COMMODITIES: ANOTHER LEG UP/ GOLD SETUP FOR A FINAL TAKEDOWN

As most of you know by now I believe we are going to see a big surge in inflation this year. As I've noted in my previous articles the first leg up in the CRB has run its course and broken the 3 year down trend that's been in place since 2011. I think it's time for the second leg up in that inflation. 

The two-week dip in the CRB has cleared the overbought conditions from the initial surge and I think we will now get one more push to test that 2012 high before commodities experience a more significant pullback this summer to set up the big inflationary spike that I am anticipating to occur during the second half of the year. 

And don’t forget, any move above that 2012 high will turn this three year cycle right translated.

The previous three year cycle was also right translated. That is confirmation that the secular bull did not expire in 2009 as some analysts suggest. I believe we still have two more big legs up before the commodity bull is done. One should top at the end of 2014/early 2015 and the last leg up should top sometime around late 2017 or 2018.

Those that want to trade hard assets should probably stick with general commodities for the next few weeks though and leave the metals portfolio alone for now. As far as I can tell, virtually all of the other commodities are trading naturally and I don’t foresee a 5000 contract dump in the middle of the night to knock the sugar market back down.

Precious metals on the other hand are being heavily manipulated right now. When gold was turned back down and lost the breakout above the September FOMC manipulation top, that was a warning flag for me to take profits in our metals portfolio. The pre-market attack last Monday to break the intermediate trend line confirmed, at least for me, that the precious metals were again under attack and the forces at work in this market were going to try to extend the bear market. 

Notice how gold is now deviating from the rest of the commodity sector. I don't think this would happen in a natural market.

I believe the metals are being set up to take a massive beating when the CRB drops down into its summer correction. During that correction gold will be moving into its yearly cycle low (YCL's are the most damaging correction of the year for any asset). I fully expect the forces controlling the gold market will try to break that double bottom and take gold down to $1050.

Notice that gold's yearly cycle is left translated. Left translated cycles more often than not make a lower low. You have to hand it to these guys; they have played the metals market perfectly over the last year and a half. They managed to manufacture a completely artificial bear market, and now that they have turned gold's intermediate cycle back down they have set the stage to take gold down to $1050 this summer which has been their goal all along.

And I think the motivation for this is the same that it has always been. The profit potential after releasing the gold market is much greater from the $1000 level than it is from the $1800 level. Make no mistake the entire purpose of this year and a half long bear raid has been to manufacture a lower D-wave bottom, thereby increasing long side profit potential. In the process they’ve managed to also make some good money on the short side. I think they’ve also intentionally damaged the physical supply side of the metals market knowing that that would exacerbate the rally once the manipulation was released, and the secular trend allowed to resume.

Not only are these guys having a banking cartel manufactured lucrative short trade, they have damaged the physical market enough that we will likely see a huge move from $1050 back to $1800-$2000 over a 4-6 month period once the manipulation is removed at the yearly cycle low.

I think over the next three months J.P. Morgan, HSBC, and Goldman Sachs are going to stretch the rubber band so tight in the metals market that when they finally release it it’s going to generate a surge comparable to what we just witnessed in the coffee market. Unlike the coffee market though, the metals market is big enough that these players can take large positions and make serious money off of that move.

On a more short-term time frame, and confirming my big picture outlook, notice that the bearish engulfing weekly candlestick was confirmed by a strong downside push this week.

I’m up in the air as to whether or not gold is ready to bounce out of its daily cycle low on Monday. Now that I am convinced the manipulation is back in control of this market I just can’t trust anything to happen naturally. Heck they already broke the natural daily cycle low that occurred last Thursday and have stretched this cycle way past its normal duration. There’s no telling how long they can make this cycle stretch. $1280 is a logical support zone but they may very well break that just to take out all of the buyers that will likely come in at that level. And while the miners did bounce on Thursday and Friday signaling a possible impending cycle bottom, it’s also conceivable that the bounce over the last two days is nothing more than an oversold bear flag that will breakdown quickly.

Despite the partial reversal in the GDX weekly candle, the big picture tells us the rest of the story. As you can see any time over the last year and a half that the miners have dropped below their 10 week moving average, especially if it occurs late in an intermediate cycle, it has almost always signaled that an intermediate degree decline has begun. So I wouldn’t get my hopes up that the banking cartel is going to release this market and a third daily cycle is going to recover to new highs. I think these guys are intent on pushing gold to $1050, and I think they probably have it set up to accomplish that this summer. Notice how the mining stocks are still making lower intermediate lows, and lower intermediate highs. The sector needed to move above last August’s high in order to confirm that the bear market was over, and the cartel aborted that move before it could happen.

Once gold does get a bounce out of the impending cycle low I intend on taking a large short position in mining stocks to play that move into the yearly cycle decline. For now though I continue to recommend staying on the sidelines in this market, and I would strongly discourage trying to catch the bounce out of the impending cycle low. We simply have no idea when the cartel is going to allow that to happen. It may start on Monday, or it may begin once gold tags $1280. Or the cartel could even drag gold all the way back to $1250 before they allow a short-term bottom to form and gold to generate a dead cat bounce.

Predicting where this market is going to go in the short term would require inside information as to the banking cartel's intentions next week. Unfortunately I doubt they are going to send us a memo on that. However I think we can probably assume that the third daily cycle once it rolls over, is going to be devastating to the precious metals market. And I expect we will also have a fourth daily cycle before the yearly cycle low is complete. That fourth daily cycle will probably take gold back down to $1050 and a final bear market bottom if the cartel has its way. 

So while I know this is tough to hear, as most of you are gold bugs, I am confident that the banking cartel has a purpose, and that purpose is to set up what will probably be one of the most lucrative long side trades in the metals of this entire secular bull market. Our job right now is to be patient and wait for that yearly cycle low later this summer. I think that low is going to drop at least down to retest $1200, and if the cartel has its way, they will push gold back to $1050 before this is over.

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Website reactivated

The regular premium website has been reactivated. Tonight's report will be posted there in a few hours. I will have more details on how I'm going to proceed in tonight's report.

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Daily commentary for Mar. 20

Mar. 20 Morning update

First off a status report on the website. 

I spent about 3 hours on a conference call last night with the developer and transfer agent. The hold up is the subscription files. The original software that runs the subscription plugin is no longer in business so it's impossible to get a re-install or support for that plugin. We tried to figure out someway to automate the process of transferring all of the active subscription files into a new payment plugin but because of certain restrictions there just doesn't appear to be any way to do this without losing some critical information along the way. So unfortunately this leaves me with an incredible mess of having to do this entirely by hand. That means I have to sort through 5000 files, figure out which ones are active and which ones are inactive. Figure out who is monthly, who is biannaul and who is annual. Then once I get all of that done we can migrate the active files into the new subscription system. 

This going to be a tedious process that will probably take at least 2-3 weeks. In the meantime we are going to reactivate the site as is. Everything should still be running fine the only problem is the malware spam links on the subscription page. 

During this process I'm going to have to assign a temporary password to everyone's account so that I can get in and check the status of the account. At some point over the next 2-4 weeks you will get an email from me with your temporary password. So if one day you try to log in and can't, check your email to see if you have been assigned your temporary password (don't forget to check your spam filters). 

Sometime this evening the site should go back live and I'm expecting to publish tonight's report back on the premium site barring some unseen difficulty. 

Now on to the morning report:

As of this morning gold is trying to bounce off the intermediate trend line. If the intermediate cycle is still advancing this should mark the bottom of the daily cycle decline. 

We're going to have to see if this trend line holds through the rest of the day and whether or not we get a swing tomorrow. 

Now for the dollar:

It's pretty clear today that the dollar has begun a new intermediate cycle. 

That may or may not force an intermediate top in gold. The knee jerk reaction would be to assume that since the dollar is probably going to rally for a month or more that gold will automatically drop during this period. I'm not going to make that assumption just yet because gold can, and has rallied right along with the dollar from time to time, just like stocks have rallied along with the dollar. All a rising dollar means is that the euro or yen is being printed more aggressively at the moment. It has no bearing on inflation or deflation.  

For now we need to see if the trend line holds today and then if gold forms a swing tomorrow despite the dollar rally.

Gary

Mar. 19

Stocks:

I'm not sure what it was the market objected to during Yellen's press conference but by the end of the day the S&P had bounced off the 1850 support and recovered about half of today's decline. With options expiration on Friday I have to think this market probably isn't quite ready to roll over into it's daily cycle decline just yet.

That being said I have no desire to try and catch a few more points only to have them taken right back away when the DCL begins. 

So for now I'm going to stay in cash in the stock portfolio until stocks drop down into their next DCL. Once that move becomes clear then we will try to spot the bottom and re-enter stock positions as close to the bottom of the DCL as we can. 

Gold:

Nothing happening today that we didn't already expect. Since we didn't get the reversal candle we now have to wait through Thursday, and probably Friday's options expiration and see if gold can hang on and hold above the intermediate trend line. 

If gold does break through that level then we will sell the rest of our positions into the next bounce and go to the sidelines for the next couple of months as the metals would likely become extremely choppy and volatile. Not the kind of market that either bulls or bears can make money in. I certainly would have no desire to try and trade the metals in that environment. If this comes to pass I would suggest folks migrate most of their capital to one of the other portfolios and give the metals a break until May or June. 

On the other hand if gold completes a swing above the trend line, and a strong move back toward the recent highs ensues then I will look to add exposure to the metal portfolio for one more leg up in this intermediate cycle.

For now though there is nothing to do until gold forms a swing.

Dollar:

Finally we come to the dollar. This one is a puzzle. On one hand today's rally did break the intermediate trend line. It's late enough in the intermediate cycle that this could end up being a final ICL, and the trend line break would suggest that may be the case. 

However that would also require us to count two short daily cycles in a row. The previous cycle bottomed on day 17 and this one on day 16. Two short cycles in a row would be very unusual. Usually a short cycle is followed by a stretched cycle.

So what I'm wondering is will the dollar roll over again quickly and give us one more short cycle with a final bottom around April 4 on the next employment report?

We'll just have to see what transpires tomorrow and Friday before we can make a call on the dollar.

Gary

Portfolio chage

Selling the stock positions. 

SPY $187.10
QQQ $90.32
IWM $119.25

Selling currency positions.

UUP $21.40
EUO $16.75

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Mar. 19th Morning report

Things are going to happen fast this afternoon right after the FOMC statement is released so I'm going to go over a couple of strategies now so everyone can decide how they want to play this and be prepared. 

First off stocks: 

Here is how I'm going to play it with the stock portfolio. If the market can rally back to 1880 before the statement at 2:00 I will go ahead a sell our stock positions at that point. If not then I will wait till after the release as I think stocks will use the statement as an excuse to test the all time highs if they haven't done so earlier in the day. 

For those willing to gamble a bit you might hold till the end of the day and see if stocks rally and break out to new highs and maybe even try to reach 1900 before this daily cycle tops. 

Gold:

As of this morning gold has broken the daily cycle trend line just like we needed it to do to confirm a DCL in progress. All the buyers at the 1350 support yesterday woke up to their stops being run. This also had to happen.

Now for those of you that are going to try and pick a bottom you have to do so at some point that has a logical reason for others in the market to do so also. Just picking a random number is unlikely that anyone else is going to back you up and you will almost certainly suffer a draw down and in the volatile market that's going to exist after the FOMC statement that draw down could be big.  

The first logical place to make an attempt is at the 38.2% retracement which comes in at roughly $1333 today. At that point you will likely have a bunch of hedge funds buying right along with you and the odds are better that the decline will stop there.

If that level doesn't bring in enough buyers to stop the selling then the next place to take a shot is at the intermediate trend line (roughly $1318). The nice thing about this level is if the intermediate rally is still intact then the DCL will hit a brick wall at that level and up gold will go. If it does go through there you don't need to stop out immediately because the market will almost certainly bounce tomorrow and give you a chance to exit, probably at a small profit or at least break even.

 

For those of you not brave enough to try and pick a bottom in a volatile DCL environment, you should wait till 10-15 minutes before the close and see if gold has exhausted the selling and printed a reversal candle. If it has buy your positions right before the close. 

For those even more risk averse wait for gold to form a swing before you buy. 

I'm going to wait for a swing in the metals portfolio unless we get a reversal candle that ends the day positive. 

Gary

Mar. 18

Stocks:

Well I'd say the Fed has accomplished their goal. Stocks have clearly reversed from the Ukraine sell off and I'd say the Fed now has the cover to initiate the third taper tomorrow.

I plan to sell our half position into what I expect will be a spike up right after the announcement. That may just end up being a test of 1880, or as I have depicted in the chart maybe a quick test of that 1900 level. But I don't think it will hold and I think stocks will quickly reverse and drift down into a daily cycle low over the next couple of weeks. That cycle low is where I will buy full positions for the model portfolio.

Dollar:

The dollar is forming a tight coil as we head into tomorrows FOMC meeting. 

As most of you may remember about 70% of the time the initial move out of a coil will usually end up being a false move that is soon reversed. Given that the dollar is late in it's intermediate cycle I suspect what we will see is the dollar breaking down very harshly tomorrow on the third taper. But one or two weeks of that and we should reach true sentiment extremes. Enough for the dollar to put in an intermediate cycle low and deliver at least a 4-6 week rally before it gets serious about collapsing down into it's three year cycle low later this fall. 

Gold:

I don't think I need to go over the plan for gold again. I made it pretty clear in the morning report what I'm going to be looking for tomorrow.

If we get a reversal candlestick that will be the signal to buy before the close. If not then we will wait till gold forms a swing and make sure it doesn't break the intermediate trend line. If it were to do that then we will lock up the rest of the positions in the metals portfolio and go on vacation for a couple of months while the ICL does it's thing. 

Gary

Mar. 18 morning update

I've been thinking about this all night and I find it hard to believe that the first intermediate rally out of a final bear market bottom would fail to at least retrace 38% of the drop. As I noted in the next chart that would be a move to roughly $1460ish.

I also find it hard to believe that the first intermediate cycle out of a final bear market bottom would unfold as a left translated cycle. 

Granted in a heavily manipulated market anything is possible, but I've gotten it in my head that what we may be seeing is a stretched daily cycle in progress that was driven beyond the normal cycle duration by the Ukraine situation. 

The other three sector metals look like they are all dropping down into cycle lows here. None of them look like they formed a cycle low 9 days ago, which is roughly where I thought gold had it's fuzzy cycle bottom. 

If I'm right then this isn't day 10, it's going to be day 32 and a cycle that is that late will form a bottom on the next swing. 

In order for this to qualify as a DCL gold would need to break it's daily cycle trendline, but not break the intermediate trend line.

I also think gold would need to retrace at least 38% of the 2nd daily cycle rally. That would be enough to give it a trend line break but still keep the intermediate cycle intact.

If this is going to happen I think it will come on the FOMC statement tomorrow afternoon, and we should see a nice reversal candlestick by the end of the day.

Perhaps we also see a reversal candlestick in the stock market Wednesday afternoon only in the other direction. With the next DCL for stocks due during either the last week of March or the first week of April that would put the inverse relationship for gold and stocks back in place for 2 or 3 more weeks, allowing gold to finish it's intermediate rally while stocks drop down into their DCL.

So for now I'm going to hold the reduced positions in the metals portfolio and plan on going back to full strength if we get that reversal tomorrow. 

I'll also probably take profits on our half stock market positions right before the FOMC statement comes out at 2:00 tomorrow. The real money will come buying at the next DCL anyway. There's no need to try to scalp a percent or two this late in the cycle. Today is day 28. There should only be 7 to 12 days left in this cycle. It's late enough now that we might see a retest of the highs tomorrow followed by a 7 to 11 day slide into the DCL. 

Gary

MAR. 17

First off an update on the website. It looks like we are getting close. Unfortunately the subscription plugin is no longer an active company and we can't obtain a re-install so we are in the process of transferring all the active files into a new subscription plugin. This is just going to take a little time, and from what I understand the new system once we go active will create new passwords for everyone. So be sure to check your email once the premium site comes back online for your temporary password. If you don't see it check your spam folders.

As soon as the website is active I will post a notice here on the blog and the nightly reports will return to the premium site. 

Stocks:

I'm going to start off today by saying that nothing happened in the Ukraine this weekend that the market didn't already know was coming. The market has known all along there was never going to be a war. It's known all along what the vote would be this weekend and that Crimea would elect to secede to Russia. All of that was priced in by the close Friday. 

I would argue that the only thing that has changed is that the Fed needs the market rising when they deliver the next FOMC statement Wednesday afternoon, and I think they will do everything in their power to make sure that happens. The question is will they succeed? Based on the close today I would have to slide the odds in the Fed's favor. 

The Nasdaq however has not regained that 4290 support zone. Until it does I'm not going to increase position size in the stock portfolio.

Gold:

On a purely technical basis gold has formed a bearish engulfing candle today. It also closed below the Sept. FOMC top. Ignoring everything else the charts are saying that manipulation zone has been successfully defended ... at least for today. 

If we were dealing with freely traded markets then I would say gold is just preparing to dip down into a half cycle low. No big deal. But as we all know there are no freely traded markets anymore, and this has to some extent become a business of trying to second guess when and where the next manipulation is going to occur. We anticipated the stock market manipulation correctly, now we have to look into our crystal ball and try to decide where the metals are going to be driven next. Will it be towards the moon, or over a cliff?

I think this all started as just a knee jerk reaction to the Fed's manufactured rally in the stock market. Gold was holding up rather well for most of the morning and had even climbed back above $1380 at one point. However it wasn't long before the now familiar dump triggered a sell off and before it was over gold had dropped over $30 from top to bottom.

I don't expect there is going to be a lot of buying pressure between now and the FOMC statement on Wednesday afternoon so the potential is there for another middle of the night or premarket attack. If it happens in this pre FOMC environment there is risk that a well timed manipulation event could drive gold back down into the consolidation zone below $1350. It took a lot of time and effort for buyers to break out above that resistance zone, a move back below that level could be demoralizing for the bulls and we could see the buying pressure dry up completely. 

The miners have already dropped back down into the consolidation zone and on heavy volume. I was really expecting buyers to show up at $27, when they didn't it triggered even more concern. 

This is a dangerous time right here. Gold could be just one manipulation away from breaking the daily and intermediate cycle. Until I have some idea how this is going to play out I'm happy to lock up most of our profits and be satisfied for now. 

Actually I'm seriously considering taking the rest of our profits and just sitting on the sidelines until the next ICL in May or June. It's not critical we catch every last penny of this intermediate cycle, we've already made good money. 

The big money is going to come during the next intermediate cycle anyway, so I'm very tempted to just lock up our metals portfolio and go on vacation for the next two months (at least in the metals portfolio).

I'll probably make a decision tomorrow based on if gold follows through to the downside. 


Oil:

Another concern is that oil continues to drop into it's intermediate bottom (ICL). As it does it's dragging most of the commodity sector down with it, and this may include gold if today is any indication. A normal ICL for oil is 50-70 days. Today was day 45 with potentially 5-25 days yet before a bottom. 

We've had a pretty good start to the year so far. It may be time to take a much deserved break and wait for a better setup with less downside risk and more upside reward. I'm confident we will get that for sure at the next ICL, so I'm not extremely motivated to try to catch every last penny now that gold isn't behaving perfectly. 

Basically once gold gets past 10 weeks into an intermediate rally, and intermediate term overbought, I need it to behave perfectly to keep me on board. Today gold misbehaved, and lost some of the romance. Anymore of that and I'm going to want a divorce...at least for a month or two.

Gary

Portfolio change

The Fed is fighting hard to keep the stock rally rising. Not only is there an FOMC meeting Wednesday but also options expiration on Friday. I think the Fed is going to be very determined to make sure the market goes back up this week. 

Gold is reacting with a knee jerk reaction down as stocks rise. This may continue over the course of the week if the Fed succeeds in driving the stock market back to new highs. This would also provide cover for another manipulation event in the metals. So just to be on  the safe side I'm going to book profits on 75% of our metal positions today and then wait to see what happens as we move into the FOMC statement on Wednesday. 

That statement always seems to be a good excuse to hit the metals and if they can force gold down today and tomorrow I don't want to have a heavy metal position on right before that statement is released. 

Gary

Exiting 75% of each position:
GDX $27.02
GDXJ $43.37
SIL $14.31
SLV $20.48

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Commentary for Mar. 17

Mar. 17 portfolio change

We knew the Fed was going to attempt to rescue the stock market ahead of the FOMC meeting. As of this morning it looks like a trend day is likely to develop and the Fed is going to succeed. I'm going to go back to half positions in the model portfolio that I will increase to full at the end of the day if the rally continues into the close.

25% position in QQQ entered at $89.66
15% position in SPY entered at $186.39
5% position in IWM entered at $118.81

COMMENTS REACTIVATED

Comments are active again on the premium website, but still no word when it will be fully repaired so I can publish the nightly reports.

Mar. 15 Weekend Report

Dollar:

I think the Fed is in a real pickle next week. If they can't get the stock market turned back up on Monday or Tuesday they will have to decide whether or not to taper into a falling market. 

On one hand withdrawing liquidity during a semi crisis may just make the situation worse. On the other hand aborting the taper would just confirm that something serious is happening and probably spook the market even more. This may be a no win situation for the Fed.

If they halt the taper the dollar is likely to collapse. If they do taper the dollar will go down anyway as the first two tapers have done nothing to halt the dollars slide. 

At this point I think the most likely bottom for the dollar will come on the GDP report March 27. That would be just long enough to balance the previous short cycle, but not so long as to run far beyond the normal timing band, which would be the case if we were to get a bottom on the April employment report. 

Stocks:

The fact that stocks couldn't rally out of the Bollinger band crash signal today is not a very encouraging sign. If we continue down Monday and Tuesday then this is going to start to look like something more serious than a half cycle decline. We already have a warning shot as the German DAX has signaled a failed intermediate cycle. A major stock market signalling a failed IC is a serious red flag. 

Needless to say we won't be trying to pick a half cycle bottom this time. I'm going to need to see a full recovery to new highs and a right translated daily cycle before I even remotely consider buying stocks again. As of Friday the market has topped on day 21. That has the potential to turn into a left translated cycle. Extreme caution is warranted at this time. 

Gold:

Let me say that while Friday's drop was certainly scary I don't think we've seen the top of this intermediate cycle. It's pretty clear we have put in a final bear market bottom. That being the case we've already made a higher intermediate low, and now we should continue up until gold also makes a higher intermediate high. That would entail a move above $1434 before this intermediate cycle tops. 

It also means this third daily cycle must unfold as another right translated cycle. Since today was only day 9 (or maybe day 5 depending on how one wants to try to count the fuzzy DCL) that means no top for at least another 4 to 8 days. If I'm right about the dollar bottoming on March 27 then gold should have at least another 9 days before this cycle tops. 

If we use silver, platinum or palladium the current cycle count is clearer and it appears day 3 or 4 would be the correct count. That would suggest gold probably has at least 2 and maybe 3 more weeks before this intermediate cycle tops.

Moving on to the weekly charts, nothing about this week looks like an intermediate top to me. Gold delivered a strong 3% gain and looks like it's ready to accelerate towards a final intermediate top. Miners a 6% pop out of the three week consolidation.

As the dollar should be ready to accelerate into it's intermediate bottom, the metals should give us at least two more weeks of gains and push the intermediate cycle into a right translated configuration. Both events should be extreme enough to drive major moves in sentiment. For the dollar I want to hear talk about a complete collapse and losing reserve currency status. We haven't heard much of that kind of talk for the last two years. Now that we are starting down into the three year cycle low it's time it starts again. That will happen once the dollar index breaks the Oct. low. 

For gold I want to see euphoria take hold of the gold bug world. I want to see sentiment do something it hasn't done since 2011 and that is generate a true bullish extreme. As you can see we still have plenty of room to rally before we have to worry about running out of buyers. 

Source: sentimentrader.com

That should happen once gold breaks above $1434. That will also set up a massive head and shoulders bottoming pattern with the potential to drive at least a retest of the all time highs later this year. 

And if all that isn't enough gold is going to complete a golden cross (50 DMA crosses above the 200 DMA) either next week or the week after. Another sign the bear market is over.

Gary

Mar. 14 morning report

Well gold didn't hesitate at all to break through the resistance. I have to think we probably have a clear shot at $1425 at this point with minimal retracements. 

More importantly silver has finally joined the party and broken out of its bull flag. It's got a lot of catching up to do. I expect the biggest move over the next week is going to come from silver. 

Hold positions. This is a monster trend now with no upside resistance for another 40 or more points. 

Gary

Mar. 13

A few people have commented that they can't post to the blog. Folks you will need to create a google account to be able to post to the comments.

Stocks:

After today I think it's safe to assume that yesterday's reversal was indeed a manufactured rally to allow Wall Street to hand off the bag on to technical dip buyers. The selling on strength number yesterday provided us with a very timely warning and prevented us from getting caught. 

It's sad that virtually all markets are rigged nowadays and we have to second guess which way the big banks are going to take the markets in order to make money. 

Oh well since there's nothing we can do about it, and there's virtually no chance the government is going to crack down on the banking system, I guess we are stuck with this for the foreseeable future. Ever since the ban on short selling financials in 2008 it became glaringly clear that no effort would be spared, or laws ignored, to insure that the banks would be protected from now on. 

In that vein of thought I have to think it won't be long now before the Fed steps in to stop this sell off. Even in a natural market today's heavy selling pressure would probably trigger some kind of snap back rally. On top of that there was a Bollinger band crash trade in the NDX.

Let's just say I won't be at all surprised if all of today's losses get reversed tomorrow. That being said I'm going to stay on the sidelines in the stock portfolio until stocks recover and make new highs. They also have to do it quickly. I wouldn't be interested in buying if it takes stocks another two weeks to recover as that would be too late in the daily cycle to buy. 

As a matter of fact at this point barring a complete reversal tomorrow I probably won't be interested in re-entering positions for the stock portfolio until we enter the timing band for the next daily cycle low (DCL). That's not due until the end of the month or first week in April. So we're probably going to twiddle our thumbs for a while in regards to stocks, unless we get a complete reversal tomorrow. 

Dollar:

Today the dollar dropped enough to test the Oct. bottom, and not surprisingly bounced. This is exactly what we were expecting, but again it's too early for the DCL to be finished, so while we may rally for a day or two it's unlikely the decline is done. 

I'll say it again: An intermediate cycle that topped on week two in one of the most extreme left translated cycles of the last decade isn't going to bottom until it moves below the previous intermediate cycle low (ICL). It's not going to bottom until sentiment hits extremes, and not until everyone starts to freak out. We haven't reached the freak out stage yet. 

Source: Sentimentrader.com

Gold:

As expected the miners finally followed gold and have broken out of their 3 week consolidation. They did so with a big move, also as expected. I figured there would be a lot of buy stops right above $27 that once they triggered would produce a strong trend day.

That being said the metals may now have to consolidate for a day or two. If the dollar bounces and stocks rebound we may see some short term profit taking in the metals after today's big move. Both stocks and gold have generated powerful moves over the last two days and it wouldn't be unreasonable to expect both trends to take a breather.

Another consideration is that gold is now bumping up against the notorious Sept. FOMC top. 

To refresh your memory that was the most blatant manipulation of this entire manufactured bear market other than the April stop run. That marked the only time in history a daily cycle topped on day 1. Obviously in a natural market we would never see a daily cycle top on day 1. So I suspect gold may take a day or two to get through this resistance level. I don't however think it will take anywhere near as long to get through $1375 as it took to get through $1350.

Ultimately I think gold is going to test $1425 and I suspect we will see another manufactured top with a marginal move above $1431 to get gold bugs excited and buying into the breakout the same as they did last Aug.

I'm not really expecting much of a pullback here, more just some sideways chop for a day or two before the trend continues higher. So I wouldn't advise one to lose their positions to try to avoid one or two sideways days.

Gary

Cycle counts:
Stocks = Day 25. Average duration 35-45 days.
Gold = Day 9. Average duration 18-28 days.
Dollar = Day 16. Average duration 18-28 days.
Oil = Day 44. Average duration 50-70 days.

Portfolio change

I'm going to stop out or take profits in a few more positions today. The markets are getting extremely volatile and I'm not sure how this is going to effect everything.

Exiting  UNG $24.16
Exiting WEAT $16.21
Exiting CORN $33.42

DAILY COMMENATARY

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Mar. 12

Stocks:

Based solely on the reversal off the early morning selling I would say the half cycle low correction completed today. However during a brief period when the market was positive this afternoon I noticed a huge selling on strength number in SPY (it's back as of the close). Granted this isn't 100% any more than any other tool, but I have to think that someone who can throw around 300-400 million dollars probably knows more about what tomorrow holds than me so I'm going to stay on the sidelines for now and see what plays out. 

It's entirely possible this is a manufactured reversal to allow big money to dump shares on eager dip buyers. So for now better safe than sorry, and let's wait to see what tomorrow brings before we make any decisions on whether or not to re-enter stock positions.

Dollar:
So far so good. As expected the dollar has begun the final move down into it's daily cycle low. This should accelerate over the next 5-6 days and I don't expect to get the next bounce until the dollar tests the Oct. lows.

Oil:

Oil is getting late in it's intermediate cycle (average duration 50-70 days). Once we move past 50 days I'm going to  watch for a swing to get us back into our DBC position, and probably DBA also. 

Gold:

As I was expecting gold has finally broken out of the multi-week consolidation. Also as expected it did so with a big move. As we should be entering the final scary phase for the dollar cycle, this should be the happy phase for gold bugs over the next week to week and a half.

The first daily cycle delivered a 100 point gain. The second daily cycle a 118 point gain. I should think a move to test $1425 shouldn't be too hard to accomplish during this third cycle, and we might even have an outside chance of 1500 if the dollar cycle stretches or we get that final short dollar cycle I've speculated about.

Once the miners finally break out of their consolidation I think they too will deliver a large aggressive move to the upside. I don't think it's unreasonable to see a move to $30 before this third daily cycle tops. 

Gary

PS: comments have been opened on the blog until the premium site is repaired. 

Daily commentary

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Canceling portfolio change

A huge selling on strength number just popped up on SPY. I'm canceling the buy order for stocks. We will stay in cash for now.

Exit prices

As noted last night I'm taking profits on several commodity positions this morning. Here are the exit prices at the open. 

JO $40.80

DBC $25.87

DBA $28.56

Current cycle counts

Stocks: Day 24. Average duration 35-45 days.

Gold: Day 8. Average duration 18-28 days.

Dollar: Day 15. Average duration 18-28 days

Oil: Day 43. Average duration 50-70 days

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