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Sunday, June 26, 2011

LEFT TRANSLATED CYCLES ARE BAD NEWS

Today I am going to teach you a little about cycles.

First a little background information. I'm going to be discussing almost exclusively the intermediate degree cycle. Now to start let me correct some misconceptions. Cycles are virtually worthless for timing tops. Cycles are measured from trough to troughAll we can really do with cycle theory is develop timing bands for bottoms, tops can occur at any time.

Next I want to go over the concept of left and right translated cycles as it is pertinent to what is happening in the stock market.

Now in order to understand how a cycle is translated you first have to determine the average duration of the cycle. In our case we are going to focus on the intermediate degree cycle in the stock market. That cycle averages 20 to 25 weeks trough to trough. The median being 22 weeks. If we divide 22 weeks by 2 we come up with 11 weeks. That is an important number. It is the dividing line between a left translated cycle and a right translated cycle.

Any cycle that tops on week 12 or later constitutes a right translated cycle. Right translated cycles are the hallmark of bull markets. Let me explain.

In a healthy bull market an intermediate degree correction is a profit-taking event, and that's all it is. The media will find some scary reason for why the market is correcting but the real truth is that the market has just rallied long enough and far enough and is due a corrective move to consolidate the gains. There is one exception, which I will go over in a minute. Healthy bull markets are composed of multiple right translated intermediate cycles.

Left translated cycles, on the other hand, are the hallmark of markets that are in trouble. A left translated cycle is a sign that the fundamentals of the market are broken, or in the process of breaking. A left translated cycle is not a profit-taking event. A left translated cycle is a sign that institutional money is selling into the rally.

Next I'm going to show you the 2002 to 2007 bull market. The intermediate cycle troughs are marked with blue arrows.

In the chart below you can clearly see that every intermediate cycle, with one exception, rallied more than 12 weeks. This is a sign of a healthy bull market. The rallies are moving to new highs. When the intermediate rallies mature they top late in the cycle followed by a profit-taking event that holds well above the prior intermediate trough.


The one exception, and I have marked it with the blue box, is that sometimes an intermediate cycle will top in a left translated manner and make a lower low after the second leg up in a new bull market. This is just a sign of a market that needs to consolidate a huge move out of a bear market bottom.





Next, let's move into the latter stages of the 2002-2007 bull market.




Again we see the familiar pattern of higher highs and higher lows, and intermediate cycles that are topping deep into their intermediate cycles.

However, in the summer of 07 something happened that was a glaring warning sign that the cyclical bull market was in trouble. And that sign; the summer intermediate cycle dropped all the way down to test the prior cycle low in February. In a healthy bull market that should not happen. As you recall this was right about the time that subprime mortgages began imploding. Smart money could read the writing on the wall, and they began exiting the market.

The deathblow came when the next intermediate cycle topped in an extreme left translated manner on week eight. That was the warning sign that institutional buyers had left the market. At that point the bull had officially died.

Now let's take a look at the current bull market.



Up until last summer this was a healthy bull market. The intermediate cycles were all right translated, and we were making higher highs and higher lows.

Last summer that started to change. To begin with the intermediate cycle topped on week 12, right on the dividing line of right and left translation. The market had managed to rally 16%, so even though time wise it was a bit early for an intermediate decline, in magnitude a 16% rally is enough to trigger a profit-taking event. However, this did not turn into just a normal profit-taking event. The decline moved below the February intermediate cycle low. Alarm bells started to ring and Bernanke he heard it. Thus began QE2 and the markets were pulled back from the brink... temporarily.

I don't think anyone is under any delusions about what has powered this bull market and propped up a deeply flawed economy. Trillions and trillions of freshly printed dollars that's what. But that is now coming to an end. Does anyone really believe that the economy or the stock market can continue to levitate without a constant flood of liquidity? If you do I have some beachfront property I want to sell you here in Las Vegas.

The market doesn't believe either! We now have an extreme left translated intermediate cycle in progress that topped on week eight. Notice how the rally out of the March bottom was only able to make marginal new highs with absolutely no follow-through. That is a sign that institutional traders sold into the breakout. And now we have a market that is on the verge of penetrating a prior intermediate cycle low.

If the March low gets breached we will have the first confirmation that a new bear market has begun. The second confirmation will come if both the industrials and transports close below the March lows. That would constitute a Dow theory sell signal. The last confirmation will come when the 50 day moving average moves below the 200 day moving average and the 200 day moving average turns down.

Next I want to look at the dollar. In a deflationary environment the value of currency rises. As many of you know I have been predicting a major three-year cycle low for the dollar to occur in the spring or early summer of this year. It came during the first week of May.

These major cycle bottoms tend to produce very powerful rallies, often lasting up to a year. Now if we were just coming out of recession and productivity was increasing, or we had a new industry that was creating massive job growth then yes I would expect the market to be able to resist a rising dollar. Actually in that scenario a rising dollar is signaling a healthy economy.

In our current environment however a rising dollar signals deflation!

You can see that during the rally out of the `08 three year cycle low the stock market came under severe pressure. I think it's safe to say that the same thing is going to happen this time as the dollar rallies.  Unfortunately, we don't have a new industry to drive job growth, power a sustainable economy, and allow the markets to resist a rising dollar. All we have is commodity inflation created by the Fed in a vain attempt to print prosperity.




I've been warning for months that once the dollar bottomed and started to rally it would signal the end of the bull market and the start of the third leg down in the secular bear market.

At this point I think the only hope the Bulls have is for Bernanke to turn the dollar back down into an extreme left translated three-year cycle. Unfortunately, he has decided to turn off the money spigot (don't worry he will be turning it back on soon, although by then it will be too late).

Let us all hope that Bernanke has at least some modicum of common sense left. To turn the dollar back down into a left translated three-year cycle this early will almost certainly destroy the currency by 2014. Not to mention the dollar will lose reserve currency status. actually that is my next big macro prediction. By 2014, the dollar's next three year cycle low, Bernanke will have wrecked the currency, and the dollar will no longer be the world's reserve currency.

So far this bear market is progressing as expected. It started with the tech bubble bursting. Transformed into a financial crisis. Has now infected sovereign debt. And will ultimately end in a massive currency crisis.

Just as a reminder the 15 month special will close by midnight tonight. www.smartmoneytrackerpremium.com

272 comments:

  1. Jin,

    One thing you might try. When you buy/sell short, add a few options to boost your beta. That should give you some idea of how options relate to the underlying stocks.

    Of course, the big danger is success. You might have some really good trades and think to yourself, "Hey, this isn't so hard." That's when you've set yourself up for some big losses. If you have some bad trades, back off to regain your cool and try to analyze what went wrong.

    Don't get back in until you can see clearly enough to avoid those mistakes. Then, you'll be ready to make some brand new mistakes.

    Good luck,
    Le Fou

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  2. Jin,
    As an inexperienced trader you are going to be at great risk of blowing out your account with options.

    Let me say again that we are all going to get rich from this bull market without having to use massive leverage. The single worst thing you can do is lose your stake. If you do that then you have nothing to ride the bull with.

    Do yourself a huge favor and limit your options to one contract for at least a full year. If during that year your option trades are profitable then you can start taking larger positions.

    ReplyDelete
  3. Drinking a Margarita, and just came back from the beach. Killer waves today.

    Great post Gary, question, are you sticking with ETF's for the A wave or dip into some yummy way oversold miners basket?

    Thanks. Bob

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  4. Gary,
    Nice post but kind of depressing post. I sadly agree.
    I am counting on you to help guide us to riches so I can help my kids in the new world that we will live in.
    Also great advice for Jin. I thought I knew a lot about options from reading lots book and then having beginners luck. It took loosing money to learn to respect them.

    ReplyDelete
  5. always ETF's. GDX and GDXJ most likley.

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  6. LOL, Le Fou, I am actually trying to regain my cool at this very moment. I think Gary's Paying call at IT low is best strategy. I actually bought some UUP calls when it test its low a couple weeks ago. I did not buy DIM call because I want to limit my risk at around $500.

    I had this urge to my some IWM puts over the weekend, but felt it may not be good timing, and need hear more reasoning from others.

    Gary, thanks. I will try out one DIM contract suggestion, that will for more likely limit my risk to $500 per contract.

    I have a very small account I am using to learn option as I hear many stories about people blow up their contract with options.

    Although I signed up abound Feb this year, but I started trading profitably on my own before I started here. I caught the IT PM bottom by myself, Signed up with you because I had not clue on how to ride PM bull. Trading with you is very much stress free, and profitable. I also learn a lot from very helpful traders here although I do not speak up much.:-)

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  7. Gary,

    You believe that gold and the miners will be able to rally (A wave) this fall in the face of a rising USD and declining stock market, correct?

    Thanks.

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  8. I meant to say trying out 1 DIM contract with $500 max risk per trade.

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  9. Great post Gary. Thanks for sharing your wisdom with the world... Maybe some folks will take advantage of the premium site and be better prepared.

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  10. anyone watching the swiss franc. Im just watching it out of a curiosity. My fathers broker told him to short it after it hit a high of 1200 and pulled back to 1193. i told him it looked better to go long, but i dont really know anything about it. it still looks like a long play i think, but not a good entry at this point

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  11. Jeff,

    Funny you mention the Swiss Franc. Ira Epstein sent out a call tonight to go long the Franc, but on a dip to a certain technical level. Not market order where it stands now.....

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  12. RJ,
    The dollar won't be rallying at the time it will be moving down into its intermediate cycle low.

    I also think Bernanke will have initiated QE3 which could conceivably turn this into a left translated three-year cycle.

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  13. The challenge for most traders, or at least the most difficult part for me, will be timing the start of the A Wave. There will be capitulation volume at a daily cycle bottom, but often the next dip will spike lower to shake out the weak hands, especially with memories of 2008 still fresh. Stocks will be getting hammered, and the dollar still rising for up to a year, and it will be a tough purchase for most. I think the key will be committing to a long Old Turkey position with no margin and trusting it during a week with capitulation volume, and then holding it through another possible spike down that will wipe out margin users. Only after that next cycle bottom and following A wave, once it has risen above the previous capitulation low, will margin be acceptable. This will take discipline and patience, but 50%-300% gains will be possible depending on your risk and vehicle, from gold-junior miners. Dollar still on track for that 1-2-3 tonight so far.

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  14. Gary,

    I noticed that with every past D-Wave (same with C-wave's)there was an increase in size, and 4 out of 5D-waves within this 10 year bull market took gold down right to the weekly 60SMA. The 5th (the last one)took gold down drastically further to the 175SMA.

    From what I see I believe this D-wave will take us to atleast the weekly 60SMA again, which is sitting at 1357 right now.

    If each proceeding D-wave was worse then the next why would it be any different this time around?

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  15. William,
    The last D wave was extreme because it was also the eight year cycle low. We won't see anything like that again until 2016.

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  16. Gary,

    Ok that explains the last D-wave, but what about the proceeding 4, they all bounced off the 60SMA, do you agree that gold will most likely bottom again at the 60SMA?

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  17. Hmm. I think I'll grab a futures contract

    Now I am long the dollar, I think I am becoming a fx freak

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  18. Gary,

    The prediction you made for the Dollar Crash/No longer the reserve currency by 2014 is based on Bernanke's QE3? or it doesn't matter, the damage is done and 2014 prediction is inevitable regardless of QE3,4, 5 etc.

    Thanks

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  19. Dallas,
    It predicated on QE three, four, five etc.

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  20. William,
    I don't make the mistake of assuming that the current D wave is going to follow the same pattern as the last.

    I see traders do this all the time, they look at a pattern or chart from the past and then assume that the future is going to be the same. Sometimes the markets rhyme but they almost never repeat.

    I'm going to assume nothing. When we get into the timing band for the daily and intermediate cycle low then I will start looking for a bottom regardless of where gold is price wise at that time. If gold happens to be close to or at the 60 week moving average as it moves into the timing band for a cycle low then yes I will look for a bottom at that level.

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  21. Actually there is a much more dependable signal I will use to spot the D-wave bottom. I'll go over it in the nightly reports when we get closer to the event.

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  22. Gary,

    Ok my friend, I gotcha, sounds good.

    Glad I will be here with you in real time.

    Thank you.

    ReplyDelete
  23. Gary,

    I noticed that towards the end of every D-wave and the beginning of every C-wave volume decreases drastically, Why is that?

    Sorry if that question calls for to much explaining, you dont have to answer if thats the case.

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  24. William,

    the accumulation is on the down move. Large money has to have volume to get in.

    The initial move out of the low is short covering from late shorts.

    ReplyDelete
  25. Gary,

    I'm sorry, I guess I'm technically challenged tonight, but when I login there is no link to cancel my subscription so that I can renew with the 15 month deal? I have read the instructions. Additionally when I go to the subscribe, it says my account already exists.

    Elaine

    ReplyDelete
  26. william

    at the begining of a c wave you ran out of sellers and buyers are scared and buying timmidly, or in my case not buying cause i was to scared. i learned from gary to close my eyes and buy into the strenghth. this time i will just be BUYING when he says to. although i first bought the dollar 6 cents off the bottom . of course i bought more and whipsawed myself for old time sake a couple of times

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  27. Jeff,

    I hear you, dont you just love getting whipsawed....lol

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  28. Oh, well, never mind. I was able to start a new subscription, I don't think the old one canceled but it's not an issue.

    Sorry to bother you.

    ReplyDelete
  29. The dollar futures pushed through that upper trendline tonight, but pulled back right below it now.

    ReplyDelete
  30. Elaine,
    If you were grandfathered in from the old website you will not have a subscription link.

    I will send you an expiration notice one day before your account expires. At that time if you remind me I will reopen the 15 month subscription for you.

    ReplyDelete
  31. Gary, what do you think of chance of pm and dollar both raily in case of Greek default?

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  32. This comment has been removed by the author.

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  33. Virtually zero.

    We are about to enter a deflationary period. In a deflation the value of currency rises and that puts pressure on all commodities.

    Also gold will finish its move into a intermediate cycle low regardless of what the fundamentals are.

    ReplyDelete
  34. Hi,

    Thank you. I was somehow able to get the 15 month subscription with today's enrollment date with my old login and password.

    It's really not anything to worry about, frankly it's a heck of a deal.

    Sorry for the bother.

    ReplyDelete
  35. What about food price and argriculture stocks? It is very hard to imaging that will fall much with world wide food shortage. I know the price is already falling, but look at sugar, it has been doing well inspite of over all market.

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  36. Yeah, food prices really are going up. Try feeding three teenagers. :-(

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  37. I have two teens. One of them consistantly hungry. :-) The really anoying thing is the stores increase prices not 4 or 5 % at a time, they increase it 10 or above at a time.

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  38. Yes and they decrease the size of the packaging to disguise the fact that price is rising.

    When was the last time anyone saw gallon of ice cream?

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  39. Bob Loves Hawaii,
    You must be on Maui right now. Summer swells are the best. My homebreak Big Beach is usually firing right now. La Perouse Bay is probably one of the best unknown lefts in the state right now so not exactly a snorkling paradise. Even if you're not there thanks for the memory.

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  40. Gary,

    What do you think the odds are that Bernanke will be able to get away with another round of money printing? The prevailing theory seems to be that at the Jackson Hole meeting in August he will announce another round of QE, or something like that. It seems to me not only does QE3 have to be announced, but the program has to be sufficiently large to cause shock and awe and start a rally in the markets. Otherwise it will be more of a "sell the news" type event since everyone is already expecting it.

    Politically it may be impossible to run another round of money printing. On the other hand, tanking stocks aren't good for a presidential election year either. What's a central planner to do?

    This setup supports your thesis that the markets need to go down hard (and soon) in order for BB to have political cover for QE3. We really need to have deflation return and for the CPI to come down before he'll risk it.

    ReplyDelete
  41. Speaking of reduced size of food products, the hot dogs I like used to come in packages of 7, and now they come in packages of 6. Kind of annoying.

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  42. LOL, ice cream! We bought two "half gallons" (or whatever size that is now) yesterday and today it was ALL gone. I didn't even get any. :-(

    ReplyDelete
  43. Gary, you say that by 2014 the dollar will no longer be the world's reserve currency.

    What currency do you think will replace it?

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  44. RJ,
    I think Gary's weekend report gave us our sell point, around the 200 for the buck. I'll be watching closely this week b/c we are day 14 and we may put in a swing high at the end of this week or the beginning of this week. I'll be buying more Aug puts on a dollar swing low while keeping a close eye on gold.

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  45. Gary, when was the last time you saw a 1/2 gallon? Some brands' half gallon is now 3 pints instead of four. Starbucks ice cream used to be a quart and now it's a pint. That's 100% inflation tacked onto the price going up, too.

    ReplyDelete
  46. RJ,

    "beginning of this week."

    I meant to say the "beginning of next week."

    ReplyDelete
  47. Hey guys,
    new subscriber who's been lurking around for some time. Just wanted to say thank you and well done to Gary for your persistence in sticking to what you believe and what the cycles says. I think we all know that the darn emotions can very easily do a coup d'êtat and oust our rationale from time to time... :)
    Also a big thanks to all others who contribute in these comment sections! Always important to have a living and vibrant dialogue during these volatile times so one can stay convinced of the "facts".
    Humbly yours,
    Christian

    ReplyDelete
  48. BTW, +1 on the "Hey, I know this stuff" sentiment for Options... I raked in two or three 4x profits on my initial smaller investments and then suddenly see all those profits and more getting wiped out 'cause I upped the ante thinking I cracked the code... That was a while ago and I've laid off the stuff since then... :)
    I think that we humans need to feel the pain in greater losses before we truly learn (assimilation) when it comes to investments.
    /C

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  49. This comment has been removed by the author.

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  50. Gary, looking forward to your signal for the end of the D.

    Looking back at the 08 D-wave it would have been damn near impossible to spot the final bottom for miners in October

    The market was crazy volatile and produced a fake bottom in Sept

    Personally I was sitting in cash licking some smaller wounds and didn't get back in the market until May 2009

    I know Gary says 08 was special due to the 8-year cycle in gold and the financial crises, however it would be great to hear from some of you who bought then and rode the bull successfully since then

    Anyone care to share their experiences of the 08 bottom in pm stocks?

    Did you buy at the right time? Could you pull the trigger?
    Did you buy in chunks or went all in in one go?
    Thanks

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  51. Ollie,
    In a bull market all we have to do is get close to the bottom. One could have missed the bottom in 08 by 200 points and they would still be up almost 100% now.

    With cycle theory we will get close. All you have to do is be willing to hold through a temporary draw down if we don't get it exact.

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  52. Gold, silver, crude down...dollar down. What surprises are in store for us today?

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  53. I am so tired of people saying "Jobless Recovery." Some of the smartest people in the world sound stupid as hell when they say this.

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  54. gold trendline broken finally..

    but you know what that means. it's time to start readying to buy. :p

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  55. Well everyone, I have good news and bad news. I am finally going back to work(union electrician) after being laid off a very long time. Unfortunately I won't be able to sip coffee read the blog every morning. But it's a good opportunity to save some money. Best of luck everyone I'll be checking in on weekends.

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  56. Is this QE-3 ?

    http://tinyurl.com/3w85s9c

    "Fed May Buy $300 Billion in Treasuries After QE2"

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  57. Haggerty,
    You can still keep up with us, just check in every night, or just get up a bit earlier. You don't want to miss out on the A train.
    Congrats on back to work. Two ways to make money. :)

    ReplyDelete
  58. Edwin,

    Aren't you one of the ones that's been bullish on PMs for the past few weeks?

    ReplyDelete
  59. At ease
    Thanks, kind of happy in a way to go back to work. There is no way I'm missing the A train.

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  60. P.K,
    no, it's just the FED using the cash they "recieve" through their bond maturities on the ones they bought earlier. As they have said, they will not shrink their balance sheet, so expect these continued purchases as their current bonds matures.
    /C

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  61. Haggerty, I am happy for you as you will do well both ways.

    ReplyDelete
  62. > By 2014, the dollar's next
    > three year cycle low,
    > Bernanke will have wrecked
    > the currency, and the
    > dollar will no longer be
    > the world's reserve
    > currency.

    I call BS on that. While the U.S. dollar will eventually fall from reserve currency status, there is no other currency in the world that will be able to take its place by 2014. A reserve currency has to be freely convertible and available in "unlimited" amounts.

    P.S. This name is my way of registering a protest at being forced to sign up for an account to comment.

    ReplyDelete
  63. Troll,
    Simple; nobody said you had to comment.

    ReplyDelete
  64. Oh, Good Morning Everyone. :)

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  65. "A reserve currency has to be freely convertible and available in "unlimited" amounts."

    Gold would work and is held in large quantities by central banks around the world. It just needs to get revalued. I doubt it can happen by 2014 but have to give it higher probablity now the Gary has made this bold prediction.

    ReplyDelete
  66. SMT_troll,
    what do you mean that the reserve currency has to be "unlimited"? Is it not the very reason that the USD seemingly is in unlimited supply that its status as reserve currency is being shot to pieces?
    /C

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  67. I expect the world will move to a basket of currencies.

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  68. The bottom line is the odds are not high today that a new stock bear is upon us. The past couple years’ cyclical bull remains well below the average duration of mid-secular-bear cyclical bulls. And the SPX’s latest interim highs were also well below their secular-bear resistance. Following a once-in-a-century stock panic’s epic fear, the subsequent cyclical bull should be bigger and longer than normal.

    http://www.zealllc.com/2011/newbear.htm

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  69. smt_troll,
    outside the USA, the EURO is in wide usage. Our dollar is used now about 65% of the time as a reserve currency.

    Oil is backing the dollar now. Once the pressure mounts for USA to pay debt without devaluing, look for the world to capitulate and trade without us and our moneys. The elite will lose control and want to spill USA solders blood EVERYWHERE. So, 2014 being a rough ballpark for 'game-over' is not a bad guesstimate imho...

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  70. "I expect the world will move to a basket of currencies."

    By the time the USD loses the confidence game only fools will still trust paper money as a reserve of wealth.

    ReplyDelete
  71. And central bankers are not fools for the most part, Berskanke excluded of course.

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  72. SMT,

    Did you ever hear of berkshares?

    There is already other currency being used in the US.

    Good morning 86

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  73. Gary,
    Boy it didn't take long for your confidence to return after telling everyone who would listen to buy, buy, buy for the explosive upside rally in silver well after it peaked and was tanking. I never really heard you come clean on this huge mistake on your part.

    ReplyDelete
  74. Haggerty, CONGRATULATIONS!!
    A long wait, but you made it. Look forward to seeing you weekends.

    Jenny

    ReplyDelete
  75. Gary,

    Is this one of the surprises you mentioned??

    Fed May Buy $300 Billion in Treasuries After QE2

    tweet9EmailPrintDaniel Kruger and John Detrixhe, On Monday June 27, 2011, 7:15 am EDT
    The Federal Reserve will remain the biggest buyer of Treasuries, even after the second round of quantitative easing ends this week, as the central bank uses its $2.86 trillion balance sheet to keep interest rates low.

    While the $600 billion purchase program, known as QE2, winds down, the Fed said June 22 that it will continue to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system.

    The central bank, which injected $2.3 trillion into the financial system after the collapse of Lehman Brothers Holdings Inc. in September 2008, will continue buying Treasuries to keep market rates down as the economy slows. The purchases are supporting demand at bond auctions while President Barack Obama and Republicans in Congress struggle to close the gap between federal spending and income by between $2 trillion and $4 trillion.

    “I don’t think the Fed wants to remove accommodation in any way, shape or form,” said Matt Toms, the head of U.S. public fixed-income investments at Atlanta-based ING Investment Management, which oversees more than $500 billion. “It’s quite natural for them to reinvest cash,” he said. “That effectively maintains the accommodative stance.”

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  76. I'm afraid Hamilton is going to be severely disappointed this time. Bull markets end when the fundamentals break.

    I think Bernanke broke the fundamentals of this bull market when he spiked the price of oil above $100.

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  77. Norm,

    Obviously not your real name. Show me where I told people to buy as silver was crashing.

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  78. Norm,

    Are you so insecure that you have to boost your self-confidence by writing PhD after your name online and bashing Gary publicly? Do you think it earns you more respect?

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  79. Looks like the buying on weakness number Friday was predictive.

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  80. Dan, same thought occurred to me

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  81. Seems the government is a bit conflicted...trying to bring oil down one day, drive stocks up the next. Tell me how they can eat the cake and have it too??

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  82. Doctor Norm,

    Did you make the mistake of buying silver after the peak? Gary only recommended holding for a bounce to those with strong hand status. He called the top perfectly but it hit and fell off after hours.

    I know it's hard to do but take responsibility for your own mistakes or you will never be a successful investor/trader.

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  83. Gary:
    I've seen some comments that "normal" (non-QE2) money that flows into US bonds as a safe haven may flow to US stocks and support the stock market.
    Do you ever follow bonds (interest rates), or TLT, cycles to confirm targets, or analyze if this may negate or reduce the potential stock decline at the end of QE2, for example?

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  84. I was wondering if UUP was going to gap fill 21.40. The dollar tried to break through 76 twice last night. Building up a running start to try again and bust through that major overhead trendline. Let's see how many days it takes.

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  85. EUO went down just enough this morning to nick my stop. I thought I had it too high, but wanted to lock in a certain profit. Now that I have sold, you can all probably buy with abandon.

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  86. Ham,
    Why would somebody sell bonds which are rising and put the money into stocks which are falling?

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  87. Sure enough, when I bought my SPY Puts this morning the S&P rose 0.7% almost immediately

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  88. Gary, would buying some UUP put options, or perhaps a buying basket of foreign currency ETFs (FXA, FXE, etc.) make sense when the US Dollar Index reaches the 200 DMA on the daily?

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  89. Or maybe go long UDN when that happens?

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  90. not unless you think you're going to be successful day trading the dollar index.

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  91. Gary, have you any ball-park region estimate of the price of silver before the A-wave commences? Thanks...

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  92. William,
    From reading your posts, you've done a good deal of research on the gold waves. Do you have any information you could forward me about them as I'm interested in learning all I can.
    Thanks William

    ReplyDelete
  93. Why not buy UDN when $DXY hits the 200 day with the idea of holding into the ride down into the next daily cycle low? (Maybe have a percent or 2 stop above the 200 DMA)

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  94. Cool Loser,

    I get all my info from Gary's premium site and studying charts. Sorry I cannot be of better assistance.

    ReplyDelete
  95. Cool Loser,

    You can also check out TSI Trader's blog, John has some great info and charts pertaining to the gold waves.

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  96. Eamonn, general rule on options, wait for the first 30 minutes to one hour before buying or selling anything unless your stop gets hit or you are taking profits. The first hour can be volatile and many reversals take place at this time. Also, option pricing can reflect imbalances thus screwing the retail customer (i.e. us) of better pricing.

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  97. Romeo Bravo, thanks for advice

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  98. Do you think you are really going to be able to time the bottom of what could be a very mild daily cycle decline? I suspect you won't.

    I never understood the fascination of needing to catch every little wiggle in the market.

    Play the big trends and you will make money.

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  99. The dip in precious metals: Gary do you still believe that it is the last best chance of our lifetime to buy precious metals?

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  100. Hey Everyone,
    I just had a chance to preview Garys new book in which he`s linking acid reflux to improper trading of silver parabolas rather than small intestinal bacterial overgrowth(SIBO) as was previously thought. I really like the part where his recommended cures are taking responsiblity for your own trading and pulling your head out of your ass. Personally since taking his advice, my account is up, my blood pressure and Maloxx stock is down and it`s all Mai Tais and Yahtzee. Thanks again Gary for the great job you do!

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  101. USD did make a new high for the cycle, its on day 14. If this cycle ends up being shorter than 28 days (likely), it will be a right translated cycle, meaning that a potential tag of the 200DMA (as many expect) should occur in the following cycle.
    So far so good.

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  102. Ten,
    If this is a D wave, and I think it is, then Gold will never trade lower than the upcoming intermediate low for the rest of this bull market.

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  103. Gary, If this will be the lowest at D wave bottom, will this be the time to just buy and hold SOME gold stocks for the long term?

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  104. Also, might be a good time to buy some more physical then also.

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  105. Gary, appreciate your views on money flowing into undervalued assets ie mining shares and i'm in the process of creating a shortlist of miners i look to buy for the a-wave

    My only concern is if equities are entering into the decline to the next 4 year low that will drag down miners too i think, not to mention the underperformance of gdx and gdxj etc compared to gold

    Do you think it's better to have a larger allocation of say ugl than miners? thanks !

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  106. Dan,

    For things to go up they must go down.

    I am bullish on PMs in general. Gold, Silver and Platinum.

    But I'm not blind to the fact that they move up and down by about +-15%

    Depends on how one trading this market. I'm in it for life. Some here are day traders trying to time movements to the 5-10min candles.

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  107. If gold's IT bottom does not coincide with the 2 1/2 year low in the CRB what could we expect from gold's run-up in the fall?

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  108. Quite the bounce up in the markets today.
    This is confusing the hell out of your average joe; up 100 points one day, down 100 the next day.
    I can see where money can erode very fast here with emotional buying/selling.

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  109. "I'm in it for life."

    I see this in the tech bubble, the housing bubble and the bank bubble over the past decades. Folks are always in it for life until the game is up. You might want to evaluate this statement.
    The big question is, what do you get for being 'IN IT FOR LIFE'?

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  110. at ease,
    I don't know about gold stocks but it will definitely be the time to buy and hold gold and probably silver. Although silver will almost certainly have to consolidate for one to three years before it breaks out above 50 again.

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  111. Still sitting pretty on my gold short from 1542. I would love to hear some exit strategies here for folks that shorted Gold or Silver for the past few weeks/month.

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  112. Ollie,
    In the long run I think you will be much better off by sticking with GDX, GDXJ, & SIL.

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  113. Mr. Miyagi,
    Now you see why I don't want to sell short.

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  114. 86d4life

    In addition to 86's wonderful new book, those amongst us who misunderstand risk and become overconfident when trading might like to check out:

    Jason Zweig: Your Money and Your Brain

    It's smart, funny, and has practical suggestions.

    ReplyDelete
  115. Gary,
    I know what you mean, I personally never short, I use put options instead this way I know the loss potential upfront.

    Now... about this waterfront property you're selling...

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  116. Edwin,

    Ah, so you were one of the bulls. All I wanted to confirm.

    Btw I am a long term PM bull also but my number one priority, above all else, is to make money...even if that means shorting the PMs.

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  117. What are the most profitable gold and gold miner ETF's?

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  118. Gary:

    Maybe you answered this already: How do you see GDX, GDXJ withstanding the stock bear during the A-wave?

    Would'nt a pure play on Gold / Silver be a better bet than miners?

    Thanks!

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  119. Stock bears don't go straight down they have violent counter trend rallies.

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  120. even with weak USD today, gold and silver pushing through lows. Anyone, have puts on slw?

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  121. Baminvestor's model has 850 gold target as early as first quarter 2012.

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  122. Gough, I hav SLV and SLW puts for a few weeks now. Watch the SLV 200 for a bounce.

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  123. Bob..I have some slw puts too. I may close them out soon.

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  124. Gary,
    Excellent read you posted there, for free to boot.
    Scary to see what can (and probably will) happen to the economy, I can't imagine what a family of five with an underwater mortgage, two leased cars, toys, gadgets and other unnecessary expenditures (kids included) does to deal with it or even sleep at night.

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  125. MrMiyagi, I have seen what you have described first hand here. It is a very real and very painful human tragedy

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  126. Bob loves Hawaii,
    Thanks for the reminder, SLV os below the 150dma and the 200dma at this time is a couple of bucks away.

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  127. Gold 850 level is the pivot level of the last D-wave.

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  128. Eamonn,
    I hope you weren't the one.
    By the way, I will post some pictures when the basement is done. As of now it is an open space as I finished up with the I-beam over the weekend.
    I have to head back down there in a few minutes having done my market rounds this morning.

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  129. MrMiyagi, cant wait to see it. Hope your wife will be satisfied with your work ;o)

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  130. Gough,
    Virtually no chance of that happening. Gold might make it down to 1350 but that would be pushing it.

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  131. Gary,
    Great post and weekend report…appreciate it. The one thing that I continue to struggle with when it comes to cycles, however, is that the analysis almost seems to be predicated on the belief that cycles dictate human emotions / actions and not the other way around. As an example, your forecast for QE3 in August almost seems to reflect the fact that this timing fits nicely within the context of the dollar and gold cycles.

    I agree that the economy is now rolling over however I’m still undecided as to whether I think that we will get an announcement regarding QE3 at the next Fed meeting. This meeting is scheduled for early August, which means we’ll only get one more months worth of economic data (June’s figures) released in July before that meeting. And although commodity prices are starting to decline to reflect the deflationary environment, food and energy prices are still considerably higher than they were at the last Jackson Hole speech.

    I guess what I’m trying to say is that I wonder if the Fed will have sufficient deterioration in the data to support their decision to initiate QE3 at their next meeting, although waiting another two months until their next meeting seems unlikely as well. I’m sure that the Fed realizes how precarious a situation the economy is in, but they still need deteriorating data to justify their decision to congress and the American public. My question for you is what happens to your predictions if QE3 is delayed and not announced in August? Do the cycles just get stretch to reflect the dollar’s continued strength until further easing is announced? Thanks again.

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  132. Anyone know what the retracement levels were for the last 2 gold D Wave? Was it 50% and 61.9%? If those are correct, a 50% retrace will put gold below 1200 on this D wave assuming the last pivot was D wave pivot low was at 850.
    That's a long way down at these current levels.

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  133. I would be careful losing your SLV shorts. Silver can be over bought and sold for very long periods. It's only into it's 3rd day of sharp declines and it could go on. I would hope to see the previous cycle low of $31.97 comfortably taken out (SLV) before seeing a dead cat bounce.

    I'm going to hold through any eventual bounce here as we're in a failed daily cycle and due for a IT low. All of the decline may or should occur over the current cycle, why mess with that?

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  134. PST,
    F the stock market is considerably below 1200 that's all the Fed will need to initiate QE3.

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  135. Gough,

    "Baminvestor's model has 850 gold target as early as first quarter 2012."

    Where did you see this, are you a subscriber?

    ReplyDelete
  136. Dan,

    I don't short because the elevator moves down are difficult to time, even with a cycle timing and technical analysis imho.

    I look for another markets to go long on. So if my PM positions are not performing my bond portfolio picks up a little some slack.

    Key to making money using cycles is to buy on the start of intermediates not daily cycles.

    Long and strong on PMs for life. :)

    For my short term prediction, a little decline this week but a run up for 4th of July (back to 1540s) After Jul 27th it's downhill for the D-wave until 2nd week of August.

    ReplyDelete
  137. Can proudly say, "new subscriber here"

    Gary, I have bunch of DZZ holding it since 1550 level? What is the Gold level should we be looking that to sell it? 1420 or even somewhere in low 1300s.?

    TIA

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  138. Edwin,

    What is this prediction based on, hope?

    "For my short term prediction, a little decline this week but a run up for 4th of July (back to 1540s) After Jul 27th it's downhill for the D-wave until 2nd week of August."

    ReplyDelete
  139. E,
    I couldn't possibly, at this time, give you any realistic target. I will just watch the daily cycle as it plays out and attempt to spot the bottom in real-time when it comes.

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  140. I don't doubt that the stock market is the Fed's yardstick, but I think there will be considerable pushback from congress if oil is north of $80 bbl and signs of food inflation are still widespread.

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  141. William, No I am not, I follow them on Twitter, and they tweeted it.

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  142. Oil still has many days yet before the cycle bottom is due.

    If the S&P is hovering under 1100 then the odds are going to be very high that all commodities are getting crushed. Don't forget the CRB three year cycle low is due this year.

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  143. William

    based on my cycle count and technical analysis.

    hope -- yeah haha and a little bit of luck thrown in too. no one can predict the future including cycles and TA which is information calculated from the past results. and for cycles stretch and can shorten.

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  144. Edwin,

    Thanks for your prediction but I don't think many would put much value on it considering youve been bullish on PMs prior to and throughout this decline.

    Good luck with that life-long emotional attachment you plan in having with the PM sector though...the rest of us will be in a sector that's in a bull market years from now.

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  145. Poly,
    Thanks as always for your sage advice. As a beginner, I appreciate your simple yet thorough explanations.

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  146. Edwin,

    What technical analysis???? If you look at a weekly chart of gold it couldnt be clearer that we have entered an intermediate decline that if NOT a D-wave will bottom atleast on the 30SMA, as the last 4-5 intermediate declines have.

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  147. Stocks like AMZN & CMG showing no signs of another recession on the horizon.

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  148. Gary,

    thank you for the post. I have a question. You write that cycle lows are between 20 to 25 weeks from trough to trough with an average of 22 weeks; then however you post two charts showing the bull from 2003 to 2007, and here most cycles run longer than 30 weeks from trough to trough, and a fewer run way, way shorter. That's what I don't understand. Isn't there a contradiction? The charts trough to trough cycle lengths appear a lot more random than what you describe at the beginning of your post as a rather reliable time factor. Would you mind explaining that? Thank you!

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  149. Dan - time will tell..

    when you say the rest of us will be sector that in a bull market.

    btw my investments are not solely in PM sector. So if PMs do go down, not big deal as i have other investments.

    yeah I've been accumulating as people have been fleeing, time will tell if this was a right move or not.

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  150. Edwin,

    I agree only time will tell although saying things like your staying lifelong in a sector IMO is just foolish as you know it's not true or if you don't know, then you just lack experience. Once this PM is over I will be the first one out and onto the the next big thing - ie. the next bubble. Whether that's nanotech or anything else, couldn't care less.

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  151. William - i'm not disagreeing. intermediate decline appears to be happening.

    i believe we're in a bull market for PM.. so i'll buy the dips and go in force when the int. decline appears to have subsided.

    if you want to short it, go ahead.

    my investment time horizon may be different from yours. i'm in it for life. not trading the day to day moves.

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  152. Dan - i've been investing since 1970s in PMs.

    So far so good.

    There's been times it's been a POS investment, though but i like to follow it like a sports team and root for it more than my other investments. :)

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  153. Poly,
    The GLD ATM puts are doing nicely since your 1550 call. Up over 115% in 3 trading days. Nice call. BTW 32 on SLV is the neckline of the H&S.

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  154. dan - yeah gold may go out of favor but to me gold is money. nothing else - i'm in it for life.

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  155. Edwin,

    I want to understand your logic behind wanting to stay invested in an under performing asset (Gold & PM) for 2 decades.
    From 1981 to 1999 (2 decades), Gold was down 65% while the DOW was up 1,500% during the same period.

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  156. everyone, i want to pimp my trade...short swissie or fxf...just made 5 waves up in 4 different degrees... strongest pattern I know... thanks good luck

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  157. This post may mark the HOD, but I just want to thank God I'm not short this market today!

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  158. basil,
    22 weeks is the historic average of 114 years of data.

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  159. I did warn in the weekend report that there was a moderate buying on weakness day and that there was a good chance Monday would be an up day.

    Bulls and bears alike getting whipsawed to death, welcome to a bear market.

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  160. Edwin,

    40 years?!? Well in that case I understand as this is obviously a hobby for you rather then a method to increase your net worth. However, since you are a permabull and not here to make any real money, if your going against Gary's game plan then can you please provide some evidence as to why or just keep it to yourself as some of us are here to keep our accounts in the black. There may be some numismatic forum that maybe better suited.

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  161. You're welcome Wav_ridah and A.

    I'm going to leave some on the table and probably start bringing in the short Silver line before the cycle low. Want to mentally prepare for the big gold IT cycle low, these only come around a couple of times a year. The past 4 IT cycles have been good for well over 200% profit, each cycle!

    In the meantime, I like a little SPY put (very small position) lottery here at the top of the days highs using the $126 weekly's. We get two more of those Greek PASOK MP's vote down the austerity bill and all hell will break loose on Wed and Thursday. It is a lottery though and will most likely expire worthless.

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  162. EricH - my firm belief is that
    gold is money.

    countries knows this.

    i didn't miss out on the stock market roller coaster gains throughout the years. I a portionate so much of a percentage to my PMs. Overall never lost any money on a absolute return basis each year with my investments.

    Sure gold has been a POS investment during times the stock market was booming.

    We go through environements of inflation, deflation, properity, expansion, contraction etc. we will continuing through these environement all the time.

    I'm not advocating people buy anything, or gold in particular as we're talking about it. gold is not going to the moon. I know it goes down. For me it's a storage of value, it will never go to zero. I will con't to buy it for life.

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  163. Gold is a store of wealth. I doubt that it will ever be used as money again, there just isn't enough of it in the world.

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  164. Poly - for the intermediate lows, do you also apply options (call options 2-3 months out) to realize these type of returns, or are you loading up on "beat-up" stocks? Appreciate your thoughts.

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  165. Dan - i'm entitled to my opinion and it's up to one to listen.

    i find your comment quite insulting.

    if you were standing here i would knock your teeth out. numismatic forum. unbelievable.

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  166. Poly, yes, for IT lows do you go OTM calls, and if so by how far from strike? Also, I would be interested to know for how many months out you select your calls. Thanks :o)

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  167. Poly,

    200% return? Wow. I'm aiming for about 100%, up about 50% so far(this is after making back what I lost from not selling all silver positions at peak). You must be positioned extremely aggressively for 200%.

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  168. Edwin ,

    Wow this gold stuff really is a passion for you, making internet threats and all. I apologize and won't say anything bad about your precious gold anymore. I'll even sell you my stuff at the next cycle high to make up for it.

    ReplyDelete
  169. dan - smart-ass no class..

    you get zero respect. carrying out like that.

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  170. Gary,

    so really the intermediate cycles in the stock market are between roughly 8 to 35 weeks between trough to trough with an arithmetic mean of 22 weeks; and so no one should really ever expect a cycle duration to actually last between 20 and 25 weeks, because as your charts prove, that practically never seems to happen. The spread between durations is much, much larger; there can often be discrepancies of 15 weeks i.e. 3-4 months, or even larger, between one cycle duration and the next; that seems to give them much less predictive value though.

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  171. DD, Eamon,

    It's a range of option strategies bought at specific points into and out of a cycle low point. It's not a close your eyes and buy deep calls strategy. Certain types of strikes/dates are much better suited at key times around the cycle low.

    Dan, actually, it's not that aggressive at all. The beauty of the IT cycle low is that it affords you a nice tight stop to work with and the beaten down sector is priced very favorably at the lows. The key is not to stall for time and confirmations, you need to act with conviction. "Buy when there is blood in the street" is a big key component to making money big money from the cycle low point.
    Yes, quotes are easy, executing is not.

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  172. Poly,
    Did u take some GLD puts off the table yet?

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  173. I know of successful top market timer who primarily trades SPX on sentiment, and he has chopped up like crazy this spring trying to swing to the long side with a relatively small stop. The same thing happened to him last spring.

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  174. ...however this year, he will be lucky to get back to break-even for the year.

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  175. Edwin,

    Yes and you do by making completely baseless claims going against 99% of people here that following Gary's plan when gold has clearly broken every trend line out there. You've provided absolutely nothing to back your claims other than empty statements and one liners. People are investing their hard earned dollars here, this isnt just some lifelong hobby for some of us.

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  176. Wav,

    I never bought GLD, I use SLV with gold as its proxy. No I have not touched them.

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  177. Good move Edwin for diversifying into gold etc. It's perfectly rational to diversify larger pools - emphasis on "larger" as note we are talking to a senior gentleman here - of money across asset classes - you don't know in advance which will perform well! Pick up a finance text from Amazon on asset allocation and the benefits of diversification - you put too many eggs in one basket (asset class or strategy) and you better be prepared for what will happen.

    Broken parabola good call, accuse me of being nitpicky, but silver/SLV options have gone from pricing 55-60% volatility a month ago to about 40% now. Sorry, I know there's a lot high-fives, but being long that has not been a great trade, people - you made far less on being right the price direction than you should because the volatility implied in the option price declined. The right trade was to be selling call options for the last month when volatility and emotions got elevated (selling options maybe beyond the scope here but don't ignore it in your toolbox if you want a full grasp). Or if you must buy options, I strongly suggest buying call spreads long (eg buy 50 strike call sell 55 strike) and put spreads for short (eg buy 30 put sell 25 put) - you define risk better and limit the impact of changes in volatility on the price of your option. Or, you can get the same leverage and limited risk using stop-losses and futures in Silver and not suffer the volatility and time-decay of being long an option when you have no software to help tell you if volatility is over- or under-priced.

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  178. basil,
    No the average is 20 to 25 weeks.

    Cycles that shorten or stretch beyond those parameters are outliers and usually only occur about 25 to 30% of the time historically.

    We are in unusual times though with governments and central banks flooding the world with money as they attempt to fight a secular bear market. That has had a tendency to stretch cycles. So it may be more appropriate to widen the parameters a bit to 18 to 30 weeks.

    In real time one watches the current daily cycle to determine the most likely end of an intermediate cycle.

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  179. Thanks Poly. I think that's my problem, I like to scale into winning positions. It's safer but it also dilutes your gains.

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  180. Michael,
    And if we all had a crystal ball we would never have a losing trade.

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  181. Gary,

    What does this guy Toby Connor post the same info as you on another blog and offer the same subscription but with a different picture than you?

    ReplyDelete
  182. Roughly 10% of the worlds supply of USD actually physically exist and the rest only exist in cyberspace.

    There is plenty of gold to serve as money because it's infinitely divisible and can be represented in cyberspace or as paper notes which are redeemable for gold.

    The worlds central banks and very wealthy individuals/organizations currently are using gold as money.

    JP Morgan once said " gold is money and nothing else"

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  183. No offense intended Gary, it's your gondolah and I'm the passenger, hat tip for letting it all hang out on the calls in real-time.
    Good move on removing options recommendations from the standard report - it's 3D compared to pure directional positions - getting the right view on price direction, volatility and expiry add layers of complication and scope for error.

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  184. Harry,
    Toby is the pen name that my publicist can I use to author the other blog.

    ReplyDelete

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