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Thursday, October 20, 2011

THE LAST SECTOR TO GO

At this point I think it's pretty clear the general stock market is now in the initial phase of a new bear market. It's trying to generate a bear market rally over the last three weeks, but so far it's been pretty weak. That doesn't bode well once the cyclical and secular bear trend resumes.

The HUI mining index is now on the verge of breaking down out of the multi-month  megaphone topping pattern. Once it does that will confirm that the bear now has his teeth in the last holdout sector. The sector that led the bull market over the last 2 1/2 years and now the last sector to succumb to the deflationary forces.




As I have noted in the chart I do expect the miners will find at least temporary support at the 200 week moving average. That should correspond with gold putting in an intermediate degree bottom sometime in the next two or maybe three weeks. Presumably it will come with gold below $1535. My best guess is that gold will make an attempt to test the 75 week moving average at that intermediate bottom.




At that point gold should be severely oversold enough to generate a very powerful, snap back, A-wave rally. That should be followed by a multi-month consolidation as gold works off the huge gains of the last 2 1/2 years. This while the stock market continues down into its final four year cycle low.

I expect the miners will produce a substantial rally off the 200 week moving average also but I'm afraid they will continue to get dragged down by the general bear market in stocks even if gold does form a high-level consolidation over the next year.




So while I expect to see a great buying opportunity on miners in the next few weeks I doubt it will be a long-term type trade. That probably won't occur until the stock market puts in its final four year cycle low sometime in the fall of next year.

64 comments:

  1. Been a tracker for over a year and have the pleasure to beat everyone to the punch! Love the dialogue...

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  2. Gary,

    How long or how many cycles on average are A waves? Are they at least 2 cycles?

    Thanks.

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  3. EAMONN

    What happened?? You are almost ALWAYS first...you were eating werent you : ]

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  4. I would guess one intermediate cycle.

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  5. ALEX, as a matter of fact, I was LOL

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  6. Gary,

    Thanks. Was today a 4 day rule for gold or does it not count?

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  7. This potential d-wave will be a real blessing. At least it has the potential to clarify the PM sector in a clear, directional way.

    I have always invested heavily in miners, and found it hard following the model portfolio into 100% cash. I had scaled down to a small core, hoping their previous lows may hold. I may abandon the remainder tomorrow. meanwhile I am breaking rule #1 with a heavy amount in HZD (2x silver bear). I have nervously watched it since buying in three days ago. I know... I know...

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  8. If the miners are destined to underperform due to the bear market in stocks, does it make more sense to play the A-wave in AGQ?

    That is, assuming that silver makes it to $21/oz?

    From $21, silver could easily double to $40 in an A-wave -- which means a 200% gain in AGQ.

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  9. Gary

    I ask with due respect ( but slight confusion)

    Your last Post (just Saturday) was "The most important decision Bernanke will ever make"

    You mentioned "The next couple of WEEKS and MONTHS are going to be of grave importance.The dollar needs to find support at the 200 day moving average and resume moving STRONGLY HIGHER. "--bold print mine

    SATURDAYS Post --seemed like 2 scenarios..2 VERY DIFFERENT SCENARIOS...today"s post seems like 1.

    This new post speaks like the deed is done already. Its only been 4 trading days..I actually do not see a strong dollar bounce yet...

    So just curious, you're still not sure what Bernanke will do either , right? Or what'll happen?

    Really still 2 possible scenarios?
    THX

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  10. I'm surprised the bullish % on miners haven't rolled over with the couple of rough days the miners have had. I understand there is a small lag.


    http://stockcharts.com/h-sc/ui?s=%24BPGDM

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  11. I was just looking at long term charts for GLD from the 08 bottom, and our next support is at the 148ish level, Then we are looking at the 135ish level. That is where I really hope we find support.

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  12. Alex

    IMO I think the dollar is heading higher, only because Gold has started to head down when the dollar hasn't really moved recently.

    I have to believe that if the dollar was going to fail it would have already shown signs by heading down aggressively. I think when it goes, it's going to go higher explosively. I also think those in the know, are selling Gold now ahead of that break higher in the buck.

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  13. Haggerty

    Right, but I'm just looking at SATURDAYS post. re-read it ...and what conclusion is stated? That we dont know until Bernanke acts or doesnt...and it says weeks or months will tell.

    So I was just wondering why , 4 days later, a more definitive post? I don't agree or dis agree with the upcoming dollar move- just curious

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  14. SF Giants: BPGDM is not bullish percent/sentiment. It's percent of candlestick charts showing bullish chart patterns. It sometimes takes a big move to ruin the charts and drive BPGDM lower.

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  15. DG,
    Thanks for stopping by. Honestly, which way do you think this dollar is going to go? It seems like the whole world is resting on the head of a pin. Clarity please, if you have it to spare.

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  16. As I mentioned last week, the FED is engaged in massive swaps with the ECB. This may be a reason the dollar hasn't rallied vs. The Euro. Wouldn't surprise me if this is all managed. This is not 2008. Euro and US banks are broke. Bankrupt. The finical derivatives are ready to implode the world financial system. The FED knows this. The European CB's knows this. The Banks know this. So, it will not be happening too soon. Print overtly or by stealth, but it will be done.

    http://www.zerohedge.com/news/fed-dollar-swap-lines-europe-soar-19-billion-most-june-2010

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  17. Gary,

    Will the model portfolio be in and out (playing, much like these recent weeks) during the consolidation, after the a wave, or all cash waiting for the next leg up?

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  18. Alex
    I just re-read the prior post and it seems to me to say the same thing. In the weeks and months ahead as the market starts to fall apart, and the dollar starts to rally, Ben is going to feel pressured to do something. The question is, does he have the courage to tell people No.

    BTW I made a note of those miners you posted. EXK is personal favorite of mine.

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  19. Actually the bullish percent chart is the percentage of mining stocks that are in uptrends as opposed to down trends on the point and figure charts.

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  20. Alex,
    I never know what's going to happen I just try to do the best I can in real time.

    In real time it looks like the dollar is consolidating for another push higher, at least to test the recent highs.

    Gold on the other hand looks like it is ready to move lower into its daily and presumably intermediate degree bottom

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  21. The dollar is waiting for stocks to move into a half cycle low...if stocks blast off from here the dollar will not rally. This europe crap is aggravating...the market swings like Austin Powers right now.

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  22. Thanks GAry

    I found this interesting - I thought the dollar was looking a tad weak and sluggish...but I found a rare reversal pattern thats says Bullish Dollar.

    ( I'm still 50/50 , but just for kicks..here it is)

    http://www.screencast.com/t/dJXy493s

    http://www.screencast.com/t/erJsD5clE

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  25. I will admit however...

    I felt the MINERS bottomed on OCT 4th and I DID buy on that day-

    And I thought the Dollar was forming a Head & Shoulders pattern here

    SO AGAIN...TIME WILL TELL :)


    (AND I FEEL SOOO ALONE LOL)

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  26. Alex,
    It`s just like on the Red Green show; we`re all in this together!
    Great charts again! Do you use paid stockcharts or is that the freebie version?

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  27. Gary,

    I have just sent you an email re my subscription expiry...

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  28. I use the freebie version-

    I pull up the chart I want and on the lower left corner hit Java or flash to Annotate.

    And You're right...we're in this together, If I see things change and move against me- I will jump & join the party in whatever direction it's heading in :)

    (but the head fakes these days are SCHIZO!)

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  29. NO Qe until deflation...Fed said as much. Once the FED says there is deflation then QE comes in....

    Reality the FED needs to keep buying bonds, otherwise yields go up...if the bond market keeps acting the way it is, expect the FEd to start talking about deflation soon, in order to increase bond purchase.

    patience gold will be a great buy soon enough

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  30. Gary is exactly correct that deflation is taking its hold on the world. It is the inevitable response to reckless monetary expansion.

    I just finished reading Dying of Money: Lessons of the Great German and American Inflations.

    It's a super rare book written in 1973, but it's available online. HIGHLY recommendable to anybody interested in a more high level understanding of what we're experiencing.

    http://esocap.com/uploads/files/Dying%20of%20Money.pdf

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  31. Link didn't go through, here is another:

    http://bit.ly/r1u3bz

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  32. Gold MACD threatening to cross down through the signal line. If that happens gold could have a very bad day. Maybe today. Most likely Monday. Possibly Tuesday.

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  34. Dollar is are starting to figure out that any positive news near term about the EU either cannot be trusted or is complete BS.

    France is about to lose their AAA credit rating. France has ICBMs and nuclear submarines. Not a joke country.

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  35. Looks like the Fed doves are warming up the printer, talking about purchasing mortgage backed securities. No wonder the USdx is acting so weak despite the events in Europe.

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  36. Big money is trying to suck the little guy in for the Sunday night surprise. I can't see anyone (big money) wanting to hold thru the weekend.
    JM2c

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  37. Damn Gold up, probably sucking everyone in on Friday, so it can gap down and trap all the longs next week

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  38. Dollar just made a new low and is sitting right on the 50sma.

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  39. Gold back testing the 20sma on a daily.

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  40. That would suggest it's still trying to put in the cycle bottom and that it did not occur 4 days ago.

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  41. Keys,

    QE hasn't really stopped. They can't stop. Debt/credit destruction, deflation has not or will not go away anytime soon. The cancer, our financial monetary system, will be "saved" at all cost, at the expense of the people. The manipulation and propaganda accompanying these policies is astounding.

    Meanwhile accumulating gold and real assets are the only protection people have to prevent the disease from devouring them.

    For the pm trade, patience is best policy now. Won't be much longer.

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  42. Gary-
    A move under 9/15 daily cycle low in the dollar would indicate a possible failed cycle, correct?

    Thanks

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  43. Natanarchist,

    I agree entirely. Have you started to accumulate yet, or waiting for early November?

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  44. Mike,
    Yes but it's so late in the daily cycle there would be little chance of any follow-through.

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  45. WW,

    When are you going to cover your gold short, or are you going to add to it insead?

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  46. Thanks, but if there is a failed dollar cycle here, shouldn't we be looking for the next cycle to be very left translated and break the lows?

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  47. Gary,

    Possible the dollar bottomed on monday and is now in an ELT cycle?

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  48. SB,

    I actually took it off last night because the dollar looked weak to me and gold strong...if the 20sma resistance holds I will put it back on.

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  49. SB, I have not bought any physical in well over a year.Feb 2010. I was hoping we would get a nice opportunity by now or very soon. I have confetti to exchange! I am thinking to just start buying once a week for the next month or so. It is not like I am going to trade it anytime soon.

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  50. looks like we have to wait for another dollar swing. i definitely didn't like that it was wedging yesterday, shouldn't see that at a bottom.

    think it may test its 1597 hourly SMA which is now at 76.089. if that doesn't hold then batten down the hatches.

    /gc's 610 (which has been my bull/bear barometer the last few months, last penetrated mid september) is at 1678.9. it gets lower every day. at whatever price it and the bid meet, that's my optimal reshorting point. 1/4 position short currently.

    in other news the move up in /es is showing serious buy divergence in that no one is buying this move. almost literally no one. first time since this last rally began. just added to my SDS, 2/4 position.

    can't see me adding or doing anything else, going to take it easy until things clear up.

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  51. WW,
    That would entail a daily cycle that rallied for only 1 day. That's not possible.

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  52. Did we just see the completion of a little head-and-shoulders pattern in the dollar?

    If so that could mean at possible target of USD 73. Ouch.

    Which would probably cause gold to tag its 50 ma.

    Before everything rolls over and we see the ultimate low in gold during, what could be, the dollar's last rally.

    This is a tricky one.

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