lows. Can't see any buyers being brave enough to step into the train heading south now...
Just logged on to find that my favorite topic was being discussed last night. Interesting how many different views there still are regarding QE, inflation and the money supply. I’m not going to get into a back and forth on this topic, but I think some basics need to be clarified so that there is not misinformation out there.
For starters, I think it helps to understand the role of the Fed and basic monetary policy. The Fed is an independent body which is responsible for conducting monetary policy in the US. The Fed does not issue government debt or print money (that power lies solely with the treasury dept), but instead they are responsible for interest rate policy and controlling the money supply. In terms of their interest rate policy, the fed sets the discount rate (rate that the Fed lends to banks) as well as influences the fed funds rate target (rate which banks lend to one another). Contrary to popular belief, they can’t set a definitive fed funds rate, but instead have a target rate (currently 0-0.25%) which they achieve by buying and selling treasuries - a topic for another discussion. In terms of Monetary Policy, the fed controls the money supply using several different policy tools – discount rate changes, changes in reserve requirements and buying/selling treasuries. For the purpose of this post, I will only discuss the last one as it is the most relevant to QE.
In the course of basic monetary policy, the Fed engages in buying and selling treasuries (not issuing – again only the treasury does that) to control the money supply. Its pretty straight forward, they use their balance sheet to inject or remove “money” by buying (give cash to the banks for treasuries that the banks own) or selling (get cash from banks in exchange for the treasuries that the Fed holds in inventory) government securities. Again, let me reiterate, they do not issue any government debt at all. They simply buy and sell securities to increase and decrease the money supply. Buy treasuries=increase money supply, Sell treasuries=decrease money supply. This is a basic function that they do all the time through their Permanent Open Market Operations (POMO) and has nothing to do with the recent QE.
Now comes the QE part. The Fed wants to inject MORE capital into the system. All they need to do is increase the amount of treasuries (or other securities during QE1) that they are purchasing. How do they increase the size of their balance sheet and where do they get the additional money to do it? They simply create it out of thin air. They do not print it (again, only a treasury function). They simply credit the bank’s account for the amount of the treasury that they are purchasing. Poof……electronic cash is created. Only 10% of our money is in the form of printed dollars and coins and the rest is just debits and credits in all of our accounts. That’s why if there is ever a run on all the banks, the money doesn’t exist.
Now just a couple of other clarifications. QE1 was focused more on agencies and MBS securities. During QE1, the Fed “sanitized” their purchases. What this means is that for every security that they purchased, they would sell a comparable amount so that their balance sheet size did not change. As an example, they would buy $100M in toxic MBS crap from the banks (increase money supply), but they would sell $100M of treasuries from their own inventory (decrease money supply). By doing so, the net money supply would not change. During QE2, however, the Fed stopped sanitizing their purchases, and discontinued selling comparable securities. For this reason, their balance sheet continued to grow and so too did the money supply.
This post is running long, so I’ll stop right here unless anyone wants to dispute what I’ve written. I can do a part II if people are interested to talk about lending trends, inflation, and how the money gets from the banks to the economy. It is this last point which is causing all the confusion as to whether we have more liquidity system or not.
I appreciate reading all analysis and interpretation of Gary's posts. I am learning a lot from all the discussion, so please keep them coming!
I am a newbie for a few months, and in my mind, I am already reading Gary as Gary the Investor and Gary the Trader. Gary the Investor presents cycle analysis and calls for approximate tops and bottoms with an uncanny accuracy. I am still trying to figure out the style of Gary the Trader, since most of the time, I still can't reconcile the short term calls with the long term analysis.
Once I go through a few daily cycles, and see how the calls are made, and learning from everyone on the blog, I am hoping to develop my own set of "Rules to play PMs", including a journal of the moves from the experienced traders on the blog!
This round was disappointing, but I chalked it up to learning experience!!!
I did sell out this morning. Seemed to be the best move under the circumstances. Still up 9% since joining SMT in Feb and have preserved cash for next move.
I bought a small position in DUG this morning due to break down on the bear flag in XLE. The position size was 10% of my account.
I'm going very small here because the trend is in transition, and I find that starting small during trend changes allows me to get a better rhythm.
The way I see it, the dollar is close to or already has put in a bottom. When that happens, trends that have been in place for the past two years will reverse as the major theme of the past two years has been the weakening dollar. So, we are near the extreme end of the pendulum being stretched to one side. This suggests that there will be a sustained move counter to what we are used to.
Commodities and stocks will go down, the Euro will weaken, the dollar will go up.
For me, just opening a position to this regard helps shift my perspective. If I'm right, I'm in and can build from there. If I'm wrong, the loss is inconsequential.
I do think there is a strong possibility of tests of the bottoms. New moves begin with lots of uncertainty which translates to weak hands. If gold goes down near its bottom and reverses, I'll close this trade, and go long DGP for a possible run up.
On a dollar test of its lows and reversal, i'll be hoping to open a position to ride a sustainable trend.
Sitting in cash; dumb and happy. Will wait for higher probability setup. I've never shorted anything with success. I will avoid that like the plague.
I do have a few thousand shares of a biotech I like, NNVC, as a long term (5-10yrs) play. They've essentially created the first anti-viral similar to the first antibiotics created in the 1940's (think penicillin). I imagine finding a cure for AIDS, bird flu, the common flu, dengue, etc. might bode well for the stock price in the long run. At least in the triple digits ;)
I am out of all positions having sold the last of my DGP today (I was waiting for the first down day). I am having a solid if unspectacular year and am content to wait for clarity. I have learned not to try to swing at every pitch. Here's too the A wave. I will post other trades as I see them. Good luck everybody!
A number of you have mentioned Richard Russell. I became one of his subscribers shortly after the 2008 crash. He has been a long time proponent of Gold.
He did not advise his subscribers to sell in 2008, which he later apologized. And he advised his subscribers to stay away from the stock market throughout 2009. He did knowledge he was wrong. Further, he knowledged that he ignored the buy signals.
This is a quote from last night’s letter, "I like the gold action and feel 55/45 that the gold correction is over.”
HKC: It's not so much that there is a Trader Gary and an Investor Gary. Every investor must pick a time to place an order. At that time, he is a trader, trying to do the best he can (though some ignore timing completely, very few do). I am just trying to make a distinction between a trading call (very difficult and often wrong) and an investing call (longer term and with much more certainty usually). We are all a bit of both I think, and the percentage of which we are varies at different times. Even Gary's comment today "I don't like selling into gaps down" is a traders call, though the investor is saying "I will be out by the close because I see no edge." The former can be said with confidence, the latter is a best guess as to the short term.
Gary: What are some of the signs we will be looking at for the D wave to end? Since we are expecting Silver to go much below its 200dMA, buying again at a tag of the 200dMA might be too early, correct?
Fubsy: I also take pilot positions sometimes. Sort of breaks the ice and keeps it on my radar screen. Why do you buy DUG instead of just shorting XLE? I try to avoid the inverse leveraged ETF's when possible. You probably have lots of cash most of the time like i do, so suspect it's not to get extra leverage, so...?
Guys, FWIW, the $$$ looks to be 'crawling' along its 50 dMA. I belive somewhere in the past Gary has mentioned that such crawls will break up (or down) powerfully. The $$$ crawl in this case will break up most likely.
anyone: how far can/will miners go down in this D-wave? we are already on the 200 DMA that was support in the past 2 years... the question is selling with a loss or sitting it out?
I've been a big fan of Tim Knight's trading. As much as some of you don't like him, he's a very good trader. Check out his performance over the past few weeks: Buy ZSL 18.83 current price 20.53 Short GDX 57.14 current price 55.90 Buy ZSL 19.76 19.74 sold (loss) Short GGB 10.98 10.88 sold (profit) Buy GDX 56.66 57.23 sold (profit) Buy SLV 35.29 35.64 sold (profit) Buy SLV 38.36 38.51 sold (profit) Buy GDX 57.09 58.01 sold (profit) Buy GLD 149.43 149.75 sold (profit) Buy GDX 57.77 58.29 sold (profit) Short EWJ 10.55 10.48 sold (profit) Short AGQ 367.00 332.65 sold (profit) Short GDX 61.48 57.76 sold (profit) Short GLD 149.63 149.19 sold (profit) Short SLV 47.37 45.04 sold (profit) Buy TLT 93.59 93.94 sold (profit) Short GLD 146.76 147.52 sold (loss) Short FXE 142.86 145.57 sold (loss) Short AAPL 321.80 350.63 sold (loss) Buy TLT 91.93 92.76 sold (profit) Short SLV 41.51 46.96 sold (loss) Short GDX 61.54 60.95 sold (profit) Short FXE 144.28 142.41 sold (profit) Buy TLT 90.02 89.97 sold (loss) Short GDX 63.61 64.05 sold (loss) Short SLV 38.66 39.63 sold (loss) Short GLD 142.55 143.62 sold (loss) Short GDX 63.63 62.54 sold (profit) Buy TYP 20.99 21.29 sold (profit) Short URRE 2.23 1.96 sold (profit) Buy ZSL 23.20 24.18 sold (profit) Buy GDX 58.59 59.31 sold (profit) Short TBT 36.66 36.23 sold (profit) Short INFY 64.72 65.88 sold (loss) Short EGO 15.91 15.85 sold (profit) Short EK 3.27 3.22 sold (profit)
Short RTH 103.49 102.96 sold (profit) Short EFA 57.95 60.48 sold (loss) Short GLD 138.40 138.21 sold (profit) Short OIH 154.03 164.22 sold (loss) Short FXE 138.92 141.69 sold (loss) Short GLD 136.10 139.62 sold (loss) Short GDX 55.72 56.49 sold (loss) Short OIH 156.18 153.79 sold (profit) Short IWM 80.15 79.36 sold (profit) Short FXE 137.67 139.27 sold (loss) Buy GDX 57.34 57.96 sold (profit) Buy GDX 57.00 57.61 sold (profit) Buy GLD 137.12 137.70 sold (profit) Short GDX 58.66 57.25 sold (profit) Short XLE 77.12 74.60 sold (profit) Short TYH 51.72 47.73 sold (profit) Short GDX 60.87 59.24 sold (profit) Buy GLD 140.36 140.37 sold (profit) Buy GDXJ 39.44 39.76 sold (profit) Short FXE 137.54 137.35 sold (profit) Buy IAG 21.84 22.00 sold (profit) Short GDX 59.54 60.98 sold (loss) Short SPY 131.16 131.17 sold (loss) Short SLV 32.58 32.39 sold (profit) Short GDX 59.31 59.09 sold (profit) Short SPY 131.52 130.77 sold (profit) Short SLV 29.95 32.02 sold (loss) Short GDX 57.36 59.47 sold (loss) Buy TLT 88.93 89.23 sold (profit) Buy ARM 18.91 19.77 sold (profit) Buy SBAC 42.78 43.47 sold (profit) Short GDX 56.25 56.12 sold (profit) Short GLD 130.37 135.77 sold (loss) Short GDX 55.40 55.16 sold (profit) Short IWM 79.75 79.48 sold (profit) Short SPY 130.68 130.56 sold (profit) Short GLD 130.91 129.75 sold (profit) Short SLV 27.91 27.75 sold (profit) Buy ZSL 11.48 11.21 sold (loss) Short MUB 99.06 98.94 sold (profit) Short SLV 27.57 27.39 sold (profit) Short GLD 130.11 129.93 sold (profit) Short GDX 53.92 53.61 sold (profit) Short DBA 33.81 33.92 sold (loss) Buy TZA 15.70 15.65 sold (loss) Short USO 37.42 37.40 sold (profit) Buy ZSL 11.56 11.72 sold (profit)
Normal "parabola analysis" works in normal, liquid markets. In normal, liquid markets, the chances of a parabola "magically rebuilding itself" are pretty much 0.
Silver is an INCREDIBLY illiquid market, by the standards of world capital flows. And, on top of that, it is "joined at the hip" to a larger, more liquid market (gold), that is the real driver of the sector. Normal "parabola analysis" doesn't NECESSARILY work in incredibly illiquid markets -- especially ones that are attached to a larger, more liquid market that is the real driver of the sector.
As I've mentioned before, I think what we just went through is roughly analagous to the "end events" of the 2006 C-wave. The swings are MUCH more extreme this time, because this has been a much bigger, longer C-wave. But I think the same general dynamics for gold and silver, and the same gold/silver interrelationship are in play. I don't think the recent plunge in silver has "busted" the overall dynamics of this sector, or the gold/silver interrelationship.
You could argue that silver was in a "smaller parabola" in 2006, and that that parabola was broken in that one day 20% crash. And yet, by the end of that C-wave, that silver parabola had been "magically rebuilt", and silver reached a marginal new high.
I think the same will happen this time. As gold powers higher into the end of June, the silver parabola will be "magically rebuilt" -- because, as 2006 has "proved", this can happen in extremely illiquid markets that are "attached at the hip" to larger, more liquid markets that are the real driver of the sector. (Even though I know gold itself is, by the standards of world capital flows, a relatively illiquid market.)
By the logic of this rough analysis, by the end of June, silver could "roughly double top" (as it did in 2006) in the $49 - $52 range.
All this also points out that it's very hard to get good "TA signals" for the entire PM sector from an unnatural, illiquid market that is attached to a larger, more liquid market that is the real driver of the sector.
I think Gary's approach all along has been the correct one -- the truest "TA signals" for what is REALLY going on in this sector come from watching gold. After what just happened in silver, it can be extremely hard to believe this. The tendency is: "Oh my God, look at the silver chart! It's GOTTA be giving us the correct signals for the PMs!" But I believe the truest signals still come from the more liquid, bigger market that is typically the real driver for the sector. And I think the underlying relationship between gold and silver is still intact, even after this big drop in silver.
I'm afraid I can't stick around to defend my repetitious "conceptual thesis", or to argue whether "2006 silver" was REALLY in a parabola, etc. I gotta run back to my real job. I just wanted to suggest these thoughts -- which others have suggested as well -- to the group.
Thanks Gary! One last question: In the past you have mentioned after the A wave, it is going to be difficult to make money till the next C wave. So whats the plan for the B wave? All cash or play the intermediate cycles? Sorry, am thinking way ahead...Would really love to recover and more than make up for all the lost paper profits! I am all cash now, up about 10%, after being up close to 100%. Small account around 80K. Thanks DJ, Fubsy, Poly and others - been a very valuable learning experience. Hopefully we don't repeat these mistakes again!
For anyone wondering whether silver is being traded by hedge funds, you just need to draw some fibs. We literally nailed the 38.2% retracement to one or two ticks. For something as thin as silver that is amazing. There were about 100-150 offered around 39.50 earlier today.
The initial sell off stopped at DS1, retraced 38.2% and moved down again to the 38.2% retracement of the move up (yup, 38% retracement of 4 days in 2 hours). A small rebound and down to DS2 which was almost the 50% retracement of the rally. Unlike the earlier collapse, which was helped along by HEAVY long liquidation, this is likely to be more grindy.
Gold has behaved much better with the 1505 high value area providing solid support.
One big problem with commodities is that the big moves start during London time and the ETF option markets are not open.
Perhaps we need to find the equivalent ETF products listed in London and trade options on them or at least use them to hedge.
I see you are interested in BioTech... Did you happen to see the paper "The Coming BioTech Bubble" by Maudlin? If not, you can see it on InvestorsInsight.com. Let me know if you have trouble finding it (if you are interested). Some great stuff and links to some very smart people in biotech field..
....It is almost unbelievable to me that the market can make a mispricing mistake of this magnitude right before the greatest parabolic move of the decade but it has....
EricH: Thanks for posting the links. What all the doubters forget is that he is what is called a Professional Loser; i.e. is he cuts his losses quickly (term I learnt @DOCs). He constantly updates his stops. So he has been wrong about the larger time-frame moves but in the time-frame he trades, he still is able to make it.
Eric: I have never fully understood the TK bashing here. I believe it is because he controls what is said on his blog and people are put off by that, so they say he's a lousy trader. If you have a tight stop in place it really makes no difference whether you are shorting a bull market or not---your risk is to the stop point and if the item doubles because it is a bull market it makes no difference to you. Risk control is the key, IMO That's a very good track record.
NJ, once the A-wave tops it's going to be tough to make money. I suppose I'll try to use a combination of overbought and oversold oscillators along with cycles to trade that presumably choppy period.
Have you ever read Jim Stack's work at Investec? He seems to have terrific indicators for the start of bear markets. Been reading him for a few years now, and I would not short the stock market without confirmation from him...
TK has his ups and downs over the past 5 years but he did make a killing in the 2008 meltdown.
The reason why i brought this up is because TK does a tremendous job of risk management. It's something we can all learn from. To him, it doesn't' matter if it's a bull or bear market. It's all about setups and exiting when the trade goes against him.
Eric: The problem with trading is it's hard to make big money. If you use tight "risk management" you get kicked out of winners all the time. If you know something is going from 30 to 60, why sell at 28? That's where Gary's cycle timing-band idea has changed my approach and allowed me to make much more money. Risk management prevents big drawdowns and also (often) prevent big wins.
Eric, Tim is a very short term trader. One will have to use strict risk management to play that game but its a very hard game to make money at consistently.
I've tried the short term game a few times and I can't do it.
A 5 year track record would probably be more instructive as to whether Tim is making it work or not.
DG: Agreed. Another way of saying it is that, with Gary's system, you can swing-trade the big pivots using cycle-timing, position sizing, an leverage-sizing to manage risk. It is a FANTASTIC way to do it. Plus, you don't have to be wedded to the computer like the "day-trading" approach.
1 - re the bear flags, can we measure the move downward the same way we would upwards ? So, SLV went from 48$ to 33$ (15$) .. consolidated (Bear Flag ) can we assume it goes from the top of the flag down another 15$ , so 20$ SLV ?
2- Also you have often said Bull Markets rarely repeat .. why do you think Silver will ?
The consolidation comes as the next C-wave gets started. The D-wave takes gold to extreme oversold conditions. The A-wave snaps back violently to relieve those conditions. The B-wave drifts down to relieve the overbought conditions created during the A-wave and then gold moves into a long consolidation after all the violent moves have run their course.
I think that just maybe, finally, this move will make the last of the holders throw in the towel. I was expecting the bounce to go to 42$ but it didn't even cross 40$.
MrM, Silver tagged the 50 DMA yesterday. That is where one should expect to see the sellers come back and apparently they did.
I think we need to face reality here. This is a busted parabola. The odds of one of those recovering are very very slim. You would have better odds on the blackjack table I think.
I think we just have to accept that silver got us this time and move on.
It is time to get the hell out of dodge. If we get a whiff of deflation almost everything is going to get slaughtered. I think Gary is dead on: save your capital for the bottom of this thing.
Gary, is this not what you were seeking immediately after the silver crash, i.e., a swing low followed by a retest of the lows, followed by a (possible) climb to new highs?
Jinks, No but a move below $1462 will at this point.
That was obviously the cycle low. Breaking it now would confirm an intermediate decline has begun and the odds would be high that would also be a D-wave decline.
Huge volume on the crash last week then low volume for the past few days on counter bounce and now were back to huge volume on decline again. PM stocs could not stay green on counter bounce and now that we've rolled over they are down huge again. Good luck to those holding calls.
Gary, on Monday you said, (for those who kept their all positions):
"So if you are looking for an exit price you might want to at least wait till silver closes above that level (BB) before you exit. Personally I would wait and see what gold does before exiting."
Technical Analysis and price action always wins combined with cycles makes it very powerful. I feel guilty at the sums I have made shorting crude, wheat, cable and silver this afternoon all with trailing stops. Scary. I just hope all the longs took heed last night. It goes to show the power of reducing volumes - big money was not interested in higher prices in silver or crude. I'm not bragging as that is destructive but I'm just pointing out that good risk management and trading your plan can bring great rewards.
Gary, you have made great calls throughout this bull. You called the 3 legs, called the 50$ silver price when the darn thing was trading at 14$. Seriously, i have the greatest respect for you and of course, my thanks again, for getting me out a very precarious financial situation !
1. You gave us an idea to switch from AGQ to DGP at the top. Some of us used this strategy. 2. Without you I would have been caught in this down draft this Morning.
I am all cash with 117% profit since February thanks to you!
Stack's indicators still strong for bull market to continue... He now has a new bellweather index in addition to his Negative Leadership Composite Index.. well worth the sub cost...
I put 2.5% of my portfolio into the July 25's. At this point of accumulated losses, I'll hardly miss the funds should the trade go sour . . . totally worth the chance for some recovery.
What's your uncle point? Is your stop way down at the low (1462 gold)?
Right now gold is at the 50 percent retracement level of the recent move up which could be a normal retrace. However, the dollar has punched its way to new highs.
I sold half my gold calls at the open, so I'm down to a small position - the equivalent in GLD shares would be about 30 percent of my account. But considering the fact that the delta on the calls is .67, it's more like 20 percent.
DG, Yes, I'm 90% cash right now with a 10% position in DUG. Why didn't I just short the XLE? I've seen DUG/DIG perform really well in trending markets. I did well with DUG in 08. I guess its like meeting up with an old friend. Also, the stops are close, so I don't risk time and reversal decay on the 2x inverse.
Plus, in the past, when the market was tanking, my brokers often lent shares with the stipulation that they could be taken away. i don;t see that as a risk at this time, but if the market starts tanking, i don't trust the powers that be, and could easily see my borrowed shares stripped. And..I like controlling more position with less cash as the 2x ETFs allow, but I'm always leary of their potential for decay so only buy them for a trending market, and with a concrete stop.
I sold out of all my last weeks purchases yesterday, because I was seeing indecision and resistance being met with slow volume...so I expected a pullback.
I do NOT at this point see a resumption of the 2nd half of a d-Wave ( could be, but may just be a little shaking out nervous buyers and filling gaps here too?). Maybe even a Re-test of our recent bottoms.
Its too early for me to know , so I am not going long here or short...yet.
Aren't you the one that asked that same question late last week? You've got on these things on the way up not after they've gone down huge like today and late last week. Although I do expect we will still hit the 200dmva eventually.
A 60 point rally in my opinion is a cycle low and yes how quickly things can change.
The bear flags really started to make me nervous. If this is a daily cycle that has topped in only three days then this is going to get very ugly and there should probably be another daily cycle down after this one.
Off my UUP chart, it still looks to me like the dollar is going to roll over.
If it doesn't, I've got my Guinea Pig Stops under my "long gold" positions. If they'e hit, my computer is programmed to repeatedly blare out the "HAha!!!!!!!" sound from "The Simpsons", and then on screen will flash over and over: "You're not just a Guinea Pig, you're a Dumb Ass!!!!!"
It happened again! The silver reached almost 40 overnight, then of course, you know what happens then! From what I see, I tend to think the 2nd leg down started today.
FYI, the dollar index breaks out its bull flag, while eur breaks down from its bear flag.
Gary, i gave up on my 4 positions. I see your point save money for the A wave. AUY was not bad, but as soon as GLD got hit everything fell apart. Out and waiting
In the nightly report two or three days ago Gary said that IF the dollar were to find it's way back to the trendline he would expect a sell off once tagging the 50dma. The 50 day SMA was tagged a few minutes ago.
Is this still a consideration as a POSSIBLE reversal in the dollar? I realize all bets are off..just curious.
Thanks for the post re the workings of the Fed. I still don't completely grok it all, but jlinks posted a couple of charts last night that gave some insight into where most of the increase in money supply from QE has gone.
If I'm reading the charts correctly, most of the QE money has gone into increased bank reserves. However, there's about 300 billion that has not gone into reserves, so can we assume that that ended up in the stock and commodities markets? If so, how much of an impact would that actually have. (We need to know the total dollar amount that is invested in stocks and dollar amount invested in commodity futures and I haven't been able to find those figures.)
I believe that Wes believes most of the inflationary moves we've seen in the markets since QE II was announced was due to the expectation of inflation and not due to the newly created money (increase in money supply) making its way into those markets.
Where do you stand on this? Is it your opinion that some of the increase in the money supply actually did make it into the markets and is therefore responsible for the big move up in stocks and commodities since last fall? Or did NONE of that money actually make it into those markets, and therefore the big move up in the markets must the result of nothing more than expectation of inflation?
WMP, I said the 50 would be the first place I would expect the trend followers to try and re-establish the trend. I also said the dollar could penetrate the 50 and if it did it would be another check mark in the "three year cycle bottom" box.
I think there can be no doubt at this point: The dollar has definitively broken its downtrend line drawn off the January and April highs. It MAY come back and retest that line (after going up for a couple of days or so), but if it does, it seems very unlikely that it would break back below it.
If we do get a retest, that would be a very low risk entry for a dollar long.
Alex: The "one more dollar drop" call cost me on my shorts. I am not short, but will post when i do. I'm a little frosted about missing EUO so far. I got a buy on the damn thing at 16.25, but we were supposed to have one more euro rally (dollar drop) so didn't take it. Oh well. If this move is to last a month or more I will get some chunk of it. I will post when I do.
jlinks - My novice interpretation (as valuable as any economist) QE2 simply balanced the deflationary forces if you define inflation/deflation as movements in overall credit instead of price action.
If deflationary forces pick up (more credit destruction), more QE will be deployed. Otherwise, they are trying to hold steady the credit destruction so it won't convert into direct deflation. IMHO
So are you in the camp of "the increase in commodity inflation during QE 2 was NOT due to the QE funds making into those markets, but instead due to the EXPECTATION of inflation" ??
How you do what you do is beyond me. If I had gone through the AGQ crash, I'd still be rolled up in a ball, sucking my thumb. And yet, the whole time, you've been analyzing rationally and answering all our questions.
It must be your rock-climbing training or something.
Regarding SMT subs moving the market, I believe if we were all trading gold and silver futures, then yes, we would have an impact. But I think only a very small fraction of the subs trade futures. Gold and silver prices are determined in the futures markets. SLV, AGQ, GLD--they all FOLLOW what the futures are doing, and it's those etf's that I believe most subs are trading.
I can't believe I ignored the many, many warnings the miners were giving us. Tough lessons, but we will get em next time.
FWIW, I see massive H&S on the daily charts for EXK & SLW. (target 3.50 for EXK, teens for SLW) They need to form RT shoulders a bit more, but if silver heads for 20 eventually, those targets will be hit. Silver does now look like a bear flag now to me. Big one too. Target-20
jhn: It's a lot easier when you have tripled your money and then lost a chunk off the top. I know for myself I am disappointed to have a smaller profit, but it feels very different than when I have taken a big hit to my capital. And yes, Gary does stay even-minded very well.
Maybe someone can explain to me how the stock market could rally like it has, how commodities could gain hundreds of percent and how the Fed's balance sheet can expand by over a trillion dollars, and government debt by several trillion dollars yet the money supply hasn't expanded
Both Jim Rogers, Marc Faber and many others seem to think the Fed did pump trillions of dollars into the banking system. I've got to think these are incredibly savvy investors who know exactly what they are talking about and they both think the Fed has printed massive amounts of money.
So despite all the evidence to the contrary and opinions of people who probably know what they are talking about how can the money supply have not increased?
Repost from the end of the last post
ReplyDelete________________________________
Alex-
I have that we already are in the 4th Intermediate cycle of this C Wave.
I show them starting in (roughly:
April 09
Feb 10
July 10
Jan 11
It seems to me that most of the discussion is on the resolution of this cycle, which is only in its 15th week. And so I assume that you are suggesting that we might add a 5th intermediate cycle to this C-Wave?
Wiggled around a swing, big deal.
ReplyDeleteTJ could post. This cycle is still relatively young, no reason not to expect a fully daily RT, even in light of the dollar
Gary,
ReplyDeleteDo yo still think the BB crash trade is still valid?
Bullion,
ReplyDeleteThe BB trade rules require holding for 15 days or until a profitable close which ever comes first.
So yes it's still active but that doesn't guarantee it will close profitable. If there was any pattern that would reduce the odds of a BB trade I would think it would be a collapsing parabola. That's why I'm not willing to take the trade at this time.
At this point I don't feel like I have an edge. Whenever that happens I'm usually better off to just exit and wait for a better setup.
And so the bear flag starts to play out. Crude off as well. Some excellent set ups short on the 15M chart this morning on both silver and crude.
ReplyDeleteT.J.
ReplyDeleteI see what you are saying ( I relly thought that Gary had said we had 3 , not 4 at this point)..but like I said- I see the lows that you pointed out.
I also liked the chart that you reposted that Jayhawk had posted ...thx.
I think that what Gary has decided to do, is probably best for most of his subscribers.
ReplyDeleteGood call Gary.
Gold should find support in the 1490s if it makes it that far before reversing to continue up.
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ReplyDeleteAlex-
ReplyDeleteYeah, the chart is interesting, and provides a great deal of perspective. I could easily see testing the bottom of the channel in the D-wave, then the question is whether we break below it like in 2008 (which was a pretty unusual event) or hold it as in the other D-Waves.
On the Intermediate cycle count...I was not trying to poke at your count - rather, I'm working to really understand cycles and so am testing my charts/counts.
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ReplyDelete"And so the bear flag starts to play out."
ReplyDeleteWish people wouldn't just re-hash poor information they hear others post.
If that's a bear flag then people need serious help. A one day small increase after two big days does not make a bear flag people. Give it 3 or 4 days then maybe, but one day, seriously!
Anybody take a look at that BIG bear flag from Jan 28h-Feb2nd....go take a look!
New cycle, new stops, great risk/reward.
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ReplyDeletePoly, are you anticipating Gold tests its lows, or straight up from here. If thats the case where would you set stops .... 146 on the GLD ? Its probably is a nice time to go into DGP right now ... good risk/reward ratio
ReplyDeletepoly ...you remind me of a previous mentor ...you wouldnt happen to live near the gate way to the west would you?
ReplyDeletePoly
ReplyDeleteAre you fully invested 100% of portfolio?
What are you holding here?
Dr Copper is singing to us.
ReplyDeletehttp://www.finviz.com/futures_charts.ashx?t=HG&p=d1
Poly - depends on your TF - I trade daily and above but look for a tight entry on the H4.
ReplyDeleteSilver is dead. A 30% sell off is not going to be recovered in my view.
The USD will no doubt rally as it becomes the new carry currency in place of the yen. City institutions will be dumping the yen and Jap bonds and Jap Eq's will rally. The yen will weaken and people will need a new carry trade - the Feds will not be raising rates any time soon... so people will be borrowing in USD..
This is only my 'forecast' and could be worth diddly as we all know humans are crap at predicting the future.
Just trade the trend. Go with what the market is telling you - and currently its positioning for a USD rally..
Shalom
ReplyDeleteI know your out there, when you become convinced we are in a D wave are you going to play that? If so what are you going to do? I want to play it with 2-3 % of portfolio on SLV puts maybe.
Was hoping to keep adding to my short positions today...guess I'll have stick with what I already have. Very curious to see how the PM stocks react to this. Thye couldn't stay green when gold/silver were up so let's see how they react when they're down.
ReplyDeleteNo I am very far from fully invested, but have enough skin in long gold to profit. No silver here. Stops should be the cycle low, but looking at a test of $1,500 would be reasonable.
ReplyDeleteHaggerty,
ReplyDeleteNo, I will not short metals for a D-wave, and I especially would not try to catch it with options.
The fundamentals are too strong for the metals. There will be easier fish to fry, IMO.
Gary
ReplyDeleteat one time you mentioned playing a sector that you thought was over stretched during the Dwave. Is there anything out there your thinking of playing?
I might even play the long side in a D-wave, just with shortened hold times.
ReplyDeleteThe last thing I want is to wake up one morning after shorting silver to find it up $5-6/oz, sitting on losses AND not in position for the re-emerging uptrend in the secular bull.
ReplyDeleteHeck, we might even be in the D-wave already!
ReplyDeleteI would say plenty of holders of Silver who rode it down to $33 are dumping today, getting back some of those losses or paper profits. Could be a couple of days of this. Maybe we form a bull flag :-)
ReplyDeleteShalom,
ReplyDeleteUnlikely, the IT cycle is young and that would be some 2.5 months of declines into the IT lows.
Sold out this morning
ReplyDeleteWill now wait on the sidelines to see what transpires
: (
(Though I am glad I took some profits before the close)
David,
ReplyDeleteYou need a bumper sticker for your car that reads: "What would Beanie do?"
LOL @ Poly - Bull Flag!! ;-)
ReplyDeleteConfidence in long Silver has gone - the gold silver ratio showed that silver was way out of kilter with gold. The question is how long will the usd bounce be?
Long USD is such a contrarian trade it must work!!
"to wake up one morning after shorting silver to find it up $5-6/oz,"
ReplyDeleteAt this stage of the game, i think there's a greater possibility of a 5-6 dollar gap down in Silver than up. There are simply too much overhead resistance.
LOL @ pimaCanyon "What would Beanie do?"
ReplyDeleteGary,
ReplyDelete2nd time in 2 weeks you're decide to SELL the next day only to see another big gap down in the morning. Ever thought about having a futures account? One could had hedged their position last night instead of waiting for the open.
The IT cycle is not young. It's 15 weeks into a cycle that normally last 20 weeks.
ReplyDeleteAt the 4/1/10 (end of QE1) to 7/1/10
ReplyDeletegold up 13%
dollar up 7%
S&P down 6%
Gold/Euro up 22%
@grimweasel
ReplyDeleteI knew you would like that one :)
Gary in your previous post you mention the BB trade having 90+% success rate. Have you back-tested it to come up with that figure, if so how extensively?
ReplyDeletebeep
ReplyDeleteMy point is that I'm not overly bearish on silver, just that I see no reason to be positioned long yet.
ReplyDeletebeep.
ReplyDeleteGary 20 weeks may have been the norm before 2008. The last three cycles were 26, 25, and 30 weeks each.
ReplyDeleteRelatively new subscriber, just sold all positions. Hugely disappointed given the months of build up for "the biggest profit making potential of the decade" that leaves me in the red. Mind boggling. Am I allowed to whine? I think I paid enough to. :) If I've learned one thing it's to discount the apparent certainty of predictions and read in more risk into every position I take.
ReplyDeleteAaron,
ReplyDeleteYes but I'm allowing enough time for a D-wave to run it's course. I really doubt gold would be able to correct the largest and longest D-wave of the entire bull market in only 4-5 weeks. More likely would be 8-10 weeks.
If that's the case then it needs to get started soon. Silver and the miners are saying it's already started. Gold's weekly chart is saying it's begun.
Gold's daily chart is not saying either way.
What the heck was that..in slv
ReplyDeleteSorry I meant to say C-wave in the above comment.
ReplyDeleteGary,
ReplyDeleteThanks to you and your report, I got out overnight :-)
Dave,
ReplyDeleteSorry to hear you ended up in the red, but welcome to the blog anyway.
There was a lot of exuberance and certainty in these comments as silver and gold were going up over the past couple of months. That in itself should have been a warning flag to us all (and will be for me in the future!).
You're right, there are no "sure things" in this field, and one should always be cautious and consider that the forecast could be wrong. However, cycle analysis does give us an edge if we use it correctly. As a result of what happened here last week, I will use the following guidelines re cycles:
1) The time to be aggressive is at the intermediate cycle lows.
2) As we move later into an IT cycle, that is NOT the time to be sitting with 100 percent position, or worse, a leveraged position.
3) Runaway moves are rare to non-existent. Don't bet on one being in place. What's more likely is that the current daily cycle is just stretched.
Dave
ReplyDeleteI'm also relatively new who waited for the biggest C wave.
You want to whine? What did you do? You invested in options? You were leveraged with no risk control?
Great. That's how you lose money. Now you know.
In anticipation of the C wave I'm down 15%. That's what I was willing to risk. That's what I lost. Simple.
Gary,
ReplyDeleteIf this is the D-wave, any other ideas to play this other than put options on SLV?
Shorting energy, industrial commodities?
XLF/DUG has been brought up by you in the past.
Errr...typo. I meant XLE and not XLF.
ReplyDeleteGary,
ReplyDeleteStating the D-Wave needs to get started soon is pure contradiction and fits the bias we all debated last night. 10 days ago we had a full daily ahead before any D-Wave began. The fact is the cycle can run from 20 to 30 weeks, that is 2.5 months, there is absolutely no basis or reason why it must start now.
I would be reluctant to short anything before getting confirmation that the bear has returned. I don't really see an edge anywhere at this time, at least not an edge that is appropriate for most people.
ReplyDeleteFor those willing to take on large risk I did suggest a play last night in the aggressive portfolio but I will not discuss that here.
Im expecting a peak into week 19/20, then an 8 week downdraft, putting this cycle at 28 weeks or so when its done.
ReplyDeletePoly,
ReplyDeleteAny daily cycle can be right or left translated. We got a swing low this morning and it reversed. It's entirely possible that the cycle has now topped and is heading down into a failed and extreme left translated cycle.
That is what we should expect if a D-wave has begun. We won't know for sure unless last Thursday's low is taken out.
But like I said I don't feel like I have an edge right now so I'm going to take my ball and go home. :)
ON VACATION AND SHUTTING DOWN!
ReplyDeleteCommods selling off now. Short Wheat as well based on daily shooting star yesterday. I think we will be off to new lows. Can't see any buyers being brave enough to step into the train heading south now...
ReplyDeleteJust logged on to find that my favorite topic was being discussed last night. Interesting how many different views there still are regarding QE, inflation and the money supply. I’m not going to get into a back and forth on this topic, but I think some basics need to be clarified so that there is not misinformation out there.
ReplyDeleteFor starters, I think it helps to understand the role of the Fed and basic monetary policy. The Fed is an independent body which is responsible for conducting monetary policy in the US. The Fed does not issue government debt or print money (that power lies solely with the treasury dept), but instead they are responsible for interest rate policy and controlling the money supply. In terms of their interest rate policy, the fed sets the discount rate (rate that the Fed lends to banks) as well as influences the fed funds rate target (rate which banks lend to one another). Contrary to popular belief, they can’t set a definitive fed funds rate, but instead have a target rate (currently 0-0.25%) which they achieve by buying and selling treasuries - a topic for another discussion. In terms of Monetary Policy, the fed controls the money supply using several different policy tools – discount rate changes, changes in reserve requirements and buying/selling treasuries. For the purpose of this post, I will only discuss the last one as it is the most relevant to QE.
In the course of basic monetary policy, the Fed engages in buying and selling treasuries (not issuing – again only the treasury does that) to control the money supply. Its pretty straight forward, they use their balance sheet to inject or remove “money” by buying (give cash to the banks for treasuries that the banks own) or selling (get cash from banks in exchange for the treasuries that the Fed holds in inventory) government securities. Again, let me reiterate, they do not issue any government debt at all. They simply buy and sell securities to increase and decrease the money supply. Buy treasuries=increase money supply, Sell treasuries=decrease money supply. This is a basic function that they do all the time through their Permanent Open Market Operations (POMO) and has nothing to do with the recent QE.
Now comes the QE part. The Fed wants to inject MORE capital into the system. All they need to do is increase the amount of treasuries (or other securities during QE1) that they are purchasing. How do they increase the size of their balance sheet and where do they get the additional money to do it? They simply create it out of thin air. They do not print it (again, only a treasury function). They simply credit the bank’s account for the amount of the treasury that they are purchasing. Poof……electronic cash is created. Only 10% of our money is in the form of printed dollars and coins and the rest is just debits and credits in all of our accounts. That’s why if there is ever a run on all the banks, the money doesn’t exist.
Now just a couple of other clarifications. QE1 was focused more on agencies and MBS securities. During QE1, the Fed “sanitized” their purchases. What this means is that for every security that they purchased, they would sell a comparable amount so that their balance sheet size did not change. As an example, they would buy $100M in toxic MBS crap from the banks (increase money supply), but they would sell $100M of treasuries from their own inventory (decrease money supply). By doing so, the net money supply would not change. During QE2, however, the Fed stopped sanitizing their purchases, and discontinued selling comparable securities. For this reason, their balance sheet continued to grow and so too did the money supply.
This post is running long, so I’ll stop right here unless anyone wants to dispute what I’ve written. I can do a part II if people are interested to talk about lending trends, inflation, and how the money gets from the banks to the economy. It is this last point which is causing all the confusion as to whether we have more liquidity system or not.
Silver down 4.5%.
ReplyDeleteAGQ down over 9.5%.
Pennies in front of a steamroller folks.
DG and Silverhound:
ReplyDeleteI appreciate reading all analysis and interpretation of Gary's posts. I am learning a lot from all the discussion, so please keep them coming!
I am a newbie for a few months, and in my mind, I am already reading Gary as Gary the Investor and Gary the Trader. Gary the Investor presents cycle analysis and calls for approximate tops and bottoms with an uncanny accuracy. I am still trying to figure out the style of Gary the Trader, since most of the time, I still can't reconcile the short term calls with the long term analysis.
Once I go through a few daily cycles, and see how the calls are made, and learning from everyone on the blog, I am hoping to develop my own set of "Rules to play PMs", including a journal of the moves from the experienced traders on the blog!
This round was disappointing, but I chalked it up to learning experience!!!
I did sell out this morning. Seemed to be the best move under the circumstances. Still up 9% since joining SMT in Feb and have preserved cash for next move.
ReplyDeletehkc
ReplyDeletevery insightful
Enjoy your break, traderlady.:)
ReplyDeleteI bought a small position in DUG this morning due to break down on the bear flag in XLE. The position size was 10% of my account.
ReplyDeleteI'm going very small here because the trend is in transition, and I find that starting small during trend changes allows me to get a better rhythm.
The way I see it, the dollar is close to or already has put in a bottom. When that happens, trends that have been in place for the past two years will reverse as the major theme of the past two years has been the weakening dollar. So, we are near the extreme end of the pendulum being stretched to one side. This suggests that there will be a sustained move counter to what we are used to.
Commodities and stocks will go down, the Euro will weaken, the dollar will go up.
For me, just opening a position to this regard helps shift my perspective. If I'm right, I'm in and can build from there. If I'm wrong, the loss is inconsequential.
I do think there is a strong possibility of tests of the bottoms. New moves begin with lots of uncertainty which translates to weak hands. If gold goes down near its bottom and reverses, I'll close this trade, and go long DGP for a possible run up.
On a dollar test of its lows and reversal, i'll be hoping to open a position to ride a sustainable trend.
f
Poly,
ReplyDeleteI must have missed it, i assume you are playing gold with DGP?
gary shot you a quick email
ReplyDeleteSitting in cash; dumb and happy. Will wait for higher probability setup. I've never shorted anything with success. I will avoid that like the plague.
ReplyDeleteI do have a few thousand shares of a biotech I like, NNVC, as a long term (5-10yrs) play. They've essentially created the first anti-viral similar to the first antibiotics created in the 1940's (think penicillin). I imagine finding a cure for AIDS, bird flu, the common flu, dengue, etc. might bode well for the stock price in the long run. At least in the triple digits ;)
Gary,
ReplyDeleteGLD topped in mid March 2008 and bottomed in mid Oct 2008, a 7 month D wave, correct?
Fubsy,
ReplyDeleteThanks for the update
RLK
The last D-wave included the move down into the 8 year cycle low. Explains why it was so long and complex.
ReplyDeleteI am out of all positions having sold the last of my DGP today (I was waiting for the first down day). I am having a solid if unspectacular year and am content to wait for clarity. I have learned not to try to swing at every pitch. Here's too the A wave. I will post other trades as I see them. Good luck everybody!
ReplyDeleteA number of you have mentioned Richard Russell. I became one of his subscribers shortly after the 2008 crash. He has been a long time proponent of Gold.
ReplyDeleteHe did not advise his subscribers to sell in 2008, which he later apologized. And he advised his subscribers to stay away from the stock market throughout 2009. He did knowledge he was wrong. Further, he knowledged that he ignored the buy signals.
This is a quote from last night’s letter, "I like the gold action and feel 55/45 that the gold correction is over.”
Just info for you to consider. Good luck.
I don't know how many shares SMT represents but I would think that there is enough here to move the market at least temporarily.
ReplyDeleteGary,
ReplyDeleteThe Dow-gold ratio is about 8.4, the same as late May 2009. When will gold start outperforming the DOW?
HKC: It's not so much that there is a Trader Gary and an Investor Gary. Every investor must pick a time to place an order. At that time, he is a trader, trying to do the best he can (though some ignore timing completely, very few do). I am just trying to make a distinction between a trading call (very difficult and often wrong) and an investing call (longer term and with much more certainty usually). We are all a bit of both I think, and the percentage of which we are varies at different times. Even Gary's comment today "I don't like selling into gaps down" is a traders call, though the investor is saying "I will be out by the close because I see no edge." The former can be said with confidence, the latter is a best guess as to the short term.
ReplyDeleteGary: What are some of the signs we will be looking at for the D wave to end? Since we are expecting Silver to go much below its 200dMA, buying again at a tag of the 200dMA might be too early, correct?
ReplyDeleteFubsy: I also take pilot positions sometimes. Sort of breaks the ice and keeps it on my radar screen. Why do you buy DUG instead of just shorting XLE? I try to avoid the inverse leveraged ETF's when possible. You probably have lots of cash most of the time like i do, so suspect it's not to get extra leverage, so...?
ReplyDeleteGuys, FWIW, the $$$ looks to be 'crawling' along its 50 dMA. I belive somewhere in the past Gary has mentioned that such crawls will break up (or down) powerfully. The $$$ crawl in this case will break up most likely.
ReplyDeleteanyone:
ReplyDeletehow far can/will miners go down in this D-wave? we are already on the 200 DMA that was support in the past 2 years...
the question is selling with a loss or sitting it out?
pima,
ReplyDeleteappreciate your thoughts.
NJ,
ReplyDeleteI'm going to go over it in tonight's report.
I've been a big fan of Tim Knight's trading. As much as some of you don't like him, he's a very good trader. Check out his performance over the past few weeks:
ReplyDeleteBuy ZSL 18.83 current price 20.53
Short GDX 57.14 current price 55.90
Buy ZSL 19.76 19.74 sold (loss)
Short GGB 10.98 10.88 sold (profit)
Buy GDX 56.66 57.23 sold (profit)
Buy SLV 35.29 35.64 sold (profit)
Buy SLV 38.36 38.51 sold (profit)
Buy GDX 57.09 58.01 sold (profit)
Buy GLD 149.43 149.75 sold (profit)
Buy GDX 57.77 58.29 sold (profit)
Short EWJ 10.55 10.48 sold (profit)
Short AGQ 367.00 332.65 sold (profit)
Short GDX 61.48 57.76 sold (profit)
Short GLD 149.63 149.19 sold (profit)
Short SLV 47.37 45.04 sold (profit)
Buy TLT 93.59 93.94 sold (profit)
Short GLD 146.76 147.52 sold (loss)
Short FXE 142.86 145.57 sold (loss)
Short AAPL 321.80 350.63 sold (loss)
Buy TLT 91.93 92.76 sold (profit)
Short SLV 41.51 46.96 sold (loss)
Short GDX 61.54 60.95 sold (profit)
Short FXE 144.28 142.41 sold (profit)
Buy TLT 90.02 89.97 sold (loss)
Short GDX 63.61 64.05 sold (loss)
Short SLV 38.66 39.63 sold (loss)
Short GLD 142.55 143.62 sold (loss)
Short GDX 63.63 62.54 sold (profit)
Buy TYP 20.99 21.29 sold (profit)
Short URRE 2.23 1.96 sold (profit)
Buy ZSL 23.20 24.18 sold (profit)
Buy GDX 58.59 59.31 sold (profit)
Short TBT 36.66 36.23 sold (profit)
Short INFY 64.72 65.88 sold (loss)
Short EGO 15.91 15.85 sold (profit)
Short EK 3.27 3.22 sold (profit)
Short RTH 103.49 102.96 sold (profit)
ReplyDeleteShort EFA 57.95 60.48 sold (loss)
Short GLD 138.40 138.21 sold (profit)
Short OIH 154.03 164.22 sold (loss)
Short FXE 138.92 141.69 sold (loss)
Short GLD 136.10 139.62 sold (loss)
Short GDX 55.72 56.49 sold (loss)
Short OIH 156.18 153.79 sold (profit)
Short IWM 80.15 79.36 sold (profit)
Short FXE 137.67 139.27 sold (loss)
Buy GDX 57.34 57.96 sold (profit)
Buy GDX 57.00 57.61 sold (profit)
Buy GLD 137.12 137.70 sold (profit)
Short GDX 58.66 57.25 sold (profit)
Short XLE 77.12 74.60 sold (profit)
Short TYH 51.72 47.73 sold (profit)
Short GDX 60.87 59.24 sold (profit)
Buy GLD 140.36 140.37 sold (profit)
Buy GDXJ 39.44 39.76 sold (profit)
Short FXE 137.54 137.35 sold (profit)
Buy IAG 21.84 22.00 sold (profit)
Short GDX 59.54 60.98 sold (loss)
Short SPY 131.16 131.17 sold (loss)
Short SLV 32.58 32.39 sold (profit)
Short GDX 59.31 59.09 sold (profit)
Short SPY 131.52 130.77 sold (profit)
Short SLV 29.95 32.02 sold (loss)
Short GDX 57.36 59.47 sold (loss)
Buy TLT 88.93 89.23 sold (profit)
Buy ARM 18.91 19.77 sold (profit)
Buy SBAC 42.78 43.47 sold (profit)
Short GDX 56.25 56.12 sold (profit)
Short GLD 130.37 135.77 sold (loss)
Short GDX 55.40 55.16 sold (profit)
Short IWM 79.75 79.48 sold (profit)
Short SPY 130.68 130.56 sold (profit)
Short GLD 130.91 129.75 sold (profit)
Short SLV 27.91 27.75 sold (profit)
Buy ZSL 11.48 11.21 sold (loss)
Short MUB 99.06 98.94 sold (profit)
Short SLV 27.57 27.39 sold (profit)
Short GLD 130.11 129.93 sold (profit)
Short GDX 53.92 53.61 sold (profit)
Short DBA 33.81 33.92 sold (loss)
Buy TZA 15.70 15.65 sold (loss)
Short USO 37.42 37.40 sold (profit)
Buy ZSL 11.56 11.72 sold (profit)
Knife,
ReplyDeleteProbably during the next bear market like it did during the last one. The Dow got hit hard but gold held up relatively well.
Normal "parabola analysis" works in normal, liquid markets. In normal, liquid markets, the chances of a parabola "magically rebuilding itself" are pretty much 0.
ReplyDeleteSilver is an INCREDIBLY illiquid market, by the standards of world capital flows. And, on top of that, it is "joined at the hip" to a larger, more liquid market (gold), that is the real driver of the sector. Normal "parabola analysis" doesn't NECESSARILY work in incredibly illiquid markets -- especially ones that are attached to a larger, more liquid market that is the real driver of the sector.
As I've mentioned before, I think what we just went through is roughly analagous to the "end events" of the 2006 C-wave. The swings are MUCH more extreme this time, because this has been a much bigger, longer C-wave. But I think the same general dynamics for gold and silver, and the same gold/silver interrelationship are in play. I don't think the recent plunge in silver has "busted" the overall dynamics of this sector, or the gold/silver interrelationship.
You could argue that silver was in a "smaller parabola" in 2006, and that that parabola was broken in that one day 20% crash. And yet, by the end of that C-wave, that silver parabola had been "magically rebuilt", and silver reached a marginal new high.
I think the same will happen this time. As gold powers higher into the end of June, the silver parabola will be "magically rebuilt" -- because, as 2006 has "proved", this can happen in extremely illiquid markets that are "attached at the hip" to larger, more liquid markets that are the real driver of the sector. (Even though I know gold itself is, by the standards of world capital flows, a relatively illiquid market.)
By the logic of this rough analysis, by the end of June, silver could "roughly double top" (as it did in 2006) in the $49 - $52 range.
All this also points out that it's very hard to get good "TA signals" for the entire PM sector from an unnatural, illiquid market that is attached to a larger, more liquid market that is the real driver of the sector.
I think Gary's approach all along has been the correct one -- the truest "TA signals" for what is REALLY going on in this sector come from watching gold. After what just happened in silver, it can be extremely hard to believe this. The tendency is: "Oh my God, look at the silver chart! It's GOTTA be giving us the correct signals for the PMs!" But I believe the truest signals still come from the more liquid, bigger market that is typically the real driver for the sector. And I think the underlying relationship between gold and silver is still intact, even after this big drop in silver.
I'm afraid I can't stick around to defend my repetitious "conceptual thesis", or to argue whether "2006 silver" was REALLY in a parabola, etc. I gotta run back to my real job. I just wanted to suggest these thoughts -- which others have suggested as well -- to the group.
Good luck today!
That's a very high winning % for a trader.
ReplyDeleteTimmy is batting .788.
ReplyDeletehttp://comments.socialtrade.com/profile/?uname=tknight
He might not be great trading under cycles and fundamentals, but the guy understands setups and risks extremely well.
Thanks Gary! One last question: In the past you have mentioned after the A wave, it is going to be difficult to make money till the next C wave. So whats the plan for the B wave? All cash or play the intermediate cycles? Sorry, am thinking way ahead...Would really love to recover and more than make up for all the lost paper profits! I am all cash now, up about 10%, after being up close to 100%. Small account around 80K. Thanks DJ, Fubsy, Poly and others - been a very valuable learning experience. Hopefully we don't repeat these mistakes again!
ReplyDeleteFor anyone wondering whether silver is being traded by hedge funds, you just need to draw some fibs. We literally nailed the 38.2% retracement to one or two ticks. For something as thin as silver that is amazing. There were about 100-150 offered around 39.50 earlier today.
ReplyDeleteThe initial sell off stopped at DS1, retraced 38.2% and moved down again to the 38.2% retracement of the move up (yup, 38% retracement of 4 days in 2 hours). A small rebound and down to DS2 which was almost the 50% retracement of the rally. Unlike the earlier collapse, which was helped along by HEAVY long liquidation, this is likely to be more grindy.
Gold has behaved much better with the 1505 high value area providing solid support.
One big problem with commodities is that the big moves start during London time and the ETF option markets are not open.
Perhaps we need to find the equivalent ETF products listed in London and trade options on them or at least use them to hedge.
I haven't actually tried to track him but what's Tim's long term record?
ReplyDeleteI've noticed he seems to try to short bull markets a lot.
Mike,
ReplyDeleteI see you are interested in BioTech... Did you happen to see the paper "The Coming BioTech Bubble" by Maudlin? If not, you can see it on InvestorsInsight.com. Let me know if you have trouble finding it (if you are interested). Some great stuff and links to some very smart people in biotech field..
....It is almost unbelievable to me that the market can make a mispricing mistake of this magnitude right before the greatest parabolic move of the decade but it has....
ReplyDeleteSilver tagged the 50 DMA. I was pretty confident the sellers would return at that level.
ReplyDeleteEricH:
ReplyDeleteThanks for posting the links. What all the doubters forget is that he is what is called a Professional Loser; i.e. is he cuts his losses quickly (term I learnt @DOCs). He constantly updates his stops. So he has been wrong about the larger time-frame moves but in the time-frame he trades, he still is able to make it.
Burton,
ReplyDeleteApparently the market wasn't making a mistake at all :)
That being said the market is making a mistake as miners are still way too cheap. If this continues I know where I will play the A-wave at.
Gary, so do we have some more room for the downside, or is this a good place for short bounce?
ReplyDeleteEric: I have never fully understood the TK bashing here. I believe it is because he controls what is said on his blog and people are put off by that, so they say he's a lousy trader. If you have a tight stop in place it really makes no difference whether you are shorting a bull market or not---your risk is to the stop point and if the item doubles because it is a bull market it makes no difference to you. Risk control is the key, IMO That's a very good track record.
ReplyDeleteNJ,
ReplyDeleteonce the A-wave tops it's going to be tough to make money. I suppose I'll try to use a combination of overbought and oversold oscillators along with cycles to trade that presumably choppy period.
Gary,
ReplyDeleteHave you ever read Jim Stack's work at Investec? He seems to have terrific indicators for the start of bear markets. Been reading him for a few years now, and I would not short the stock market without confirmation from him...
I just wish that the silver/gold prices would fall through a hole and bottom out so that the next phase can begin.
ReplyDeleteGary,
ReplyDeleteTK has his ups and downs over the past 5 years but he did make a killing in the 2008 meltdown.
The reason why i brought this up is because TK does a tremendous job of risk management. It's something we can all learn from. To him, it doesn't' matter if it's a bull or bear market. It's all about setups and exiting when the trade goes against him.
Eric: The problem with trading is it's hard to make big money. If you use tight "risk management" you get kicked out of winners all the time. If you know something is going from 30 to 60, why sell at 28? That's where Gary's cycle timing-band idea has changed my approach and allowed me to make much more money. Risk management prevents big drawdowns and also (often) prevent big wins.
ReplyDeleteMichael,
ReplyDeleteI used to read Jim Stack till about ayear ago. From then on, focused on Gary exclusively.
What does he say about start of bear market at this point in time.
Eric,
ReplyDeleteTim is a very short term trader. One will have to use strict risk management to play that game but its a very hard game to make money at consistently.
I've tried the short term game a few times and I can't do it.
A 5 year track record would probably be more instructive as to whether Tim is making it work or not.
I think we can definitively say those were bear flags at this point.
ReplyDeleteGary, just a rough idea, A wave timeframe?
ReplyDeleteDG: Agreed. Another way of saying it is that, with Gary's system, you can swing-trade the big pivots using cycle-timing, position sizing, an leverage-sizing to manage risk. It is a FANTASTIC way to do it. Plus, you don't have to be wedded to the computer like the "day-trading" approach.
ReplyDeleteShould start once this intermediate cycle bottoms.
ReplyDeleteWow, as soon as that? No consolidation period?
ReplyDeleteGary, hope you dont mind 2 quick questions.
ReplyDelete1 - re the bear flags, can we measure the move downward the same way we would upwards ? So, SLV went from 48$ to 33$ (15$) .. consolidated (Bear Flag ) can we assume it goes from the top of the flag down another 15$ , so 20$ SLV ?
2- Also you have often said Bull Markets rarely repeat .. why do you think Silver will ?
Added to silver calls. Will know by next week if this thing has legs or not.
ReplyDeleteGDX putting in what I think is a double-bottom.
ReplyDeleteInteresting action today. Will remain on the sidelines for now.
ReplyDeleteThanks Michael, got it.
ReplyDeleteGary,
ReplyDeleteYes, TK is a very very short term trader, he's method works great for those willing to step in front of this D wave train.
The consolidation comes as the next C-wave gets started. The D-wave takes gold to extreme oversold conditions. The A-wave snaps back violently to relieve those conditions. The B-wave drifts down to relieve the overbought conditions created during the A-wave and then gold moves into a long consolidation after all the violent moves have run their course.
ReplyDeletePeter,
ReplyDeleteThis bull market isn't over. So there's nothing to repeat. It will just continue.
Gary,
ReplyDeleteThanks for the explanation, I'm sure you get tired of repeating it....
Anybody taking the EUO trade to make a little money, while we wait?
ReplyDeletePay attention to whats going on here folks. The dollar is rallying, the silver parabola is collapsing, everything is getting hit.
ReplyDeleteAre you sure you want to fight this when we know we are in the timing band for the D-wave.
If you get caught you are going to damage to your account and not be able to play the A-wave.
Thanks Gary. Any thoughts on the measured move ? SLV down to 20$ ?
ReplyDeleteI think that just maybe, finally, this move will make the last of the holders throw in the towel.
ReplyDeleteI was expecting the bounce to go to 42$ but it didn't even cross 40$.
Dr. Copper continues to sing to us.
ReplyDeletehttp://www.finviz.com/futures_charts.ashx?t=HG&p=h1
New lows for the year.
:)
Gary,
ReplyDeleteDoes the low in the current D-Wave ever gets broken in the next ABCD cycle?
What I am trying to say if this is the D-Wave and lets say we go down to $21 in Silver, will this be the new low for the next ABCD cycle.
Thanks
Peter,
ReplyDeleteIf gold goes down to $1300 or maybe a little lower I expect we will see silver test the breakout at $21.
Dallas,
ReplyDeleteYes the D-wave low will be the low for the cycle and the starting point for the next cycle up.
Gary
ReplyDeleteDoes a bear flag confirmation confirm the D Wave?
MrM,
ReplyDeleteSilver tagged the 50 DMA yesterday. That is where one should expect to see the sellers come back and apparently they did.
I think we need to face reality here. This is a busted parabola. The odds of one of those recovering are very very slim. You would have better odds on the blackjack table I think.
I think we just have to accept that silver got us this time and move on.
It is time to get the hell out of dodge. If we get a whiff of deflation almost everything is going to get slaughtered. I think Gary is dead on: save your capital for the bottom of this thing.
ReplyDeleteGary, is this not what you were seeking immediately after the silver crash, i.e., a swing low followed by a retest of the lows, followed by a (possible) climb to new highs?
ReplyDeleteJinks,
ReplyDeleteNo but a move below $1462 will at this point.
That was obviously the cycle low. Breaking it now would confirm an intermediate decline has begun and the odds would be high that would also be a D-wave decline.
i'm just licking my chops thinking of buying SLW in the 20s again.
ReplyDeleteHuge volume on the crash last week then low volume for the past few days on counter bounce and now were back to huge volume on decline again. PM stocs could not stay green on counter bounce and now that we've rolled over they are down huge again. Good luck to those holding calls.
ReplyDeleteE,
ReplyDeleteI wanted to see a test fairly quickly. Something where it was obvious the cycle HAD NOT bottomed yet.
Now it has become pretty clear the cycle did bottom and gold is now at risk of a left translated cycle.
Gary,
ReplyDeleteThanks a lot for getting us out this Morning!
Did I make amends (a little bit) for getting caught in the silver crash? :)
ReplyDeleteDan,
ReplyDeleteI'm with you and so did many here...
What is pushing the US$ up, just the cycle off the low?
ReplyDeletewhat is the estimated timeframe of gold going to 1300 and slv to 21? by july or october?
ReplyDeleteYes Gary. Thanks for getting us out.
ReplyDeleteYes good call getting out Gary. I got out of all my positions first thing this morning after reading your report. Saved me quite a bit of money.
ReplyDeleteGary, on Monday you said, (for those who kept their all positions):
ReplyDelete"So if you are looking for an exit price you might want to at least wait till silver closes above that level (BB) before you exit. Personally I would wait and see what gold does before exiting."
Did you change your mind about that?
This comment has been removed by the author.
ReplyDeleteE,
ReplyDeleteI'll cover it in tonight's report.
Technical Analysis and price action always wins combined with cycles makes it very powerful. I feel guilty at the sums I have made shorting crude, wheat, cable and silver this afternoon all with trailing stops. Scary. I just hope all the longs took heed last night. It goes to show the power of reducing volumes - big money was not interested in higher prices in silver or crude. I'm not bragging as that is destructive but I'm just pointing out that good risk management and trading your plan can bring great rewards.
ReplyDeleteABC,
ReplyDeleteI did. Once I saw those bear flags forming I started to get nervous.
Gary, you have made great calls throughout this bull. You called the 3 legs, called the 50$ silver price when the darn thing was trading at 14$. Seriously, i have the greatest respect for you and of course, my thanks again, for getting me out a very precarious financial situation !
ReplyDeleteLook forward to the next run
Alright time to go train. I do have a tournament in two weeks so I better get off my butt and get to work.
ReplyDeleteGary,
ReplyDelete1. You gave us an idea to switch from AGQ to DGP at the top. Some of us used this strategy.
2. Without you I would have been caught in this down draft this Morning.
I am all cash with 117% profit since February thanks to you!
Great call on last evening's premium update, Gary.
ReplyDeleteSilver is now down over 8%. Wow!!
I am so glad that I stayed out after reading your update!!! Thank you.
Nice move exiting positions into the bounce, Gary. :)
ReplyDeletefor people buying silver or SLV puts which ones are you buying? I'm thinking the july 25 would be a good candidate...
ReplyDeleteSandy,
ReplyDeleteStack's indicators still strong for bull market to continue... He now has a new bellweather index in addition to his Negative Leadership Composite Index.. well worth the sub cost...
Not,
ReplyDeleteI put 2.5% of my portfolio into the July 25's. At this point of accumulated losses, I'll hardly miss the funds should the trade go sour . . . totally worth the chance for some recovery.
Good luck!
OTM SLV puts, btw, not SIL
ReplyDeletePoly,
ReplyDeleteWhat's your uncle point? Is your stop way down at the low (1462 gold)?
Right now gold is at the 50 percent retracement level of the recent move up which could be a normal retrace. However, the dollar has punched its way to new highs.
I sold half my gold calls at the open, so I'm down to a small position - the equivalent in GLD shares would be about 30 percent of my account. But considering the fact that the delta on the calls is .67, it's more like 20 percent.
Good call on today report Gary. Thanks
ReplyDeleteDG,
ReplyDeleteYes, I'm 90% cash right now with a 10% position in DUG.
Why didn't I just short the XLE? I've seen DUG/DIG perform really well in trending markets. I did well with DUG in 08. I guess its like meeting up with an old friend. Also, the stops are close, so I don't risk time and reversal decay on the 2x inverse.
Plus, in the past, when the market was tanking, my brokers often lent shares with the stipulation that they could be taken away. i don;t see that as a risk at this time, but if the market starts tanking, i don't trust the powers that be, and could easily see my borrowed shares stripped. And..I like controlling more position with less cash as the 2x ETFs allow, but I'm always leary of their potential for decay so only buy them for a trending market, and with a concrete stop.
f
For me personally...
ReplyDeleteI sold out of all my last weeks purchases yesterday, because I was seeing indecision and resistance being met with slow volume...so I expected a pullback.
I do NOT at this point see a resumption of the 2nd half of a d-Wave ( could be, but may just be a little shaking out nervous buyers and filling gaps here too?). Maybe even a Re-test of our recent bottoms.
Its too early for me to know , so I am not going long here or short...yet.
exited all gold and silver postions this morning, before the pain got excessive.
ReplyDeleteJUST so you see how quickly things can change...
ReplyDeleteMonday Gary said you would not have to make a decision this week, a rally here would last into next week, and bollinger band trade was in effect too.
So its too early HERE to know whats next for me. :)
Can anyone please explain why it has become clear that the cycle has bottomed already and this is not just a retest of the prior lows? Thank you.
ReplyDeleteNotgreedisgood,
ReplyDeleteAren't you the one that asked that same question late last week? You've got on these things on the way up not after they've gone down huge like today and late last week. Although I do expect we will still hit the 200dmva eventually.
Mike,
ReplyDeleteI've also got some NNVC. Did you hear about the company thru Allan?
A 60 point rally in my opinion is a cycle low and yes how quickly things can change.
ReplyDeleteThe bear flags really started to make me nervous. If this is a daily cycle that has topped in only three days then this is going to get very ugly and there should probably be another daily cycle down after this one.
Off my UUP chart, it still looks to me like the dollar is going to roll over.
ReplyDeleteIf it doesn't, I've got my Guinea Pig Stops under my "long gold" positions. If they'e hit, my computer is programmed to repeatedly blare out the "HAha!!!!!!!" sound from "The Simpsons", and then on screen will flash over and over: "You're not just a Guinea Pig, you're a Dumb Ass!!!!!"
;^)
It happened again! The silver reached almost 40 overnight, then of course, you know what happens then! From what I see, I tend to think the 2nd leg down started today.
ReplyDeleteFYI, the dollar index breaks out its bull flag, while eur breaks down from its bear flag.
Be prepared!
Rachel,
ReplyDeleteAt least we didn't let the gap down catch us twice.
Gary,
ReplyDeletei gave up on my 4 positions. I see your point save money for the A wave.
AUY was not bad, but as soon as GLD got hit everything fell apart.
Out and waiting
Gary,
ReplyDeleteSo in this case it's the magnitude of the rally and not that it broke $1521 and then failed?
I'm a newbie at this cycle stuff, so still trying to take it all in.
If that is true (Gary)
ReplyDeleteCash is KING , or downside gains will be huge.
DG (DWIGHT) haha
I believe you said we'd be shorting the crap out of the D-Wave. Where are ya Buddy ? You shortin with out us?? :)
In the nightly report two or three days ago Gary said that IF the dollar were to find it's way back to the trendline he would expect a sell off once tagging the 50dma. The 50 day SMA was tagged a few minutes ago.
ReplyDeleteIs this still a consideration as a POSSIBLE reversal in the dollar? I realize all bets are off..just curious.
PST,
ReplyDeleteThanks for the post re the workings of the Fed. I still don't completely grok it all, but jlinks posted a couple of charts last night that gave some insight into where most of the increase in money supply from QE has gone.
If I'm reading the charts correctly, most of the QE money has gone into increased bank reserves. However, there's about 300 billion that has not gone into reserves, so can we assume that that ended up in the stock and commodities markets? If so, how much of an impact would that actually have. (We need to know the total dollar amount that is invested in stocks and dollar amount invested in commodity futures and I haven't been able to find those figures.)
I believe that Wes believes most of the inflationary moves we've seen in the markets since QE II was announced was due to the expectation of inflation and not due to the newly created money (increase in money supply) making its way into those markets.
Where do you stand on this? Is it your opinion that some of the increase in the money supply actually did make it into the markets and is therefore responsible for the big move up in stocks and commodities since last fall? Or did NONE of that money actually make it into those markets, and therefore the big move up in the markets must the result of nothing more than expectation of inflation?
jhnewman,
ReplyDeleteThat's funny. I want a copy of those sound files so I can get my computer to chastise me too!
WMP,
ReplyDeleteI said the 50 would be the first place I would expect the trend followers to try and re-establish the trend. I also said the dollar could penetrate the 50 and if it did it would be another check mark in the "three year cycle bottom" box.
Another good call Gary, you are back on track.
ReplyDeletePima: Will do!
ReplyDeleteYou'll find it can be very beneficial to be chastised by your computer. (Until you smash the damn thing.)
I think there can be no doubt at this point: The dollar has definitively broken its downtrend line drawn off the January and April highs. It MAY come back and retest that line (after going up for a couple of days or so), but if it does, it seems very unlikely that it would break back below it.
ReplyDeleteIf we do get a retest, that would be a very low risk entry for a dollar long.
Pima,
ReplyDelete"What's your uncle point? Is your stop way down at the low (1462 gold)?"
I like $1,474 as my stop, will play it off that. It's off 0.9% at this point, doing rather well considering.
Alex: The "one more dollar drop" call cost me on my shorts. I am not short, but will post when i do. I'm a little frosted about missing EUO so far. I got a buy on the damn thing at 16.25, but we were supposed to have one more euro rally (dollar drop) so didn't take it. Oh well. If this move is to last a month or more I will get some chunk of it. I will post when I do.
ReplyDeleteDan
ReplyDeleteNice call are you adding to your puts today?
PC
ReplyDeleteRead this for a different opinion on the effect of ending QE2
http://www.minyanville.com/businessmarkets/articles/quantitative-easing-qe2-treasury-bond-treasury/5/11/2011/id/34469
Read point 6 twice.
Gary,
ReplyDeleteThen you pegged it again :) The 50 might not hold for long, but gottem thinkin'!
Double bottom on silver just above last Thursday's closing low. Watching...
ReplyDeletejlinks - My novice interpretation (as valuable as any economist) QE2 simply balanced the deflationary forces if you define inflation/deflation as movements in overall credit instead of price action.
ReplyDeleteIf deflationary forces pick up (more credit destruction), more QE will be deployed. Otherwise, they are trying to hold steady the credit destruction so it won't convert into direct deflation. IMHO
Yep,
ReplyDeleteI closed my 3 day old longs this morning. Downside risks carry the day.
http://speculativemeasures.wordpress.com/2011/05/11/153/
Gold is holding very well, as expected in the 1490s.
ReplyDeleteStill holding.
If the USD can rally past 75.50, Id get worried.
ReplyDeletejlinks,
ReplyDeletethanks!
So are you in the camp of "the increase in commodity inflation during QE 2 was NOT due to the QE funds making into those markets, but instead due to the EXPECTATION of inflation" ??
What is the US$ index at?
ReplyDeleteI have a site showing 75.55 and another 75.32.
Gary:
ReplyDeleteHow you do what you do is beyond me. If I had gone through the AGQ crash, I'd still be rolled up in a ball, sucking my thumb. And yet, the whole time, you've been analyzing rationally and answering all our questions.
It must be your rock-climbing training or something.
Mr.M you have a spot and a futures contract pricing.
ReplyDeletefunmike,
ReplyDeleteRegarding SMT subs moving the market, I believe if we were all trading gold and silver futures, then yes, we would have an impact. But I think only a very small fraction of the subs trade futures. Gold and silver prices are determined in the futures markets. SLV, AGQ, GLD--they all FOLLOW what the futures are doing, and it's those etf's that I believe most subs are trading.
Aaron.
ReplyDeleteAh thanks, spot is lower I guess.
Boy oh boy, this freaking blows. 100% cash now.
ReplyDeleteI can't believe I ignored the many, many warnings the miners were giving us. Tough lessons, but we will get em next time.
FWIW, I see massive H&S on the daily charts for EXK & SLW. (target 3.50 for EXK, teens for SLW) They need to form RT shoulders a bit more, but if silver heads for 20 eventually, those targets will be hit. Silver does now look like a bear flag now to me. Big one too. Target-20
jhn: It's a lot easier when you have tripled your money and then lost a chunk off the top. I know for myself I am disappointed to have a smaller profit, but it feels very different than when I have taken a big hit to my capital. And yes, Gary does stay even-minded very well.
ReplyDeleteMr. Miyagison - 75.337 as of 1:49pm EST
ReplyDeleteMr T,
ReplyDeleteI pity the fool who doesn't thank you.
Maybe someone can explain to me how the stock market could rally like it has, how commodities could gain hundreds of percent and how the Fed's balance sheet can expand by over a trillion dollars, and government debt by several trillion dollars yet the money supply hasn't expanded
ReplyDeleteBoth Jim Rogers, Marc Faber and many others seem to think the Fed did pump trillions of dollars into the banking system. I've got to think these are incredibly savvy investors who know exactly what they are talking about and they both think the Fed has printed massive amounts of money.
So despite all the evidence to the contrary and opinions of people who probably know what they are talking about how can the money supply have not increased?
PST/Jlinks:
ReplyDeleteThanks very much for the econ lesson. Any good book you'd recommend? I totally missed this area of education! (100% nerd scientist!)
Mr M:
ReplyDelete$DXY high 75.366, now 75.33