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Monday, January 16, 2012


It seems like most analysts, and gold bugs are now assuming that the reversal on December 29 marked the bottom of golds D-Wave decline. It's certainly possible that we saw a bottom two weeks ago but it's still too early to make that assumption. Gold, and most assets are about to be severely tested. How gold handles that test will be a big clue as to whether or not the correction is over.

What many analysts are overlooking is the impending daily and intermediate cycle correction that is coming due in the stock market. When the stock market moves down into a cycle low, especially an intermediate cycle low, it generates a tremendous amount of selling pressure. Invariably that selling pressure bleeds into virtually every other asset class, even gold, as you can see in the chart below. Over the last two years there were only two daily cycle corrections in the stock market where gold was unaffected (I've marked them with green arrows).

The stock market is now in the timing band for a move down into a daily cycle low. As you can see in the chart below those tend to occur almost like clockwork about every 35 to 40 days. As of Friday the stock market was on day 33. On top of that we have a larger intermediate degree cycle that should bottom sometime in March/April. The selling pressure generated at an intermediate bottom is much more intense than a mere daily cycle low. That means sometime around the middle of March or early April things are going to be looking pretty bleak. My best guess is at that time interest rates will be spiking in France and maybe the UK (along with all of the other countries that are already having debt issues).

It's late enough in the daily cycle that there is a good chance the market began that move down into its daily cycle bottom on Friday, despite recovering most of the sell off before the close. I say that because we have a coil pattern playing out in the stock market. 

Contrary to what most people believe, the initial break out of a volatility coil is usually a false move that is soon followed by a much more powerful and durable move in the opposite direction. In our case the volatility coil broke to the upside and by Friday it was already trying to reverse. Once the stock market moves back through the coil zone it would be very unlikely to recover those levels until after the next intermediate degree bottom, which like I pointed out isn't due until March/April.

Sometime in the next 4-8 days we should see the stock market break its cycle trend line. It's very rare for a move down into a daily cycle low not to break the cycle trend line. So for our purposes I think we can probably assume that it will.

If the stock market just retraces 50% of the daily cycle advance (assuming 1297 is the top) then we should see a pretty hefty sell off in the next week or two. 

That kind of selling pressure will almost certainly have some affect on gold. If the D-Wave is still in progress it's going to have a sharp affect on gold, probably forcing gold back below the $1523 December bottom. How gold handles the stock market moving down into its daily cycle low will give us a big clue as to whether the D-Wave has bottomed or not.

And even stiffer test is going to occur as the stock market moves down into its intermediate bottom in March/April. If gold can't hold above $1523 as stocks move into a daily cycle low then it is going to get driven much lower during the intense selling pressure that will be generated when stocks move down into a larger degree intermediate bottom.

A couple of things to keep in mind.

The last C-wave was the greatest in both magnitude and duration of the entire secular bull market. Is it possible that a 2 1/2 year, 100%+ rally can be corrected with only a 38% retracement in four short months?

There is also the problem with the last intermediate cycle in gold running very short at only 13 weeks (normal duration is about 20-25 weeks). More often than not a short cycle is followed by a long cycle that evens out the next larger cycle. In this case the next larger cycle would be the yearly cycle. 

If December 29th did mark an intermediate bottom then we would've had two intermediate cycles of only 13 weeks each. A short cycle followed by another short cycle is a pretty rare occurrence. In this case exceptionally so because the yearly cycle low isn't do until February/March. If I take into account nothing else I would have to assume that gold still has about 5 to 6 more weeks before the final D-Wave and yearly cycle low are formed.

That doesn't mean that gold has to drop a considerable distance below $1523. If it does turn out that gold continues lower into a more normal intermediate timing band I doubt that gold would move below the 50% Fibonacci retracement level, which is at about $1400. That also corresponds with the extensive consolidation zone in the summer of 2010.

One other thing to consider is the powerful correlation of a stronger dollar whenever the stock market moves down into a cycle low. We should continue to see the dollar spike higher over the next couple of weeks as the stock market drops down into its daily cycle trough, followed by a much more powerful rise during the intermediate degree decline due later in the spring. As you can see in the chart below gold has had little ability to resist a rising dollar.

So unless you think that the stock market will never drop down into a cycle low again, or that the market and the dollar will drop simultaneously (very unlikely), then gold is going to be severely tested as the dollar spikes sharply higher during the next few weeks and months as the stock market works its way down into first, a daily cycle low, and then a much more serious intermediate degree correction.

Right now investors need to be on the sidelines while we wait to see how gold handles the stock market's move down into its daily cycle low. If gold can hold above $1523 while the stock market suffers what is likely to be a rather sharp correction then the odds will improve dramatically that the D-Wave did in fact bottom in December.

If however gold follows the stock market down and breaches that $1523 pivot then the odds are very high that the D-Wave is still in progress and will not bottom until late February/mid-March.

I am currently still running the one week, $10 introductory offer for the SMT premium newsletter. Since we should see the stock market form its daily cycle low sometime in the next 1-2 weeks now would be a perfect time to sample the newsletter.


  1. Jeez Gary, all this for free... you must've had a good weekend.

    Futures are green, +62 for the DOW. I have seen this happen many times; up overnight and red when the market opens. This past week it was red overnight on 4 occasions and opened green on 3.

  2. Thank you, Gary. It sure is nerve wracking to watch gold keep going up.

  3. Miyagi,

    I have seen this happen many times also. If the market reverses tonight it will be when the European markets opens, if opening lower. Asian markets are up pretty decent right now, US futures popped when asian markets opened higher, as they usually do. I have seen US futures pop when asian markets open high, and then drop if european markets open low. I often trade gold futures on these swings, its almost always a given. Right now im long gold off the 200dma, if european markets trade lower and I see gold reverse I will most likely be short tomorrow.

  4. Elaine,

    I know how you feel, but be at ease, I assure you gold will pull back and present another great buying opportunity. Try not to focus on the price, it's the trade that is most important.

  5. WW, also many thanks to you for your contributions and commentary to help guide SMT'ers.

  6. I smiled when I read this http://goo.gl/wL9LJ

  7. Waiting for that darn stock market correction!

    Here's Tiffany's look unhealthy- supposedly a pre-cursor to stock market trend:


  8. WW if you flip short tonight, would appreciate post. I'll watch euro open. Thinking about buying the Dx dip. Thanks, if not able to post will wait.

  9. How ironic would it be (after 1 1/2 years of D wave discussion) if the D wave bottom occurred on the day that it was confirmed?

    1524 does seem like a long way off but as we have seen it can happen in the blink of an eye.

  10. Gary:

    Great post but I have a question. From gold's high of about $1,925 to the low of $1,523 is $400. That is a decline of just under 21%. How do get to 38% as stated in your article?

  11. This week is Opex week...will wait for overbought indicators to sell before Friday...usually it turns like a dime and retrace from the following monday... Will the market be at 1310 by then? I have to say that Copper is cruising!

  12. Unknown,
    I'm not sure what you are asking me. Are you trying to say that gold can't correct more than 21%?

  13. Unknown,
    $1523 is a 38% retrace of the move from $860 (the start of the last C wave) to $1925 (C wave top).

  14. Gold has broken above the IC trendline on the True Strength Index but still has not moved into positive territory, and Stochastics on a weekly have crossed over and turned up, on a daily starting to become imbedded at the top, first daily cycle of an A-wave behavior.

  15. WW, you think it will hit 1670 then turn back down?

  16. at ease,

    Im expecting the 150dma, but I have to look for a reversal in real time, it may occur sooner.

  17. /ES just broke 1300, asian markets are up big, gold is just grinding higher, it needs to hit hard resistance to reverse, or stock futures need to roll over.

  18. Run of stops over 1300 and we can notice a top either Tues or Wed. Likewise in GC too before 150MA rejects it. Looks like a great risk/reward setup for shorts given we are so close to the timing bands.

  19. The 50dma has crossed below the 150dma, possible gold gets rejected by the 50dma before tagging the 150dma.

  20. "...gold is going to be severely tested as the dollar spikes sharply higher during the next few weeks and months.."

    Yeah. Too many people think everything with be wrapped up in a tidy little bow within a few weeks. It's good that you included the word MONTHS because this could take some time.

  21. Took off the gold futures long from the 200dma $1635 here at $1665.60, short now with a tight stop.

  22. WW.. What's your stop? Its pbly on some MA.

  23. Arun,

    LOL.. actually your wrong it not on an MA, its at tonight's high $1668, like I said its a tight stop tonight.

  24. ha ha.. you are trading against your own rules, beware!!

  25. Thanks got in late at 1663, gonna give a little room, 1665.

  26. Arun,

    Actually im not trading against my own rules, look what I said earlier...

    "it needs to hit hard resistance to reverse (MA), OR stock futures need to roll over."

  27. Riley,

    Just make sure your stop is above the 10sma on a 5 min, which is at $1664 right now...so your tight but good at $1665.

  28. Riley,

    If I nailed this reversal we should have a nice short here with a tight stop.

  29. WW,I'm learning from you. Thanks much.

  30. WW, misstake stop 1675 not 1665, will drop it after watching for a while.

  31. Mikezza:
    Something is showing up on the Fed's balance sheet since it has risen from about 800 billion in 2008 to around 2.6 trillion now, as officially reported.
    A good example of the Fed's idea of transparency is it's accounting change of Jan. 6, 2011 whereby future losses in asset values will not reduce capital. This is perhaps intended to reduce the recognition of potential insolvency while it continues to emit currency. I believe Bernanke has expicitly resisted efforts at disclosure on the basis that it would harm market confidence.
    See "Pimco stirs up debate over U.S. Treasury bonds" (ft.com > markets, March 10, 2011) wherein Bill Gross "estimates the Fed has been buying 70% of annualised issuance of Treasuries since QE 2 began in November." Current rates show that Gross was wrong about QE 2 ending, not the stated estimate. Who knows how it is divied up between the Fed and its bailed out subsidiaries on Wall Street and around the world? He even has absurd quantities of(subprime) mortgage backed "securities" on the balance sheet, valued at exactly what?
    Whatever it takes from day to day, the only way he can keep to his interest rate target is substantial inflation of demand for treasury debt. Our recent history shows a tendency to asset class inflation, dot.com, real estate, treasuries. The magnitude of the inflation is exteme,notwithstanding restaint to the CPI from a weak economy. Liquidity is a euphemism for inflation.

  32. Here is an example of a successful Rounding Bottom pattern in $USD. Note the year.


    And here is the current Rounding Bottom in $USD. I can't guarantee that price will continue higher, but statistics suggest the odds are good.


    I may make some small edits to the charts later, but essentially they are complete.

  33. rjm
    that increase of 1.9 trillion since sept 08 was due to qe1 and qe2 and was advertised and completely obvious to the market. their balance sheet has stabilized around 2.8 trillion since the end of qe2 in june, with only a modest uptick to about 2.9 trillion in december associated with some of their self liquidating liquidity programs.
    i'm not arguing that the fed is overly transparent on all their dealings, but they do a good job in disclosing their treasury transactions for in their own accounts. i agree that a lot of their operations are intentionally opaque and in fact, that was at the crux of my question. how are they keeping treasuries well bid without further monetization or expansion of their balance sheet?
    btw, i’m not going to get caught up in another back and forth because i wasted enough time doing this on friday, so no offense if i don’t respond to other posts

  34. BTW that was another outstanding SMT article.

  35. Boy a lot of green this morning. Spanish auction went well. Looks like all problems solved. Might see some big SoS #'s on spy and GLD this week.

  36. Danno

    Are you a sub yet? Only 10 bucks...

  37. SF, I'm tempted to send YOU $200 if it would get you off my back. lol

  38. r u guys mad?
    u see all these positive divergences on 15min, 60 min, daily, and weekly, and u still focused on cycle and D wave?
    unbelievable .. you guys just left %17 on the table in silver

  39. 12500 Dow, 1300 SPX, 2400 Nasdaq. Nice numbers to reverse off of. I think we start to find a DCL from here.

  40. John,
    No we didn't. We caught a piece of the move. As I said we have to wait and see how gold handles the impending cycle correction before we can be sure the D-wave has bottomed. If it holds above $1523 then we will enter at the next cycle low which will probably be somewhere around $1600 or maybe a little lower.

    If however the stock market drags gold back down to new lows then we will avoid it and be ready to buy lower in the normal timing band for an intermediate bottom.

    Missing an opportunity, especially one as risky as trying to catch the bottom of a D-wave, isn't the end of the world. There will always be more opportunities.

  41. rjm
    last post. to clarify, how is the fed adding liquidity and keeping asset prices inflated in the absence of continuing qe and balance sheet expansion which clearly ended in june. are we to believe that this is organic investment demand for treasuries when many of the largest central banks are reducing their holdings. do investors believe that risk assets are benefiting from a true economic recovery or is this all about liquidity. might i suggest that you consider that there could be more going on here than just a flight to safety trade for treasuries or the belief in an economic turnaround for risk assets. since the financial crisis, the fed has turned us all into speculators and investing in this market is all about front-running the money flows induced by the fed. if we are unable to figure out what the fed is doing, then it makes it much more difficult to be anything other than a short-term trader.

  42. I am really pushing my shorts here. Absolutely perfect setup as far as cycle analysis goes: well into the timing band for a low and still setting new highs.

  43. euro seems to start giving in

  44. Anybody selling S&P here? Quite tempting but still a bit early on Opex week

  45. I should've said NQ not Nasdaq in my last post.

  46. sold some DAX and S&P here...will see how it looks tonight

  47. I'm watching for heavy resistance at 1315 on SPX.

  48. gary,
    i confess i wish i was methodical and disciplined like you .. but sometimes the oversold condition is too extreme not to jump in, at least catch the BIG portion of snap back, and then exit and wait for confirmation ...

  49. It seems too easy to short it...don't like it , out in a sec

  50. Just trying to learn...any thoughts on why GDX down with both $SPX and $GLD up?

    I think the $ is rolling over as we speak, see the 100 month MA in the chart bellow, it's a concrete ceiling, wait for it to break before celebrating, I don't think it will, which means gold and silver bottoms are IN


  52. For the dollar to be topping here one would have to assume that the stock market and dollar will drop together...or that there will never be another profit taking correction (daily or intermediate cycle decline).

    Both of those seem so unlikely that it's not even worth considering.

  53. i think the markets are going higher, dollar down, gold/silver up up up .. but what do i know? i'm just a conspiracy analyst

  54. SPX backed right off the upper trendline drawn from the May high.

  55. Spy and GLd on SoS list. Small #'s but the day is young...

  56. WW,
    I'm not sure how you set up the axis on your charts but I'm showing that trend line at about 1315.

  57. Gary,

    My second point was at the close, but your right, like you said its around 1315 if drawn from the highs.

  58. natural gas going to Zero?
    no, just low enough for EXXON to buy up everything in sight, then they will let it go higher


  59. Conspiracy -

    Low natural gas is a boom to American business, unless you are an energy producer:


  60. GDX is going down because it's usually an early indicator as to where gold and silver are heading?

  61. James R,

    Look at Kinross. That's the reason. As I said here before, very few miners are making money in this game.

  62. Gold has made a new high on day 12 of this cycle, and is RT according to Gary's interpretation of RT cycles.

  63. t&j
    i understand ... but they need to save the market in these situations and no let the price collapse ... you may argue it's a free market ... but no ... market intervention is part of making a market, that's why we have market makers trading every stock and buy when there is no bid

  64. Gary,

    Last summer I read some commentary about a "crisis of complacency". A crash of unusual proportions was posited as a possibility, albeit an event of low probability. Thereafter it was observed that the July-August decline failed to reach a true panic-selling level. Do you regard developments along these lines as a possibility during the period covered in your latest post?

  65. RJM,
    I'm not sure what you are talking about. During the August semi crash the intermediate score moved down to levels only seen a couple of times in the last ten years. If that's not an indication of panic selling I don't know what is.

  66. Actually I would count today as 11. Yesterday the US markets weren't open. If the largest market in the world isn't trading I don't count the day.

    All of this is still irrelevant We have to see what happens to gold when the stock market starts to fall.

    It's not surprising that gold is up as long as extreme buying pressure is coming off the stock market. We need to see what happens when that turns to selling pressure.

    The roof never leaks when the sun is shining.

  67. OK Gary, day 11, TY for clarifying.It seems like gold has a date with the 150 day MA as that was support for a few years and should now be at least some resistance.

  68. Gary,

    I was talking about a crash that surpasses the level of a "semi crash" and perhaps the action of October, 2008. I apologize for soliciting an opinion on a "low probability event", but I was interested in your opinion as to the chances now compared to last summer. Greater?, lesser?, not worth considering?

  69. Well we aren't seeing a runaway move so it's unlikely we will see another crash. Probably just a very deceptive grind lower over the next two months. Something that kills both bulls and bears alike.

  70. It might be noted that Jim Rogers' recent media comments posit that Merkle-Sarkozy-Obama-Bernanke can cobble something together by way spending-money pumping to boost re-election prospects. Thus big problems can be put off until rather late in the year.
    The EU is now attempting difficult and utterly toxic structural-constitutional changes in order to wind up with an ECB more like the Fed. I doubt that the market will give the EU time to accomplish anything this "clean".
    So while the crisis rests, I've been wondering if it plans to return with a cameo appearance or a one-person show. That could be a "million dollar qestion".

  71. As we all can see, GDX looks ugly today.
    Spy is slowly moving up the SoS list. Just need a little bad news after the close to get things moving...

  72. Please, just one small disaster to get the ball rolling. It doesn`t even have to be nuclear.

  73. Gold futures traders who took my $1665 short last night we are deep in the green here, but dont get greedy. Be prepared to lock in those profits.

  74. WW already started trailing stop. Thanks

  75. WW when do you sleep, I get up after 4hrs sleep and you are already posting. You've must be bionic.

  76. Riley,

    I sleep about 4 hours, im probably just waking up before you..lol

  77. Last print on Spy SoS before it went negative was 67.

  78. MrMiyagi,
    Any leads on a house yet?
    Hope things are moving along for you.
    Need you back here more often. :)

  79. The next couple of months should be quite interesting because it is rare that Gary and I differ so much in our interpretations. For starters, I strongly believe the December low marked an intermediate low for gold... so much so that I bought that low. I've scaled back the last couple of days in deference to the need for an equity correction and intend to get aggressive once gold's daily cycle bottoms as RT.

    I also thought the 13-week cycle that ended in Sep would be followed by a longer cycle. However, the fact that we got a LT daily cycle into the Dec low that was also met by such dismal sentiment... and occurred exactly when I've been, for months, anticipating a major commodity low... has me convinced that the two, 13-week cycles balance each other out. In other words, they emulate a single 26-week cycle.

    For reasons I won't get into here, I expect an intermediate cycle low for stocks in late April or early May. Being roughly 15 weeks away would also allow for a simultaneous ICL in gold.

    So, I see the dollar topping as stocks find a DCL. The dollar will then plunge into an intermediate decline bring a huge surge in commodity prices... the intermediate DX cycle is on Week 12 and is getting ripe for a decline. Sentiment is also sky high. Once the dollar bounces out of its ICL, stocks will then plunge into their April/May low.

    So a burrito and a tall beer says gold saw an ICL in Dec and the DX will set an intermediate peak with the coming DCL in stocks.

  80. Doc,
    I don't know about gold, I'll just play it in real time instead of forming expectations.

    But you are looking at the wrong sentiment levels. You are focusing on the dollar when you should be focusing on stock market sentiment.

    The dollar and stocks are tethered to each other. If stocks go down it's going to force the dollar higher no matter what the sentiment levels are. Stock market sentiment has now reached intermediate topping levels not to mention we are now 15 weeks into the intermediate cycle.

  81. Doc:

    Are you tracking a different timing band for the coming daily cycle low in stocks? Last you posted it sounded like you were expecting another 2-3+ weeks before a low.

    Thanks for sharing.

  82. ver,

    The daily timing band I follow for stocks has always been 30-45 days. Most cycles complete within the 35-40 day range Gary mentions, but I prefer the broader band as it includes far more cycles. So, yes, I am expecting a DCL for stocks within a couple of weeks, and that low should coincide... within a day or two... with a DCL for gold.

  83. SB

    Two miners released earnings today (KGC and NEM) and both cited higher future operating costs.  My question is do you feel this is a company specific problem or is this something that might trickle down to other miners thus affecting possible future trades in GDX.  Thx

  84. Covered $1665 gold futures short at $1652. I will be looking to possibly short the 150dma if gold tests it tonight. If gold continues lower I will most likely wait for a DCL to go long again.

  85. Gary,

    I love it when our different methods agree, and articles like this are the reason I visit your site! We now have both the same price AND approximate time targets, and I fell confident in them.

  86. Gideon,

    Didn't you mention the other day that gold wouldn't push higher than $1645, and then if gold pushed above $1667 that you were wrong about your outlook?

  87. WW,
    Are you still shorting the SPX? If you are, have you adjusted your stop or still the same?

  88. Ryan,

    Im still short the SPX, I moved my stop up to Poly's at 1315.

  89. As I mentioned a couple days ago gold would be supported by the 10dma into a right translated cycle, it has, a break below the 10dma now will almost certainly indicate the beginning of a move into a DCL.

  90. WW,
    Thanks, waiting for the DCL is definitely testing my patience!

  91. Anyone hear from Alex, is he doing ok?

  92. Personally, I would not make decisions in the currency markets based on the US Dollar Index, like so many others investors. This is suicide, as the Euro and the Pound hold majority of the weighting and the index is definitely not a good broad measure of Dollar's strength.

    Last week was interesting. While the US Dollar made a new weekly gain against the Euro, Pound and few other European currencies, it struggled against a lot of other important currencies, including New Zealand Dollar, Australian, Brazilian Real, Indian Rupee, Singapore Dollar, Mexican Peso, South African Rand, Polish Zloty etc etc (list goes on forever).

    In other words, the Dollar strength is NOT broad, but quite narrow. That is where the DXY is letting you down and that is why it will not rally for months like you have said it will.

    On top of that every man and his dog is recommending Euro shorts with COT at extremely negative record levels. Sentiment on the Dollar is also very very high too. The call will prove to be wrong.

  93. Then one would have to assume that the stock market and the dollar are going to fall simultaneously since the stock market is now in the timing band for a move down into a daily cycle low, and will soon be in the timing band for a much greater degree intermediate cycle low.

    Since March of 2009 every move by the stock market down into a cycle low has been accompanied by a rally in the dollar. There is no evidence yet that that correlation has been broken.

    You're making the same mistake as Doc, and focusing on dollar sentiment instead of in the stock market where you should be concentrating. Sentiment in the stock market, especially tech stocks, has now reached levels that typically generate intermediate degree tops.

  94. By the way the currency contracts in the COT report have never shown any predictive value. You are wasting your time monitoring the Euro contracts.

  95. I disagree. By the way I do not know who Doc is. Nor do I follow cycles and technicals. Nor do I follow correlations too much either. None of that stuff works all the time. The only thing that does work in the markets is buying panic sell offs and selling climaxes when everyone is super negative on some asset.

    That is why I follow every asset class on its own and it has been working for me for years now without problems or mistakes. I'm still "paying my bills"! Here are some examples:

    I shorted the Euro in November 2009 as sentiment on the USD got extremely bearish, but the stock market did not correct until middle January 2010. And than it still kept going higher into April 2010 with the Dollar moving higher and commodities going lower too.

    So much for correlations. They work until they don't! So why would I bother following stocks if I am investing in currencies? That is non sense. Smart investors should be waiting for a final drop in the Euro and especially the Swiss Franc.

    They should buy those currencies regardless of what the S&P 500 does or doesn't do. They will show you huge profits in months to come. The important thing is to wait for a final collapse here, which should do a false break down and trap the last of the bears. Usually that type of a move is accompanied by some type of a catalyst or announcement for the policy makers. That will reverse the trend!

  96. Tiho,
    The only problem with your story is that sentiment on the dollar got extremely bearish by May of 2009. If you were really trading off of sentiment like you claim you would have shorted the Euro 6 months too early and suffered a massive drawdown.

    I'm pretty good at spotting BS and you my friend are full of it.

  97. William Wallace said...
    Anyone hear from Alex, is he doing ok?

    JANUARY 17, 2012 6:45 PM

    Yea, he's doing just fine. I think he's already up well over 25% for his accounts already this year. Maybe he should take the rest of the year off since he's beat most hedge funds for the year. LOL :)

    Seriously...the guy is a master at catching stocks just before they are about to rocket up. (AUMN & he was in many other energy plays--solars, etc.)

    He's holding a core and waiting with cash to buy the next dip. PS...He has done some extensive back testing of other bottoms in mining shares and thinks that was indeed to bottom back in Dec.

    I'm bragging on him because he's given me some excellent picks over the years and many I regret not taking. (I missed AUMN like an idiot because it gapped up 4%...and then proceeded to rally like 30% from there. He also pointed out ENER which has gone up like 600% since he told me to buy it. He was in the solars before they moved, etc etc.)

    Cheers all!

  98. Just a word of caution for guys who try trading on Doc's calls on this blog. I have been a subscriber for last 1 year and had a disastrous time following Doc. His calls for last 3-4 months have been very off. I have suffered substantial losses emulating his portfolio. He has admitted his frustration on his trading record on his blog. He also admitted that his subscriber base is shrinking due to recent track record.

    I would recommend caution at the very least.

  99. I would appreciate you stick to the market discussed and not lower yourself to personal attacks and calling other traders bullish. The funny thing is when others give it back to you, you just remove their post like a little wimp who can't take it!

    There was no extreme sentiment in May 2009. COT Euro speculator positions were only slightly net long. On top of that 10 day Daily Sentiment Index was not extreme and above 90 to 95% bulls. On top of that Public Opinion was not extreme on absolute level in May 2009. I actually have no idea why you picked May 2009... besides, you shouldn't get too angry that other traders use your blog as a contrarian indicator. I'll give you another example, even though you will call this one bullish too:

    Gold sentiment was super bullish in late November according to Bloomberg survey as well as ETP holdings, which just hit a new record high. There was a triangle on Gold, which you dismissed as unimportant and concluded that Gold will not have a D wave or whatever you call it.

    Boy were you wrong, because when I did the opposite I got paid as the triangle broke to the downside and Gold lost $200! I guess it all must be bull shit when others get it right and when you get it wrong, isn't it? Only you know what you are doing.

    But to be honest reading all of your last posts since August 2011, where you predicted stocks to re test March 2009s, where you predicted no major sell off for Gold and where you are now predicting a spike in USD have all proved wrong or will in due time.

    Come to think of it, what have you actually called right? You know we can spout bullish when we see it, but I rather call it a contrary indicator!

  100. Sandy-

    I'm sorry for your recent experience with Doc. I know his recent record has been a bit shaky.

    However, I've been a sub to both Gary and Doc (was one of his very first) for quite a while. I think both are excellent and seem to have hot and cold streaks. (We are ALL human).

    I recall Gary getting the subs into what he thought was the start of a C wave blow off top in early 2010 and it turned out to be a pretty hefty sell off that dragged us down into the depths. My account (very conservative, no leverage) was down -25% at the time. I seem to recall we also sold pretty near the bottom for some reason. (Not ripping on Gary. This is VERY tricky stuff and sometimes traders have to make a call that in hindsight looks bad. PS...I think I held onto my shares knowing that "the bull will correct all timing mistakes" Boy oh boy was I relieved to get back to break even and dump my 4000 shares of SLW at 14, EXK at 3, etc etc. LOL!) Both guys nailed the intermediate lows in the summer of 2010 and DOC nailed the to. That was a huge run. Doc nailed the bottom in the start of 2011, was heavy into silver, exited slightly early but we all know that was better than getting caught in the bloodbath.

    Gary has had some rough spells, Doc has had some rough spells, they both have had some home runs and both have WAY outperformed the underlying assets we know and love to trade. (Silver down -9% for 2011 for crying out loud, but we all pretty much killed it last year.)

    Anyway, both are class acts and I've learned a ton from these guys. Just wanted to put my 2 cents in.

  101. Okay let me be specific end of May beginning of June 2009 sentiment on the dollar index reached a bearish extreme of roughly 25% bulls. In November sentiment was less extreme with about 27% bulls.

    I have never said that gold would not suffer a D-wave decline. That was Doc. We were already in cash by November and waiting for the inevitable correction.

    I also warned that the dollar would put in a major three year cycle low probably sometime in the spring of 2011. That major cycle low occurred in May. Generally speaking the rally out of a three year cycle low tends to last about nine months to a year.

    I have no idea who you are talking about but it certainly wasn't me.

    Do you just make this stuff up as you go along just to be irritating?

  102. Gary,

    I think you are Tiho and just want to spice up the blog to get more hits. A page straight out of Zero Hedge.

  103. My wife just reminded me that my Birthday is tomorrow, Jan. 18th. I completely would have forgotten until my kids would have come in singing and jumping on my head in bed.

  104. James are you for real. At times funny but whatever, you aren't going to change, Hell neither am I so try your best to keep it funny and not sophomoric.

  105. Sandy,

    We are responsible for each and every trade that we make. Period.

  106. Son of a gun, Happy bday. Family makes this stuff real. My daughter blew out my candles a week ago. Many more to you. Out gold, made a few swings for essentially zero, now watching. You a goodun as we say down here in the south. Riley

  107. William Wallace,

    Happy birthday, WW.

    Just make sure that you see a few more than just this one. Your heart trouble troubles many of us.

    Oh, if you want me to come over and jump on your head tomorrow just say the word. ;)

  108. William Wallace,

    Happy birthday!!!
    I very appreciate your comments on this blog.

    God bless you and your family!

  109. Sandy,

    Regarding your feedback about DOC, I have been a subscriber of his for about 11 months.

    It's fair to highlight that, as he admits, he has been "off form" in last few specific months, but it neglects the all important context of playing in the trading/investment space.

    For example, those that followed DOC into gold after 12/29/11 are absolutely delighted I am sure (I did not enter).

    I also believe DOC's portfolio went relatively unscathed in the Silver crash of April/May 2011 (I did not exit in time)

    My point is that, I believe Richard Russell once said: "Watch the guy who has made a series of right calls because the very next one will be wrong".

    NOBODY and I mean NOBODY has (as Gary alludes) a 100% working crystal ball.

    What Gary, DOC and now Poly offer are valuable interpretations using cycles and other tools biased with their personal experiences and analytical insights.

    Deciding which interpretation (if they differ)to act on becomes the individual's call.

  110. A good site I have read over the years. I was reading an article from back in 2007:


    Overall the article is great at predicting the upcoming 2008 crisis and showing ways the market was overvalued.

    I draw your attention to the bottom where he reviews an earlier discussion (higher up on the page; the whole page is good reading) of P/E ratios over the last 100+years.

    He makes a very interesting observation (back in 2007) that the P/E lows (after bubbles and financial manias) are occurring approx 31yrs apart and that the next one is due approx 2011.

    If you give leeway of a few months or even a year (surely things can't be *THAT* exact and the fed is REALLY trying to stop things) then he has an interesting conjecture that might argue for a catastrophic decline and valuation reversion in the near future of this year.

    What makes that interesting is:

    1) this is a cycle type argument (which I happen to believe in since new people who never experienced the mistakes of those older tend to repeat them)

    2) it coincides with gary's expectation of 2012 being a *very* bad year coming up.

    So we have an interesting cycle reversion argument here on this chart with three data points.

    Thoughts anyone?

  111. PS: one of the arguments for no P/E crash low earlier than the first one of approx 1918 on that chart is that there was no FED before 1913. It is possible the FED and national fiat is necessary to create those lows.

    You could also argue a slow increase in the 31yr duration of those cycle lows by simply incorporating a longer lifespan/workspan of people

  112. TZ,

    I met the guy for lunch because I was fascinated by his site. A big fan of 4 turning book as well.

    But I doubt we will see a depression....war however very likely

  113. I neither mentioned war nor depression (although I think we are already in a depression by many measures and that war soon is likely-distract the masses and allow printing and profits of elite.).

    My comment on his chart and lower part of that article is in how stock P/E's seem to bottom every 31yrs approx. Interesting and wanted to point it out since many here are cyclical and also cause gary is already on record calling 2012 likely to be a VERY bad year.

  114. Happy Birthday WW!!

    I have you have a great day with the Family

  115. What the hell is going on in the markets?

    I'm getting confused.

  116. I think that it is playing exactly as SMT is playing it... Last retail guys getting nailed by buying at 1300.
    It is Opex week, so we could rally until Friday and then....woosh..

  117. Sophia,

    whoosh to where? Do you also see support at 1277 on the spoos?

    Does anyone here have any thoughts on coal?

  118. WW,
    Happy Birthday and best wishes for many many more!

  119. WW,
    Happy Birthday from Paris! So, as they say here, "Bon Anniversaire!"

    I'm wishing you lots of joy with your family today, and many, many happy, healthy years to come.

    You are a class act, WW. It's worth digging through all the "noise" on this blog to find your pearls of insight. Many thanks, and best wishes to you.

  120. intresting article on future gold price evolution


  121. This comment has been removed by the author.

  122. Happy Belated Birthday to you Riley! And Happy Birthday to all the other Capricorns out there. :)

  123. >>>>> How do i get Poly's newsletter. <<<<<


  124. Trade Station has had problems over the weekend and still having problems with mini futures contracts. I thought I was going crazy thinking I was in a trade and in a totally different one when I woke up the next day. Happened again over night. I thought I was flat and found myself in two contracts long. I called and they said they had problems over the weekend. I told them they are still having problems. At one time it had me in four positions and I never trade four positions at a time. Just to let anyone else know if they trade using Trade station futures.

  125. Tracy,

    send a request to Tradepoly@gmail.com

  126. Tracy... send a request to tradepoly@gmail.com

    for tweets

    to: 40404
    message: follow TradePoly

  127. at least futures on the S&P are turning red.
    Hope this will reverse the euro

  128. Jayhawk & Arive,

    Thanks for the good words. I appreciate that. Yes, every trader goes through rough spells. It's part of the learning process, and anyone that expects me, Gary, or anyone else to be right all the time will be disappointed. The key is money management so one never gets blown out. I think I have done that part quite well, as all four of my years of independent trading (since I left Citi) have produced positive results, the last two... once I adopted cycles as my primary methodology... spectacularly so.

    Gary: just to clarify again, I never said gold would not suffer serious declines, only that I did not see value in labeling ABCD movements. I recognized those waves during the first 8 years of the bull, but they have become less structured since 2008, and I simply don't see the value added beyond what one can get from cycles. Gold and silver will always suffer severe pull-backs after parabolic phases. Whether you label it a D-wave, post-parabolic hangover, or whatever, it is still just an intermediate cycle decline.

    I also think we are both in agreement that if gold's current daily cycle forms as RT, the DCL will constitute a huge buying opportunity, regardless of wave labeling.

    Everyone is going to have different ways of looking at the market and should never just blindly rely on another's interpretation. When Gary turned me onto cycle analysis, I studied the methodology from the ground up, counting cycles and labeling years worth of charts from scratch. The process gave me an in-depth understanding and also helped me introduce several new techniques of my own. That's why I started my own subscription newsletter.

    I recommend that everyone serious about trading take the time to perform the exercise of chart labeling because then you can read SMT or The DOCument with a fuller understanding and obtain a higher level of confidence through that understanding. Without confidence, one's emotions will get the best of them as soon as the market ticks against you.

  129. If the HUI can get down to around 505 and stay there into tomorrow morning, I'll begin adding again to my miners.

    For today though, nothing that requires action on my part. Good luck out there. :)

  130. Well Said Doc,
    Every trade must entered must be taken with a personally known exit strategy if turns against you. Capital Preservation should be foremost ahead of profits. If you can anticipate the worse and be prepared for it, you will be much more confident on when it's safe to enter back into the water. You win some, you lose some, all part of the game here.

  131. Doc,

    I am a suscriber as well and I am appalled by the judgement made earlier on! I made very nice money on your call last July Long Gold, Short S&P and made money this month as well, in and out of Silver.
    Thanks to Gary also to let people discuss views and exchange ideas on this blog, it is what makes it interesting!!

  132. W2,


  133. No problem with either Doc or Gary, BTW if it wasn't for Gary I would have rode mining stocks all the way down which is more valuable than the basehits we've been hitting.

  134. Shalom
    PSLV at a 9% discount today, do you think that's a steal or what?

  135. Sophia,

    c'est mieux d'avoir des remords que des regrets. ;)

  136. WW,

    Happy B'day!!
    You deserve all the best!!

    P.S. Get more sleep!!

  137. fwiw, its POMO day everyday this week and most of next week...

    shorting seems a little risky

  138. Happy birthday WW..have a great one

  139. The market is far too difficult for even most experienced traders to navigate alone. Our odds are much better if we are a part of a group of minds working together to solve the problem. The group needs leadership, but even leaders can benefit from the added hours of labor the group provides. So long as people are actually working (e.g reading books, marking charts) and not just looking over each others' shoulders.

  140. Haggerty,

    PSLV had an additional offering, thus the decline today. I wouldn't touch it for awhile until the dust settles. The premium was up near 20% yesterday before the announcement, so who knows where it should trade in the short run?

  141. I don't recall where I read it, but apparently Sprott and his family accounts are taking $43 million of the offering.

  142. Haggerty,

    Hmm, just typed a response and it vanished, but PSLV is down due to an offering. Tough to tell where it will settle, so I'd sit tight until it does.

  143. SB or anyone

    Two miners released earnings Yesterday (KGC and NEM) and both cited higher future operating costs.  My question is do you feel this is a company specific problem or is this something that might trickle down to other miners thus affecting possible future trades in GDX and GDXJ.  Thx

  144. SFGiantsfan,

    I would think this will affect all miners to some degree, sooner or later.

    However that doesn't shake my belief that miners must be owned. The more expensive it is to mine gold, the higher the price b/c of perceived supply shortages. It might affect a miner in the short run (any one quarter), but the bigger picture is quite rosy and possibly the best place to be.

    I'm also looking to a few other commodity stocks like agriculture and even energy the last few days, but my focus will remain on the miners for the next couple years. I also missed the purchase areas on the fertilizer names already, but they look attractive into pullbacks, IMO.

  145. Yes, GDX and GDXJ will be affected like the components, but to a lesser degree. This is always the case, including the upside when good news comes out on just one or two names in the etfs.

  146. I really think the LTRO – which will be larger than QE1 and QE2 combined – is stretching cycles just as the QEs did. If we are on Day 35 of a 55 day cycle, we should be within 5 to 7 days of the top.

    For those who think the news from Europe is bad – it’s not. There are from last night:

    “Price action can sometimes be very revealing. On three occasions since the start of last week there have been powerful short-covering rallies in the single currency which have imposed pain and suffering on all of those record short positions amongst the trading community. This morning’s jump from a low of 1.2650 to a high of 1.28 is the latest episode, and once again it is difficult to pinpoint any real trigger for the move. Indeed, the euro is now not that far from where it was trading prior to the commencement of Friday’s S&P credit rating-downgrade rumours. The single currency has managed to recover despite the now distinct likelihood that Greece will default before too long as well as the scathing criticism of a draft of the fiscal compact from an ECB board member. Euro shorts will be taking note of the inability of the single currency to sustain sell-offs on bad news.”

    French borrowing costs fell at the country’s first debt auction since Standard Poor’s cut its credit rating last week.

    Spain Monday auctioned 12-month debt at an average yield of 2.049 percent, compared with 4.05 percent at a sale on Dec. 13. Greece sold 1.625 billion euros ($2.1 billion) of 13-week bills Monday with a yield of 4.64 percent, down from 4.68 percent on Dec. 20.

    Investor risk appetite will be tested later on Wednesday when Portugal sells treasury bills in its biggest debt auction since last year’s bailout. Germany also holds a debt auction on Wednesday.

    Spain and France, both of which saw solid demand for their bill auctions early this week, will face a tougher challenge when they tap the market with longer-dated debts by Friday.
    Also, the Portugal debt auction went very well:

    I am not “hoping” or “expecting” anything. Ned Davis wrote a great book, Being Right or Making Money. I no longer have an ego involvement in being right. I just want to identify the trend early enough to ride it, and then get off right after it changes. Gary is great at catching bottom trend changes.

    Still long NUGT.

  147. Farm girl,
    Actually a normal duration is 35-45 days. I suspect this will continue at least until it breaks the down trend line at 1315-14 forcing all the technical traders to cover their shorts.

  148. I think so too...there must be a lot of short stops at 1315...we run all those stops by pushing to 1320 and then correct

  149. russell breaking out today..TNA might start flying soon or it's gonna one helluva bull trap

  150. SPY sos Nos building up,,, lets see if they stick around and grow till 4:00 PM

  151. Happy Birthday WW...have a great day.

  152. Sophia,

    Flanders, near the coast

  153. Gp

    Yep @178 that is a decent SoS# size. Won't be long now.

  154. USD index still above 80 as this market continues to head higher.

    I see strength across the board with the 'RETAIL' sector hitting new all time highs. We got a runaway move on the weekly chart for RTH. A massive multi-year breakout assuming this move sticks.

    Anyone following the European markets (DAX & FTSE)? The charts look mightily bullish.

    I think this could be one of the WORST years in human history might have been aborted, but not by the action of our Federal Reserve led by Ben Benanke. Instead it might have been the action of our cross Atlantic partners in crime (Euro Nations).

  155. Eric,
    This is why I don't waste time with charts. At tops it always looks bullish, and at bottoms it looks like the end of the world is coming.

    Cycles and sentiment both are saying we are very close to an intermediate top and by March we are going to have serious problems in the European debt markets.

  156. gary
    sorry if i missed it, but why are we going to have problems in march for European debt ?

  157. "and by March we are going to have serious problems in the European debt markets."

    Remember, at 29 February ECB will have another LTRO where they might print another $1 trillion. I really don't know but cycles might get stretched.

  158. 2012 PM Trade Call:

    Short Gold and Long Copper as a pair trade.

    Results in a year.... ;)

  159. 2nd Trade call....

    This is the year the Sell in May and go away pattern works well.

    Look to rebuy stocks in August/September for a decent rally.

    Careful in November.

    Again, results in a year....

  160. From the last six days SLV has now formed a diamond.

    Bought ZSL for a short term trade

  161. Here is a piece of the possibility of IMF selling their gold. What are you guys' thoughts?


  162. In 3 to 5 days time to go all in.

    I'm in the camp that the bottom did occur in Dec. for PM

  163. This comment has been removed by the author.

  164. @Doc..what was your call last year for end of April early May before silver collapsed?

  165. S&Q,

    If you go to his blog @ www.thedocument.com I'm sure you'll get his answer.

  166. Hmmmmm!!!
    ST noise in a long term bull market for GOLD.
    We all know ( or at least should know) that the name of the "game" is currency debasement. This has been true more importantly for the better part of a decade.
    The players...the usual suspects...USD, EURO and RMB.
    While China exports deflation to the world, the Euro battles the US and the RMB, whilst concurrently the US battles China to ensure it does not suffer deflationary effects.
    The winner of course in this currency war will be the CB's and anyone shrewd enough to buy and store physical GOLD. Although Gold is not part of the monetary system like it has been in history when countries go to extremes in a fight for survival / growth, it is and always has been considered the only true money.
    Whilst the governments and cb's continue to print money, be it an overt or covert fashion, currencies will continue the stampede to the bottom. This is inevitable.
    I've said it before..."stay the course of this bull for its entirety". Forget about the ST noise and market gyrations, they will do their best to knock you off so that you never come back. Strong hands during this period will become stronger in the years ahead.

  167. For all those holding ZSL (not me) there is currently a 2.4% discount to NAV shown on the Pro shares  Website 

  168. Let's face it. The bears have lost this fight. This is most probably the start of a new bull market.

    The Fed has lost control of money velocity.

  169. James:

    Pardon my French but I don't know how else to put it..... you are full of sh*t.

    Good God, what are your looking at?

    Money velocity is at historical lows. Benny would trade his left nut for raging money velocity. Where in hell have you been?

  170. James,
    I don't know if the bull market is over or not. But this is a classic example of why I don't put much stock in charts.

    If all you do is look at charts a top will never look like a top and a bottom will look like it's continuing down forever. You need different tools to spot turning points. This is why I use cycles and sentiment.

    I think there is a pretty good chance that the market is going to break the down trend line causing shorts to cover and emotional retail traders to buy into the move. We will almost certainly see an intermediate top at that point.

    Then we will start moving back in the other direction until we get to a point where everyone is sure that all European debt markets are on the verge of imploding. Then right about the time you are convinced that the market is ready to crash we'll put in a bottom.

  171. This disagreement between Doc and Gary highlights a fundamental flaw in this cycle analysis. Importantly, it shows the significance of interpretative bias. Back around the June bottom when Gary also was predicting imminent D-wave lows, the reasoning was again cycle duration and intermediate cycle lows.

    A first step toward an improved methodology that is free from bias is to introduce statistical analysis rather than saying the duration is "usually" X days. You need to say that the median during is X with a 95% confidence level of plus/minus Y and a standard deviation of Z. This will at least put some rigor into the methodology.

    The statistical analysis can in turn introduce a core holding of X% into the system, which is based on the level of uncertainty of the situation coupled with partial selling near peaks and partial accumulation near bottoms. The all-in vs. all-out approach is based on exuberance about the system, which is not justified by the track record. I have been following this since late summer 2009.

  172. Gary,

    Why aren't we trading this? We are trying to catch one side of the trade, on the long side. But we've missed a few trades on the long side lately. I know what you say about going short but there are ways to hedge and make money both ways. The rope is skipping but nobody is jumping in because we're to afraid to get tripped up. I have confidence in you that most of the time you will get us in and out without that happening, and of course we have to accept the odd time we do step on the rope. C'mon Gary, lets get back in the saddle.

  173. bamster,
    I don't know how many times you have to lose money trying to sell short before you finally learn your lesson, but I have, so I don't do it anymore.

    By the way we are in the saddle, we have a position in the dollar index which is based on the market moving down into its cycle low. The positive is that the dollar is much less volatile and the long side is much easier to trade than the short side.

    For the vast majority of traders the short side is more about bragging rights than making money. I am confident that the vast majority of traders lose more money than they make selling short, I know I have.

    Bottom line, if I don't make money at it, I don't do it.

  174. Frank,
    We've made a huge amount of money since the summer of 2009. Most people are up way over 100%.

    I'm not sure what's wrong with that track record.

  175. Frank,


    It took the car industry decades to adopt statistical process analysis and leverage other sophisticated tools like Design of Experiments (all derived originally from the US military) so that we could finally get rid of our crappy BIG 3 cars and enjoy ultra predictable Toyotas & Hondas.

    Poly may be a trendsetter with his Cycle Analyzer which appears to be adopting (?) some rigour and statistical analysis into cycles theory- but I am not sure- I only look to his results.

    Maybe some hedge fund has already painstakingly done a multi regression modelling of cycles theory and but I doubt it- till then we will have to depend on the experiences and knowledge of the cycles gurus

  176. Gary,

    I recall you recently said wait for the swing low to prove that the d-wave in gold has been put.
    Well ....are we there yet....??
    If we wait for confirmation any longer than "we" miss the bottom.
    Gold is now a FACTOR of fear out of the EURO zone (EURO loss of value)and not just an inverse correlation of USD as your slide show evidently portrays.
    More scenes and drama than a greek tragedy.

  177. One would nearly be +100% with buy and hold the SPY since spring of 2009.

  178. Frank,

    Anytime you want to start posting ACTUAL buy and sell orders we will start ranking your performance and give you whatever credit (or insult) is due.

    Until then it is easy to cheer and boo from the stands...and of little benefit.

    (And the SPY hindsight comment is less than useless because it is being used as a jab to suggest 'if only you had done this' when you or most other people had no idea at the time. We are waiting and welcome for you to suggest the security to buy *NOW* which will outperform *GOING FORWARD*. It isn't so easy without a free charting service to calculate the historical return.)

  179. This comment has been removed by a blog administrator.


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