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Thursday, July 28, 2011

DEVILS ADVOCATE

The persistent and mindless bullishness on gold lately has got me nervous. When I get nervous the first thing I do is pull up a multi-year chart and look at the big picture.

A couple of things are apparent when one looks at the chart below. First as I've noted many times in the past gold has a tendency to move above a big round number before topping. It did it at $1025, $1225, $1432, and gold  recently tagged $1630.

Another glaring discrepancy in that chart is the utter failure of the miners to participate in the last 200 point rally in gold. As a matter of fact the miners could possibly be forming a head and shoulders top.



We can also add to this the fact that sentiment has reached levels that in the past have triggered intermediate declines. Plus gold is now stretched above the 200 day moving average.

Now I don't want anybody to think that I have all of a sudden become bearish on gold, I haven't. Gold is quite obviously in a secular bull market. I am however beginning to question whether or not the low we saw three weeks ago was an intermediate bottom. I have been riding this bull market long enough to know that when everyone is rabidly bullish (especially me) it's about time for gold to throw a curveball.

Until the dollar breaks below the May bottom I think we need to be very careful in assuming that gold is going straight up.

174 comments:

  1. Look at PHYS. Major evening star at 14th and failed to cover. Big sell off might be just around the corner...

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  2. Gary,
    What would be your cue to get out of gold given your concerns...a daily cycle low being reached and then it failing? or are you thinking something different?

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  3. If gold closes back below $1600 I will drastically trim the GLD position in the model portfolio.

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  4. Thanks Gary. That seems prudent. I'm not aware of what the sentiment measurements are currently but Gold sure has been buzzing lately in the media outlets I read/watch fwiw.

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  5. A small position of ZSL might be worth some thought for Friday

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  6. I have to complement you Gary on your balanced analysis. Everything I am looking at at the moment is warning me of the same thing. It will be interesting to see how it plays out.

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  7. I was thinking a long dollar position could be a good potential trade with a stop at its most recent low. I'll have to take a look at some of those UUP calls...

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  8. Gary,

    I don't want to give away part of tonight's report, but I do have a question: Why not let the Bollinger Band crash trade work for a couple or 3 days before making the change to the model portfolio?

    In addition to the BB crash trade, you also have stocks moving into their timing band for a daily cycle low, which could help the BB crash trade.

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  9. Patrick,

    I considered a UUP long position today, but canceled the order. You'd have to buy a boatload of shares to make any money because the moves on UUP are small. However, your suggestion to use calls could give you enough leverage to make the trade worth doing.

    Good luck!

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  10. Interesting... indeed.. i believe gold goes higher.. as fear grips our nation.

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  11. This comment has been removed by the author.

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  12. PC,
    Stocks still had about three weeks before a cycle low is due so that isn't going to help precious metal positions.

    A Bollinger band crash trade could possibly be exited tomorrow on a positive close. It doesn't mean that a significant rally has to occur. It just means that the market stretched a little too far on the downside and is due some kind of breather. That breather can be as small as one up day before the trend continues.

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  13. I heard that S&P rating authority feels that any debt reduction plan less than 4 trillion will not be viewed as serious and would result in a downgrade.(?CNBC or Bloomberg) Neither Reid nor Boehner have >3T reduction. What will happen to USdx with a downgrade.

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  14. George,
    Nonsense. The miners participated in the rally all the way from $680-$1400. Those ETF's were available that entire time.

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  16. Gary,

    what are the dates for your trip to the Gunks?

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  17. take a look at an AEM chart, it had been in a rectangle for months, reliably bouncing up and down off the walls of the rectangle, today though it just completely cratered and died.

    incidentally watching the metals right at this moment, silver is a little stronger than gold.

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  18. GAry,

    Poly is going to be maaaaaaadddddddd. ;) LOL

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  19. IMO anyone taking that BB crash trade in GDX needs to have their head examined

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  20. Bruce,
    we are flying into Newark on 12 September, and will be there for two weeks.

    I will let everyone know in the weekend report and maybe we can put together some kind of "trackers" get together for the folks on the East Coast.

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  21. gary

    so what is the upside potentail for gold at this point?

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  22. GDX hammered its 233 (and 89, coincidentally) day SMA. so far a healthy retest imo.

    i never liked this rally sentiment-wise but the price action is very, nay, extremely convincing. i think the IT low will hold but this correction should be rigorous since everyone is going to assume the debt ceiling is to be a massive sell the news event.

    gld/uup decisively broke out
    http://i54.tinypic.com/iqlut0.png

    and now we retest the breakout as basically every other thrust upwards has. if there's no bounce, then we worry.

    p.s. long time no post, hey everyone

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  23. PSYCHIATRIC HELP 5 CENTS
    THE DOCTOR IS IN

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  24. Incidentally when I see traders making excuses for why something didn't do what it was supposed to do that's when I get nervous.

    The miners quite obviously are not behaving as they should be. Gold is at new highs yet miners have dropped 7% to tag the 200 day moving average.

    There's no way in hell that should be happening in a healthy market.

    Instead of making excuses when something like that happensone is probably better off asking themselves if they have made the correct assumptions.

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  25. I found a link that answers my question re downgrade in US credit and it's impact on the US dollar. I think this downgrade will send the US dollar below May low.
    http://www.cfr.org/financial-crises/us-debt----prestige----downgrade/p25565

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  26. LOL Rob.

    An extended IT cycle has always been on the radar, it's just the lowest of the open scenarios. Our stops would take care of this scenario.
    The other being that we set an IT lowon May 5th and were in a 2nd daily cycle.

    I think Gary is right to question and review his analysis. I caution over reading the charts though and to understand the emotional toll daily cycle tops have on ones analysis.

    Sentiment is one thing, but there is stil far more evidence that an IT cycle low was printed July 1st compared to an over stretched IT cycle about to top and collapse.

    I also caution the over analysis and role the dollar is playing or needs to play in this cycle. Doc seems too focused on this also. This IT cycle is characteristically a different animal to all other IT cycles recently. We're experiencing a flight to safety trade and not a debasing liquidity type trade seen in past cycles. This past rally, the strongest of the entire bull came on the heels of a significant dollar rally.

    So yes I see reasons to be on guard, same reasons I see at every daily cycle top. In the end we can only agressively trade our vision with applied probabilities while employ prudent risk mgmt. I'm still favoring some amazing fireworks to come, if I get stopped it will still be a profitable cycle.

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  27. Gary
    I like that your being cautious...that chart you just posted on the blog, showing the head and shoulders pattern on the Hui....I am also looking at how the dip in between June and July was lower then the dip at the end of Jan.... (Lower low) and how we recently failed to make a higher high.

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  28. one can also argue that we are in the middle of a 10 month consolidation on the Hui between 5-600

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  29. More than anything sentiment is a problem. It usually requires an intermediate degree correction in order to clear the kind of sentiment extreme we are seeing right now.

    If this turns out to be the case I think we will see the next phase in the broken silver parabola play out.

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  30. This comment has been removed by the author.

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  31. Poly,

    Is your stop on gold the breakout at $1578?

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  32. Russell,

    I am of the opinion that the ratings agencies threatened a downgrade just to get some air time. I don't think they would seriously consider a U.S. debt downgrade except under an extreme circumstance. Why risk the ire of Washington when folks on the Hill are still contemplating how to regulate them?

    I have been telling my subs for weeks we would have to be very careful with the dollar as it approached the May low. It is very typical of the dollar to threaten a 3-year cycle low before launching higher. Furthermore, the first intermediate cycle out of a yearly low... which includes 3-year lows... has a tendency to run short of the typical timing band.

    It seems like everyone is expecting the dollar to fall apart around this debt issue, which is little more than politicking in DC. Bullish sentiment under the dollar plunged in the last week. Personally I am long the dollar (I bought into Tuesday's panic sell) with a stop under yesterday's daily cycle low. If the action continues to confirm this view, I intend to build the position.

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  33. Gary

    Wasnt sentiment also high between august and October 2010 and between feb and may 2011?

    How can sentment get this high so fast?

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  34. There is a very good reason why Doc and myself pay close attention to the dollar index. Currency debasement is what is driving the gold bull market.

    During the deflationary period ion 2008 that fundamental support was pulled out from under everything, including gold. It resulted in gold dropping down into its eight year cycle low.

    Quite obviously QE1 and QE2 have driven the gold rally out of the April 09 bottom. If that fundamental driver is removed and deflation returns than gold is going to take a hit.

    Folks the only way we are going to have a parabolic C-wave finish is if the dollar still has another move down into its three year cycle low.

    The dollar has to roll over and make another lower low. Without that there is no way gold continues to stretch this far above the 200 day moving average.

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  35. I know one TA guy who believes that since gold did not reach support at the 150 day moving average, this has been a 'false' rally (since July 1st).

    He also believes that the anticipated downturn in gold will take it back to the 150 day moving average and only then will gold run much higher.

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  36. Moneyman,
    Sentiment didn't hit a bullish extreme until December of 2010.

    The intermediate correction before that lasted long enough and was deep enough to build a wall of worry that endured all the way till the end of November.

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  37. no vote tonight on debt plan, not enough votes for Republicans!

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  38. Do my tired eyes deceive me or are the futures that deep in the red?
    DOW -97
    S&P -10
    NASDAQ -25.

    If this continues to the open, it will be one heck of a down day; gold is up to 1617 at this time, maybe a leg up tomorrow.

    Again, I think that the debt brouhaha will point this out and use it as THE excuse to be pushed through; do you want your pension checks or not?

    Or maybe I've lost my mind...

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  39. from the previous post:

    unknown: revealing the model portfolio on the blog might irk the subs and Gary. as a bizman myself I know I would be upset if my product was being given away for free. not everyone here is a sub.

    dude: the first rule in any market training is (or should be): never think anything is ironclad or a sure thing. the market twists and turns with no reason. Gary has mentioned before that if it means preserving capital (money, what have you) he will turn 180* without hesitation. getting fixated will kill your account. "do" first, understanding comes later.

    I mean no offense with this post :)

    goodnight to you all

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  40. If somebody wants to see something amusing they should take a look at the daily chart for IMAX....

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  41. I think the ultimate move would be for the dollar to dip just under the May low and then skyrocket, sending PMs (especially silver) and equities into a tailspin. We would get a little bounce here in PMs/miners to look like a cycle low occurred, then the bottom falls out. Very few would trade that correctly or be able to adjust no matter if long/short.

    This bull is tough to get 8 seconds on.

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  43. Gary;
    First time I agree with your daily report 100%. On another note I am a fellow climber, actually a caver. I SRT into caves using racks, petzl croll / prusik. Here is a cave I did - 200 foot vertical drop from the lip... http://en.wikipedia.org/wiki/File:Alabama_cave_2005-04-24.km.jpg

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  44. Does anyone remember what gold did on black Friday and on the spike down day in march last year? Did it fall too, was it flat or up?

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  45. Hack

    I prefer to use a rack for rapelling also. We have a 100 metre (300ft) face that the town is built around. Not an overhang but close enough to verticle. We have to join two 50 metre ropes to rapel down it and use prusik loops to get over the join. Takes a bit to get your mind around hanging from an 8mm prusik loop when you disconnect the rack that first time.

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  46. LOL the horror stories I could tell about my first years climbing. I didn't have a mentor and learned by trial and error and the few books that were available at the time.

    Let's just say it's a small miracle I survived.

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  47. what would Toby do if you didn't come down alive from the cliff to bring him home? think of that

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  48. Listen... this is what is happening and what is going to happen, its very simple really... ready? :)

    Dollar has put in its base already, and ready to rally, just like 08 base. Dollar rally's with gold.

    Gold took off early out of an intermediate bottom, not bouncing off the 150sma but the 100sma instead, because of the manufactured crap behind the scene Gary speaks of about the market...I was watching gold futures trade while I was watching fireworks on the 4th, as soon as the gate opened at 6:00 pm gold blasted off and never looked back (not normal)and rallied nonstop until the session was over, giving us the "finger" candle...also the staggering drop in commercial net shorts right before confirms that someone knew something. Now, gold is looking perfectly normal, except for the mass tug-a-war we have been seeing because of this debt ceiling crap (I watch every wiggle on every bit of news and have been trading it as if I had a chrystal ball, thats how predictable gold's reaction to debt ceiling news has been!) Gold consolidated and traded sideways, let the 10sma catch up... I think it would have even possibly dropped into the daily cycle low when it tagged the 10sma, but news came out again and I watched it pop on the news causing that gap up on the 25th. Ofcourse that brought buyers back in quick thinking we were blasting off again. Now here we are and gold is ready to correct as normal, we'll get a normal daily cycle pullback to the 30sma and then business as usual...no crazy straight up parabolic top, just the same ole intermediate cycle as the last 4-5, only difference being the early bounce out of the IT low.

    Some perspective hey Poly....lol?

    Just what I see on me little ole charts my friends :)

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  49. How often will swing highs or lows fail?

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  50. You been hittin` the crack pipe again, haven`t you?? LOL!!!

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  51. From the little experience I've had with it, and we never got past top roping, there isn't much that beats the buzz you get from a good day on the cliffs.

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  52. Swings form all the time. The only time the are relevant is when we are in the timing band for a cycle bottom.

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  53. RJ are you talking about the flash crash day? I remember it well as the miners were mostly green that day along with gold...Almost like nothing was happening and these miners were up several %. (By the way, it was May 6th)

    Gold (GC) opened 1176, high of 1211, close 1197

    HUI Opened at 450, hit 463, closed 457.



    Gary- most daily cycles will see the miners cough up 50% of the move after hitting a daily cycle top. Also, the 252 MA has been very interesting support for the HUI over the past several years. You also have the trend line breach that could be back-tested. All around 530-535 zone. That might be worth a long with a mental stop around the 252 (2 daily closes under it and I would bail)


    HUI

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  54. I never pull the rack off of the rope, I want to live a bit longer. ;) However on the ascend if I encounter a lip I have to pull the petzl off of the rope and rejoin it further up on the lip. Trying to wedge a petzl under a rope with your full body weight on it is murder, and this is after spending a day underground with boots holding 10 pounds of mud...

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  55. 86,

    Your not talking to me are you..lol?

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  56. Jay,

    Yes and thanks.

    What about black Friday in 1987?

    I'm curious then as well, in other words what does gold do on black swan event days....

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  57. The miners are anticipating a hard drop for gold...today they basically over did it, when they seen gold wasn't dropping as hard as expected (at the moment)they recovered. Like, oops holdup fella's gold isn't right behind us!

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  58. Let's see if my simple mind knows what the hell it's thinking and making me see...time will tell.

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  59. Hack you have my respect for going down those caves. Thats the stuff kiddies nightmares are made of.

    I prefer the wide open spaces ;-)

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  60. Gary,

    I think I will be seeing you September my friend :)

    If I get tired of hiking on my crutches can you give me a piggy back, maybe scale a cliff with me aboard...lol?

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  61. WW

    Did you get yourself one of those dragon thingy's

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  62. Looking at the HUI...
    Most of the gains were in the first couple years. It hasn't outpaced gold, on a long term basis, since before 2004. (Coincidentally oil prices were flat during the bull market before 2004. The big 2009 HUI year was when oil prices had dropped like a rock)

    There were 3 large consolidation periods of 1 year, 1.5 years, and 2 years where the HUI did nothing and gold went up a significant amount.

    Maybe people have just figured out that the the miners are a way for the more experienced pros, who keep pushing the miners even though if you don't get out at the right moment your gains are no better than gold, to separate the noobs from their money.

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  63. I don't think gold was catching a fear bid in 1987, different market dynamics but someone much older than me can correct this. (I was a lowly college sophomore in 87. Most likely eating Ramen noodles or some such crap.)

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  64. Except for individual names like SLW of cource

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  65. Speaking of SLW, not THAT looks more H&Sish on the weekly than the HUI.

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  66. Silver Bullet,

    No...but maybe I should right, so I can bash 86d4life with rapid fire, you see what that filthy wilderbeast just said to me...lol?

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  67. If it's plain to see for everyone that miners give up 50% of their gains, than the logical progression is for everyone to rush for the door faster and faster. Until they get too cheap and people rush in faster and faster.

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  68. Silver,

    Thats not a Hemi Cuda is it? Or is it a chevy with a big block?

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  69. WW

    I try to keep out of it.....

    besides you do a good enough job on your own lol

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  70. My gold system stop on this long trade is probably relevant at this time. It is at 1569 currently, and on day 18, with the average winning trade taking 25 days.This will be the 8th straight winning long trade, and with a 10 year track record of 65% winners can this streak keep going?

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  71. Nope it's an Aussie muscle car.

    Phase 4 Falcon GTHO, runs a 351 Cleveland. Belongs to David Bowden a famous Aussie Trader.

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  72. Gary,

    Let me get this straight...solely due to the action in the miners you abandoned your thoughts on the "mild rally scenerio"(gold pullback to 1578) being your looking to trim GLD position if gold closes below 1600...also, you mentioned that a normal daily cycle correction can take gold back to the 50sma, and the miners changed your mind on that too?

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  73. Veronica,

    Your system tells you that gold will pullback to 1569, then where does it go from there according to your system, or can't tell yet?
    Your amazing...Thanks :)

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  74. My system tells me we will be in the low 1590's tomorrow.

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  75. Aren't the miners reporting earnings over the next couple of weeks? Isn't there traditionally a push down into earnings and then strength to follow?

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  76. WW, it's sell stop is rising and is at 1569, but it may not sell and continue to 1700,1800,2k. Who knows?I don't and nobody does,but with so many wins in a row we are going to enter a consolidation period soon as we have done for years now where my system will underperform.BTW, consider yourself blessed that you have a mentor like Gary who can change his view/positions on a dime.Not many like him.

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  77. Veronica,

    I have said before that I am blessed to have found Gary. Wish I had a system like yours...im not smart enough to develop such a system.

    Thats why you amaze me :)

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  78. William,
    Correct. The recent action in the miners is saying that something is wrong with my assumption. The miners should not be making big drops down to test the 200 DMA with gold at new all time highs.

    Something isn't right. When something isn't right I've invariably found the best move is to head to the sidelines and protect my capital. There will always be another opportunity. If I miss this one then I will just catch the next one.

    As I explained in the nightly report what appears to be happening in the stock market is a big part of my decision making process right now.

    If stocks are heading into an intermediate and yearly cycle low and the first leg down in a new bear market then everything is going to get the crap kicked out of it. That includes to some extent gold and certainly miners.

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  79. Gary,

    Ok...I will be waiting on your calls my friend.

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  80. GDX had a severe correction in the first DCL out of the Feb 2011 IT bottom, going from 62 to 55 and snapped back for a V shaped recovery. Also bounced right off the bottom of the Kettner channel. Repeat?

    http://stockcharts.com/h-sc/ui?s=GDX&p=D&b=5&g=0&id=p66401653402

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  81. Look great report! My massive stress ball was telling the same thing.........

    i frankly am very worried about gold right now...not long term...but in this short-term....I wish more would tell their story more often on this blog....too many guru followers...Gary is a great coach, but too many treat Gary like God...

    I am scared of gold right now...not because I don't think gold is not a long term play, but for the fact that right now to many are thinking of it. Nobody knows me here, but I am beyond a gold bull...I really believe in gold as a final currency to when fiat destroys itself...I beyond no means am a gold bug...screw that!, my only desire is to preserve and then make more purchasing power...all my bs aside...

    wow....we are really at cross roads...and since I don't have people subscribing to my membership I can say whatever i want....

    my best guess....
    gold will tank...harder then in gary's report....
    silver will be destroyed.
    I frankly have no idea, but I am cautious, and I don't like being cautious...

    blindly going old turkey is never wise...I am at arms with myself....the d-wave potential is still there.

    Anyways...really frustrated right now!

    I hate myself for my views, and really would rather ride this bull....but the potential of gold becoming jack ther rippper is really pissing me off....

    I am 100% hedge...AND i fully hate myself for doing it...I am quite frankly the biggest f-ing idiot I know...

    F me I know...I really wish the best to all during this f uped time.

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  82. Gold is running into a lot of longterm overhead resistance. I was watching for a break of the upper rail on a short term chart but zoom out the last 6 years and you get a better picture.

    http://www.screencast.com/t/CpUCILtWBQLE

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  83. The big problem with gold right now is sentiment. The extremes we are seeing usually require a 3-6 week correction in order to clear. I have my doubts it can be done with a 4-8 day daily cycle correction.

    I suspect gold will put in a daily cycle bottom sometime in the next two weeks that will then be violated as stocks enter the final move down into a yearly cycle low.

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  84. Gary you are a great coach...keep at it...despite, the times when the market moves against your views....I a really get ticked at people when they say you are wrong, when you gave a perfect scenerio of what is to come...too many confuse scenerio with future....very frustating at the least...anyways...you continue to do a great job!

    anyways....your last post even furthered my desire to keep my hedges on....

    Alright time to sleep...I think my family allows me to do that from time to time...

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  85. WW,
    For someone with so much insight I'm surprised you asked me about options.
    Also, what the hell are you doing up this late?

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  86. Gary,
    I take you back to this chart by Rambus...GDX:Gold ratio

    http://stockcharts.com/h-sc/ui?s=GDX:$GOLD&p=W&yr=16&mn=6&dy=0&id=p13755617821&a=229863894&listNum=107

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  87. http://stockcharts.com/h-sc/ui?s=GDX:$GOLD&p=W&yr=16&mn=6&dy=0&id=p13755617821&a=229863894&listNum=107

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  88. This comment has been removed by the author.

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  89. The chart had a target of the major low in the Fall of 2011.

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  90. AK,
    Its a reversal pattern...duh.

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  91. Being sarcastic!

    No pun intended here....

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  92. Miyagi,

    LOL..Im watching 24 on netflix..season 8 episode 22...and im studying charts.

    Gary,

    I would say sentiment is only this high because of what just occured out of the "early" intermediate bottom, lets see how it looks after we touch down on the 50sma next week, I bet alot less bullish.

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  93. Gary, some 35 yrs back when I was climbing in Boulder, we heard a bit about the Gunks. Heard that folks there were Bohemian purists - even more pure than Boulderites (who never use bolts (like our lesser developed friends in Yosemitie) - Gunk Bohemians climb w/no shoes - barefoot! - and w/no chalk - they just rub their hands in the dirt like prehistoric cavemen - and they hate aid climbing, so taking it the extreme they wear nothing but jockstraps - so these Bohemian cavemen climb barefoot in jocks w/no chalk - tell me it ain't true when you visit.

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  94. Oh, and pack light - apparently all's you need is a jock.

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  95. Bohemian cavemen climbing barefoot in jocks w/no chalk??? Gary forget it im staying home!!

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  96. How's this for a little
    stroll for all you climbers.

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  97. BEEP BEEP BEGINS Doc has rephrased the gold cycle STOP intermediate decline possible from here STOP ENDS BEEP BEEP

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  98. Eamonn,

    Now everyone will be scared to death to add anything near a daily cycle low even after they see a swing low in place...except me :)

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  99. Eamonn..
    I wonder how many people here have either sent or received an actual telegram.

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  100. WW,
    I'm rooting for your GLD puts!

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  101. William Wallace, BE CAREFUL, the dollar index could hit 80 is a flash as it rockets into its second intermediate cycle out of the low initiating deflation in assets

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  102. MM,

    What ever happened to your SLV 36 puts???

    I was a jealous admirer!

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  103. Q2 GDP estimate out tomorrow....could see some damage to stocks

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  104. Seems silver is much more responsive to dollar movements.

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  105. Eamonn,

    The dollar is only going to rally because stocks are going to crash, people are going to run into gold as quick as the dollar.

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  106. WW, good luck. Ur probably right :o)
    Btw, hope your leg is ok

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  107. WW, good luck. Ur probably right :o)
    Btw, hope your leg is ok

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  108. Time will tell dear Eamonn. Hopefully my leg will be better once and for all after this next surgery, a surgery a year since 1996 is starting become a little too much now!! Im going to try and meet up with Gary and gang in september and go for a nice hike before flying off to Indiana for surgery :)

    Time for bed...talk to you tomorrow!

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  109. AK,
    The bearish diamond pattern is a reversal pattern usually found at market tops. The number points is just how many times price bounced off the trend lines. Bullish diamond patterns are found at bottoms.

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  111. Chart-wise, w/out guidance from sentiment and cycles, this is what I've been noticing w/regard to $GOLD:

    The net is, it's bullish.

    Details: From the Feb low we charged up hard to May 1st, when the $SPX started selling off ("sell in May..."). Then we kept attacking $1560 on the upside, trying to break out. But, that failed, so we went down and tested the downside of 1462-71, and that HELD. Then we went up again and pierced through 1560 and went all the way to 1628. Bullish breakout.

    So while I can't predict the future, I myself wouldn't be surprised to see $GOLD retest/backtest the $1560 level, before taking off to the upside again.

    Why? Fundamentally, all major WW countries are in debt - the US, Japan and Europe - all of 'em - and as they can't raise taxes much w/high unemployment, they will have to print.

    Again, to me, the fact $GOLD is not going down (yet) is important, I think.

    $HUI are stocks. They represent gold in the ground. Yes that's leverage, but that's not as good gold in hand, as we all know that 1 bird in hand (GLD) is better than 2 in the bush (GDX).

    I will keep following the trend, but the fact that GDX has turned decisively down, yet GLD has not (yet), is bullish for GLD in my view. Right here I'd sell GDX but be long GLD. We'll see.

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  112. Uh, in case anyone's wondering, I say that GDX has turned decisively down because price closed below the 20d EMA, and because the PPO (MACD) turned negative today. GLD on the other hand is still on a buy signal, using these simple tools.

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  113. Too much babbling - sorry - one last bit: if $GOLD fell below the 20d EMA at $1582 I'd sell.

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  116. er, lastly, the $XEU rise up sharply from Jan to May 1st, like $GOLD, and now it looks like it's BULL flagging (however volume is high not low...), about to break out and UP, for a massive move, similar in size/symmetry w/it's move from Jan to May. Anyways, it's possible.

    The H&S in the $HUI doesn't do it for me. But again, I'm focused on GLD now, not GDX. SPY could pull GDX down while GLD skyrockets. This technical action would exactly match the fundamentals, in my book.

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  117. http://chartramblings.blogspot.com/2011/07/gold-cycle-convergence-next-week.html

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  118. Ok...I'm going to weigh in on recent topics:

    Gary's caution has me taking note and so I've pondered a plan for 'what if I'm wrong' scenario (currently 4x gold futures).

    My opinion is that gold is VERY strong here. I'm in a Poly sort of camp.

    I think recent events in Europe along with the mess here in the US are demonstrating worldwide (to the slow stupid people who don't know about gold for the last decade) where this game is going, how it will play out, and that the US is just waiting for its turn on the 'austerity...we are all broke now' bandwagon.

    Weeks ago gold rocketed up from 1575 or so and only paused around 1600 (to put in a triangle lasting about a week) before continuing higher.

    In my opinion, that triangle SHOULD HOLD if we are strong and heading higher. (The lower part of the triangle is about 1580 or so).

    As some of you know I have a strategy (among a few) of trying to buy selloffs. There are about two different levels I believe I will attempt to buy if we start dropping.

    First will be near 1600 (where gary says he will lighten). The next would be a bit above that 1580 point.

    The goal at those addition points is to buy large but with a small stop - hoping either of those levels holds and we resume going higher.

    If we do, the adds should bring me to 6-8x with minimal risk.

    However if we keep going lower and go below that 1580 (or so) point there is little but air underneath (and it will also be demonstrating less strength then I think the last month's rally initially projected).

    Thus, below about 1580 I am thinking I will dump everything except core. That will give me maybe a 10% gain for the last month's action. Live to fight the next battle as they say and just see what happens after that point.

    I'm not sold on this described plan just yet, but I've created orders and I'm pretty green unless something doesn't set well in the morning. I'm holding the existing 4x and doing nothing unless we drop. And if we go high I'll just sit on it and wait for the next trade.

    Overall...I think this is a bull and the world is waking up to how broke most everybody really is. Gold may actually be entering an accellerated phase here like when the NAZ slanted higher in 98. Thus the sentiment comments many are worried about MIGHT be signs of something new. Or not. Those are always dangerous comments. But, like I said, that's the reason for the 'if i'm wrong' plan.

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  119. Hi Gary: While I understand the decision to sell the miners, why add to GLD on day 20 of daily especially since we are now in the timing band for a DCL anytime now?
    Also, since the outlook regarding the IT cycle is unclear, is the plan for adding:

    1. Add on next DCL and see if cycle develops as RT or LT. (maybe around the 1578 breakout region)

    2. If LT, we will be stopped out and the IT decline is ahead of us.

    3. If RT, we make some gains similar to this daily cycle. This will confirm that the IT low is behind us.

    Heck, if the IT low is still ahead, the 150 or 200 SMA or the most recent 1478 low look likely!

    Of course, a lot depends on the $$$ and everything is subject to change - I just wanted to see possible plans a little ahead, not to mention get things out there in writing to clear my head. Thanks!

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  120. TZ, I like your thinking. Would you buy gold at 1580 no matter what, or would you wait to see if price bounces via/a reversal candle w/heavy volume, or some other such confirmation-of-a-bounce type thing? Thanks.

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  121. A note on my comments above: essentially I'm treating the week long gold triangle right below 1600 as the 'retest of the breakout at 1577 INSTEAD OF thoughts from gary and others that we may NOW proceed to pull back and 'retest' that point. I am taking the argument (with stops) that the 'retest' already happened with a congestion instead.

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  122. Bill,

    You can go higher leverage IF you try and catch gold while it is falling and hope you are correct.

    More risk, more reward. It is more dependent on you using a chart to pick a very good zone where you feel support will hold.

    I've used both methods...trying to guess beforehand with a live order as it's dropping. Or waiting for something that looks like confirmation. Those have a higher chance of holding, but the movement away from the low by time you get in means the position size is much lower (since my stops are often near previous lows).

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  123. Thanks TZ. Yea, I never use leverage, and always wait for confirmation, but you're right this means less reward plus stops are farther below. Good to hear your thinking though, thanks.

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  125. good saying i just heard

    you cant legislate the stupidity out of stupid people

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  127. Could it be what you see and hear today has been discounted somehow even with Washungton crap.

    I remain very defensive and likely get more so. If you end up buying higher, so what. As mentioned early yesterday, DUST plays a part in defensive posture.

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  128. Cramer says to get out your shopping list. It makes me then think to sell!
    LOL Glad we have Gary.

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  129. Looking at the cycle count chart, why is it that some intermediate cycles for gold contain 4 daily cycles and some contain 5? Or is this just normal?

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  130. NJ,
    I said one could either add the capital to GLD or keep it on the sidelines.

    If gold closes back below $1600 I will take the model portfolio to cash.

    Like I said what bothers me the most is the mindless bullish sentiment I'm clearly seeing here on the blog and the intense call buying the other day.

    When sentiment gets complacent like this it almost always requires a 3-6 week correction to clear it.

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  131. Morning Gary (and all)

    Gary- I traded the 2005-2006 parabolic Gold run, but at the time I had NO IDEA about sentiment.

    I am wondering, did you? and if so,do you remember what it registered back then.

    All I remember is that everyone was talking about it after 3 months and it ran for over 1/2 a yr.

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  132. Miners and the sentiment are varning us about a correction. But where will people put there money..?

    I wonder the same as Alex..Is it possible for gold to rally with high sentiment..? Happen before?

    Im long dollar and long gold but sold some of my gold because of the warning signs..

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  133. "Like I said what bothers me the most is the mindless bullish sentiment I'm clearly seeing here on the blog"
    -Gary

    Maybe 1-2 weeks ago, but all I'm seeing is chicken littles around here this week. If Gary ends up correct and we are going lower, selling miners yesterday was still a mistake, IMO.

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  134. Gary: Assuming we go with the current gold cycle model (not the revised one from last night) and yesterday gold kissed the 10sma could we have a swing high today for the daily cycle based on the action so far?

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  135. In this kind of environment when US is heading to recession the dollar probably will go higher..But investors might also think that QE3 is getting closer and then the dollar will fall..

    w8 and see..

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  136. Here's the thing anyone pushing the long side right now is basically playing chicken with the politicians. As soon as the debt deal is done the market is going to use it as an excuse to rally and gold is going to use it as an excuse to sell off into the daily cycle low.

    I'll be willing to bet a burrito that the news will come after the market closes so anyone in the trade is going to get caught in a premarket gap.

    Once the daily cycle bottoms we can certainly buy gold and miners for a trade. But be prepared to take your profits quickly in case this rolls over into a left translated cycle. Which it will almost certainly do if the stock market rally fails and heads down into a yearly cycle low.

    The reason being is if that happens the dollar will be spiking violently. And despite the fact that some here believe that gold will not be influenced by the dollar, it's simply not true.

    Currency debasement is the fundamental driver behind the gold bull market. The last deflationary period In 08 drove gold down into its eight year cycle low.

    The brief deflationary period last summer as QE1 came to an end drove a $150 correction in gold.

    People you are kidding yourself if you think that another deflationary period isn't going to have an effect on gold.

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  137. SB,
    Sentiment is confirmed by sentiment traders public opinion poll. Almost without exception when sentiment reaches these levels it requires a 3-6 week correction to clear. A mild daily cycle correction isn't going to make a dent in it.

    Obviously the reason we are seeing caution right now is because I have become cautious. Let's be real, if I was rabidly bullish everyone on the blog would also be bullish.

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  138. W2,
    Re; post 10:46, staying home, you Candy Ass!!!

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  139. F.W.I.W. my personal opinion for Miners is

    1) we had a SWEET run from the Mid june bottom.

    2) the retracing of about 50% (so far), and saved by the 200sma is healthy (so far)

    3) We will get the answer to MINERS direction REAL SOON. We are at the MID POINT.

    --this chart of the GDX shows 2 ranges , a red range and a Blue range...a drop to the bottom sets up a typical fall rally.

    --A bounce now will be watched like a hawk for signs of a retest on the top of the range and Aug sell off?

    --A breakout over this range would l BLOW US AWAY !!

    P.s. This is MINERS, not GOLD

    http://www.screencast.com/t/XwnpVh48WgHM

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  140. sentimentrader's rydex pm assets showing limited participation by rydex traders in this advance. Though public opinion looks stretched in the short-term.

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  141. Notice the minors have started out immediately not confirming this move in gold.

    I'll say again that when the market doesn't do what it should do it's usually a good idea to pay attention.

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  142. Gary what do you mean. Please explain a little more what you are seeing :)

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  143. Given the low Q2 GDP number this morning and the downward revisions to GDP of the last 3 quarters (Q3 & Q4 of 2010, Q1 of 2011), I'm wondering if the market is beginning to discount a possible QE3, given the jump up in gold and the plummeting dollar.

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  144. Holy,
    What is it you don't understand?

    The miners are clearly telling us that something is wrong. Gold is a new highs and mining stocks are selling off.

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  145. If we ignore the miners though (not saying that we necessarily should), Gold is playing out exactly how Gary how predicted with gold reaching 1625-1650 before going into a DCL....I think we'll have alot more clarity with all this once the debt ceiling crap is out of the way.

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  146. 86,

    LOLL..nowadays your like a little mouse! You come in and snatch some cheese and take off.

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  147. good stuff gary. being objectional.

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  148. Patrick,

    Thats the thing, miners are not being ignored.

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  149. Gary - when you say "miners could be forced to new lows" are you saying HUI could go below 490? And of course with the SHS formation it could go a lot lower.

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  150. Long GDXJ 87%+, EUO 8%-
    Cash 5%

    +increased position
    -reduced position

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  151. I bought a small position in SLV puts. Not that I'm happy about losing money, but amount was small if it goes to zero. On the other hand, if Asia wakes up to a debt deal, it could be an instant winner.

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  152. Dumping all my DGP here. Holding GLD puts.

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  153. Broad mkt----I am amazed at the complacency using TRIN as the guide! ie does not show fear---not good! IMO

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  154. Indeed WW and I'm finding it hard to ignore the red I'm seeing day after day in my few mining positions.

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  155. Patrick,

    I sold all my miners two weeks ago. Went strong just metal.

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  156. Ok, nearly had a heart attack.

    My intention was to buy 4 MGC futures contracts at 1624 with tight $2 stop. Click, transaction sent, purchased.

    Then I went to enter 4 stop contracts at 1622 i noticed the provisional amount next to it before sending and got a heart attack. I realised purchased 4 GC contracts by mistake.

    I know exactly how much 4 MGC contracts are in relation to my account, that's why i didnt re-check the order numbers before submit like i always do :-/



    A reminder - you can do serious damage with a few wrong clicks if over time you get a bit too 'relaxed' and want to accomplish something a bit too quick.


    Luckily i accidentally made 320usd in about 1 minute by 0.8$ move in gold :)

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  157. Wise move. I'm going to sit on these positions for now (as they are pretty small), but in the future will play just the metal like DG's been saying. Much easier imo and some sensible call options to juice the returns a little.

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  158. Bot small ill advised naked call on S and P bounce to about 1291.

    On a short leash.

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  159. Already bot back on smack down!

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  160. Shorting silver. Hello again ZSL, I won't let you get me THIS TIME

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