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Tuesday, April 3, 2012

THE BEGINNING OF THE END

As convincing as this rally has been I am confident this is an ending phase and not the start a new secular bull market. Actually the bear market began last year in May but was temporarily aborted by massive central bank printing. Let me explain.

The last four year cycle that started in 2002 and bottomed in 2009 was the longest four year cycle in history. It was stretched to these extreme lengths by Bernanke's desperate strategy of debasing the currency to avoid the bear market that should have begun in 2006. Instead the stock market cycle stretched all the way into the spring of 2009. 

I have mentioned before that often a long cycle will be followed by a short cycle. This being the case the current four year cycle should have bottomed in the fall of 2012. That process had begun last summer.



However, central banks around the world, in the futile attempt to avoid a global depression again cranked up the printing presses. The bear market that had begun in May was temporarily aborted. Amazingly I think we are going to see another stretched four year cycle. And this one is going to end just like the last one when the price of oil spikes far enough to collapse the global economy and  another market crash. The next economic downturn won't be a Great Recession, it will be a Great Depression.



At the moment the stock market is in a runaway move very similar to what unfolded out of the summer 2006 yearly cycle low. These runaway moves are characterized by uniform mild corrections all of similar magnitude and duration. For this particular rally the corrective size has been roughly 25-35 points. This could continue for weeks or months, but all runaway moves end in the same fashion, with a crash or semi crash that wipes out months of gains in a matter of days or even minutes.

Generally speaking, once a corrective move has run 20% beyond the normal correction size that is the signal that the move is over. Unfortunately, at that point you are usually already into the 'crash day'. This is why at some point one has to say enough is enough, and stand aside, or you risk getting caught in the crash.



When this runaway move comes to an end I'm pretty sure it will signal the beginning of the end for this cyclical bull market. That doesn't mean that we won't see a test or even a marginal break to new highs but I think we are clearly in the final phase of this liquidity driven rally that began in March of 2009. 

We are now at the mercy of oil and the commodity markets. Bernanke's plan to print our way to prosperity is destined to failure. Ultimately he is just going to spike inflation and collapse the global economy, resulting in a worse downturn than what we saw in 2008/09.  

Whether that breaking point is at $120 oil or $160 oil is anyone's guess.

162 comments:

  1. Window dressing in an attempt to keep their jobs for four more years.

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  2. The war factor is looming ever bigger with the BRICs trading in non-US dollars, enticing other nations to soon follow suite.
    The idea that we can better afford higher gas prices than say China should sound alarms, imho.
    Any major military move will send oil speculation through the roof and everyone else eying their bank deposits and wondering about their mattresses.
    It might be wise to have a 2 week to 1 month supply of food on hand in any event.

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  3. Why does it have to be a runaway exhaustion move? Why can't it just be a strong trend?

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  4. I think hamster and that other guy aren't gonna win the bet of dollar down and gold up this week. I expect gary to exit gdx/gdxj today too. Looks like we go lower still.

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  5. Whoa, look at silver right now.

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  6. I will just let our stop take us out since we don't have a very big position.

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  7. TZ - Did you put your money where your mouth is ? (meaning are you shorting gold ?). I wouldn't speak too soon if I were you, as I recalled, you thought AAPL topped at $520 (it's now over $600).

    I think this is just a bear trap (meaning they want everybody to short), but then they'll take it up killing the bears. We'll see.

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  8. This comment has been removed by the author.

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  9. My mouth simply said you werent likely going to win that bet going up. Chill out. I said it as a trader who has been wrong plenty of times and I'm not saying it maliciously.

    And no I don't short gold or silver.

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  10. And I didn't take a stand BEFORE this drop so I'm not saying I had some sort of better opinion.

    I didn't take a side in the last week or two cause from my view I couldn't see a clear trade.

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  11. I WAS (personally) expecting some kind of recognition move soon since we've been fighting back and forth for a while and I think it's happening - down.

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  12. TZ - Nobody on this blog made any comment about your wrong call on AAPL. I just think it's arrogant of you to criticize others when you don't even have your money behind it.

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    1. This comment has been removed by the author.

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  13. TZ - By the way, if you actually read our posts (Hamster & mine), we're in SPX, since it doesn't zig zag like PMs, and we're not shorting the dollar. So even if we're wrong on the dollar & PMs, SPX might still make us money, like it's been since Oct. of last year.

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  14. I love when Gary says, "Let me explain."

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  15. HarryApr 3, 2012 12:07 PM

    I love when Gary says, "Let me explain."


    Heh heh. I do too!

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  16. Model portfolio performance since inception in July +23.4%............ absolute killer performance Gary !!

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  17. The last several months have been rather poor unfortunately. I do an exceptional job of controlling risk though so we are giving back profits very grudgingly.

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  18. I think gold still has to do its whole wave 3 of 3 through 5 of 3 before the cycle ends, and therefore, while I agree this is a cyclical bull within a secular bear for stocks, I think the bull will last until 2015 and make all time new highs, forming an expanded flat, which will be followed by a crash to below the 6500 level in dow, maybe 5000 something. THAT will be the ultimate low of the secular bear.

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  19. Gary, nice report today. It seems the Fed is trying to have its cake and it it too. Who is buying these bonds the market is selling? And this should drive money into oil and copper. I noticed they did not sell-off much with the silver and gold swoosh.

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  20. It is great to wake up here in Asia and find out Bernanke's minutes have smashed Euro, Bonds and PMs down a lot in our overnight trade. Huge reversals everywhere, which indicates risk off obviously.

    US Dollar sentiment has move close to decently strong bearish levels from the short term perspective. The fact that sentiment is bearish and yet prices have not fallen a lot from their peaks in January, now adds a definite possibility that Gold will break its long term trend line and US Dollar might stage a decent rally from here. How much of a rally?

    I still think the Dollar Index will struggle making a new high about the January peak, but the fact that Bernanke has now refused to stimulate twice (at the start of March and April) could indicate that the Dollar might need to rally higher to levels where it "forces" him to beat it back down... and that might mean new highs for the DXY.

    Obviously the Dollar is not rallying because economy is good and that Fed will tighten, but quite the contrary. The Dollar is pricing in future economic disappointments, which the Citigroup Economic Surprise Index already shows are coming in strong and fast. It feels like the repeat of early 2011, and Sell In May & Go Away could be in play yet again for stocks...

    I still remain short the Dollar from middle of Jan entry as stated many times on this blog, so I can take a decent drawdown before break-even point approaches. Having said that, if the Dollar was to make a new 52 week high, than I'd be wrong with my Dollar top call and Gary would be right.

    From a contrarian point of view, with such sentiment readings, I'd expect the Dollar to rally, but Gold's sentiment is just as bearish and Gold Miners breadth is very oversold... so we might need just one more drive down lower before we bottom. That is the reason why I think that while the Dollar will now rally, PMs might be decently close to oversold levels and a buy.

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  21. p.s. The comment in the first chart that states "this is what should have unfolded" is just a fairy tale deflationists like Robert Prechter hold close to their pillow at night. Bernanke actually didn't print any money, he just did a "twist" of bonds from short to long term duration. Market already bottomed in August and retested in October, because market discounted continued strong earnings. It is going to take a huge earnings collapse and profit margin squeeze to take down this cyclical bull since March 2009. I agree its coming in 2013/14, but I disagree it will go below March 2009 lows of 666 on the S&P 500. The Nominal low for the secular bear in stocks is already in my opinion.

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    1. M2 is showing a big surge in money supply so I would have to disagree. Bernanke is and has been printing even though he claims twist is being sterilized.

      "Should have" was in a cyclical context. The 09 bear market should have continued lower into a final bear market deflationary depression in 2010 but Bernanke aborted what was then the most extremely left translated four year cycle in history with QE1.

      I wouldn't have believed a 4 year cycle could be altered until I saw it with my own eyes. It appears he is now going to stretch this four year cycle also. Unfortunately all this tampering just makes the endgame that much worse. We got a front row seat to that in 2008 and 2009. If he had just let the market unfold naturally then we would have suffered another severe recession in 2006 but avoided the catastrophe of 2008/09. Oil would not have spiked to $147.

      We are now on the verge of repeating the same mistake again as oil is holding above $100 and due to put in an intermediate cycle bottom at any time. The next leg up is going to start severely impacting discretionary spendingand more than likely will start to tip the world over into the next economic mess.

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    2. I agree that M2 has been growing without Fed expanding its balance sheet. it is very very dodgy to be honest. However, since M2 has spiked in August when Operation Twist was announced why did Gold break down right after and stocks rallied higher? If you claim Bernanke has been "printing" fresh paper, Gold should be "adjusting" to the fresh paper. Also M2 started to rise in August and Silver crashed in September from $44 to $26.

      How do you explain that?

      I don't follow or use cycles, so I won't comment there. I don't think they work properly and they "always" change from this time frame to that time frame etc etc etc, so I'll leave that part alone.

      However, your comment on Oil is is not too correct. Maybe OIl was never going to spike as high as $147 in 2008, because Bernanke definitely did give it a push, but Oil is going much higher from here and it probably was rising anyway in 2007... not because of Feds balance sheet, but because we are running out of Oil.

      Well, let me explain that comment... we are not running out of Oil per se, we are just running out of global Oil reserves at 6 to 7% per annum, which means in 20 to 25 years world will not have any reserves unless we discover more Oil. We haven't discovered an "elephant" in 20 years now. Elephant is a huge Oil field that has a potential to feed large amount of barrels per day. This is a secular bull market in commodities and money print does "help" but the true reason or the rise in commodity prices is SUPPLY and DEMAND, not Bernanke.

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    3. Gold is on the back side of a broken parabola. This is what happens when a C-wave tops. So it doesn't matter what happens to the money supply that liquidity will find something else to land on.

      In 2007 and 2008 we had more oil than we knew what to do with. It was running out of ours ears. Tankers were sitting in the gulf with no place to unload.

      I don't really know whether we are running out of oil or not. Peak oil is an interesting concept but I'm not sure if it's true. I do know that when the next recession hits demand is going to collapse just like it did the last time, and the price of oil will drop again.

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    4. Gary ... in "peacetimes" you are right with your theory. In "stresstimes" though you are dead wrong.

      In the end Gold is not a question of Dollar or Euro or any other currency.
      Instead Gold is a matter of trust into what CBers and gov officials do.
      Add fear and instability in any specific currency - and that curency will loose in value and gold will gain in value.

      Just wait once the PIIGS or another Lehman is back on the table.

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    5. "In 2007 and 2008 we had more oil than we knew what to do with. It was running out of ours ears. Tankers were sitting in the gulf with no place to unload."

      That is actually non sense. That Oil is only enough for a couple of months of excess or even a year or two at maximum. What do we do after that?

      I just stated before that we are running out of global Oil reserves at 6% to 7% per annum, which means in 20 to 25 years world will not have any reserves unless we discover more Oil. That is not my fact nor is it from some blog. That is what the International Energy Agency has been saying for ages now. That is the only decent creditable body when it comes to energy markets. You cannot trust the OPEC nor can you trust the Russian nor American nor can you trust the short term media reports.

      Also, I am not talking about peak oil. I do not believe in that nor do I believe that we are running out of Oil on this planet. We are just running out of global reserves.

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    6. Let me dispel this notion that an increasing M2 is indicative of active money printing by the Fed. I know Jim Rogers has been saying this in the media, but the simple fact is it just isn’t accurate and I’m sure he knows it. In the most simplistic definition, M2 includes the physical money stock, demand deposits as well as savings and non-institutional money market funds. However, M2 does not include excess reserve balances of financial institutions that are being held at the Fed. When the Fed has engaged in recent money printing episodes during QE and QE2, these operations have primarily added to the reserve balances of the banking system via the Fed’s treasury purchases. However, these excess reserves do not impact M2 at all until those reserves are transferred from the monetary base into the money supply (loaned into existence or used as speculative capital). As base money explodes, the overall monetary aggregates can still theoretically decline as long as credit contracts.

      Now we have seen about $120B in excess reserves released into the markets since July 2011, however more than half of that amount has been reabsorbed in the first quarter of this year. There are several other factors though that have contributed to the increase in M2. One factor MAY BE the transfer of deposits by Europeans from their domestic institutions into US banks. There have been depositor runs on Greek, Portuguese, Irish and even UK banks and it is possible that a portion of this capital has made its way into the US banking system where it is guaranteed by the FDIC. One clue that this might be happening was the contraction in Europe’s M3 money aggregate in Q4 of 2011. Another factor is the continued outflows from equity funds as reported by Trimtabs. While a portion of these funds have made their way into fixed income funds, a significant portion remains unaccounted for and has likely been put into retail money market and demand deposit accounts.
      The main factor, however, and the one with the greatest impact on M2 has been the transfer of institutional money into demand deposit accounts. Institutions that typically used prime money funds became concerned about these funds exposure to European banks and they have opted to shift short-term money into bank deposits instead. In addition, money market funds themselves have also opted to hold demand deposits at zero rates rather than expose themselves to the potential of sovereign defaults and the risk of breaking the buck (similar to what happened when Lehman defaulted). It is for this reason that you saw BONY Mellon recently start charging its clients for deposits over $50M to effectively try to force them back into bills and money markets.
      So, in other words, the majority of the increase in M2 in 2011 was not the result of additional money printing but instead represented the flight to risk-free cash assets. If you don’t want to take my word for it, the Fed confirmed as much in their Fed minutes:
      “M2 surged as investors and asset managers sought the relative safety and liquidity of bank deposits and other assets that make up the M2 aggregate. Notably, institutional investors, concerned about exposures of money funds to European financial institutions, shifted from prime money funds to bank deposits, and money fund managers accumulated sizable bank deposits in anticipation of potentially large redemptions by investors. In addition, retail investors evidently placed redemptions from equity and bond mutual funds into bank deposits and retail money market funds.”

      I’ve said it before and I’ll say it again, the majority of investors and the media will be aware of the Fed’s “money printing” only when they want you to be. They have other avenues to provide liquidity which goes virtually unseen to the masses.

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    7. That is a great write up PST. Thank you for taking time to put that forward.

      If Fed was really "printing" instead of "twisting" then Gold would "spiking". Its funny how people just go... ohh well stocks went up but Gold didn't because it was in this and that cycle. Yeah.... like cycles or parabolic runs have anything to do with increasing monetary base and purchasing of bonds.

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    8. When a parabola breaks it doesn't matter whether the Fed is printing or not the money doesn't flow to that particular asset. QE1 and QE2 didn't help the housing market in the slightest but we know the Fed increased the money supply massively. That liquidity just found something else to land on.

      It's going to be a while before the precious metals market can take off again. It will have to build another base just like every other C-wave. Until that base is finished liquidity is going to land on other assets.

      That being said if the dollar is ready to rally like I've been warning then this runaway move is a great risk of being over in the stock market and we should experience some kind of crash or semi crash in the not too distant future. That's what happens when the fed tampers with markets and stretches assets far away from the mean.

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    9. That is awesome and all, but houses are real estate and gold is a currency for 5,000 years. So despite Gold parabola or not, when Zimbabwe printed and printed, Gold adjusted for printing, despite parabolas, cycles and Z-wave or whatever you call them.

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    10. The obvious answer is that we aren't to the hyperinflation state yet. So gold is going to have to build a base just like every other C-wave did. I expect it to take at least the rest of the year, maybe longer.

      That was a huge C-wave from April 2009 to Sept. of last year. Something that large is going to have to consolidate for a long time before the next leg up can begin.

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    11. I completely agree. So one should try and buy the bottom of that consolidation or base building and not wait for the recovery back to record highs (1920 for Gold and 50 for Silver).

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    12. For the record, I'm a subscriber to Gary's service and see value in following his cycle analysis. Since I'm more of a fundamental investor, I don't invest exclusively based on cycles but find them very helpful as yet another data point.

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  22. I'm out of all my positions again.

    Somehow I can't get rid of the feeling that this is/was sort of a sentiment turn:
    The Fed is not trustworthy anymore. That institution is just a row of worthless talkers anymore. Today they announce to support markets whenever necessary. Tomorrow they pull any support. This is NOT what markets like. This is what adds volatility and uncertainty.

    Accordingly this could well have deeper and longer lasting implications.
    I'm not yet in the mood to call a stock market top - but there's no doubt, that further moves north might be used as selling opportunities.

    And once the PIIGS are again on the table, or another unpleasant event - then it might well be that talk from Benny will not be enough of a medicine anymore.
    They can fool the market for some time - but at some point that will fire back.

    I guess Obama will NOT be amused as of now.
    But maybe that is da boyz plan - first trigger a fast and shortlived selloff and then 3-5 months ahead of elections announce another round of gifts.
    I have my doubts that it will be that easy.

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  23. MARKETS



    http://traderjoed.blogspot.com/

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  24. I do have to agree that there is always a chance of a crash from oversold positions in PMs markets. Gold is up 11 years in the row obviously and hasn't even retraced 38% Fibonacci since its October 2008 low at $680. Believe it or not a 38% retracement would go to about $1,450. At that point you would be totally correct with the Dollar call making a new high above Jan-12 and I would be totally wrong.

    What are chances of that happening? Well, like I said there is a chance obviously and everything and anything does happen in markets as we all know very well, but I wouldn't short Gold to try profit from it. In other words, I wouldn't take that bet myself right here right now.

    Gold's sentiment is very bearish, Puts have jumped towards extremes on both Gold & Silverthat were seen at prior intermediate bottoms (I think you call these ICLs or something) and finally retail money keeps getting out of GLD ETF as fund outflows reach 4th week in the row (not updated for this weeks sell off either).

    All of these signals almost always call a bottom or buying signal rather than a selling opportunity / shorting opportunity. Sometimes we bottom in a day, sometimes we bottom in a week or two. On top of that Gold Miners breadth is very much oversold as we can see here and here.

    Overall, my outlook is that when sentiment is this negative and prices still refuse to rally, than you need a short term wash out before the actual intermediate bottom kicks in. And that is coming sooner rather than later.

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    1. Actually I meant a crash in the stock market. It will exacerbate the selling in the precious metals complex. It always does when the stock market drops into an intermediate degree bottom. The S&P will probably at least tag the 200 DMA. Gold may make a lower low signalling a D-wave continuation.

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    2. I think that is also possibility of that too, but I do not think it will happen like that. Market breadth is still healthy as we have no major divergence (yes yes yes... there are minor divergences). It is a rarity for markets to crash from overbought conditions like in April 2010 flash crash. They usually crash from oversold conditions instead, like in 1987 or 2008. For example, last years crash came in early August, but equity markets actually peaked between February and May depending on sectors within S&P 500. It took months of topping before a fall. Tops are a process.

      For example, cyclical sectors are still currently at very health breadth readings, unlike prior to other times before the crash where they were under-performing the S&P 500. All in all crash is very unlikely from everything I follow.

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    3. Runaway moves do crash from overbought conditions. There is usually several small down days as the market goes through denial that the run is over. Then all the nervous longs try to hit the door at the same time when it becomes obvious there is a problem.

      This is just how these type of moves end. It's a direct result of the Fed trying to meddle in the markets. They pump in money to create an artificial rally that isn't allowed to generate normal corrective moves. So then when it comes everyone panics out all at once.

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    4. It's very rare according to history of the last 70 years of SP 500.

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    5. Well it happened in Feb and May of 2010 and August of 2011, so it can't be that rare.

      I'm talking runaway moves. Those have special characteristics, and not just a strong rally. If this was just a strong rally then I would not expect a crash just a normal intermediate correction. But this was clearly a runaway move so it should end like all runaway moves.

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    6. My point is that it takes a long time for the market to form a top, even if this was a top in the first place. While we had a crash in August, you forgot to put forward the chart which showed that QE2 rally ended between February and May of 2011. It took months and months before the crash came. So my point is this - it is rare to just crash from overbought readings like today. Usually you form a top for a few months first than crash.

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    7. In a normal top yes but in a runaway move it usually unfolds as several small down days and then everyone hits the door at the same time as they try to get out of the way of the crash. That's what causes the crash. If we close below 1400 the market is going to become very nervous and conditions will be primed for the crash.

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    8. Watch the AAPL parabola. When it breaks it will almost certainly signal the end of this cyclical bull market.

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    9. I disagree with all that as I see no crash coming, just a correction that some will use for a buying opportunity.

      Personally, I'm not interest because I prefer to invest in commodities as they are ending their cyclical bear market. Either way we will see how it all plays out.

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  25. HUI will be down six weeks in a row! That didn't even happen in 2008.

    Waiting for a tag of the 200 week MA or an RSI of 30 on the weekly chart before considering a trade. I will concede though the HUI could rally for a few weeks at any time, at least based on technicals.

    The "rally" the last week of March unfortunately took the technicals out of deep oversold conditions on the daily chart, so we could see a lot more selling before the daily indicators are oversold again (RSI and stochastics).

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  26. I would also consider SLW if it tags its lower BB on the weekly chart.

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  27. At this point one should wait for the market crash or semi crash before buying anything. When it happens it is going to exacerbate the selling in everything. Miners are going into this in a very weakened state, they will get obliterated if the S&P were to drop all the way back to the 200 DMA.

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    1. And hopefully no black candles! We need a huge red exhaustion candle followed by a huge white candle, followed by another large red or white candle. Black candles on the daily chart are a big warning sign that any rally will be given back ( usually within a month at most). IMHO of course. There won't be any hesistation at a true and final bottom.

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    2. Also I would note that on the weekly chart, the $hui:$spx ratio is oversold on every metric. The RSI is about to tag 30. All that is to say that while the HUI could certainly underperform the SPX, such underperformance will likely be very short lived based on history. This should all play out within the next 2 months at most IMO. Hopefully we will aee some crazy exhaustion day that spikes the HUI into previously unseen oversold levels in absolute terms and verses gold and the SPX. Unless you believe the PM bull is dead, this will be the best buy since it hit 150(!) in 2008.

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  28. AGHamster - You bailed already bud. SPX will do 2 steps forward & 1 step back, always higher lows. Dollar won't affect it much. Look at how dollar rallied in Nov & Dec, yet SPX just moved sideways. I do admit PMs still got issues, main reason I'm not in it, but this is the year for SPX (money's moving out of bonds, it has to go somewhere, since it's not in PMs, it'll go into stocks). My money flow / oscillator readings are still very bullish. Don't be surprised if you see real "chase" a week or 2 from now in SPX. Days like today are just to fake out the bulls.

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    1. I tend to agree. But when the Fed acknowledges the need for QE, i highly highly doubt bond money will flow into stocks over PMs.

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    2. Quy - yes went short in EU morning.
      As of now closed the shorts - and long again.
      Of course with stops.

      I have one source saying 1582 tomorrow. Another one again called the low for 2011.
      Dollar is at resistance around 80. That's the reason why I went long again - with stops somewhere below the intraday lows.
      If those lows are crossed again - I might, like Benny, flip again.

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  29. xle is almost @ 200ma.
    xlf,xlp,xly have long way to fall

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  30. SPX came back yesterday from day's low, I'd venture to say it'd do the same today. Double bottom pattern intraday.

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  31. AGHamster - My indicators are flashing a possible huge break out in SPX within the next 10 days. Today's another gift for whoever's not in. Let's see if it'll pan out.

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  32. AGHamster - Just for your amusement, I got a boatload of option calls on KORS. My model is saying it'll break out within the next 3 days. Let's see if I'll be able to cash in, or will they take my money :-)

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  33. Quy ... the second of my two major sources sent me an email, that he will buy gold/silver today and tomorrow and that will be good for around 3 weeks after which he will tp.

    The other (first) source seems 100% sure the low is in today. And that DOW 13000 seems to hold. And that 1800 comes soon and ditte QE3. Not so sure what to think about it.
    But anyway I'm surrounded by buy flags. So it looks as of today or tomorrow we see/saw the lows. The washout in G&S stocks looks good in my book.

    Though maybe it is another trap.
    Anyway my bet is long again - as long as key levels hold.

    Time will tell. gl & gt

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  34. Quy - also the technicals (i.e. BBs) almost across the board (of Gold and most major gold stocks) are a screamin' buy today.

    Dollar is just a whipsawing sidewhow.
    I have it with JS - this was nothing but a power demonstration - combined with a trap and therafter the 5 big banks covering shorts.

    Maybe another fakeout towards 158x - in Asia or Europe, but after that a several weeks lasting bounce. IMHO.

    Similar for the broads.
    Good night my friend.

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  35. TZ's inverse head and shoulders still in play on gold....

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  36. The inverse head and shoulders on the daily gold chart is actually beautifully symmetrical. Check out the daily gold chart at Jesse's Cafe Americain to get a great image of this.

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  37. Nice report Gary. Could be, could be. Better said, it should be.

    But the Fed has the printing press, and he will use it again, esp. in an election year, so I think this whole cycle business is on hold. The S&P fall will be great although temporary, as I'm expecting Bernanke to announce QE3 if that happens, and that would be a bottom for gold. In fact, gold could bottom earlier.

    But who knows; I certainly don't. Following is my tactic, and now my strategy.

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    1. A couple more random thoughts ...

      For all the few trillions of dollars and now euros printed, debt is still > USD 50 trillion. So either everyone's house deflates back to $30K/ea, and retirees loose Soc Sec and Medicare/caid, and unemployment rises from 20% to 50%, or Bernanke prints. My house plants know the answer to that one.

      So what to do then? Perhaps start cost averaging into gold bullion, me thinks. If price goes down, my avg price decreases = good.

      2 things on charts: 1) $SILVER made a higher high in late Feb, and 2) $GOLD has an inverse H&S playing out that is just now finishing off the right shoulder if price firms. If not, then not.

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  38. AGH - I hate to beat it to death, my indicators are saying this year is SPX, next year is year for PMs, so I'm not even looking at PMs. I think a lot of people on this blog will kick themselves at yearend for missing the SPX move, cause they focus on PMs too much. I agree with Gary, it'll take a while for PMs to get back to its glory days. SPX has been on a strong uptrend since Oct. of last year, yet people are not talking about it. The dollar is just a distraction for SPX, it won't be able to derail SPX this year. I see people jumping in & out of PMs, when they can just be in SPX & relax & enjoy the ride up. Yes, there'll come time to get off it, but we'll deal with it then, it's a long way out. SPX is up 12% this year so far without breaking a sweat, why bother with PMs & other stuff that have not proven they're in an uptrend yet. Ride the trend until it's broken.

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    1. I'm kicking myself now. I'm not sure how I missed the move while waiting for miners to kickup.

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    2. Probably coz you expect 2012 to be the worst year on record and since 2012 someone has been telling you that the rally will crash every 5 days.

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    3. On the contrary, I only began to expect a crash once it became obvious we were in a runaway move. I avoided the stock market because it was too late in the intermediate cycle to be buying. To do so is to risk getting caught in the severe selling event that always follows these kind of moves. Unless one is confident they can pick a top (which very few people actually can in real time) then at some point you just have to exit and sit on the sidelines until that selling event occurs.

      The vast majority of people that are beating their chest and fluffing their feathers thinking they are smart riding this rally are going to get caught in that profit-taking event and are going to watch all of their profits evaporate.

      I'm not confident that I can pick a top in real time so I choose to miss the upside in order to avoid the downside.

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    5. That is just nonsense.

      I bet that people who bought between August and December on the S&P 500 between 1100 and 1200 will not lose all their profits because the market won't crash, but just correct. Markets don't crash from overbought conditions majority of the time - that is very very rare. Last major two runaway moves into early 2007 and into early 2011 took months and months to top. It takes months form a toping process which is very volatile, so therefore people have plenty of time to buy Puts for protections or just sell their shares.

      The truth is you were expecting 2012 to be a disaster and now you are blaming central bankers and say quotes like "this is what should have happened but LTRO aborted the bear market" coz of this and that cycle. Don't worry about excuses, just say you got it wrong - plain and simple. Market did exactly the opposite thing of what you thought what happen, because you were consensus thinker at the time. Instead of crash down 300 points from October it actually rallied 300 points.

      If the Dollar spikes to 52 week new highs... personally I got it totally wrong. Sentiment got washed out so so so quickly without Dollar falling too much. It turns out a lot of bears are now sitting on the Dollar short term and I am consensus. That's it. No excuses from what Bernanke did or didn't do, or whatever else. Just plain and simple... if Dollar goes above 81.50, I'm wrong!

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    6. 96 years of cycle history isn't wrong. But Bernanke can stretch cycles with enough money printing. I didn't believe it was possible until I saw it happen in 2009. My expectation for a 4 year cycle low in 2012 is and was valid in a cyclical context but that doesn't mean it can't be temporarily aborted with several trillion in currency debasement.

      This doesn't avoid the collapse it just pushes it out a little further and makes it worse when it does arrive. It just means that 2013 or 2014 will be the year of the depression. If Bernanke continues to try and stop the deleveraging then it will unfold as a hyperinflationary depression instead of a deflationary one.

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    7. We still owe a depression though. Every credit bubble in history has led to one. Until we pay down or default on all of this debt that is built up over the last 40 years it's going to be nearly impossible to make any true progress. The money that needs to go into investment and developing a new industry will continue to be parasitized by the government to prop up the economy and an insolvent banking sector.

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    8. No offense, but you just got it wrong. No excuses are necessary. Back around late September and early October as well as middle of October I was saying to buy stocks.

      I started following your blog around that time and posted the same thing here. You were telling people are recession has started and the worst Depression since 30s is about to begin. However, that just proved to be a great contrarian indicator, as S&P 500 shot up like a rocket since August 09th crash. Don't blame Bernanke.

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    9. Actually I was saying that in late March and early April. We avoided the entire correction. I spotted the bottom in Oct as soon as the swing formed but I wasn't terribly interested in stocks because we were moving into the timing band for a decline into the next four year cycle low. I was mostly interested in trying to catch rallies in the precious metals sector.

      The cycles there are more dependable, so I'm more comfortable trading something where my tools are more consistent. We have managed to generate a respectable profit and more importantly we aren't going to get trapped when the market collapses so we will keep our profits.

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    10. Ok cool. Here in Asia we give more respect to a man with character who can admit he has made mistakes. After all, we all make them.

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  39. Quy,

    Your perspective about the SPX is very valid. I have thought about that a lot this year as I have struggled to make, and hold, any money with PMs. When I took time to reflect, I realized that something is always in an upswing, just not necessarily the market I am focused on. That's why it was easy to miss the breakout in apple. So, I have to learn to look at a bigger picture.

    Keep posting, I appreciate your views.

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  40. For all those watching the now Famous RS of the IH&S in Gold (or GLD), I would mention that it is a 2 hump Shoulder, with 156 and 154 (for GLD). Hitting 156 and bouncing to 165 to go back down to 154 could drive us to the end of April-beginning May....for a ST low. An opinion based on chart...and 2 relevant MA's at exactly 156 and 154.69 (current, but going up).

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  41. I don't think I would put much stock in chart patterns at this point. The dollar is only on day one of a new daily cycle and gold is still very early in it's daily cycle and has already generated a failed cycle. It has a long way to drop and a long time to do it in. A test of the Dec. low is probably a given. And if the dollar generates a third daily cycle higher gold will probably break to new lows and test the 2010 consolidation zone thus confirming a D-wave continuation.

    Patience is required for at least the next two and maybe three weeks.

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    Replies
    1. Sounds very plausable to me. Time to go lifting, climbing and of course RIDING!

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    2. Well Gary that depends on what insight you extract and from which charts. The fact is that certain stock leaders have and continue to signal a breakdown in the economy and thus the markets and a higher USD

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  42. http://www.forum-monetaire.com/?p=5981

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  43. For Gold, a break with conviction of 1580 level, on a closing basis, could mean a break of the Bullish Trend as it breaks the LT lower up trendline and a relevant Moving average for the LT.

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  44. http://cdnmo.coveritlive.com/media/image/201204/phpwGOIaO_thumb_gold.png

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  45. I'd cautioun against such bearishness on Gold for the time being as sentiment is extremely bearish. Sure we could go down a bit lower but I think $1600 support will create a bounce of some kind.

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  46. My gold system did not generate a stop, and is now in a position to generate an add on buy. AS i wrote here a few days ago, odds say that this trade will be a winner and the add on buy should mark the low.

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  47. Veronica, have you any idea when the buy signal will come?

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  48. Veronica,
    Thank you for keeping us posted.

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  49. Gold may be close to the ST low. Agree with Veronica.

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  50. Smartbullion, the buy changes daily so I don't know when it will happen.

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  51. Doubtful. Its way too early in the current daily cycle to look for a bottom anytime in the next couple of weeks unless the dollar were to roll over immediately. Sentiment is way too bearish on the dollar for that to happen barring a sudden announcement of QE3.

    I'm not sure I would trade on the hope of another QE before operation twist has even officially ended.

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    Replies
    1. Most likely gold will continue this choppy decline and continue to pull in impatient gold bugs just to get slaughtered over and over.

      We just had a 2 1/2 year C-wave. That is almost certainly going to generate an incredibly complex and destructive correction or consolidation.

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    2. I should note that there is a Bollinger band crash trade active in the sector. So we could get a very short term bounce but like I said it's way too early for a daily cycle low and a significant rally with any sustainability.

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  52. Matrix, gold can still fall sharply, don't get me wrong.All I'm saying is that when the add on buy happens it should mark the bottom.

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  53. Gary, then why not buy otm puts with a small amount of capital for the April expiry in 2 weeks, would fit the end of golds current cycle.

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    Replies
    1. Because I've learned my lesson about trying to sell short, especially shorting bull markets. The counter trend rallies knock you out for losses and missing the bottom in real time usually costs you all of your profits. Ask yourself how many people have made any money on the short side of gold since the Sept. top. I can assure you it's very very few. This has been a whipsawing mess for months now killing both bulls and bears alike. I really doubt that is going to change any time soon.

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  54. Veronica: Pls. dont feel involved in any trade recco., as my play will be based on own TA set up, to be confirmed, too.Anyway, good to read you..!!

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  55. Elaine / AGH / & others who appreciate my views - WW loves moving averages, I on the other hand love "trendlines". They're simple, but not too many people use them. Too many people try to catch the exact bottom or top, it's impossible & futile. All I want is to jump on a trend when there's a clear trendline, ride that trendline until it breaks (adjust the trendline if it tilts upward like the silver C wave back in early 2011). You will miss the 1st 10% and the last 10% of the move, but you'll catch 80% of the move. That's tough to beat. When there's no trendline, you do nothing. Sounds simple, yet people don't do it. They always allow their opinions to dictate their investment decisions. Opinions can be wrong, the market is never wrong, when it points you the way, you just follow it. Not listening to the market is like not using a map when you're lost (i.e., you may run out of gas before reaching your destination :-) I use money flow & oscillators to predict the trend so I can jump on & off earlier, but even without those tools, trendlines alone is enough. If things zig zag like PMs, then obviously there's not a clear trendline, so you don't touch it. SPX on the other hand, has a clear trendline since mid-December (connecting lowest points in early Oct., end of Nov., & mid Dec.)

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  56. http://stockcharts.com/h-sc/ui?s=$USD&p=W&yr=8&mn=10&dy=0&id=p98778545687&a=243271917

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  57. Gold is exhibiting very typical bottoming behavior as this buy did not establish a stop, as I had hoped a few days ago on this blog. It would be nice to get some more smash here with a countertrend bounce in coming days and then a final move down marked by an add on buy. 2 losses in a row has been the max the last 10 years and my system is there now, so the odds say this trade will eventually sell at a profit above 1670. Have to get back to some of the most beautiful mountains I have ever seen, as we're vacationing in Asheville NC this week:)

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  58. I normally would have bought gold yesterday in another 'catch the bottom' attempt like I do. It met my parameters and I would be long a few X right now and holding.

    I didn't buy however which could turn out to be one of those things where the time you don't buy is the time it IS the bottom. Markets are good at doing that.

    I didn't buy because: 1) the cycles guys are saying lower; I don't like to bet against them; 2) I have another indicator which essentially says "stop trying to catch bottoms, this is going lower" which is borderline true at the moment.

    So we will see how that works out, but I can make an argument that the low was yesterday, I just didn't take it (which helps to make the odds higher that it was).

    As for the mining shares they continue to drop like a rock, now below that HUGE congestion triangle of 1.5 years and not looking good. They can recover and make this a fakeout, but it has to happen relatively soon or you have a legit breakdown of a very nasty looking pattern.

    What I repeated over and over is true...the mining stocks are NOT outperforming metal and haven't since 2004. Anybody playing a "they will move NOW...THIS time....I KNOW it..." trade of hope is getting killed with no idea of where the bottom is. (But they keep saying they will eventually prevail).

    Yes, it is LIKELY (but not guaranteed...be very careful about the definition of the word I just used there) that the miners will eventually match or outperform metal, but there is no reason a person shouldn't just wait until it actually starts to happen vs holding and hoping. And there are also quite a few reasons why now is different than the 70's and the miners may NEVER outperform metal.

    So waiting until they do is a better approach I continue to maintain.

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    1. Can't say I disagree with you re the miners. It is prudent to wait for a confirmed trend nondoubt. The HUI looks like a waterfall decline about to happen.

      But even if they don't outperform over the long run, they are great trading vehicles due to their volatility. The HUI went from 150 to 640 in 3 years. Many of the solid midtier miners went up way more than that. Yeah futures are great but they have their own risks and limitations

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    2. Did any stock index outperform the HUI over the same time frame?

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    3. One final note, the HUI is still diverging massively from gold. Today is a great example. The month of March and now April have been brutal. The question is why?

      I think it's because the metal has further to fall. The miners have been great at sniffing this out in the past. In 2008, gold, the HUI and the HUI:gold ratio all bottomed at the same time.

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    4. U still havent answered ur own question.......WHY ??
      Think of the controllers of Gold price and of stock (miners) prices.
      "They" need to make income....somehow.
      Manipulation doesnt always come from the CB's.

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    5. There are a number of logical reasons why miners are not outperforming and may never outperform in this bull market. I have made this statement before and challenged people to PUT IN THE WORK to THINK of what those reasons might be. (I don't like handing people food so they can eat. They get lazy and they dont deserve the free food anyway.)

      For those who want to try and think of why this is different from the 70's I encourage your attempt. For those who don't, may I suggest miners are very undervalued and a clear buying opportunity.

      For Greenspan above's specific question, may I suggest that slowly slowly a few people with miners are starting to wake up to the reasons why those securities might have some serious problems in the future and might not mirror the 70's. I.E...you might just be seeing a recognition move heat up.

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  59. side note: the HUI doesn't trade, the GDX does.

    In ALL situations when you are operating financially a person should ALWAYS use an index/security that TRADES (and thus represents real money on the line from buyers and seller) instead of a theoretical index which doesn't represent any money (when they have a choice).

    The GDX is the proper tool to use for all 'mining' comparisions and not HUI for this reason.

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    1. Totally disagree. The HUI is a composite of stocks that actually trade. Do you understand what that means? Lol. GDX on the other hand is a derivative of those underlying stocks--an ETF that exhibits decay and can rise and fall based on demand for the ETF itself and not the underlying assets that it's supposed to track.

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    2. The components of the HUI do trade. The sum total of the HUI *ITSELF* however (with the weighting and construction) does NOT.

      So, for example, I would use stops and significant points on a GDX chart before I did on a HUI chart.

      But to each their own.

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  60. Bob Hoye is keen to say you can't trade the GDP or the CPI or such, therefore the numbers are highly suspect. If you COULD trade them, the market would likely indicated almost immediately that they are bogus numbers (either by projecting vastly different values than those 'reported' or by resulting in huge spreads showing the market doesn't trust the calcuations).

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  61. To make a parallell, the TVIX etf hasn't been quite as ok as the VIX lately - some 'minor' Nav problems :)
    However GDM which is the index GDX tracks is better than the Hui, since it consists of far more miners.

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  62. India gold tax and levies has just being hiked considerably by that government. This already threatens to impact the worlds largets gold market. In addition the India jewellers have been striking against this for 2 weeks, completely collapsing the gold import there.
    And judged by the commentaries in India Times, the government has a lot of support, it is considered a non-essensial and unproductive import. But silver is escaping the tax hike.

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    1. It's a bit funny, but due to random cultural traits india will end up being quite wealthy after this game plays out - through no direct intentional act with that goal in mind.

      (Many cultures save, but THEIR culture is programmed to save in gold. That random cultural twist is gonna yield a windfall profit.)

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    2. For example, the Japanese save viciously also, but they save in PAPER and YEN through govt postal saving account - not metal.

      Unlike the indians, the vast majority of the 'savings' of the japanese is going to disappear in smoke. Had a parallel universe switched the cultural artifact of what to 'save', the opposite would be true.

      THe world really is quite random.

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  63. Quy,

    The old saying... The trend is your friend. I appreciate your reminder.

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  64. We definitely don't have any indication that the trend has finished yet. The AAPL parabola is still intact. However the dollar has begun it's second daily cycle higher and it is very late in the intermediate cycle. All the conditions are in place for this intermediate cycle to top. It's definitely way too late to be buying. If you bought months ago then place a trailing stop 45 points below the high and let it ride.

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  65. Gary, a question about cycles (for the 100th time, I know - thanks for your patience!).

    Are the cycles still useful for you to spot bottoms?

    For instance, a while ago I thought that cycles were saying that gold is in a B wave, w/the C wave next. Now the former D wave may still be in play. I know you said once that cycles are not ABCD, so maybe that's my hang-up. I'm OK with the current B wave being relabeled as D, but for some reason I still don't believe that cycles are any good. Can you please give me 2 or 3 good and recent (over the last year) examples where cycles had you buying or selling? Thanks much.

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    1. Clarification on "examples where cycles had you buying and selling" ... here I mean, where cycles were your primary tool to determine this (knowing that you combine cycles w/sentiment and TA plus other stuff). Thanks much.

      FYI my bike is in the shop getting new drivetrain - Dura Ace - $2000 - can't wait.

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    2. Uh, and if you have 1 or 2 examples where cycles failed you, and how you navigated around that, I'd appreciate it.

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    3. The ABCD wave pattern has nothing to do with cycles other than a D-wave and a B-wave will bottom at an intermediate cycle low. And D-wave will also likely be a yearly cycle low. Sometimes I can get exact bottoms with cycles. But I almost always know when to steop on the gas and when to tap the brakes because of cycles.

      Case in point. The current daily cycle has already topped and moved below the last cycle bottom. The next cycle low isn't due for about two, maybe even three weeks. So all those people trying to pick a bottom are are way too early. They are going to continue to get slaughtered.

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    5. Thanks for that, Gary.

      I remember now the cycle hurdle I'm still struggling on, which is that periods between troughs vary, enough so that I have no idea how one can use them to time bottoms.

      With my untrained and novice eyes, I see "bottoms" in early May 2011, then July (2 mos later), then Sept (3 mos later), then Dec (3 mos later). So one point is that the variation is too wide for me. If the variation were a few days or up to a week, I'd be OK w/it.

      Also, a 2nd thing is that, given the "bottoms" above, counting 3 mos from Dec is NOW/TODAY, so I am again troubled because to me, cycles should be calling for a bottom in gold now.

      I know that you also combine gold and dollar cycles, so therein may be the rub.

      Alas, I am f'd again. Back to the bike! I need to ride harder and farther to get cycles, I think!

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    6. You need to break the intermediate cycles into smaller daily cycles to spot bottoms with more accuracy. For example right now the daily cycle is on day 10. The timing band is between day 18-25, so you know the intermediate cycle can't end until the current daily cycle bottoms. Plus that would still be a little on the short side for an intermediate cycle and we know the last two intermediate cycles ran a bit short. That should mean that this one will run a bit long.

      All of that equals gold should still have one more daily cycle down after this one before a final bottom. That snychs with three daily cycles higher for the dollar.

      Now do you see how these cycles mesh? the only thing that will throw a wrench in the works is if the Fed announces the next round of QE early. Usually those kind of events happen in the normal timing band for cycle turning points though so I don't expect QE to happen until the dollars third daily cycle higher.

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    7. OK, that detail helps a lot. I'm going to write this down as a baseline, and see if it plays out real-time in actuals.

      However, the part you wrote about the Fed throwing a wrench into the works is an example of the kind of things that keeps me doubting cycles. If this happens, my mind nets out that cycles don't work (because of intervention). I can TOTALLY see and believe that cycles work w/out Fed intervention, but since the $SPX 666 low of March 2009, we've had nothing but intervention after intervention, in the US and now Europe and Japan. And I don't see this stopping (we're currently delaying, but not stopping), not w/all the massive debt to get out from under. So to me, fundamentally, cycles should work, but don't for the foreseeable future, and the only game in town is gold and silver.

      But I'm not as experienced as you are, and you know all this plus a ton more. So I'll stop here and wait for the actuals play out per the baseline. I really hope it does because I'd love nothing more than to check out my brain and let you take over auto-pilot - gives me more time to ride, and I'm not that good at trading anyways - the whole thing is unethical gambling in my book, but it is what it is.

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    8. Actually cycles have been working just fine in the dollar index and precious metals market. Were they are being warped is the stock market. The Fed is actively trying to reflate stocks to create a "wealth effect", so that is were the cyclical break downs are occurring, and it's a big reason I don't have much desire to dapple in that sector. The Fed is negating one of my best tools in that market. When that happens I tend to not want to play the game.

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    9. Smart. For some reason I thought that gold/dollar cycles were also screwed - my bad.

      OK, w/fresh energy I'll watch this baseline. You always speak the truth, and are humble to say when the market does a 180 on your toolbox. If it works I'll be a sub again, as just using TA/charts alone is really tough, esp. for my pea brain.

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  66. SPY

    http://traderjoed.blogspot.com/

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  67. It might surprise some to note that the successful downward breakout of the $HUI Megaphone Top (aka Broadening top) should exhaust itself within as little as another -3% to -6%. After that the pattern can be discarded as it will be of no further use to a trader. Just FYI. The pattern is a notoriously poor performer which is why it has almost reached its average target already. However, after the positive price reaction that will surely come once the target is reached, there is a much larger potential Rounding Top pattern to be aware of. I'm not sure how this would all jive with cycles. Just FYI.

    http://stockcharts.com/h-sc/ui?s=$HUI&p=D&yr=3&mn=0&dy=0&id=p76368666544&a=252241785

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    1. Wild chart, Danno. You sure have that one nailed!

      What's your take on $GOLD? Is there an inverse H&S there or is it something else? Do you see us re-testing the Dec lows as Gary suspects? Thanks.

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    2. Thanks. There is real potential for an Inverse Head & Shoulders in $GOLD. It's too early to say. Maybe about a month too early. We have to wait for the pattern to develop more. Technically, you're not supposed to go long that pattern until the neckline is broken. So we don't gamble yet on that pattern coming true. We have plently of time to wait and see. I'd be tempted to go long (based on that pattern) if I saw the right shoulder fleshing out, heading back up in a clearly defined way... and Gary's cycle count also lined up. That would be very tempting to take a long trade before the neckline.

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    3. Concerning re-testing the Dec lows. Always a possibility. Too early to say for sure.

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  68. And so here we are on Good Friday and the US NFP is nothing short of a disaster. Combine that with a global bond market begining to get VERY nervous about Wednesdays failed Spanish Bond auction and think it is pretty reasonable to expect a big down draft in the stock market on Monday and another leap up in the USD.

    I hate to harp on it but the big global diversified miners have been signalling a major downturn for weeks.

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    1. Just take a lookie see at these charts and one can almost sense the fear about to creep into the market:

      http://stockcharts.com/h-sc/ui?s=BHP&p=W&b=5&g=0&id=p05571096035
      http://stockcharts.com/h-sc/ui?s=VALE&p=W&b=5&g=0&id=p22953116055
      http://stockcharts.com/h-sc/ui?s=RIO&p=W&b=5&g=0&id=p12591039269
      http://stockcharts.com/h-sc/ui?s=FCX&p=W&b=5&g=0&id=p40073570602

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  69. Yes and all those traders that were so proud of themselves for riding the S&P and continue to call for higher prices are now at high risk of already being caught in the "crash day".

    This is why at some point one just has to say say enough is enough and move to the sidelines or you as weend up getting caught and giving back all of your gains, sometimes in days, sometimes like the flash crash in minutes.

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  70. For the SPX bears - if you stay bearish long enough, eventually you'll be right (even a broken clock is right twice a day). The problem is you'd miss out on the big move. Yes, the bulls will take a drawdown, but those that recognized the trend would had been on this bull since mid-Dec. (21% gain). The trendline breakdown point is around 1370 (2% from current level), so even if you get off there after big down open on Mon., you'd still have 19% profit in your pocket. How well did bears do ? Even with flash crashes, you can get out once the trendline is broken (like SLV parabolic drop last year). Yes, you'd be hurt if you bought late, but even a 2% stop loss is not that bad, at least you get the shot of a bull ride. Don't be surprised if SPX opens down, then reverses (not breaking the trendline) & up it goes (marking Mon. as best buying opportunity). Typical bear fake. The bears that short Mon. morning might be the ones that'll be hurt. Again, don't let your opinion cloud your decision, let the market tell you what to do. If I haven't bought SPX, I'd buy once it gets close to 1370 cause it could be a cheap buy point (but sell if it breaks below it). Futures now only show 16 point down, hardly a crash that the bears hoping for. Remember, so far every little dip got bought up in the uptrend, so give the bulls the benefit of the doubt.

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    1. You know I've been thinking about this a bit because of missing the boat on this move.
      And here is my thinking
      - Most people got out of the stock market last March and again were warned in May - that save big capital.
      - Then many got back into the stock market after that big early August selloff.
      - We were shaken out of position because the market whipsawed until October.

      Post the shake out we played the "beaten down miners" though in retrospect they never responded like the SPY or QQQ have. Looking back now I think the miners was the right call and sure we could diversified a bit but as of now we are too late in the cycle to play the stock market.

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    2. One thing I've learned writing this blog is that there will always be a never ending supply of Monday morning quarterbacks in this business. Data mining historical charts is always 100% accurate, unfortunately none of us actually get that luxury. We all have to make our decisions in real time.

      In real time I never make a wrong decision, because I always bet with the odds. But that doesn't mean that the odds always come play out as expected.

      Not taking a trade in the stock market was the correct decision. We were due to begin moving down into a 4 year cycle low. We had a Dow Theory sell signal, and a failed intermediate cycle. The 50 DMA had crossed below the 200 DMA and the 200 had turned down. All of that confirms that we made the right decision, it just happens that this time the market beat the odds. This is just one of those times when the correct decision cost us an opportunity. Fortunately another one of those will come around again soon.

      A lost opportunity isn't the same thing as lost money.

      Delete
  71. For those who's thinking about getting on SPX Mon. (Elaine / AGH / etc.) - Watch for 2 things: 1) SPX index of course, and 2) the market leaders (AAPL, ISRG, PCLN, CMG, etc) - if the leaders don't pull back much Mon. morning, that's a sure sign that this bull is not done. The leaders will always lead the market. So if SPX gets close to 1370 & you see the leaders are still hanging in there, that's a green light to buy. That's what I'll do (since I have some extra cash). Remember if they both break down hard (below trendlines), then do nothing (or get out if you're in). My indicators are still bullish, but I'll let the market tell me what to do Mon.

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  72. Aren't we traders supposed to buy low and sell high? And isn't the S&P high? There are some flipped bits here. If one has an existing position, then tightening the stop makes sense, but to put fresh money to work on the SPY or AAPL here is flat out INSANE, to me.

    I'm waiting for gold to bottom, trying to buy low. I'll bet that the jobs report has Ben re-thinking about the timing of QE3. I'm sure Obama has phoned Bernanke as well. Don't know - just know that America is hooked on free cash, same as dope. Gold is the safe haven.

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    1. Spot on Bill
      The NFP numbers together with the inflationary trends and presidential election will have tongues wagging.
      The "traders" making money in this environment are the same ones controlling it.
      You hit on some of it in ur earlier comments. Intervention = distortion.
      Waiting for Gold to bottom isnt being the sharpest tool in the shed. When you can perfect that game then maybe you can you tell me when Gold will top so that I can prepare to dump ahead of everyone else. Doesnt everybody wish they can buy "low" ??? Need to put it into perspective. Low compared to what ?
      Where it was or where its headed......!!!
      If you believe in Gary's theory Gold will head to $10,000 and beyond. So in that sense Gold is already cheap.

      Delete
  73. http://www.forum-monetaire.com/?p=6002

    Interesting chart of $hui

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    1. Yup. I'd prefer to wait for the hui/gdx to 'show me' than to try and guess where that is heading.

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  74. Bill - I'm advocating buying if it stays above the trendline, not to buy blindly (with stops right below trendline). I'd be interested to hear any trader here that did better than what SPX did since 12/15, when it clearly formed a trendline. PMs on other hand, has no trendline whatsoever, so be prepared for it to zig zag, taking you out of your positions. Wouldn't surprise me if GLD gets down to 140 before yearend (it may bounce here & there, but trendless). Don't laugh yet, but SPX & AAPL have so far made fools out of people trying to short them weeks & $100 ago.

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  75. Q,
    You are making some really big assumptions. For one you are assuming that traders were lucky enough (or stupid enough) to buy at the exact bottom of a half cycle low in a market that was underneath a declining 200 DMA and a 50 DMA that had crossed below the 200.

    You are also assuming that these same traders knew nothing about cycles (all big trading firms have cycles analysts nowadays) and were willing to continue holding long past the timing band for the intermediate cycle to top. The multiple selling on strength numbers over the last several months clearly indicate that institutional investors were not willing to take that risk. So one would have to be willing to buy and hold in a market that is being supported by retail investors and the bubble phase in AAPL. (dangerous)

    Anyone who did that isn't smart. They just got lucky and beat the odds this time. But anyone who bets against the odds repeatedly will ultimately lose money. That's why I don't do it. Sure that means that sometimes I miss a run, but it also means I never get caught in a bear market or an intermediate degree correction. That means that I consistently produce gains year after year after year with only very minimal draw downs.

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  76. Quy your previous comments directed toward "bears" is arrogant to say the least.

    Just because somebody has a bearish stance doesn't mean they are short and it doesn't mean they are perpetual bears either.
    It is however my opinion that the stock market is now devoid of any logic. Within minutes of the release of the NFP the market, like a junkie looking for their next fix, was already talking QE and loosening of monetary policy.
    This is not a rally based upon solid fundamentals but a rally based upon a reckless and irresponsible Fed that have yet again driven stock prices to levels that are unsustainable in comparison to the real picture.

    So if you wish to go long, remain long whatever, that is your choice and your right, but don't stick your nee out at others because they refuse to participate in a insanely over bought market that is well past it's use by date.

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  77. Gary a question regarding cycles of the stock market. The SPX made new lows last October after the August lows, however the Nasdaq put its lows in August and formed a higher high in October. The question then is which is the "correct" index to use for cycle purposes when observing the stock market?

    I also noticed that during the crisis, the Nasdaq formed a low in October 08, whereas the SPX bottomed in March 09.

    Do you assume SPX is the correct index or that each index is "independent" and correct or that the information from these indices are "inconclusive"?

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  78. The Nasdaq followed the S&P at both bottoms and made a lower low just like the S&P. Maybe you mean the Nasdaq 100?

    I will always go with the S&P over 100 Nasdaq stocks BTW.

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  79. I think Gary is 100% correct to be neutral here.

    http://stockcharts.com/h-sc/ui?s=$SILVER&p=D&yr=5&mn=0&dy=0&id=p03931096741&a=240167402

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    1. Nice chart. Notice how $SILVER touched 26.15 twice. Amazing. What are the odds.

      Looking at your chart Danno, I also see a potential falling wedge, using 2011's May, Sept and Dec's lows, but still using your top trendline. I also see that 34 silver is an important support/resistance line. Again, nice chart. It's good to look at long term daily charts sometimes.

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    2. Bill, I'd say of the 2 patterns the Descending Triangle is more defined so I would rank it as more important. Within that triangle is a Double Bottom tagging 26.15 twice like you mentioned. Odds are astronomical. Some might say that Double Bottom failed. Hmm. I think it's a bit too early to say that. It might just be forming a handle. Whether or not the triangle breaks upward or downward, the pattern is so massive I'd wager the move is going to be very large. You sure don't want to be on the wrong side of that trade so it could really, really pay to wait for a while.

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    3. Yup am with you. Do you see a similar pattern in gold by chance? The thought there being that if that silver pattern plays out, it'd be a huge move down, correct? So what about gold, wouldn't that also move down? It'd be odd wouldn't it if silver went way down but gold didn't? Thanks again.

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    4. If the silver pattern breaks out downward it has the potential to hit about $13-. If the silver pattern breaks out upward it has the potential to hit about $52+. But we don't know which way the breakout will be. Too risky to bet either way until one of the trendlines is penetrated, and far too risky to bet against silver in general so I'd stay in cash if you think the breakout will be downward.

      Still looking at the gold chart. Will have to get back to you on that one.

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    5. If Silver hits $13 the secular bull market is over as we would be down almost 80% from the $50 highs back in May 2011. In my opinion, that won't happen...

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    6. I don't have an opinion.

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  80. beetlejuice & Gary - I only responded to some of the attacks from the bears (if you read posts prior to mine). I didn't initiate my post for no reason. An arrogant person is someone who thinks his opinion is above others. I've stated that I let the market tells me what to do through trendlines, that my opinion or anybody's mean squat, the market has a final say. How I was perceived as arrogant or a "buy & hold" guy by you guys, is beyond me.

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  81. I wasn't implying you were arrogant. I don't know about anyone else. I don't read all the posts. I was just disagreeing because my cycles and sentiment tools don't align with going long and they were the reason I didn't go long in the first place. They don't always get it right but they do often enough that I never bet against them.

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  82. MARKETS



    http://traderjoed.blogspot.com/

    ReplyDelete

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