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Sunday, July 24, 2011

THE REAL STOCK MARKET AIN'T SO PRETTY

When priced in something that has real value and cannot be debased (gold), one can clearly see that stocks have been in a severe bear market since 2000. (If one were to look at PE valuations during the same period they would see the same bear market.)

In the chart below I have marked the final phase of several gold C-waves. These highly speculative periods tend to end as a parabolic blowoff rally with gold stretched quite far above the 200 day moving average. The final phase of a C wave rally also tends to correspond with another leg down in the Dow:gold ratio.


After an extended two year consolidation I think we are now due for that final explosive move that should drive the next repricing of stocks against gold.

I expect we will see a combination of gold rallying wildly higher while stocks rollover into the next cyclical bear market. I'm looking for a Dow:gold ratio somewhere around 6 to 1 later this fall. If gold rallies to $1800 (my best guess) then we can look for the Dow to drop down around 10,000.

As many of you may have noticed stocks tend to put in major intermediate lows in November and March. The dollar often forms it's yearly cycle low in November. If the dollars three-year cycle bottom is still ahead of us, and it's starting to appear that it is, then the currency crisis that we avoided in May should come in late October or November this year.

That currency crisis should drive the final parabolic C-wave move in gold and the first major leg down in the stock market.



We should then see a relief rally in stocks as the dollar crisis comes to an end and gold will enter a severe D-wave, regression to the mean, profit-taking event.

The relief rally in stocks unfortunately will be short-lived. With no true productivity to drive it the stock market is not going to be able to fight a rising dollar.

Now that the last true period of productivity has ended (the personal computer and Internet boom) the only way stocks can resist the forces of the secular bear is through expansion of the money supply. That becomes painfully obvious when one looks at a 10 year chart of the Dow priced in gold.

The problem of course is that printing money is not true productivity. Printing money has consequences, as we found out in 2008.

It won't be long before we begin to suffer the consequences of Bernanke churning out trillions of dollars to save the financial system.

But who's gonna save us from Bernanke!

726 comments:

  1. Nice post, Gary.

    Maybe this is a "Captain Obvious" moment, but if people who still have dry powder want to buy gold, the $1607 area would seem a natural buy point--assuming of course we get there tomorrow. What was once stiff resistance should become firm support, right? I wouldn't expect the next daily cycle low to get below there.

    Gold has already dropped about $10 from its high tonight. We might just get there.

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  2. I have a feeling that the Big Boys will let the market drop for 2-3 days and then do a show of "We're gonna save A-M-E-R-I-C-A" in comes the cavalry with horns blowing and guns blasting putting the next fifty generations into an insurmountable debt.

    I think that this won't drag past Wednesday night into Thursday morning time frame.

    Then again, what do I know?

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  3. Miyagi-sensei,

    it seems a very likely scenario indeed .
    The market is lower than on Friday but pretty nicely up from the lows one week or so ago... Those politicians are full of BS and the traders know it.

    Gary, very interesting post. Are you playing at one point to show us how to short S&P and add to long Gold for the same $$$ amount?

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  4. Gary, you think that precious metal stocks will follow the metal rather than the general stock market? A drop to 10k DOW could see some major margin calls being made and perhaps some forced sales even in the PM stock sector...

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  5. Also what effect do you think this currency crisis will have on commodities? Will other resources hold up against the panic or only the monetary metals?

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  8. off topic

    i found it interesting that the swiss franc is doing well and has good fundimentals. Now they have a problem, they cant export and be compeditive. So what do the swiss companys want to do to their employees? they want to start paying them in euros. their currency is to strong and they cant keep up ( or down as the case is). i guess they may be forced to join the race to the bottom with the rest of us.
    i just throw this out there because i dont fully understand it and thought someone might add

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  9. re: off topic.

    Swiss franc is falling wedge on week charts. Technicals may smell the bottom is close...

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  10. Gary,

    If Gold is headed for a parabolic C-wave top I would think that either 1800 may be a tad conservative or the time frame for the parabolic move may be more accelerated than you suggest.

    Gold has put in 200 point legs. The past rally from March to May added almost 200 points without it being a parbolic top.

    The March 2008 C-wave top saw gold stretched about 33% above the 200 MA.

    Right now gold is about 11.5% above the 200 MA.

    To get to 30% above the 200 MA, gold would need to get to about 1864 from the current 200 MA.

    From this past May to June 1st, the 200 MA for gold rose about 63 points.

    Assuming a 63 point rise in the 200 MA from the current level of 1434 brings the 200 MA to roughly 1500.

    30% above 1500 would have gold at 1950.

    Now that would be a parabolic rise!

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  11. So, instead of SI being on the backside of the parabola, this is like I've been saying, the frontside, with the recent dip being analogous to 1980's frontside of the parabola.

    SI to 130 would max it out in terms of being co-equal in even buying power to the 1980 high of $50.

    But you're looking for 1800 when 1800-2100 is the equivalent of GC's 1980 high of 850.

    Both in SI and GC, in real, equivalent-to-1980 buying power, we can expect a "double top".

    Then the D wave would be appropriate, and thereafter, the serious blow off tops in the PM's, spelling the failure of the USD and probably most if not all fiat.

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  12. However, today, the markets will open with breakaway gaps, NY Pit vs NY Pit. These gaps most of the time, fill. We just saw the last gap fill and get stomped on for some days.

    It's not unreasonable to see a quick flash drop to Friday's high and then take off. That's the highest probability direction, down, at the moment. Once Fri's high is touched, then the concept of gap filling is no longer in force.

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  13. http://content.screencast.com/users/Gemini513/folders/Stocks/media/aba13302-4923-428b-8064-94c6529dc825/FXA_W.jpg

    http://content.screencast.com/users/Gemini513/folders/Stocks/media/d841132b-f8eb-463b-ba90-bfe554a9af7a/FXA_D.jpg

    I was looking for some alternative hedge (in case you know...). Tried to count some cycles and just wanted to share :)

    Comments welocme

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  14. Marginal failed move to new highs by SI continuous at $41 - these can be ominous in terms of follow through. Stop-take and run by the burglars ...

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  15. Gary-
    Why cant the SPX 4 year cycle low due in mid 2012- early 2013 run long? Is this due to the previous cycle running past its normal timing band?

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  16. The last four year cycle was the longest in history. This one should be short.

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  17. Sophia,
    I don't expect to be shorting the stock market anytime soon.

    Bernanke and his printing press are too dangerous.

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  18. Got it! I learned my lesson from few months ago and I agree with you!
    I was just trying to apply your idea of Dow vs Gold ratio

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  20. Who was the one that told me gold was not going to news highs because it never did before?? lol

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  21. Gold up 20 points and we have a slow sell-off? I do not comprehend this at all...

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  22. In case you haven't figured it out every time something gaps up big hedge funds sell trying to fill the gap.

    Once the gap fills the hedge funds cover and usually the asset recovers.

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  23. If you want to figure out what everybody else is thinking just look into your own mind. What is your first inclination when you see a huge gap up in the morning?

    That's right you're nervous and you want to sell and take your profits. Do you think everybody else thinks different than you do?

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  24. Gary,
    I guess they are figuratively nickel and diming' our gold?

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  25. Gary:

    Newbie question: Aren't Hedge Funds smart money? If so, why would they short a Bull by shorting gaps and picking pennies in front of the Big Bull?

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  26. Goooood point, indeed. Do not think like me...lol

    Have a great day, all. Off to the doctors...

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  27. Because gap fills are very high probability trades.

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  29. AAPL Weekly Channel Chart: http://screencast.com/t/D9dafrNueBjo

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  30. AAPL Weekly Channel Chart: http://screencast.com/t/D9dafrNueBjo

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  31. miners diverging here...the wrong way...hmm

    Maybe gold will close under 1600 tomm

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  32. Is anyone looking to buy the dip if gold drops enough to fill the gap?

    Strangely quiet in here today.

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  33. Gary,

    Just curious: comparative pullbacks gold vs silver at the daily cycle low?

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  34. catbird,

    I'll buy dips, but am not too concerned about a gap fill as my spot to add.

    In fact, if prices just go sideways for awhile I don't have a problem adding at these levels. Other than that, it doesn't seem like there is much need for action today.

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  35. Did anyone back-test probability of gap to close for GLD?

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  36. Wow, what a nice move up! I guess I now expect the new debt deal to allow gold to rest for a bit probably into the daily cycle low...

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  37. Anyone know where to get data on hedge funds net long or short positions for gold?

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  38. They aren't going to post their positions for you.

    Switch your charts from daily to weekly and stop stressing about every little wiggle.

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  39. Gary,

    Dont the COT reports show that data? No stressing wiggles here, just learning :)

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  40. WW, not many disclose their intellectual capital extensively even in their monthly reports to clients. Marketfolly.com post reports from Merrill Lynch etc that tracks what can be gleaned from the delayed regulatory filings of - relevant more for the stock pickers than the market timers.

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  41. Michael,

    Reason I asked is because I just read below on MarketWatch, and was trying to confirm that data but can't find those numbers on the CFTC site:

    "Net long positions on gold futures, or bets prices will go higher, increased 7% on the week, data from the Commodity Futures Trading Commission released late Friday showed. Net long positions for the week ending July 19 reached a little over 238,000. That compares to little over 222,000 the previous reported week. Gold hit a record $1,602.40 an ounce on Monday, and ended higher Friday at $1,601.50 an ounce. Open interest this week reached 854,141, compared to 775,360 the previous week."

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  42. Shalom,

    I could easily see gold bouncing around about where it is here until the resolution to the debt ceiling hits the wires.

    Or, it could take off any time now but put in a sharp and scary dip on the debt news to flush out the chasers. Too bad my crystal ball is in the shop : )

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  43. I update the COT speadsheets every week.

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  44. looking more and more like they want to close gold below 1600 tomorrow...and SLW below 40

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  45. Gary,

    Oh yeah you do right....on the website...im sorry I forgot about that, Thanks.

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  46. Troll,

    The smack down hasn't even occured yet, a $10-15 drop on the debt ceiling news. The pop last night was on the "no deal yet" news, this $10-15 pullback today from the highs is in preparation for the "we got a deal" $10-15 smack.

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  47. if gold and silver cant recover, it'll be one ugly looking exhaustion candlestick

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  48. This is looking crappier by the minute. Will be rebuilding dry-powder if weakness continues...

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  49. looks to me that there wont be any "deal". both parties will attempt to pass legislation through the US Congress. I wouldn't be surprised if Obama will be cornered & forced to sign the Republican bill, or else risk default.

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  50. Looking to add on a pullback to the 10sma around 1595.

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  51. Look at the big picture folks. Gold has now broken out of the consolidation and so far is still holding the breakout.

    The miners are struggling to break through stiff resistance at 580. Once they do I expect it will be a rocket shot straight to 600.

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  52. Not to mention the dollar is forming a bear flag and still has 5 to 10 days before the next cycle low is due.

    Does anyone really think gold is going to drop sharply if the dollar is collapsing?

    When the debt deal gets done gold will use that as an excuse to move down into its daily cycle low. The conspiracy nuts will go crazy pointing out that raising the debt ceiling means more money printing and gold should be going higher.

    Most people won't be able to buy into the dip and they will miss another golden opportunity because they made the mistake thinking that the debt ceiling debate has anything at all to do with gold.

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  53. LowTax,

    We have just started the move in gold and silver - with probably over 2 months of rising prices left. You aren't planning on selling here and trying to buy back on a dip, are you?

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  54. Gary,

    Do you consider gold dropping $10-15, then rebounding, as a sharp drop...I dont think anyone is saying that?

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  55. I expect the daily cycle correction, when it comes, will be much more severe than 10 or $15.

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  56. Per my post at July 25, 2011 3:49 AM, the daily NY Pit gap's filled.

    That sets up a lower probability for filling a gap that will occur four or five more out in time.

    Every trader knows the game now. So, that game ain't gonna work very well for a while.

    GSTroll, it's not a key reversal, but there are a lotta latecomers with weakhands who now are to be slaughtered. Give it a while here. There's no rush. The parabola is not on an hourly or daily. So, give it time to get those who just got in and those who dunno what to do except get anxious to get out. A scary drop into the prior gap which filled last week will be a buying oppty, maybe, if it sets up right. Remember, there are still a lotta newbie positions here. Very few have taken positions when BB did.

    A low before a high makes a lotta strategic profit sense at this time.

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  57. Gary,

    I meant before we enter a daily cycle correction.

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  58. Gary, RobL, I agree with you. I didn't make it clear that I was referring to my leverage. I will trim it if gold acts weak beyond a certain point, regardless of the outlook. I will maintain my 100% baseline however :)

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  59. I can see us easily tagging the 10 day again today on the debt ceiling news crap, then rebounding back to the 1610-1615 level. Thats if its a headliner today.

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  60. Gary, what's a typical DMA tag on a daily cycle low? Any particular level you'll be looking for us to bounce off of?

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  61. We see more tags of the 30dma for daily cycle lows, but the 30 and 50 are right now about $5-6 apart

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  62. Gary,

    You think the daily cycle low will be less severe being the intermediate was less severe?

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  64. I believe we started a new set of "5-waves-up" for spot gold on Friday morning at 1585. We may've put in the wave 1 top at 1623 Sunday night (if so = +$38 Wave 1). If so, I wouldn't be at all surprised to see a wave 2 down into 5:15 P.M. Eastern (options expiration) that "miraculously" dips under 1600 -- with wave 3 up to start thereafter.

    I have no idea if this is going to happen, but it will be very interesting to watch and see what actually does happen.

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  65. JN,

    I agree, lets see what happens :)

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  66. Hints on a debt ceiling deal will "miraculously" come out to drive gold below 1600 for options expiration.

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  67. Lets have a contest!

    Where will gold close today?

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  68. For those monitoring GC options, I presume the options expire at 5:15PM (Eastern) tomorrow?

    tajir:
    Regarding your questions about which option strategy to use: I think it would be best if you plot them in TOS. That way you will make a decision you are comfortable with. Everyone has their own risk tolerance and trading style and what works for one may not work for someone else. Ratio spreads and OTM options are both high gamma plays with slightly different characteristics; more important is to get the big picture right. (Thanks Gary).

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  69. I've thought about this many times but never said it,
    The REAL reason for the high unemployment is too many people.
    The job market is saturated and with present-day automation the workforce can remain steady even with increased output. The government can't create jobs out of thin air without the workers paying for them.
    That is my take, I'm not the first to think it I'm sure.

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  70. 10 Min GLD Channel: http://screencast.com/t/w6Zx832gtMtO

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  71. Mr.M, I work for a company that specializes in putting people out of work through automation. I can also say that this is not only good for the economy as a whole but also ultimately good for those laid off. Generally speaking, automation results in higher quality and lower costs. Consumers benefit by having more disposable income. More disposable income means other things can be purchased, things that CANNOT be done by machines.

    For instance, with more money in my pocket, I might buy more fine wine and liquor. The unemployed are generally free to move into those fields where there is no compentition from machines. The most obvious path would be health care - machines cannot care for the elderly and we will have to pay more and more for them as they age.

    So no, there are not too many people.

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  72. There are. And there is a service econmy. USA needs industry to export products outside the country...

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  73. ...and the NFL lockout is removed. How's that for a news :)

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  74. Gary,

    do you expect miners to bottom before GLD. Today is the 26th day from their daily cycle (if counted them correctly).

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  75. What does it mean "failed cycle"?

    I wasn't able to find the definition on the site.

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  76. DP,

    You're right, I just looked at the Cycles section of the Terminology doc on the premium site and I don't find a definition there.

    A failed cycle occurs when the low of the current cycle drops below the low of the previous cycle.

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  77. If this daily cycle is going to be shorter, we may have seen a top last night.

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  78. Gary,

    It looks like most daily cycles top around 14-20 days...is that right?

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  79. pimaCanyon --

    What's wrong with the situation when low of the current cycle goes below the low of the previous cycle?

    Is this bull-market specific situation?

    BTW, are you from Tucson? I lived in there from 1990 through 1996.

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  80. Right now im watching gold trade on teirs, the tiers are from the 1621.90 top to the 1609.40 bottom with a midpoint pivot between that high and low....gold just hit resistance at that midpoint pivot...the teirs are created three hours apart (making new lows every three hours), so if this pattern holds gold will drop to below 1604.90 within the next 20minutes

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  81. This comment has been removed by the author.

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  82. Im sorry, I meant below 1609.40 within the next 60 minutes.

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  83. DP,

    Yes, I live in Tucson. Used to live near Pima Canyon.

    A failed cycle generally means the trend is down.

    In a bullish trend, each daily cycle low within an IT cycle should come in higher than the last. Likewise in a bullish trend, each IT cycle low should be higher than the last.

    When a daily cycle "fails" (makes a low lower than the last daily cycle) it usually results in prices moving down into an IT low, so DC failure would indicate IT has topped and IT low lies ahead. You can extrapolate the same thing for IT cycles and the next larger cycle, etc.

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  84. Gary,

    It looks like most daily cycles top around 14-20 days...is that right?

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  85. pimaCanyon --

    Thank you, that's clear now for me.

    BTW, all these concepts of left, right translated and failed cycles become very clear from simple mathematical exercise.

    Let's take two sinus functions with periods different by factor say, 10 and faster oscillating function having the amplitude 1/10 of slow one.

    Then sum them up, and you will see that resulting function wiggles exhibit all those properties of left, right translated and failed cycles.

    The trend direction in this case will be slowly oscillating function.

    That's that easy -- we just deciphering, roughly speaking, superpositions of oscillations of different scales.

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  86. DP,
    are you looking for the Nobel peace prize in market analysis?
    You have my vote...

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  87. TommyD --


    Not quite right -- that's about me:

    http://www.youtube.com/watch?v=O-C18dMFYLM

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  88. Probably the last words


    "You never made ten dollars yet,
    You say you can balance the national debt
    If you're so smart,
    How come you ain't rich? "


    sound very special today :)

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  89. WW, I think you need to take Gary's advice and zoom out your charts a bit.

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  90. Harry,

    I think you have a point.

    WW, I have been with Gary for a few months and what I quickly discovered is that one can get an amazing return with Gary and Cycle Analysis by doing barely anything.

    If you buy when Gary buys and sell when he sells I bet you a burrito smothered in sour cream and hot sauce that your return will be better than you could have ever imagined.

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  91. AAPL Observation

    AAPL Flash Crash Low was $200 Bucks. Since May 6th ,2010 AAPL Doubled today ,When it Tagged $400.00 Lots of Vibrations in Price Here.

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  92. Harry & Rob L,

    I follow all Gary's advice...I have two accounts, one I use to trade with daily. So I am an old turkey with Gary.

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  93. Wav,

    Looks like you may win the contest... now go play the lottery my friend...lol

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  94. If I didnt trade daily besides my old turkey account I get real bored and start to feel too old, and like Gary my neck starts to hurt sitting here at my desk.

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  95. The miners underperforming today is a bit auspicious, but there are many ways to read it. Perhaps the miners are signaling an impending top to the daily cycle. Or..Hedge funds taking profits due to projected S&P weakness as a result of fears regarding the delay of a debt deal/debt burden potentially putting pressure on equities; or fear that a completed debt deal would lead to a drop in the PMs and associated mining stocks (only temporary IMO). One possibility from the latter two is that without a debt deal gold rocks higher and the miners end up following gold.

    Whichever it is, we are in the middle of the first daily cycle in a new int cycle (likely the finale of a powerful C-Wave) that has shown extreme strength in gold, is now rt translated and is occurring at a time in which a parabolic rise is due. Not to mention mounting sovereign debt issues that will continue to resurface and counteract any good news that may pressure gold for a day or two.

    I suspect that the top of this daily cycle has not yet been reached. At day 15 we likey have 8to 10 more till a cycle bottom. Any sideways to slightly downward consolidation is healthy at this point, in my view.

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  96. August GC contract finished at 1612.2. I was the closest without going over (per Price is Right rules), so I declare myself the winner.

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  97. Miyagi,

    The problem with the "too many people" thesis is that people consume goods and services. Less people = less consumption.

    If anything, the problem in the developed world is too few people. Europe and Japan are experiencing negative population growth as a result of low birthrates and restrictive immigration, and flatlining economies. By contrast, China, India, and Brazil truly have "too many people" and are forced to worry about overheating growth.

    The problem is too much debt, not too many people.

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  98. sophia, David,
    When I say too many people, it is in relation to employment.
    Now granted, this is not from a scientific paper or research but it is evident to me.
    Let's say Wal-Mart employs 200 people at one megastore somewhere with a population of 100,000. These cashiers and stockers and managers, drivers, cleaners and what have you can serve that populace or less. If your population goes to 150,000 then you may need more cash registers, more frequent deliveries and general staff but it is not going to be a thousand people! They might add 30 more to their staff.
    Multiply this by a few more stores,openings, factor in some bankrupcies and figure out that some businesses won't need to increase their workforce and you have less jobs than job seekers.
    In fact if you had 50,000 people added to your existing population you would need around 12,000 new jobs at the least.

    That's the way I see it, might not be 100% accurate but it seems pretty good.

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  99. does eric cantor dye his hair? sure looks like it...god politicians are so tedious

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  100. It's not that we have too many people, it's that we need a new industry to create jobs that were lost when the tech bubble and housing bubble burst.

    The personal computer and the Internet created millions and millions of jobs worldwide. Unfortunately like any new industry it over expanded. Once the bubble burst the market killed off the weak companies taking with it a big chunk of the workforce.

    Greenspan and Bernanke temporarily brought those jobs back by creating a real estate bubble. Unfortunately that bubble was short-lived and we lost the jobs again.

    If we would just let the market cleanse the debt bubble then capital that is now flowing to support an insolvent financial system would instead flow into research and development and we would get through this much much faster.

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  101. Gary, thanks for that very timely report.

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  102. Fubsy,

    Was today not day 16, day 1 being 7/4...we bottomed on 7/1 no?

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  103. Harry,

    I got GC aug contract closing at 1615 on ThinkorSwim.

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  104. William:

    Day 16 on spot and, I believe, futures. (May be wrong on futures.) Day 15 on GLD.

    I go with Day 16, since spot traded on July 4.

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  105. JN,

    Thats what I go with, futures, day 16.

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  106. WW:

    We are gonna master this market yet!!! ;^)

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  107. Gary,
    That is a different way of looking at it, the need to have a new industry to employ people.
    It's not farming.
    It's not computers.
    It's not automotive.
    It's not fishing.

    What will it be?
    Until then, too many people for the existing job market.

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  108. Miyagi,

    Gary said many times - Biotech

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  109. WW,
    Biotech needs educated researchers and dumb test subjects and both numbers are limited.
    Unfortunately biotech will also extend the lives of many unproductive leeches... just can't win..

    Global thermonuclear war maybe?

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  110. Obama going to raise the debt ceiling tonight..

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  111. As new industries come, and old ones go, so will employees. I think there will forever be a cycle of low unemployment, high unemployment... as the rotations continue throughout history.

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  112. none of the miners have moved in like 7-8 days...they're exactly where they were 7-8 days ago...talk about some consolidation...

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  113. Good report Gary, as usual. It sounds like 1578 or 1600 may be levels to add with extra powder:) I really appreciate the simplicity of your approach.

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  114. Mr. Miyagi, I don't think to many people is ever the problem. In fact, the world is going to suffer from underpopulation in a much worse way than overpopulation. Malthus had it wrong and the so called "population bomb" believers do as well.

    In the end when you don't have enough bodies, you can't continue to produce wealth and your society dies. This is what is going to kill China. The one child policy will make them old and poor sooner than they can make their society rich. Bet on it!

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  115. IMO, we're not ready for a move down towards a cycle low, this daily cycle has not been satisfied.

    I'm looking for a 4 day run right here that will leave many speechless.

    It shouldn't matter either way, this IT cycle is a monster and will correct all timing.

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  116. RB,
    I think we need a population balance, right now it is stretched way above its' 200 century MA....

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  117. Poly, I like the way you think!

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  118. Mr. Miyagi: Are you saying it's reached the top of its Bollinger Band?

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  119. Would someone please interpret very simply the current commercial net short position in gold?

    With sincerest thanks and kindest regards,

    Rose

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  120. You can find the COT positions in the COT spreadsheet link. Until it gets to extremes (Blees rating of +90 or -10) the COT's are mostly meaningless.

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  121. I would further add that a Blees rating of 0 isn't necessarily bearish as gold can continue higher for many months while the commercials are heavily net short.

    Commercial traders aren't any better at picking tops than anyone else.

    Really all I ever use COT reports for is spotting bottoms.

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  122. Gary, how did you get so good at the stock market? When did you start, and was it a hobby? Thanks...

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  123. Eamonn,

    Gary is that little baby from the Scottrade commercials. He has been doing this a long long time!

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  124. Gary,

    Is it Scottrade, or E-Trade...lol?

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  125. William Wallace, i think he started in the tech boom, and learned the hard lessons there

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  126. Eamonn,

    Thats when I started and took a beating.

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  127. William Wallace, education is never a waste. you learned from it :o)

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  128. Here is an ugly (not surprising) employment chart. Looks like we have a LOOOOONG way to go.

    Dear Ben. Please give us 110% on those printing presses.

    http://cr4re.com/charts/chart-images/EmployRecessAlignedJune2011.jpg

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  129. Gary

    What bullits does the fed, Ben have left to use? What trick do they have up there sleeve to try to turn the economy around? See my chart above and it looks like dooms day. Can there be any good news in the next employment report?

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  130. All the Fed can do is make the problem worse.

    They tried printing money to stop the recession in 2000 and it caused a housing and debt bubble which ultimately led to the second-worst bear market in history and the most severe recession since the Great Depression.

    Instead of learning his lesson Bernanke made the same mistake again only on a much larger scale.

    The rubber band theory, action/reaction works not only in the stock market but in the economy. The bigger the economic boom the larger the collapse is once the boom is over. Basically we're just talking about regression to the mean.

    Greenspan and Bernanke printed trillions of dollars, it gave us one hell of a party, and one hell of a hangover.

    Instead of learning from his mistakes Bernanke is making them again.

    We've had the party for two years now, it's about time for the hangover.

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  131. EXK's reluctance to hold above 11 and SLW above 40 is not a good sign. I will sell on any further weakness, book my gains and move on.

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  132. Not a bad speech. However, he failed to mention two little details that added to the current debt problem.

    Obama care
    US bank rescue (bank bail outs) of 12.7 trillion.


    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=armOzfkwtCA4&refer=worldwide

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  133. apple is outperforming gold so I am buying apple and selling all my gold. thanks marketwatch!

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  134. This action just seems like gold is sitting around waiting for positive news on the debt ceiling to get slammed down. There should of been big gains today but half of them were gone by the end of the trading day and here we are sitting at the same levels as last week. With the options expiry tomorrow, I can only imagine big money will try to push this thing under $1600 into the close tomorrow. If that happens, we are right back in the consolidation range.

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  135. Both were full of shit.

    It's all over red rover, just a matter of some years now.

    People should not be suffering like this, they both went them to suffer more. Amazing ignorance.

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  136. Dan, gold is at ALL time high's,

    It's not like this event is new or that you really expect a default......some perspective.

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  137. Let's all pull together and help this great country get out of the deep hole they have dug by paying our fair share of capital gains next April.

    Thanks again Gary...

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  138. Dan,
    The longer it takes the better for gold. We all saw what happened to sentiment after 10 up days in a row. At that rate the rally would be over in a month.

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  139. 1615.2 They are absorbing almost 500 contracts here. I think the op-ex games have started. 1600 seems to be the number being talked about. Even that break in DX could not get through that level. The thing is that if it breaks 1600 it will trigger a bunch of sell stops for the late comers....

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  140. I think way too many people are way too focused on a meaningless options expiration. There have been plenty of times when gold soared during an options expiration.

    Of course the manipulation bugs conveniently overlook those times.

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  141. JPY.. I think BOJ intervened...

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  142. I am wondering if we don't get another bail out type event....fail then a quick return to the table for the pro vote....wondering if both parties take this to a default, which isn't a real default, just to blame the other party....then both parties play the hero game...

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  143. Looking at the previous rallies out of intermediate bottoms and how gold pulled back to the 50dma, right now gold is stretched much further above the 50dma than previous daily cycles.

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  144. Gary:
    Some one is trying hard to hold the price at 1615. They absorbed almost 700 contracts refreshing the offers (never more than 20-25) on the DOM.

    The bulls were defending the VWAP at 1614.2. Then that JPY spike happened and we had a long liquidation spike down to 1610 which has since recovered as we are back at 1614...

    So they are definitely sellers at that 1615 level with deep pockets. There are a lot of scared longs who panicked at the first DX spike (the shorts at 1615 did not). Note that 1615 area was being defended in the afternoon also.

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  145. Aviat,

    I see that right now in futures, they just took it from over 1615 to 1611 in a 5 minute candle, but buyers stepped right in and took it back up to 1614

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  146. William,
    I don't think you're looking at the right intermediate bottoms. I think we are coming out of the last consolidation before a final parabolic C-wave rally.

    Look what happened as gold exited the final consolidation during the last two C-waves

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  147. Gary,

    I am looking at the intermediate bottoms of the last 4-5 cycles where we bottomed on the 150...what am I doing wrong my friend?

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  148. Aviat,
    What difference does it make?

    Do you think that sellers can stop the intermediate cycle?

    Like I've said many times in the past, in a true bull market anything that suppresses price below true market levels will only increase demand.

    This is why the manipulation theory simply cannot work. If the government or Federal Reserve is trying to suppress price, then they are the reason that gold is at $1600 an ounce instead of $1200.

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  149. William,
    This intermediate bottom is not the same as the last four or five intermediate bottoms. As I illustrated in the link I think this is a final consolidation before the parabolic phase of this C wave.

    Look what happened as gold exited the last two consolidations before a final parabolic move.

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  150. Gary,

    Did you think that the consolidation before the intermediate correction of the previous intermediate cycle was the C-wave finale?

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  151. Gary,

    Thanks for showing me that chart, I appreciate your help :)

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  152. William,
    I think you need to take a step back and look at the big picture.

    All other intermediate declines took gold back to the 150 day simple moving average. At the recent intermediate cycle low gold was so strong that sellers were barely able to take it under the 50 day moving average. It never even got close to the 150 day moving average.

    Gold is showing incredible strength and has been since last fall. I think you are getting sidetracked by the daily wiggles and are missing the big picture.

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  153. Gary,

    Thats not true gary, im right with you my friend...are you forgetting that I was the one who pointed out that gold would bounce off the 75sma and then the 100sma before the 150sma bottom (which never happened in this Intermediate cycle)?

    Im just trying to understand exactly what your thinking and looking at at all times :)

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  154. If I calculated with accuracy, the last two C-wave cycles topped roughly 20% above the breakout ( where Gary circled). If gold did the same thing this C-wave, $gold would be at $1900.

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  155. Aviat,

    Here is some food for thought. How do you know they are really sellers?? It comes across the time and sales but you really don't know if they are true sellers.

    We are a day before expiration. They could buy cheap ATM Puts or slight OTM Put options. Push the futures lower and expand Volatility in the options.

    Sell the puts back and cover the shorts via futures.

    They trade these setups all the time. That is one problem with depending on the DOM for trades.

    Just a thought

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  156. Gary,

    "At the recent intermediate cycle low gold was so strong that sellers were barely able to take it under the 50 day moving average."

    Gary we were below the 50sma...we bounced off the 75sma and 100sma exactly as previous cycles, just no bottom on the 150sma as previously.

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  157. Don't forget that the average leg up is roughly 24% from an intermediate bottom. So far gold has only rallied 10%. And if this is the final parabolic phase we should probably see more than 24%.

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  158. Gary,

    Now...why are you and everyone ganging up on me today telling me to step back and look at the big picture? What the hell did I say or do to deserve these vicious attacks....lol????

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  159. Gold only spent 7 days below the 50 DMA. And other than one day most of that time it was $20 or less below the 50.

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  160. Gary,

    The previous leg out of that intermediate bottom was $136, so far we have seen $146 at last nights high

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  161. Yeah it was short lived below the 50sma (as I was pointing out in real-time)but we did tag the 75sma for a short bounce and then dropped to the 100sma where we bounced out of the intermediate bottom. and already we have rallied $146, and thats not even off the 150sma.

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  162. The dollar appears to have fallen off a cliff here...

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  163. Gary,

    One day when I finally meet you in a country on the other side of the planet, im going to give you a big hug for all you have taught me...then im going to snatch you and body slam ya for giving me a hard time doing it :)

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  164. USD taking a dive - gold not budging...Op Ex games

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  165. WW, I wouldn't try any funny stuff with Gary. I don't think he would be found wanting in taking care of himself. That's my sense

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  166. Eamonn,

    Thats for sure...maybe we will just go to the gym together instead...lol

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  167. Gary,

    I may be going to Vegas (if not Michigan) to see a specialist in amputations to get another revision on my leg...maybe we can meet and climb a cliff together, what do you think?

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  168. A climb and then a burrito.

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  169. Sounds good, never ate a burrito before..or climbed a cliff..lol

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  170. All currencies are taking a hit after a report of explosion in China,,Macau?

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  171. Gary,

    Why do you hold positions through daily cycle corrections but not intermediate corrections, I assume it is because an intermediate may become a D-wave?

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  172. They seem to have put a lid at 1615. Completely decoupled from the DX.

    Incidentally Goldman is saying that the bar for QE3 is very low. This might explain some of the O/N DX weakness apart from the "Deal or No Deal" fetish.

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  173. Picking daily cycle tops is next to impossible.

    Spotting intermediate declines is much easier. When a daily cycle low is violated the odds are very high that an intermediate decline has begun.

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  174. Why would some one want to cap Gold on a night when the first whiffs of QE3 are out is beyond me..

    Mainstream media calls for QE3


    It got through 1615ish only to find another wall of offers at 1616.5. They have been hitting the offer like there is no tomorrow but price is not moving at all.

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  175. I've seen this movie before... Gold always does this - the dollar takes a big hit, gold mills about for a few hours/days, everyone screams about the 'forces of evil' manipulating the market, and then gold rallies $30 and everyone's mouth is all of a sudden so full of money you can't hear them whining anymore.

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  176. Gary, thank you for the chart. Sure wish I had found your blog in 2006. But, I wonder why we are trading, and not just staying Old Turkey?

    I know there will be ups and downs, but if the end game isn't for another 4-5 years, wouldn't we be better off holding?

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  177. Mr Miyagi,

    regarding unemployment and population.

    The answer might be actually in shorter work week to lower unemployment. It's been a trend through last couple of centuries that work hours/week dropped as technology took over jobs.

    There's a really interesting article on Bullion Bulls Canada that discusses this:
    Where is 4 day work-week

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  178. The article also explains why high unemployment could be a policy of some to lower inflation, and permament percentage of unemployment a generally desired component of economy (to some).

    One might not agree with it all, but it gets you thinking.

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  179. Economy is still alive -- houses, guns and food-stamps:

    http://video.cnbc.com/gallery/?video=3000034735

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  180. Elaine,
    I prefer to avoid an intermediate decline if possible. Most investors aren't emotionally equipped to hold through an intermediate decline and will end up selling at the bottom.

    Also we haven't gone to anything like a true D wave yet. Trust me you do not want to hold through D wave.

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