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Saturday, April 7, 2012

STOCKS HAVE REACHED THE EUPHORIA STAGE

The last bull ended when the leading stock, GOOG, entered a parabolic "bubble" phase. That was the signal that the bull had reached the euphoria stage. When the GOOG bubble popped it signaled the end of the bull market.



Two stocks, AAPL and PCLN, have been the leaders of this bull market. Both have entered the euphoric "bubble" stage. When the Apple and Priceline parabolas break it will almost certainly signal the end of this bull market.



Apple is now stretched 49% above the 200 day moving average. Anything between 50 and 60% above the mean is extreme dangerous territory.

As I pointed out in my last article the dollar is beginning its second daily cycle up in what could very well be a cyclical bull market. This should correspond with the stock market topping and the next leg down in the secular bear market.

My best guess is that we will see a sharp sell off over the next 2 to 3 weeks, followed by a sharp rebound (QE3?) that may, or may not, move stocks to marginal new highs, similar to the 2007 top.





The poor employment report on Friday is the first warning shot across the bow that the economy is slowing in preparation for moving down into the next recession/depression.  

Bernanke is in the same position he was in 2007. Printing more money won't stop the collapse. It will only continue to spike the price of energy and exacerbate the decline.

124 comments:

  1. Posts like this are likely going to wake up the bears! :-)

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  2. We may see further downside into 20-22 April after which the cycles are bullish until the end of May. Gold will likely bottom around the same time frame as the broader equities markets.

    http://change-in-trend.blogspot.com/2012/04/dollar-miners-update.html

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  3. Great post Gary. Couldn't agree more that we are in a vey dangerous time period. The Fed are just about out of options here.
    Deflation is IMO the real danger here and not inflation, as almost every economist is anticipating or cautious of.

    I expect to see a deflationary collapse followed by rampant runaway inflation.

    Cash(USD) is King for the foreseable future.

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  4. Major cycle turn date should allow for a bottom around April 23-24.

    http://silversaxena.blogspot.com/2012/04/futures-breaking-down-preview-of-whats.html

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  5. While I agree with majority of the points written in this post, it is way too bearish for our current time period. In other words, the timing here is very poor and it will take months for the top to form. Few reason why I think like this:

    Stock bull markets do not top while cyclical sectors outperform defensives, but visa versa. In late 2007 as well as in early 2011 defensive sectors were outperforming cyclicals. Financial sector tends to top first in a de-leverging environment. Currently, Financials and Banks are leading the way higher, unlike late 2007 and early 2011.

    Believe it or not, the average equity bull market tends to top with a very small number of 52 week new highs when one studies previous 14 major tops since 1929. If you have done your research properly and have gone through the moutons of data for the Dow Jones or S&P 500, you will find that on the final high of the cyclical bull, on average only 6% of the index would go and make 52 week new highs.

    That is right.... only 6% of the index on average makes new 52 week highs on the final day of the bull market. Majority of the people think its 70%, or even 60% or even 50%. No, its just 6%.

    As of last week Consumer Discretionary (cyclical sector) had 49% of its components make a 52 week new high. Technology did 34%, while the S&P 500 itself did almost 30%. That means this bull market still has a lot of strength left, despite what anyone's opinion is. Opinions are irrelevant to the facts.

    The fact is, market wants to move higher based on both relative strength and outperformance of economic sensitive sectors like cyclicals as well as powerful breadth. Obviously no one is saying that we cannot have a 5% to 7% correction for a couple of weeks around these levels. Right sectors are moving higher and breadth in the overall indices everywhere remain very very solid.

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  6. Tiho,
    Did you miss chart number three? I'm expecting the Fed to deliver QE3 and for that to push the market back up to at least test the highs and maybe marginally break them followed by a period where the market slowly rolls over as it becomes obvious the global economy is entering the next recession. Depending on how sharply QE3 spikes the price of energy this could accelerate the topping process.

    In the last couple of weeks I have started to notice people begging on street corners and restaurants are now at half capacity where a month or two before they were packed. Four dollar gasoline is already starting to take its toll on a weakened economy with chronic high unemployment.

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  7. Considering that even during the most robust rally we rarely see more than 24% of stocks making new highs This isn't really a significant indicator to tell you when a top has arrived. It's more of a warning and it drags out over months as fewer and fewer stocks make new highs as the market continues to push up.

    If one uses that criteria then we are already well into the topping process as the peak of new highs was set back in early 2010. What has followed is a series of weaker and weaker pushes as the market struggles higher with fewer and fewer stocks following.

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  8. So what is it that is driving the price of Priceline? Apple I can understand, but Priceline?

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  9. Well said. Your call regarding the V-bottom in the summer of 2007... when you wrote that V-bottoms were weak and that stocks would fail that low after a partial break to new highs... is what made me a reader. Likewise, a lot of folks think that if the stock market tops, commodities must follow them lower. Untrue. Commodities did not top with stocks in 2007, but a year later after huge moves higher.

    At this point, commodities are very early in a 2.5-year cycle. Their next major low is due in 2014, and I suspect we will once again see huge moves higher over the next 12-18 months. Both stocks and commodities will likely then crash into lows together in either spring or autumn of 2014 much like they did during the 2008-09 period.

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  10. www.acting-man[PUT.DOT.HERE.TO.FIX]com/blog/media/2012/04/QE-SPX.png

    I will leave this simple chart to ponder.
    I suggest to people that there are actually quite a few interesting observations and conclusions that can be drawn from it. Anybody want to offer a few?

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  11. But, but, but....Beanie says the equity market is invincible and that it is actually secular bull market. LOL

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  12. AGH / Elaine / Phantom - Remember, don't listen to anybody's view, just listen to the market. Unless SPX breaks the trendline around 1370 AND the leaders (PCLN, AAPL, ISRG, etc) breaks their trendlines, the bulls are still in control.

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  13. Actually the S&P has broken the trend line from the Nov. bottom to the March low. FWIW there isn't anything special about a trend line. They are just lines on a chart, nothing more.

    There's no fundamental significance behind a trend line. They only reason they work sometimes is because technicians watch them.

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  14. Gary - I use early Oct. as my starting trendline point, so trendline is still intact. It's special enough that it works all the time for me. Trendline is a way the markets speak to me (nothing else). Fundamentals don't mean much in a liquidity driven market. People that ignored the trendline, missed the SPX ride since mid Dec. People may miss the SPX continuance move if they use fundamentals or other tools trying to predict its next move. If it breaks the trendline, I'm out, no question asked, but it has to prove it to me. Nobody else is above the market. Mr. Market is always 100% right. It could care less about anybody's opinion. I know you're just trying to predict the next move, and you may be right, but you also may be wrong. I've seen people been predicting the SPX demise since late last year, so far the market has proven all of them wrong. So I'm not trusting anybody but Mr. Market (no offense intended).

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  15. None taken. I was just pointing out that trend lines only work sometimes and it just depends on how many people trade off a particular line. You may trade off the line from the Oct. low but others may trade off the Nov. low. It's kind of like an oscillator. One can speed it up and generate quicker entry and exit signals but more whipsaws. Slowing it down weeds out some of the whipsaws, but gives back more percentage points when the turn occurs.

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  16. TZ,
    you are being missed at bullbeartalk.com. SB was on the verge of puking out his miners.

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    Replies
    1. http://1funny.com/wp-content/uploads/2009/10/pumpkin_puking.jpg

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  17. Gary,

    Yes I saw chart no 3 and that is pretty much my point. I disagree with chart 3 and the way you have showed the market will play, just like I disagreed with this chart from your previous post, which also proved to be wrong from the timing perspective.

    Back than you expected a crash, but the market just went higher. Today, once again you expected a crash, but the market will probably just correct and go higher.

    If we were to crash like you have drawn in chart no3, that would a 10% mini-flash crash within a few straight weeks. Majority of the time, markets do not crash when a lot of stocks within the index are participating on the upside and furthermore stocks usually do not crash when cyclicals outperform defensives. I rather stick to history and probabilities, than someones hunches.

    Furthermore, yes I understand it did happen in April 2010, but from March 09 lows to April 10 highs, market was up 80%. From October 04th 2011 bottom at 1075, up to today the market is up 30%. It's a big run, but its not anywhere close to the overbought move we had in April 2010.

    So the current rally does deserve a correction (futures are already as low as 1375 as of Friday), but not a 10% crash within a month. I think that the correction will be mild and shallow, and it will be bought by a lot of retail investors as soon as the price dips closer to 1370 / 1350 polarity line in sand (previous resistance turns into new support).

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  18. Also, just to note a very important point... in April 2010, defensive sectors were already outperforming cyclicals and than flash crash occurred!

    Also, the tech sector as well as the financial sector, were in serious underperformance vs the S&P 500. In other words, investors expected a risk off event to be around the corner. Today we have none of those indicators flashing warning signals.

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  19. Just so you know. Charts are just showing trajectory, not targets. So far the dollar is playing out as expected. I will grant you that the stock market cycle has stretched much further than I expected.

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  20. Market down over 1%, yet the stock leaders are down less than that. All trendlines are still intact. I'm putting the rest of my money to work right here. Specific stocks I'm buying: KORS, MCP, HLF. Remember, if the trendlines break down, I'm out, so if you're in like me, watch those trendlines. I think this is just a bear fake.

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  21. Quy,

    What trnedlines are you refering to AAPL and PCLN or just SPX and others

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  22. Gracegift - Since AAPL & PCLN are being parabolic, I use steeper trendlines. On AAPL, I use early Mar. low of 515 as beginning point, & early Apr low of 600 as second point. On PCLN, mid Mar 650 & early Apr 720.
    See how these leaders bounced up, PCLN is green now. This is how I listen to the market, & the market is telling me to buy right here, since this could just be a bear fake.

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  23. PCLN and AAPL are definitely not ready to give up yet. The Banks however aren't looking good. If we lose the banks we are going to lose the entire market eventually. I would be more inclined to buy if the banks were also holding up.

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  24. Gary - I have to disagree with you. The stock leaders are called leaders for that sole reason. They lead the market. If they're hanging in there, the market will turn & follow them. The banks are not the leaders right now. Growth stocks like AAPL & PCLN are the current leaders (which everybody knows but hate them cause they're not on them, what a shame, instead of fighting the market & the leaders, if people would only listen to them, & right now they're screaming "buy or you'd be left behind again").

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  25. I just can't buy into a parabola that's stretched 50% above the 200 DMA. Never in history has that ended well. Just look what happened to the Googilonian's last time.

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  26. When the GOOG parabola broke it lost 16% in 4 days. When the silver parabola broke it lost over 33% in 6 days.

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  27. Gary - Like I mentioned, until it breaks that trendline, it's going up. That's what it's saying. Even if someone bought AAPL now & it breaks the trendline tomorrow, you risk 3% (trendline around 620). Even if it gaps down 5%, so you risk 5%, but look what you could gain if it stays above the trendline. The risk/reward makes it worth it. Yes it'll end at some point, but wait & let the stock & the market tell us, don't try to predict it. If I had listened to the bears, I'd still be in 100% cash now and might be there for a long long time, meanwhile everybody that listened to the market is raking it in. I want to be 100% right, that means I have to do what the market tells me to do, just that simple. It's amazing I get all kinds of arguments from the bears. I'm an opportunist, meaning I'm bullish when the market trend is up, bear when market trend is down (or going sideways), that's it. I'm not a perma-bull.

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  28. Gary - I would had sold after the first day it's down (since most likely trendline would be broken), trust me, I'm not that kind of "buy & hold guy". When the stock & the market tell me to get out by breaking the trendline, I'm out, keeping the bulk of the gain. If someone held after it'd gone down that much, then they didn't listen to it, that simple. When you don't listen to it, you have to suffer the consequences.

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  29. Gary - I even put in stop orders & not even look at them much (raising stops as trend goes up). That's how easy I make it. I let the market take me out of the position. I don't lose sleep over it.

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  30. I'll let you make money on any further upside. It's just too late in the intermediate cycle for me to buy. On top of that we have a break of the daily cycle trend line. A weekly swing. A move below the half cycle low, and a 4 day rule possible trend change. There are just too many odds against the long side right now for me to buy. I'll wait until we get an intermediate cycle low and buy into that decline.

    That's the great thing about the stock market. If one misses an opportunity there will always be another one coming along shortly :)

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  31. AGH / Elaine / Phantom / Gracegift - Do you guys see how the leaders like AAPL & PCLN led the market turnaround today ? Always follow the leaders, they're the best predictor of where the market is heading.

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    Replies
    1. the Manipulators just move some Qs stocks with high weight to try get a rally. This is old already and long in the tooth.

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  32. plus..they are hitting the USD. Same old, by the same crooks.

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  33. The market dipped far enough to test the Feb. 29th high. This is the first level of support and the most likely level to try and stage a test of the highs. One probably just needs to watch that level from here on out. If today's lows get breached then we are almost certainly into an intermediate degree correction.

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  34. matrix - I've stopped trying to figure out what's behind the moves. Yes, Bernanke & others may manipulate things, but guess what, I could care less, if the market tells me to get on board cause there's money to be made, I'm in (no questions asked).

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  35. Markets are finally coming into Gary's wheelhouse. Totally agree with Gary, now, on his outlook. Especially a slightly new high this year in SPX after the sell-off, as the FED likely moves towards more QE. Remember Jackson Hole? What I'm not bullish on however is the USD. Best, G

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  36. Yes, they manage well to get the BTFD at first support 1378 and 12896 highs....Turn for them to drive all the mkt on 5 stocks...again...

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  37. AGH / Elaine / Phantom / Gracegift - Keep your eyes on KORS & HLF. My model shows they should hit new high in 2 weeks. I bought call options on them.

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  38. This is just how markets work. Most successful traders are trend followers. So they tend to buy at support levels in the direction of the predominate trend. We hit one of those levels this morning. Traders can buy at that level with a very tight stop.

    That's why you get these turns. It's also one of the reasons it's so hard to hold short positions. These violent counter trend reactions are tough to hang on through.

    It's a big reason I don't bother trying to sell short anymore.

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  39. It's amazing the number of bears on this blog. I think Tiho & I are the only current bulls.

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    Replies
    1. Jesse Livermore teaches to remain bullish in a bull market. So does Charles Dow of Dow Theory. So do many other famous investors. Bull markets comb a wall of worry and S&P 500 will top just like all other major 14 tops since 1929... on huge breadth weakness, cyclical underperformance and bearish divergence. That is not what today's picture looks like.

      I wouldn't buy stocks here, but if I owned stocks I wouldn't sell here either. I am more interested on PMs sector, because in my opinion, their cyclical bear market has already ended for certain assets like Silver and will soon be ending for other assets like Gold Miners. I want to establish good long term positions in that sector, because of its relative under-performance vs equities. Eventually money will flow into commodities and away from stocks.

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  40. Gary - Bingo !! You finally hit home my point all along. The trend is your friend, until it's broken !

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  41. I'm not really one or the other. I just know it's dangerous to buy with the two leading stocks in parabolas and 27 weeks into an intermediate cycle. At this point your trying to snatch the cheese off the mouse trap.

    Yes if you are fast you might get a reward but is it really worth the risk?

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    Replies
    1. Are you serious? You've been saying that the runaway move will crash on every 5th post.

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    2. Runaway moves typically generate a crash or semi crash once they end. I don't know if this one has ended or not. The leading stocks holding up would lead me to believe that it hasn't ended, but the action in the stock market and banks would suggest it has. Mixed signals at the moment.

      I'm just sitting on the sidelines waiting for either the stock market to move down into an intermediate cycle low or the precious metal sector to give some indication that the selling has ended.

      I will say this, if Bernanke can break the dollar rally then gold's correction will be done and there's no telling how long the stock market can rally. Probably until oil ruins the economy again.

      Just from my observations here in Vegas $4.00 gasoline is slowing the economy.

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    3. Beginning to see the signs of some folks making decisions due to cost of gas. It's already in our food line and other products going up silently. Remember the 70's many did the same thing. And we aren't even in gas lines or rationing yet alternate days yet.

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  42. Gary - It was worth it when AAPL was at $500 (when a lot of people thought it was parabolic then). If I had listened to those people, I'd miss out on a 25% move. Even if it gaps down & breaks the trendline tomorrow, I'd be way ahead of the naysayers. I'm not saying to go out & buy AAPL & PCLN, since there are other stocks that are just now forming trendlines, but even if they buy AAPL & PCLN & watch their trendlines, it's better than keep fighting & hating them, cause these stocks are saying (right now) that they'll probably going higher.

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  43. Who is fighting them? No one with a lick of common sense is shorting either one of those stocks.

    BTW a missed opportunity isn't the same thing as a loss. There will always be another opportunity. As a matter of fact there will be a great one at the intermediate cycle low. All one needs is the patience to wait for it. I think that will probably generate an incredible opportunity in miners when it arrives.

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  44. The market can lead us to where the money is, but it's up to us to jump on & try to get it. I think it just comes down to the defensive mechanism in human behavior. Most people would rather be right, than making money, so they keep fighting the market even when they're wrong. I'd rather make money & let the market be right, cause it'll always be right. Okay, the bears are probably sick of me talking, so I just stop here for a while & let the market do the talking :-)

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  45. Thanks Quy,
    Dont really try to trade many individual stock maybe I should start :-)

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  46. Gracegift - Keep an eye on the 2 I mentioned (KORS, HLF). If they make new high in the next 2 weeks, I'll continue to post any new plays I enter, then you can decide if you want to give them a shot. I have half of my money on the proven leaders like AAPL, PCLN, CMG, ISRG, the other half of my money I play short term for quick pops based on my short term play model. Believe it or not, so far, my short term plays outperforming the long plays. Let's see if KORS & HLF will hit in next 2 weeks.

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  47. quy,

    great call. went long ar spx 1381.

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  48. Phantom - We take cues from the market okay, just watch that trendline like a hawk. If you want to make it easy on yourself, put in a stop order at 1369.

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  49. Quy,

    I totally agree with you're trading style. Keep posting your comments and know there are people reading this blog and are in agreement with you. I stopped trading the metals at the beginning of the year and traded only 2 stocks since then, AAPL and PCLN. Until the market tells me something has changed, I will continue to do so.

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  50. bamster - you got it. Yep, don't let someone else have those shares 'til the market tells us to. I put in stop orders (right below trendline)so I get my emotions out of the way, in case the trendlines do break down. Glad to hear my posts are of some value.

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  51. FWIW I think one could place a stop below today's intraday low. If the market is going to bounce it should do it immediately and not breach the support level of the Feb. 29th high (today's low). There is a Bollinger band crash trade in effect tonight also. That should generate a bounce also. Whether the bounce can make it back to new highs remains to be seen.

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  52. 2011 lo, IMHO, was a yearly low and I expect next IC low to come at a higher low

    Every IC peak-to-low since 2009 has taken at least 3 weeks and has at least touched 13-wk EMA. This, of course, gurantees nothing, but can provide a background


    I think it likely to have another push for a lower short-term low before a better bounce tp perhaps squeeze a bunch of shorts

    This has been the longest IC cycle since 2009 (27 weeks and counting) and next one may be shortened and, I think, that fits well with Gary's 3rd chart of a fast rise and fizzle after the next IC low

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  53. Tiho, I enjoy very much your posts, providing as they do a nice contrarian pivot to Gary

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  54. The market doesn't have to bounce today. There is nothing wrong with market falling for a day or two more towards 1,350 previous resistance levels from August 2011. It probably won't fall further, but I'm just saying it would be nice if it did.

    The area around 1350 should not breach the recent lows made in early March and should also act as a polarity support (previous resistance). Short term breadth like McClellan Oscillator is becoming oversold, but it would be nice to go a step or two lower to get a really nice short term oversold position.

    During this rally from December 2011, majority of the sentiment indicators never reached the extreme levels we saw in April 2010 prior to flash crash. This is true for sentiment surveys and mutual fund flows especially, where retail investors do not believe into this rally and did not buy one inch of it. On top of that, we still have economically sensitive cyclical stocks leading the way higher.

    Having said all that, I think the cyclical bull since March 2009 is ageing and coming closer to the end. Profit margins are at all time high levels, corporate earnings are at an all time high level and recessions / bear markets occur every 4 to 5 years on average over the last 100 years. There will be a time to be bearish, but I believe it is still too early.

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  55. TIHO, FWIW, and it probably is worth nothing, I agree with you that it is too early to become and all-out bear, especially as far as US-based assets are concerned

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  56. A few people have commented on a potential Inverse Head & Shoulders in $Gold. If you want to get technical, it is not a confirmed Inverse Head & Shoulders until price closes above the neckline, so to gamble on that pattern now is unwise. Even more, you can only call that a Potential pattern if you completely ignore the spike down to 1535 on 09/26/11. If you do include that spike down, which you should, then strictly speaking you cannot draw an Inverse H&S in $Gold.

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    Replies
    1. There is a chance that price could sink far lower twoards 1535 and eventually flesh out a right shoulder, but it's way too early to say. So one day there could be a potential Inverse H&S but it won't be clear or tradable for weeks, or even months.

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  57. I'm a US Dollar bear and have been short the Dollar since middle of January 2012 via buying Swiss Francs, as well as long SIlver since 29th of December 2011. I am of the view that the Dollar will not make a new high above 81.50. My positions are still profitable despite dollar's strong movement last week.

    Having said that, depending on how far the current risk aversion correction across many assets moves, we could have further movements in the US Dollar. Therefore, while I still hold my short Dollars and long SIlver positions, in this mornings Asian trade, just as a small term trade / hedge, I bought some US Dollars against the Canadian Dollar.

    I think that the sentiment on the Loonie is quite optimistic, so from a contrarian point of view, there is room for a drop in the Loonie around these levels of parity. Correlation wise, Canadian Dollar and S&P 500 tend to move in similar "risk on" directions. However, that is worrying here is that despite both of the assets (S&P & CAD) bottoming on October 04th 2011, the S&P 500 made a new high above May 2011 resistance, while the Loonie has not. It is seems to be weak in this respect.

    Since majority is bearish on the Dollar, including me... well to be honest - especially me. So with that in mind I bought some Dollars today as a small trade / hedge.

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  58. Where has Gary said he buys physical from again?

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  59. Watch how the leaders AAPL & PCLN are up 1% this morning, the market will follow them up soon. The correction looks done, earnings season is here, could provide a pop up.

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  60. Quy, you are right on the money. AAPL is up today signalling that the cyclical bull is still fine, while the S&P 500 is probably moving into a last bit of an oversold condition from the short term perspective. The market could stop around 1,370 or even 1,350 at worst.

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  61. AAPL & PCLN may be able to fight a strong dollar but the general stock market is showing no ability to do so. It's still very early in the dollar's daily cycle. Unless Ben does something to break the rally this is the best opportunity for an intermediate degree correction.

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    Replies
    1. Gary,
      Do you think that the collapse in yields is telling of what will happen to the dollar? If yields are less attractive, the $ should decline and support level should get taken out. Perhaps we already have Ben's answer.

      Delete
  62. Well, Quy, I hope you are correct. Right now we are only 7 points away from that 1370 mark you mentioned on the S&P. Not all analysts are expecting good earnings reports, so a tumble could come rather than a pop. I added a little to my small SPY position at the lows yesterday, so hoping for a turnaround this afternoon. I'm not going to hold it much longer no matter what AAPL and PCLN are doing, as the market does not seem to be following their lead. Not even a bounce today on the Bollinger Band crash!

    ***CNBC is talking about lowered expectations for earnings right now, so maybe we WILL get an upside surprise. Those talking heads are always wrong!

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  63. ckpc - I got stop in at 1369, that will take my emotion out. Let the market take us out, don't let your emotion decide the trade. If you can't stand to watch, put in the stop & then do something else. I think this is just a last effort by bears to take this thing down. I don't think they'll succeed (with AAPL & PCLN up), but if they do, we'll be out, no questions asked. I've been through this many times, where it gets close to the trendline & bam, it pops right up (the big guys are watching the trendline like a hawk), cause to them if it gets there & it's still a bull market, it represents cheap buy for them.

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  64. GDX Gold Miners Weekly Channel Chart,With Poss Support Levels:

    http://screencast.com/t/ya7NyDOIzv7

    Gann360

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  65. I don't think I would touch anything until the stock market puts in an intermediate correction. The weekly chart has moved below the 10 WMA. If it closes there at the end of the week that almost always signals an intermediate decline has begun. With the dollar starting it's second daily cycle up things are getting dicey. I'm not sure two stocks are going to be able to levitate the rest of the market against a rising dollar.

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  66. Jamie - At 1369, I'm out, I'm not waiting for 1350. Heavy support at 1370, that's where the trendline is, plus that was the break out point from last year's high. This thing could fake us out by going below the trendline, but then pop right back up & continue the uptrend. If that's the case, I'll be out, but will be right back on it. I'll do whatever the market tells me to do. He's the boss.

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  67. Gary - It's not just the 2 stocks. I only used those 2 cause everybody knows them. I track over 50 strong growth stocks & they're all hanging in there. Again, you may be right this time, but you have to admit you've been bearish all along too, while the market moved up. If I weren't in already, I'd still buy right here cause it's close to the trendline, representing potential cheap buy, if it kicks me out by breaking trendline, small loss, no big deal, but potential big gain. None of the tools works 100% of the time, that's why I'd rather stick with what the market says.

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  68. Gary,
    I DO agree with your advice, which is why I am 99.99% in cash. No way I'm going to miss having funds available for buying the upcoming IC low. My SPY calls are almost a laughably small position, which I took just to see if Quy's theory plays out. No biggie if it doesn't.

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  69. ckpc - Thanks for the vote of confidence, man :-). It really depends on how much the 0.01% though. If you're a billionaire, that's a big vote of confidence. All kidding aside, the market will tell us soon if the trade works out.

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  70. I told Gary for weeks that if he feels super bearish about the current rise in the stock market, he should have bought the Japanese Yen by shortin the US Dollar. The Yen is the real safe have and has done well since the start of the month as stocks stated correcting.

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  71. My stop hit, so I'm out, 100% cash now, no questions asked. The ride was worth it.

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  72. Quy,
    No reflection on you, sweetie. (And, by the way, I'm a lady.) I found your arguments had a common sense approach which resonated with me, so I dabbled a losable amount to test your theory. At the moment you are still an unknown entity to me, so it wouldn't be prudent to jump in whole hog until your advice bears out.
    Gary has a proven track record, so he pulls a lot more sway, since I'm still a pretty novice trader.

    Billionaire??? Not hardly!

    Anyway, looks like we just got stopped out, so it is now a moot point.

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  73. DOW



    http://traderjoed.blogspot.com/

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  74. ckpc - Ooops ! Thought you were a guy. My bad.

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  75. We just saw the bottom of the 7 month PM sector correction. Amazing moment. Very important juncture. Now its time to watch the SPY/GLD ratio. Best to all, G

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    1. This comment has been removed by the author.

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    2. You must be talking about Gold stocks? I swear Silver bottomed on 29th of December, which is about 4 months ago.

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    3. Yes, I understand your point. Perhaps a better term would have been "the end" of the 7 month PM sector correction. What I mean is that gold stocks, both junior and major, and the metals themselves will of course have different bottoms. However, I think the phase is over, as this was a very important juncture. You note, as I have been watching for a year+, down the thread, that Gold vs the Indexes may have reversed. Yes, exactly. Best, G

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  76. short term ,Possible Bullsih Backtest of Breakout level.
    lets see if it Holds:

    10 Min GDX

    http://screencast.com/t/SuNoBVGFST

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  77. Bull or bear, one has to admit the markets, all of them, are sick. My god, look at long bonds. The swing over the last two months has been absolutley insane. This is what you get when markets are driven by liquidity. The Fed is an absolute cancer and has destroyed any semblence of free markets driven by fundamentals (i.e. true productivity increases and not just credit growth!).

    This whole market is a farce. It should bounce near term as we are way oversold, but the selling probably won't subside until Bernanke cues up QE. And only Bernanke knows what the trigger point will be.

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  78. Even BB doesnt know . He waits until the banksters tell him what to do .

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  79. This comment has been removed by the author.

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  80. This comment has been removed by the author.

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  81. This blog & iPad don't go well together.

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  82. Bernanke does swing the markets up and down, especially Bonds and PMs which relay on more QE. Having said that, when investors in majority get too bearish and prices get oversold enough, than you know we are close to the bottom regardless of what Bernanke says. The market knows what he will eventually do anyway... print more money.

    I think we have arrived close to or at that time frame right now. The stock market correction has failed to drag Gold prices lower, despite investors like Gary telling us for months it will do so. Dow Jones and S&P 500 fell hard in the last three days, with Dow down over 200 points last night. At the same time Gold is up three days in the row completely brushed off that sell off. It is amazing to also see S&P 500 down by over 1.5% and yet Mining Juniors up over 3%. Gold vs Dow ratio now did a major reversal in my opinion.

    On top of that, sentiment on Gold as well as Silver is now at short term panic levels which usually signal an intermediate bottom is about to occur. Put options are now matching Calls, for both Gold and Silver, which means we have reached levels where previous intermediate bottoms occurred. Finally, Bullish Precent Index for Gold Miners has now reached 10% readings - usually a strong signal of an intermediate bottom happening as we speak or in the next several days.

    If you missed out on buying Silver around $26/$27 last time, this is most likely the beginning of a first HIGHER LOW and a signal that the cyclical bear market, which started in May 2011 and declined from $50 resistance, is now coming to end. I'm not saying Silver will now blow up and go to a $100 per ounce tomorrow, but what I am saying is that in this secular bull market, time to buy is on major lows... and one of these lows is right in front of us right now!

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  83. If the market continues down PMs will eventually get sucked down with it. Gary was not born yesterday. He knows what he is talking about and he is right to err on the side of caution. No one can say when the market will stop bleeding. We just have to wait and see.

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  84. Quy, in all honesty the right decision was to step aside as this market climbed. The internals were horrible and still are horrible.

    Who in their right mind invests capital in a totally defunct market? The smart investor preserves capital as their #1 goal.

    This correction has just begun. Copper broke down last night out of a triangle pattern confirming this IS just the begining of a trip back to reality.

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  85. BPSPX was hit hard. Due to NYMO read of minus 103 we are due for a bounce in Broad Mkt. Goldstocks 1st. day of decoupling. We still need a Lower Low in SPX..imo

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  86. There is no low risk trade yet long or short.

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

    Patience is a virtue.

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  87. Odd factoid: Charles Nenner predicted a low for gold this April 19th. He's Jewish, obviously as he always wears his cap.

    April 19th is Holocaust Remembrance Day.

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  88. Veronica, any stop or sell signal for your system ?

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  89. MARKETS

    http://traderjoed.blogspot.com/

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    1. Joed,

      Your posts would increase in value dramatically if you took a moment to add one or two sentences which summarize the problem you are discussing or the assertion you are making, thus informing people as to why they might want to visit that link and what benefit the recent blog piece has to their current situation.

      Repeatedly posting "Markets" doesn't quite nail down the issue, eh?

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    2. I agree. Whenever I look at his blog post I can't tell if he is long or short or plain confused

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  90. Tiho,

    Cycle theory suggests a strong possibility of seeing gold move to one more low in the next week or so, but that low should be an intermediate low, as you suggest. Alternatively, if gold moves above $1697, we will know the low is already in, but we cyclists will have to re-phase the last DCL for gold to an unusually long count.

    I prefer to follow the route that does not involve an exception to cycle theory. In other words, I will buy either a new low for gold or a break above $1697. In the latter case, I have no problem forfeiting the next $40 of move in exchange for the assurance a low has been set. I expect gold to test its high above $1900 during the next intermediate cycle, so there will still be plenty of room for profit.

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  91. BBpoint, Still no stop or add on buy yet, but they will generate soon with some strength in gold. I'm still hoping for a washout move but time is ticking away.

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  92. You might recall I mentioned that the drop last thurs (to the most recent low) met my parameters for another 'catch the knife' purchase like I do. I didn't take that one for a number of reasons.

    The markets have a way of every so slightly causing people to take trades they shouldn't and ignore those they should take. I speculated that that trade might have been a legit low due to my feeling not to take it.

    So far it has bounced as I would have expected and I'd be long and holding at this point with a profit. I'm not in though - obviously. So my thoughts from this point....

    There is a current expectation gold has one more sharp drop down. It might, but that missed buy point and my feel of the situation is that there is just as much chance that the low has already occurred 3 days ago.

    Let me rephrase that a bit from a trader standpoint: I think there is enough chance that the low is in to place a bet (usually 1% net worth from my view) on that belief. If stopped out I just accept the loss and conceed that there is a leg lower as expected. If not however, then I get in very early with a leveraged position (the higher you move up from a low the harder it is to get leverage.)

    So I'm checking out the current trading and trying to find a good entry with a good stop to go long. Maybe it just runs higher and leaves me behind (and then triggers that 1696 level all the cycles guys are watching), but that's life.

    So, to summarize, I think it is worth it here to risk a small amount with a long position betting the low might be in. I don't have that long yet cause I can't just buy randomly (I still have to try and find a place where I can put in a reasonable stop that will hold - afterhours or overnight doesn't usually qualify).

    If I get stopped out, then I'll defer back to cycles and look for that lower low.

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  93. (Due to the volatile nature of thursday's low I would have only been able to manage 1x at best, so missing didn't really affect my account totals even if I had gone long. Still...it is always good to get a starting position gather profits and build bigger from there, so if the low was last thurs I'll be a bit worse off trying to get in here.)

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  94. Oh...and as for the cycles guys calls...I respect them as always, but cycles havent exactly worked perfectly lately and the last 2 intermediate gold cycles were short (violating the 'long then short' or 'short then long' pattern.) Who is to say this third one isn't short as well? Just one more reason I'm gonna listen (a bit) to my own voice and probably make an attempt here.

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  95. Doc - I understand your point of view from the cycle theory and you have laid out a low risk entry profile based on two scenarios which is very good way to trade / invest.

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  96. Your analysis is spot on. Though no one knows when it will pop, it is likely to pop soon. Wednesday's volatility is a sure sign that smart money is selling into strength (Apple and Priceline were down whilst the market was up, first time in awhile.) I sold half of my longs in both mid day.

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  97. The longer I play this game the more I feel that guessing direction might be a game for suckers.

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  98. Hope you guys bought some Silver around $31.50 in the last few days of quiet as it was bottoming. We could now have an upside bullish readout on our hands... sentiment is very very negative!

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  99. I would rather try a position in miners. The bullish percentage is at rock bottom levels and they are extremely oversold. I think the odds are probably better for a bigger percentage moved here than in the actual metals.

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  100. Call me crazy, but I got back onto SPX yesterday when it got back above 1370 (market's way of saying "give it another try"). My risk if it goes back below 1370 is only 0.2%, meaning even if it flip flops, I can try this 10 more times & only risk 2%. Oh but if the trend does in fact continue up, it'd be well worth the risk.

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  101. No thanks... silver for me tip $300 by the end of the decade. Meantime buy every crash and correction you can!

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    1. To each his own. I like to buy into the bleakest sentiment as that is where the outperformers usually come from. Silver already had its day in the sun last year. That's not to say that silver can't or won't go to $300 eventually. But it's time for the mining stocks to have their day in the sun. Sentiment and breadth have reached horrendous levels that could spark at the very least a sharp countertrend rally and if Bernanke is successful in breaking the dollar rally then this could be the very early stages of the bubble phase.

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    2. Completely agree and I wrote it all on my blog couple of weeks ago. Having said that, I just accumulate Silver. While Miners will have their day in the sun soon, and Gold has already had an amazing decade for the last 10 years up in the row, SIlver will have an amazing decade itself which is more than just 6 to 12 months of outperformance.

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