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Saturday, August 11, 2012

BULLS STILL IN CONTROL, BUT TIME IS RUNNING OUT

In last week's article "Three Weeks Left" I outlined a brief synopsis of what I was expecting based on how the daily cycles were unfolding. So far markets are playing out pretty much as anticipated.

This week I'm going to go a bit more in depth and tie cycles analysis with the upcoming fundamental calendar, namely the next two FOMC, and Jackson Hole meetings.

As you may recall from the last article, the dollar index is in the process of moving down into an intermediate degree bottom, which in turn is triggering a rally in virtually all risk assets, most noticeable in the energy and grain sectors as the CRB exploded out of its three year cycle low.

I think we will probably see the dollar continue to drift generally lower for most of the remainder of this month, possibly even into the Jackson Hole meeting as traders continue to hope for the next round of QE.

When the Fed fails to deliver, which they almost certainly will, we should see the market start to move down into its daily cycle low, which coincidentally is due almost exactly on the September FOMC meeting.
 



The September FOMC meeting will be the opportunity for the Fed to shorten the stock market intermediate cycle and possibly abort most of the move down into the yearly cycle low due in October. However I think the Fed is probably going to balk at the September meeting also, and when they do it will initiate the real move down into the normal timing band for an intermediate, and yearly cycle low in late October, or early November.



I suspect that the Fed will finally cave at the October meeting and begin an open ended QE with the misguided goal of achieving a nominal GDP target and lowering the unemployment rate. The one caveat would be that the Fed meeting in October would call for a slightly short stock market daily cycle, which is not unusual if the market is experiencing a hard decline.

Another possibility, although one with lesser odds in my opinion, would be a final intermediate, and yearly cycle low on the November employment report, or the presidential election results which would stretch out the daily cycle to its normal duration of 35-40 days.

Based on the current cycle count, and taking into account the timing band for the next two FOMC meetings, and the dollar's current intermediate cycle we should trigger a top in the stock market sometime around the end of August. However let me warn bears that the move down into the intermediate bottom is not going to be an easy short. I expect we will see most of September chopping back-and-forth with several retests of the highs before finally rolling over. Most of the losses will probably come in the final 5-10 days before the bottom. Like I said not an easy market for bulls or bears either one.

Gold is a bit of a different animal than the stock market and its intermediate cycle has a different duration. But gold is still tethered to the dollar index as it continues working through the consolidation phase of this new C wave. Here is a chart I posted back in February depicting the extended consolidation that I was anticipating this year.



Considering that gold is still in this consolidation phase I think we are probably going to see a test, or more likely a break of the D-Wave trendline as the dollar completes its move down into its intermediate cycle low later this month. That should be followed by an intermediate decline that should bottom ahead of the stock market in mid to late September.



At that point I suspect gold will start to sniff out the next round of QE and will begin to resist the remainder of the dollar rally, very similar to what happened between May-July.



Open ended QE, which I expect to begin at the October FOMC meeting (there is a small chance that the Fed will act early in September), is going to be the driver of what should be an inflationary spiral, culminating with a parabolic move in the CRB and the next leg up in the secular gold bull (probably to $3500-$4000) as the dollar drops down into its next three year cycle low in mid-2014.

SMT newsletter.

162 comments:

  1. Good report except there is less than 0% chance of any QE announcement one month before a presidential election.

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  2. "the dollar index is in the process of moving down...triggering a rally in virtually all risk assets, most noticeable in the energy and grain sectors"

    Grain has been rallying since mid to late June, based on the worst drought conditions in the US since 1936.

    I farm, but I thought it was mainstream news by now. The dollar moving slightly lower didn't move corn $3 higher.

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  3. Good insights, will see if QE is released (announced).

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  4. Nut,
    In case you didn't notice the grains bottomed at exactly the same time as the CRB, which bottomed when the oil cycle bottomed.

    I had been telling everyone for weeks to focus on the oil cycle as it would trigger the bottom for the entire commodity complex. Let's face it the drought conditions have existed all summer but they didn't start to matter until the oil cycle bottomed.

    The dollar moving down into it's intermediate cycle low over the next couple of weeks is just going to exacerbate the move up in commodities.

    I've been doing this for years but I'm still amazed at how cycles can predict major turning points like this.

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  5. Instead of all these crazy bets and stipulations on these bets, why not just bet on a number where gold tops in the next c-wave

    $4125 by spring....let's go, we can have a burrito party at Gary's house

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  6. Good attempt to make some sense of what is in front of us. Clear (even with your 3 scenarios) that certainty is not evident..remains that way...uncertainty and fear will rule. Dumb/impatient money will always try to follow the market higher/or lower as the case may be.
    The short term moves can/will eat you alive. With every passing day of being sidelined we have one less day of trading /investing..waiting for the ultimate break higher...to commit...so far this year...if you werent in equities (and traded them on the lows and highs with perfection) what else are you making money in ??? Currencies..Bonds....???
    I continue to believe in the only certainties in life...death, taxes,manipulation...and the secular bull market in Gold. Time and patience will bring just rewards. The psychology of the market hasnt changed....still ruled by fear and greed.

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  8. This comment has been removed by the author.

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  9. No QE this year.
    All evidence points to diminishing impact of QE, yet everyone expects QE to put another higher floor on stock prices.

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  10. I should point out that QE did abort the bear market that began in 2011. So I'm not really sure what you mean by diminishing returns.

    Currency debasement is keeping asset markets inflated, which was all it was ever going to do anyway.

    I think we all know that printing money was never going to create jobs or real prosperity. It never has in history, I don't know why this time would be any different.

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  11. Gary,
    the only way traditional QE works is by lowering the bond yields. What thus happens is stocks trade at higher multiples as pension funds are forced to own them.
    Two factors prevent this from going on forever.
    1)There is a limit to how low you can push down the 20 bond yields.
    Think about it. IF 10 years rates are 7% and they move to 5% will people switch into stocks? Sure.
    Bring it down to 3% ..yeah even more.
    At 1.5% everyone who has to be in is in, or very nearly so. Will bringing it to 1.3% have any effect...maybe a little but nowhere close to the initial part.

    You are a weight trainer. Tell me what happens when you increase your workouts from 1 set to 2 sets?
    You probably get double the benefits.
    If you are already doing 10 and you go to 20 will you get twice the results? What about from 20to 40?

    2) Even if stocks trade at higher multiples, there is nothing to stop earnings from going down.
    Even with higher multiples stocks can go down.

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  12. Nicely said Saif,
    Even I could understand that logic. It kind of shores up the 'going long' the short TBT trade idea, doesn't it?

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  13. so no QE is coming and the world is coming to an end....everything is going to 0

    so what caused Gold to quadruple in the 7 years before anybody even heard the acronym 'QE'?

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  14. I think of it in a different sense, but with the same end result. I doubt bond yields are the trigger for stock market appreciation. Traders buy assets because they expect them to go up, and they sell when they expect price to decline.

    When central banks create liquidity it has to land on something. Yes some of it will land in ultra safe bonds, but some portion of it ends up in riskier assets. The more liquidity created the more will end up in stocks and commodities.

    Eventually this creates inflation similar to what we saw happen in 2008. Even though the economy had clearly rolled over into recession, commodity prices, especially oil, continue to rise, spurred on by the Feds ultra easy monetary policy, and the Bush tax rebates.

    The top in the stock market doesn't come because interest rates can't go any lower, it happens because inflation eventually destroys the economy.

    This is what I expect to happen sometime in 2013. Eventually the CRB's rally out of its three year cycle low will just become too much for the global economy to withstand.

    Stocks will start a lengthy topping process and the economy will start to decelerate at an even faster pace. All the while the Fed will push harder and harder on the monetary throttle stoking the fires of inflation higher and higher as the economy starts to collapse.

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  15. I've actually turned more bullish on the stock market lately. If the only way out of this debt crisis is dollar devaluation, then sitting in cash or bonds won't be that great of an option. Putting money into great companies with very low valuations makes since. So many good companies with great products and services pay dividends now, and are trading at multi year low P/Es. This strategy has me up over 18% year to date. What could derail this strategy?

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  16. So everything ends with the collapse in 2014 - that's when the FED will run out of ammunition. What happens next ??

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  17. During the 1930's Great Depression in the United States, how did the wealthy people preserve their wealth? Anyone know this?
    Gary? You are obviously a wealthy person. Have you thought this through to the end?
    Isn't is possible the US Government will outlaw trading in gold to prevent "speculators" profiting from out of control inflation in the future?

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  18. SM I doubt it will be banned - that's the short cut everyone to rush into it. More likely it will declare war or something. Like one prominent Nobel prize winner said - alien invasion will end the crisis i.e. only then people will readily give their wealth to the military to save them ( and the planet )

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  19. Gary, if the Fed succeeds in actually creating any inflation, stocks should start heading lower.
    Look at every inflationary period and you will see multiples contract as DCF analysis leads people to price stocks lower.
    Only in case of sudden currency debasement or very high inflation, i.e greater than 20% pa, do stocks moves lower.
    Stocks are now priced for perfection. Even a small inflationary pricing on the long bond will see yields rise 100 basis points. That will have the reverse effect with pension funds pushing stocks lower.

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  20. Actually if things play out as I expect the bottom will come in 2015 or 16.

    The inflationary spike should top in 2014 as the dollar puts in a three year cycle low.

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  21. Saif,
    Yes stocks will head lower eventually, but not at the beginning. At first liquidity will flow into everything. It's only later that it will start to leak out of stocks and move faster and faster into commodities.

    We got a text book example of this from 2006 to 2008.

    It started as the economy began to slow down in the summer of 2006. We should have got a four year cycle low that year and a pretty severe recession.

    Instead Bernanke seriously debased the currency which delayed the recession. Then as the subprime mortgage market started to implode Bernanke began to debase at an even faster rate.

    At that point it was too late though. The stock market and the economy had already rolled over and excess liquidity was moving immediately into the energy markets.

    The sharp inflationary spike in commodities collapsed the economy resulting in a recession much worse than what we would've had if we had just allowed nature to run its course in 2006.

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  22. Study your history books. Every recession since World War II has been preceded by a spike in oil prices of 80% or greater in a year or less.

    The implosion of the real estate market pushed us to the edge of the cliff. It was Bernanke's monetary policy that drove oil from $50 in 2007 to $150 in the summer of 2008 that caused the Great Recession.

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  23. "Stocks are now priced for perfection" well yes but that's very general....miners arent.

    Bonds are priced to perfection too.
    Which one is wrong...or are they both?

    False beliefs for QE, improving economy/unemployment, productivity, GDP etc. A very long 5 years may very well turn into 20years. After all it took 4 decades of bubble building to create the mess. No crashes/immediate unwinding....implies a slow grind lower. At the end...what do they have...mountains of debt, worthless fiat currency, high inflation, very depressed standards of living, a noticeable divide between the have/have nots.. and more than likely civil unrest and possible revolutions. Bcos the world is so interconnected the revolution will not be symptomatic to one country in isolation. Overthrown govts with the rule of democracy again finding its feet perhaps, (self imposed Totalitarian control more likely). One could argue that that has been the plan all along. The world needs a revolution to bring about the NWO.
    Cant discount that theory because in all reality how do they solve the problems facing the world.
    Answer: They cannot. They know that and so should everyone else by now. Problem is 99 % of the world's population doesnt. They still cling to the belief that the central planners can work it all out for the good of all. Sorry to be the pessimist..but they have already worked it out....we are all on the road to serfdom.

    Anyone notice what's on the $1 US greenback (reverse side). Two circles (one with the incomplete pyramid). Challenge anyone to tell me what that means.

    The EZ model is all about the future united states of Europe. It wont fail...it cannot. Draghi was right ...anyone who is not listening to his words is missing the reality that is a NWO. They want to push everyone to a state of total reliance on government. Capitalism has had its chance and the greedy bankers with their reckless abandon have done irrepairable damage. The system is BROKEN and IT CANNOT BE FIXED.

    Too many people that live in denial and with false hope.

    Not trying to rain on your parade here Gary...trying to make sense of the crazy world is brave. Even you talk about 2014...2016/17 being low points ushering in another recession brought about through high inflation (seen in commodities) and a low USD. That IMO is an understatement. The order of magnitude is far greater than anyone can expect but should.

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  24. Gary, haven't you been changing your views lately that the top could come in 2016/2017? Doesn't that make more sense with your whole 8yr Gold bull cycle

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  25. Capitalism isn't broke, we just haven't had any of it since 2008.

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  26. Mike,
    The gold top. Not the stock market top and not for this particular phase.

    I believe stocks will top sometime next year. Gold will move down into it's next 8 year cycle low in 2016 and then the parabolic stage should begin with a final bubble top in 2017 or 18.

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  27. Gary et all...here is a final thought for today and which IMO is quite apt for today's world..

    "The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of an modes of getting wealth this is the most unnatural"

    Aristotle 350BC

    That is the crux of modern banking and to a large extent...financial markets.

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  28. Gary,
    So...for Gold bull: 2 to 3 more years for this new C wave 2012 to 2015, bottom in 2016 then bubble phase up to 2017 2018 timeframe?

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  30. I would apply the credit bust model to this situation not an oil price spike. The kind every European economy is experiencing in the ABSENCE of on oil price spike.

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  31. Just to put it out there, I think we will breach 1150 S and P at some point this year as earnings for Q4 come in below last year.

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  32. I would point out that the EU is trying to refrain from printing and that is the reason some European countries are in recession.

    The US has had no such reluctance to print and we clearly are not in recession.

    But there is still an end game coming because printing money is not the same thing as creating true prosperity. If we continue down this path then we're going to get the same result we did in 2008 with another spike in inflation and a collapse of economic activity.

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  33. Gary,
    EU expansion of balance sheet has matched and exceeded US Fed's expansion of balance sheet, so you need to explain what you mean by refraining from printing.

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  34. Isn't it clear that Europe tried the austerity path which delivered the expected recession.

    The US went down the stimulus road and we've avoided the recession...for now. But it's going to be much worse when it finally arrives.

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  35. Oh Gary, you change your tune when your argument has been proven wrong.
    You just said about printing and based on BS expansions u r clearly wrong.

    Now run actual fiscal deficits as a % of GDP for all the European countries. You will find that austerity is pretty much a term only.

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  36. Did deficits in Europe remain static or did they balloon by trillions like they did here in the US?

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  37. as a % of GGDP they have ballooned in many European countries. Actually they are the worst in Countries with the worst economies.
    If higher deficits explained better economies then Germany would be a basket case, whereas Spain and Italy would be flourishing.

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  38. BTW if Bernanke Launches QE III with Brent anywhere near $114, then I will consider that he is more insane than I thought.

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  39. People really need to learn the difference between fiscal and monetary policy. Austerity is a fiscal policy concept.

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  40. Im really not sure how you guys could be positioned to make any money - here as of the past week..let alone the last weeks/months.

    As suggested.. the dollar has now burned off an additional 5 trading days going absolutely nowhere, and is now getting (as I count) relatively close to the timing band for a DCL.

    Risk currencies have barely budged (as Ive skimmed what I could with plans to catch a touch more upside - now back in cash).

    It would be difficult to expect much further upside movement here (short of news driven spike perhaps!?)- let alone any kind of "sustained rally" - with overall trade volume now offically in the toilet.

    Currencies tell me "take the bench for a day er two".

    I really cant see/understand what anyone could possibly invested in over the last week - with any expectation of even the smallest return.

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  41. Blog,
    What if Aug 7th was a slightly early DCL? Then we should have 3 more weeks before an expected bottom.

    The dollar chart has become quite choppy, enough that's its difficult to determine where the cycle low is.

    Generally speaking an intermediate cycle decline resets sentiment. At this point sentiment still has a long way to go before reaching what I would consider the kind of levels that normally represent an intermediate bottom.

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  42. Just in time.
    Here Gary, see what your European "Austerity" looks like.
    http://www.zerohedge.com/news/italys-latest-record-debt-load-bigger-faster-more

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  43. Is there not room for one more complete daily cycle? in looking for the intermediate bottom?

    Once again...and forgive me but...Im extremely jumpy these days in pressing any trade or letting my guard down in this environment.

    With all factors included, Im just having trouble envisioning the best risk/reward scenario here and will keep positions small and hold time short...if anything at at all.

    Its hard to envision missing much up here, as AUD and NZD both lookin relatively weak - so we shall see!

    Trade extra safe fellows.



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  44. And Kaboom! - the dollar makes his move!

    In all...I cant stand the U.S session - almost always a tough time to enter trades - and almost always a great time to lose money.

    In any case....and just goes to show...ready to turn on a dime here these days.

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  45. long way to go to reset the sentiment, which means we could possibly have another DC after the current one in th IC?

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  46. the structure of Great depression

    http://humblestudent777.blogspot.com/

    currently the structure of $indu, Dow Jones Inductrial Average, rhythm well with the stucture of year 1929-1930's Great Depression.

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  47. http://finance.yahoo.com/q/bc?s=X+Basic+Chart&t=5y

    In June 2008, US steel's forward P/E was 7 before it began it's 90% descent.
    Good luck using P/E's to make great investment decisions.

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  48. Agreed. PEs are the most useless metric in stock valuation. Most people don't even know how to calculate the E correctly anyways.

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  49. If you want to use P/E use CAPE (cyclically adjusted P/E). Even then by itself it is not a great tool.

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  50. Saif, if you are of the opinion that the world is basically gonna end, why be long Silver?

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  51. Where did I say I am long Silver?

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  52. No, don't use PEs period. Every line item on an income statement including revenue is fungible and reported eps is a completely worthless number. On top of that most people have no idea how to adjust that number to make it something even resembling reality. What's even more worthless is the arbitrary multiple that is then applied to come up with the stock price

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  53. thought I saw you say last week

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  54. Nope.
    Check the comments again. You might be confusing me with TIHO, which a few people seem to do on this board.
    I believe he is long Silver.
    I have said that PM's will outperform Base metals a few times but I never said I was long any silver.

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  55. No Gary...disagree...
    The system is broken , Capitalism is not working bcos free markets dont exist.

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  56. Gary,
    based on ur cycles, if the dollar does bottom extraordinarily early, say it has today, does that signify anything?
    I.e have short bottoming cycles signified something?
    Thanks,

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  57. Occasionally we will see a short cycle after a hard decline, but that obviously isn't the case here.

    One also has to take into account sentiment. Intermediate declines are when sentiment gets reset. As of last week sentiment on the dollar index is still quite far from levels that typically indicate an intermediate degree bottom.

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  58. Gary,
    Question. Can cycles be mathematically defined, or do you actually trade discretionary with the hindsight of cycles?

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  59. Cycles tend to run in clearly defined timing bands. However, that doesn't mean that the odd cycle can't run long or short.

    The normal timing bands are respected about 70-75% of the time.

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  60. "[W]e clearly are not in recession."

    It is certainly not clear that the United States is not in recession (I actually believe that the U.S. is in recession now, and that the NBER will eventually designate the start of it as June or July).

    Even some of the big boys are starting to come around:

    http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2012/08/07/orders-and-production-no-time-for-complacency.aspx

    "So many good companies with great products and services pay dividends now, and are trading at multi year low P/Es. This strategy has me up over 18% year to date. What could derail this strategy?"

    The problem is that profit margins (which are mean-reverting) are at multi-decade highs (that won't last).

    The market remains overvalued - in (roughly) the most one-half of one percent overvalued of all observations:

    http://hussmanfunds.com/wmc/wmc120813.htm

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  61. SMT_troll,
    If all that you said is true(we're in a rescission and profits will fall) where do you employ capital? John Mauldon didn't say to stop investing, if fact he believes we will have inflation (if I recall, he likes mining stocks??)

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  62. seems like S&P wants to at least try to challenge the previous high

    so, despite all the blah-blah-hoopla-hoopla of perma creatures, the last intermediate cycle low, which gary called in advance, the trade has been a wonderfully lucrative one

    let this bbe a lesson

    to make money, ione has to play based on price and price, since last intermediate cycle low has been a series of higher low

    To make money in the market, one does not need to read every angst-driven drivel by every perma-head out there, one does not need to have all the econo-data-crap aligned. Market does what market does and the rest is just backdrop noise, sometimes in alignment and sometimes not

    all it takes is a bit of common sense and some tried and tested tool to give you probable entries


    no money is ever gain until booked, so, to book the gain, after one has successfully ignored perma-heads of all sorts, one needs to assess risk and come up with an exit strategy


    ignore the herd and prosper

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  63. All of you dreaming about additional easing will have a rude awakening. The smart money is short and getting shorter here. It is Q3 2007!

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  64. It's amazing that gold and silver had such a huge smack down this morning, yet so many of the mining stocks are in the green. It looks like the only way the FED is able to keep the market moving higher it to keep the dollar on a downward projection.

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  65. The dollar is most certainly "NOT" in a downward moving direction as of this morning. As Ive tried to point out here previously.....the $dxy is not even worth following short of consideration of a long / short EUR trade.

    Risk related currencies like the NZD for example...on day 6 of downward price action (yes 6 straight days) while silly indexes like $indu still flat as pancake at previously suggested resistance around 13,200.

    Huge Yen inflows here as of this moment - again while the "dumb ass" indexes still appear elevated/up - when in reality - RISK GETTING ABSOLUTELY CRUSHED HERE THIS A.M

    I still can't believe / understand why you guys dont follow/study/ trade currencies as opposed to participation in this stock market side show.

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  66. Currencies are good "tells"specially near turns.

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  67. I for one.........will let this daily gong show run its course...and look to buy the dip across the board - currency wise....ie...long commods (and a few others) short usd and yen.

    At these levels...with relatively tight stops (60-80 pips) I look forward to being stopped out.... as clear indication that we've topped out here.

    Otherwise....this will be likely be my last long entry regardless of outcome....as risk vs reward just isnt there.

    Again...Im not sure how you guys have made out "stock wise" - but imagine any trades initiated in last weeks are in ther hole. Damn.



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  68. equities are usually the last drunks left at the party

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  69. Yes the pain trade is definitely up and we probably have a little more upside left here but trying to pick exact tops and bottoms is a suckers game. Short-term traders can try to pick up a few percentage points here but it’s the proverbial "picking up pennies in front of the steamroller". People are waking up to the reality that Jackson Hole will be a non-event and the market will not wait patiently until the month-end to make a larger move to the downside IMO. The current trend may be up but the risk is to the downside.

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  70. I have to admit the dollar index has become so choppy that it's hard to determine where the last daily cycle low is. If it was 6 days ago then the dollar has potentially about 12-22 days to drift generally south before the next intermediate bottom.

    I noted yesterday that intermediate declines (in anything) are when sentiment is reset. So far the dollar hasn't dipped far enough or long enough to reset sentiment.

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  71. Again...if I could suggest...tracking currencies provides additional insight (if not in my opinion - the ultimate insight) into what is happening in the markets.

    Breaking it down as "risk related" vs "safe havens" in the simplest sense (I actually exclude both the EUR and the GBP from this) one can see what is truly going on.

    The $USD and/or $dxy is a unequally weighted basket of currencies (57% EUR) that (in my opinion) provides little insight.

    Take a look at movements in both EUR as well as USD AGAINST NZD or AUD...then youve got a good look at some serious "risk on / risk off" type moves.

    An aside....EUR /NZD has more os less flipped my trigger here as a buy (at least the 1H has now more than suggested so) - and this cannot be taken lightly as a serious...very serious indication of risk off.

    One cant really envision/imagine how the downtrodden and much hated EUR could gain any traction on the high yielding darling of commods no?...well this is what most people are missing when viewing currencies.

    ITS NOT EUR STRENGTH...ITS MASSIVE NZD WEAKNESS.

    Hope it helps guys....just my take on things.

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  72. SPANISH GOVERNMENT BONDS down 1.6%

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  73. Cycles difficult to call..hmmm
    No wonder .....How long can the game keep going on....for as long as the lies are believed and the truth is not revealed. Play the market to your hearts content....the 1-2% will be skimmed from your account at the blink of eye....for the individual its not a great deal...for the big boys ...every fraction on $$$billions matters.

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  74. Ok, I want to hear everyone's idea of how to make money in the next few days. I'm long gold contracts. What you got?

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  75. close stop. looking very oversold though.

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  76. Well....here we go.

    This will be my final re entry/long here as of this morning (likely in 2 separate orders/times - averaged in) considering this lil "dolla pop" an opportunity.

    Interestingly (and again) $dxy suggests like...a +.27 type move - resulting in a 50 pip move downward in EUR/USD obviously...and for most consideration of "risk off".

    Buck is acually down against CAD (a typical synthetic play for oil) and flat as a pancake against NZD and AUD....while YEN shows weakness across the board.

    Looks like a dip buy opp to me...have fun guys.

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  77. According to Bloomberg, Paulson is down 23% YTD on his gold and mining stock bets, and now has 44% of his fund in GLD. Something is going to give somewhere. I just feel it.

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  78. I'm officially confused. The dollar is going up when It is supposed to be in an int. decline. However, stocks aren't falling with the dollar up, but PMs are. And yesterday Gary was buying while Doc was selling. Can someone just tell me where prices will be next week, please?!

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  79. Well that was a nice pop. Hope it isn't a gold head fake.

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  80. What is amazing is that lot and lots of large scale gold field projects are being shelved by the major gold producers to conserve money. Should be a good back drop for gold moving forward.

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  81. slw,
    If indicators were 100% we'd all be rich. But, my indicators say stocks and PM's are oversold and the DX is overbought.

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  82. Gary do you write under the name Toby Conner? WSJ market beat just linked to article that was your last post but the writer was Toby Conner?

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  83. Caleb Yes, he writes under Toby Conor, Can you please share the link?

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  84. http://blogs.wsj.com/marketbeat/?mod=WSJ_topnav_na_markets

    under morning links

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  85. An interesting article on China.
    http://www.alsosprachanalyst.com/economy/chinas-copper-inventory-rebounded-to-record-level.html

    With demand falling so rapidly, base metals should not hold up much longer.

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  86. Paulson also raised its holdings in gold exchange-traded fund SPDR Gold Trust, as did billionaire investor George Soros’s Soros Fund Management LLC. Soros Fund exited its stakes in Goldman Sachs Group Inc. and J.P. Morgan Chase & Co., but it bought shares in social-networking company Facebook Inc.

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  87. Looks like the smart money can sniff out something...distaste for fiat and fear of inflation(understand Paulson has something like 44% of his fund in Gold). Thats aggressive and alarming for those that arent invested.

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  88. china's empty bridge

    http://www.youtube.com/watch?v=4PMuY5Kg8CE

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  89. SILVER

    http://traderjoed.blogspot.com/

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  90. Saif,
    Small blip on the radar. Powerful forces lined up to ensure continuation of the commodity bull.
    Liquidity is critical for the survival of commodities (& equities) markets...without it...it would crumble into a heap.
    There is massive volumes of liquidity coming very soon. YES I know that it doesnt solve the debt/solvency issues....at least not short term....INFLATION will go a long way to doing that.
    Its critical to keep the status quo...so that the banksters can keep making money....from well...money !! Damn Usury.

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  91. LM,
    U need to study history. U do get isolated Hyperinflations with Govt insolvency, but u do not get generalized high inflation with Capacity utilization so low.

    Commodities in most case are less than 20% of the cost of items. The rest is labor.
    Even a doubling of prices over 2 years from here would only create an additional 20% inflation and that is a stretch if it happened.

    Unless there is tightness in the end product u r not going to get generalized inflation.

    Yes Food may get expensive because of droughts and bad Govt policy (ethanol)but that does not lead to generalized inflation.

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  92. It looks like the bond market it showing some topping action. Is it possible (as I've heard) that when money starts coming out of the bond market and looking for a real return that, that is what creates a velocity in money into PMs and commodities? In the 70s when inflation was running rampant, interest rates where rising, until interest rates topped in the early 80s. I mean, because the bond market it so huge that is dwarfs all other markets, money leaving it has to land somewhere.

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  93. Its currency induced cost push inflation i am referring to. Gary has mentioned it several times before too.

    Flight of money out of Bonds/Treasuries....now thats something to watch carefully. Typical of where there is an expectation of interest rates moving up / inflation on the horizon. CRB and PM's will indeed be the beneficiaries. Follow the money (smart) and keep it simple.

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  94. Several on this board acted like I was crazy to short bonds, including Gary. We'll the bond king himself, Bill Gross called for shorting long dated bonds today. Guess I'm not a total idiot, or if I am, I'm in good company - ;P

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  95. I said it's risky to short bonds with the Fed actively trying to support the market. Plus bond cycles turn very slowly.

    There have been 5 convincing spikes in interest rates over the last three years. Any one of them looked like the real deal as they were progressing. They all ultimately failed.

    Is this the real top for bonds or are the shorts just going to give all their gains back like the last 5 times? Who knows.

    I'll let someone else fight the Fed.

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  96. Well I really don't know much about the bond market. But when I read Doug Kass report it mad a lot of sense. Then when I looked at the chart I was pretty sure I saw a knife catching opportunity. The trade is up 10% so I'll let it ride.

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  97. Mr Market will fight the FED...eventually it will win...always has.
    But short term...I wouldnt want to bet against them...they can be a stubborn bunch.

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  98. The complete lack of overall trading volume is an interesting phenom...as many of my usual "currency co relations" are out of sync/balance..this.. as well as the 9 straight days sideways (things have barely moved a hair!) has me a touch suspicious of further upside movement - short of perhaps some news driven blow off top type thing.

    I sense that markets are playing the waiting game with both China and EU news - as well as the ol J Hole meeting to follow.

    Like watching paint dry short of some nice moves in currency...scaling out to 100% cash here throughout the day.

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  99. Jason Geophert noted yesterday that not once in the last 50 years has this kind of low volatility marked a major top.

    Plus if we can get the dollar moving back down into a new daily cycle low for the next 2-3 weeks the odds would be good for at least a marginal break to new highs.

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  100. Just observations on my end.....as my trade plan does what it can to stay out of sideways/dead money markets - just as it looks to take advantage of trending moves.

    I dont particularily believe in "tops or bottoms" as these things tend to occur over time....and I just stick to the plan. No big calls coming outta me!

    As for the cycles Gary....are we not getting a lil closer to the timing band for a low in the dollar? - Im thinkin we are on like day 20-21 now no?

    Ive had my foot on the gas / then the brake here twice this week as we've chopped sideways (and have actually traded it quite well) but still have us in this "range" getting later n later in the cycle.

    In any case....enjoying the move here today (as posted prior - long commods vs both Yen and U.S)

    So you still consider weeks of dollar weakness? - In some ways I wish I had your conviction, but am just keeping nimble these days.

    However she goes - hope everyone is making money.





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  101. Based on the break of the trend line it's more likely that the dollar has begun a new cycle and is on day 7. There is the potential that the cycle topped today which would fit in with my expectation of another two or three weeks before the stock market tops.

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  102. Gary,
    "another 2-3weeks" that means after Jackson Hole? ->QE3

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  103. today's action has something to do with spain?

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  104. Pretty sure you mean "day 2" not 7..and in that context (an extremely left translated new daily cycle) with expectations of several days/weeks down adds up.

    BUT WOW! It gets pretty tricky in the finer details doesnt it - just cause of the trendline break/wow.

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  105. Day 7 is correct. Bottom on Aug. 7

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  106. huh....ok - I cant count it - but will put the thinking cap back on.

    Thanks Gary.

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  107. People need to get over QE3 because it's not going to happen. The FED isn't going to keep on buying bonds. Interest rates will rise. All IMO.

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  108. Check out USD / JPY.

    First on a long term daily chart - and note the massive 8 month consolidation ( back from May of 2011 ) then spike/trend change ....as of like last January......then note support at 78.00...and continued consolidation from May until present.

    And...could it be....here and now...literally right at this juncture? Likely the most lucrative trade of coming years???

    Youv've nailed it.....interest rates in the U.S will most certainly rise..(long before Japan).and the Carry Trade (already been in preparation/ie...the consolidations over past year in this pair) will shift - and we will actually see/witness one of largest "trend changes" of our time!!

    As interest rate differentials drive this pair thru the roof.

    Im about as long USD/JPY as one can possiblely get...now if I could just learn to spell.

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  109. I hope nobody takes Motley Fool serious. They are the biggest dis-information mill there is. I actually think they get paid to put out false information and mislead people.

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  110. Will have to give major props to Gary's cycles if this runs another two weeks until JH.

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  111. Significant implications "currency wise" here as of today..lending further support to Gary's count.

    Trendline break on WEEKLY USD / CAD - solid suggestion of further downside...likely in the same ballpark as Gary's count for coming weeks.

    Gotta love it. Keep on bankin.

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  112. so Gary, you mentioned there wouldn't be any significant USD downside likely until option expiry tomorrow, are you of the opinion that we should be heading down pretty hard starting tomorrow?

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  113. Mike,
    Where did I say that?

    Read the article again. I expect stocks and commodities to trade generally higher for the next 2-3 weeks as the dollar moves down into its intermediate cycle low.

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  114. Gary said...
    Maybe next week, but I think early the week after is probably more likely, and the dollar has to drop much further in order to reverse the bullish sentiment.
    August 7, 2012 12:43 PM

    Gary said...
    Unlikely we get any serious downside until after options X on the 17th.

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  115. Any serious downside in stocks not the dollar.

    The dollar should see serious downside risk over the next 2-3 weeks which should push risk assets higher.

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  116. I told the ex subs they were going to regret dropping their subscription.

    The markets are unfolding exactly as I was expecting. We are making good money and we have a game plan in place for how to play the next intermediate cycle low.

    One just needed the patience to weather the consolidation period. Unfortunately most people are lacking in the patience department and will probably not make much if any money during this bull market.

    Those focused on short term gain got knocked off right at the bottom. Right when you should have been buying, like we were :)

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  117. GL,
    Interest rates will "have" to rise.
    Bonds are already sniffing this out. Dont be surprised that they withdraw interest paid on funds held at Fed Reserve (like ECB did). JH could be full of empty promises...except for one.

    RNM...trend change...I believe U hit the nail on the head. U will see it in currency first.

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  118. I think the bond shorts are probably going to get fleeced again when the stock market moves down into it's next ICL later this fall.

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  119. Two observations from that GS....
    You either had to have the conviction to stay with the trend (patience) and weather the drawdwon in PM's and miners(ala Paulson who has taken an absolute bath across the board) or you stay on the sidelines and wait for the confirmation.
    Not having a crystal ball...and being able to know precisely when it was going to turn...perhaps it was/is approp to enter with the knowledge of where this is ultimately headed. That implies you have an appreciation of the effects of monetary stimulus. On the magnitude of what has been created to date alone...its enough (when u allow for the lag) to create sufficient effects on pricing. Concurrently the damage has been done to the USD....permanently !!!
    "Short termism" will eat you alive...leave it to the money masters..they have got deeper pockets...and besides ...they play with other peoples money.

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  120. Gary says:

    "I told the ex subs they were going to regret dropping their subscription.

    The markets are unfolding exactly as I was expecting. We are making good money and we have a game plan in place for how to play the next intermediate cycle low."


    It is getting really boring here with nay sayers and perma heads unable to defend their wrong positions

    Their silence and the air of civility is truly welcome, not to mention the gains

    That int cycle low on S&P has been minting $$$$

    higher-lows and higher highs mean that we can raise stops and book more when the time comes


    this is how money is made and not by reading every bit of perm-drivel blah-blah-blah

    follow the price, ignore the herd and thou shall be rewarded

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  121. Gary,
    I'd like to challenge you to post a few of your charts showing your predicted market action right along with a later chart showing how close your prediction played out to reality. If you can show me a few that were even 70% correct in timing and market movement I will resubcribe to your service. Fair enough?

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  122. it's not the percentage being correct that makes money. It's letting the winners run and cutting the losers short



    If you really wanna know if he's making money or not, just do a trial subscription whenever he offers and look at his portfolio


    if he would be losing money, some of his ex-subs would come here and taunt him

    and, no, I am not a subscriber of his, I was at some point and have learned quite a bit and do things on my own now

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  123. Bonds ain't finished their historic run yet so be sure not to overstay your shorts. Just ask those that prematurely buried the bull back in March when prices pulled back to higher lows before resuming their climb higher. Yields will be back below 1.5% faster than you can say flight to safety.

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  124. I just wonder what happened to those who went long silver and short stock market


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  125. isn't really any other trade out there than shorting the bond for the average retail player?


    bond market may eventually become straight monetization arena even if all demand dries up and even that would probably play first as currency issue than rate problem

    but hey, what do I know, I am just an index player

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  126. Piazi,
    There are many many investments out there making money. I manage money for clients and have over 30 different positions, in several different accounts. Year to date I am up 20.5% for my clients. I also trade futures and have one account up over 50% YTD. I can't just have one method of making money or my clients wouldn't stick around. Mining stocks are only about 15% of my invested money. But I have miners that are up 30%.

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  127. Piazzi
    You mean me? I got net short on Tuesday and added to my positions at the close today. Between 1270 and 1422 is a neutral sideways swipe in my book. IMO this is a topping process and I ain't smart enough to pick a perfect top so I'm legging into my positions here. My bet is we get a push to the top of the rising channel from the June bottom which is also a double top at 1422. I don't rule out Gary's push to marginal new highs either but I think it happens any day now rather than in early September.

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  128. Gold Lion,
    Just click on the second link in this post if you want to see a real time call.

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  129. gold lion,

    I meant the average retail who try to short bonds, not professionals who, hopefully, know what they are doing

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  130. rocksit,

    I have no one really in mind

    I just remember some were saying short equity and long PM, especially, silver and, at the time, I found the call, peculiar since a simple performance chart would say PM were not and had not been outperforming S&P

    I thought it was peculiar because why would one trade an underperforming asset class

    but, it's a market of different people and different methods

    so, I was wondering how they were doing and if they still stood short equity long PM

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  131. I think it was Tiho who was short the stock market and long silver.

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  132. BTW, short equity/long PM was not original as posted here

    it had been touted way before that by the perma-bear tireless posters of Zero-Hedge

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  133. Okay Gary, So when I click on that the chart looks like you predicted the DX to head down at the beginning of July and to bottom in mid July. That didn't happen. The dollar went from about 81.5 to over 84 by the 3rd week in July. I'm not saying I could do better. I'm just saying cycles ain't no crystal ball either. I think the main reason I like following your charts as that is challenges my biased ideas of what I think will happen. Hopefully, we'll both make money. Good luck!!!

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  134. Seriously? Did you not read the link? It says "Three year cycle low"

    The bottom half of the chart. The chart of the CRB?

    Here are the exact quotes from the article.

    "Today will be the first day in a commodity rally that should last roughly 2 years topping in mid-to-late 2014 when the dollar puts in its next three year cycle low.

    The next two or three weeks should produce an exceptionally violent rally from extreme oversold conditions followed by a consolidation period"

    Even the title of the article is "The bottom is here"

    The only reason I even mentioned the dollar is because I expected it to begin moving down as the CRB rallies out of it's three year cycle low.

    Yes the dollar did manage to move back up to marginal new highs for 4 days. But the dollar was never the point of the article. The point was to call attention to a major cycle low that had formed in commodities right during a time when everyone was calling for an end to the commodity bull market.

    How many other people spotted that bottom in real time or where even predicting it was coming?

    I think we all know that cycles aren't a perfect crystal ball. There is no such thing. But they obviously are an excellent tool for one to have in combination with other tools.

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  135. Piazzi,
    I'm only a wanna-be professional. I get my nose bloodied all to often.

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  136. Okay Gary,
    So when I did pull up a chart of the CRB index it did pretty much precisely what you said. It headed straight to about 300. Giving credit where it is due, that was an accurate and timely call.

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  137. Let me get this right......Gold Lion....you are a "wanna be professional" ? - yet you manage money for clients??..and have over 30 positions??

    How bout you are a complete clown!...and (still)likely an alias for Tiho - looking to pull info here.

    Seriosuly? Take your clients ( ya right) and your silly banter somewhere else.

    Can you even hear yourself/ read it back? Hilarious! Absolutely Hilarious!

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  138. RNM,
    I've been on Gary's site since he started. I was in fact one of his first subscribers. I don't need to prove a damn thing to you. So you can be the one to take your Forex trading BS somewhere. And yes, since I do charge my clients a percentage of the profits, I guess that does make me somewhat of a professional. I don't trade/invest full time, I am a full time design engineer who just loves trading/investing. I really could care less what you think. So why don't you quit acting like a dumb Gorilla.

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  139. Both AUD/USD and AUD/JPY failed to exceed their previous highs by a decent margin while the stock market did. This divergence has marked all intermediate tops since 2008. It might be telling atop is very close at hand.

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  140. Yes I expect it sometime around the last week of Aug or very early in Sept.

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  141. Im sorry Gold Lion...and you are 100% right - u most certainly dont need to prove anything, and I apologize.

    I will also do my best to keep my Forex BS to a minimum.

    I can only assume you've given it little or.. no consideration - unfortunate as I am up an additional 4% this week - thats 8% in less than 10 days - in a completely flat directionless market.

    The beach is lookin great here on the Mayan Riviera this morning - so I think Ill grab the gear and head out for a dive - have a great day!



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  142. Ooops! Here we go - more Forex BS.

    You guys have it..as suggested earlier - many stedfast co relations look outta wack to me currency wise..and the ol AUD is literally on the brink of flipping my switch - as a complete outperformer here as of last few days - as well as NZD just cant seem to get up and join the party so.....

    We are most certainly close...as the last of my longs will either run or stop out here pronto.

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  143. RNM,
    Thanks! Well I didn't mean to be insulting on your FX stuff either. FX is one subject I could sure learn a lot more about. I hope was can have a constructive exchange of ideas. I think that's why a lot of us come here, subscribers, ex-subscribers and trolls :)

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  144. The issue is everyone is expecting a top on the disappointment at Jackson Hole which IMO increases the chances of a selloff prior to that meeting. In addition to the signals in the currency markets, I also think JNK is now signaling a top and we will start to see a rotation out of risk and back into safety over the next few days. It does seem like everyone is on the same page in terms of direction but disagree a bit on timing so why try to pick the top exactly.

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  145. Right on ma man.........lets keep on keepin on.

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  146. GL
    I will say that Gary did nail the exact bottom in the CRB which is what attracted me to this site in the first place. I don't believe in trying to pick tops and bottoms but that was definately eye-catching. The only question I have though is why gary wasn't able to take advantage of that call since he called it perfectly.

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  147. The mistake was expecting gold to rally along with the rest of the commodity index. Instead it got locked in the triangle consolidation.

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  148. Well thats a fair point Gary. Either way that was a hell of a call. If you do it again with a market top in September then I may have to explore these cycles a bit more.

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  149. If my cycle count is right and the dollar is now on day 8 of a new cycle then we shouldn't expect a final bottom until around the end of the month, and consequently a top for stocks till the same time.

    At this point stocks could be on the verge of another momentum move so one definitely doesn't want to try and pick a top right now.

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  150. What this gold market needs is a quick run to 1640-1650 to really start gaining some traction...and confidence.

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  151. I'm not trying to PICK a top. I'm rotating my portfolio into an increasing net short position. Trying to pick the exact tops and bottoms for me is a tough way to make a living. I'm now net short and will continue to get shorter unless I see an improvement in fundamentals or we get a dramatic break above the 1430 area. In a neutral sideways market I just trade the range until it tells me to do otherwise.

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  152. Ha, I just took my profits on my god contracts. No since in getting greedy.

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  153. Make that GOLD contracts. That trade netted my futures account 6.6%.

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  154. No "Since" in correct spelling either :)

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