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Friday, March 14, 2014

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

80 comments:

  1. Thanks Gary, now I can go to sleep with peace in mind :)

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  2. I am expecting an absolute explosion in silver based on the weekly Bollinger bands, which are super tight.

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    Replies
    1. Where do you think silver will hit by the IC top? Thanks for your thoughts.

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    2. I'm going to go out on a limb and say we get a 10-12% rally in silver next week.

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    3. Lol, i just read this post after I made mine. I agree. I gave some targets shows at bottom of page.

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    4. I don't have a squeeze on Silver weekly TF YET...... however getting close..... But I do have a daily set-up already running a couple days - not sure the weekly will set-up but only time will tell... the Daily set-ups in GDX & NUGT fired off today so I don't expect Silver's to me vary far behind....... but lagging poorly here relative to price vs. Gold.... Silver should be in the $23 range..... very worrying but looking for the daily fire to produce a catch-up here....

      Cheers Schmed,

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    5. No idea how high silver can go.
      Silver is due to make a big move, but the bollingers cannot predict the ultimate direction of the move. So do your own DD. Personally, I feel it will break upwards.

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    6. But the daily chart for hui looks like giving a warning at least next 2-3 days for gold and silver

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  3. Assuming it was manipulation and not regular profit taking, why did they wait for Gold to break above the Sept FOMC top?
    What level will they defend? I know you can't read minds, but are they just picking spots at random?

    I was very encouraged by the way gold bounced back. It seems like the manipulations have been increasingly feeble.

    Is there a big showdown in our future?

    Thanks for the early report,
    Le Fou

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  4. Stocks are only down 2% so far, and we're already talking about the Fed panicking? That truly marks an irrational market.
    I do think stocks continue down, but I doubt it will be enough for the Fed to panic.

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  5. I tend to agree unless we have a 300 point down day on Monday.

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  6. Gary if the SM brakes down do you still believe that we will have a half cycle low in gold considering that money will be rushing out of the SM

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  7. Gary, your analysis is very entertaining, but the only thing that matters to me is: will this actually result in profitable trading? Is there any actual proof that your trading actually beats simply buying and holding short-term US Treasuries over time....with real money? (and not hypothetical portfolios that could be reset or replaced with a new port at any time) Thanks. If the answer is 'no proof' then kindly please just be honest about it. Thanks.

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    1. Jaynews, here's the news. I've been here for several years now. Through the highs and the lows. My real portfolio is up, since Jan.,roughly 60%. Now I have posted my trades with some family members and not here so perhaps not enough evidence for you. But afterall this is a place to trade ideas then do your own due diligence. We are a responsible group here with an awesome leader.
      Hope this most entertaining for you.

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    2. So far this year the commodity portfolio is up 11%, Stocks almost 3%, Metal trades are still open but if marked to market the metal portfolio would be up about 11% also. Currency portfolio is up about 1%. The bond portfolio is down slightly.

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  8. Im projecting, using the weeklies in gold and silver $1550 and $31. Thats within 90 days.

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  9. Gary, Are you still expecting PMs to reach the IC top on this third cycle and start heading down in April and May for correction before the ICL for summer run up to start in June? Looks to be that way shown on your gold chart.

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    Replies
    1. So far I haven't seen anything to change my expectation.

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  10. Gary, so is the stock market no longer the easy money, pick-it-up-off-the-floor, S&P to 2200 trade? I have about 30% profit remaining in some SPY calls. Would it be smart to shut that down now? Or wait to see what happens next week?

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    Replies
    1. Black,
      We exited stock market positions early in the week. At this point I probably won't trade stocks again until the next DCL, and if we were to get a failed ICL between now and then I would say the bull is done and we aren't going to make it to Nasdaq 5000. We'll just have to see how the next 2-3 weeks play out.

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  11. Gary
    enlightning analysis as always
    I think you are great

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  12. Gary -
    Around Noon on Friday, I asked essentially the same question as "black albert" posed in his first sentence above. You replied the stock market parabola may have been broken.
    I then asked, "Will you be able to project the markets' fates with much greater confidence by next Thursday, after the FOMC?"
    Assuming that is a fair and relevant question, your thoughts please. Thanks.

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    Replies
    1. I can't really tell anything until the next DCL, unless the market were to very quickly recover and move back to new highs. If that happens with plenty of time still in the daily cycle then our Nasdaq 5000 scenario would still be intact.

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  13. Hy Garry -
    Anychance you have cycle count for the DAX, or can you tell me how to find out? Cause that is what I am trading mostly and I think it could help me alot.
    Thanks
    Alex

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    Replies
    1. The European markets mostly just follow the US markets. Now that the DAX has formed a failed IC you should stay out.

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  14. Gold 1.400,- ? http://www.mineweb.com/mineweb/content/en/mineweb-political-economy?oid=232999&sn=Detail

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  15. Gary

    Once PM reach the intermediate high can you give us a road map for where to go..before we talked about the stock market...

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    1. Depending on how the stock market DCL plays out we could go into stocks or just sit on the sidelines for a couple of months while we wait for gold to form an ICL.

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    2. Don't you think that if the SM breaks down PM will go up much faster than what you thought originally???

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    3. Gold is already going almost straight up. How much more do you need?

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    4. Got it.... I meant that maybe we will not get the half cycle low if SM breaks down??? and we keep going up???

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  16. hey Gary
    Why do you avoid shorting a bull market? lets say gold reaches it's medium term high, why not shorting it (with 30% of the metals portfolio)

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    Replies
    1. How much do you anticipate the miners will go down until the ICL bottoms?

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    2. Because markets go down differently than they go up, and the counter trend moves are usually violent enough to knock one out of their positions. Then you also have the fact that surprises come on the upside in bull markets so it's very difficult to recognize where the top is until the decline is almost over.

      Shorting usually only works well in hindsight for Monday morning quarterbacks. In real time it's a very tough way to make money.

      The only real short position I'm going to recommend will be long term LEAP puts on stocks whenever I become convinced the market has topped or if we were to get to Nasdaq 5000.

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  17. don't know..and don't plan to make big bux out of it. But I plan on buying (like I did before) DUST, and some June puts on GDX, 30% of portolio.
    I think a simple fib 38% retracement off january low would be reasonble. Ofcourse stoploss etc

    But sit and do nothing while we do estimate that the markets are gonna go X direction doesn't seem right (to me)

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    1. You think the miners will drop 38% under January low?

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    2. no
      100% would be the january low and the current run high i(who knows where that would be)

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    3. but don't mind me I'm just a beginner trying not to blow up my account..

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    4. So the risk you are taking is that the POG and miners will not go down, in which case you loose your money?

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    5. lose SOME of my money
      this is the game..

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  18. Gary - Thank you so much for your answer at 7:25 this morning (the only method by which I could identify your post until your SMT site is back up.)

    Analyst Adam Hamilton yesterday in his Zeal Intelligence: "The bottom line is big gold-futures buying has fueled this year’s strong gold rally. And it wasn’t just short covering like last summer, but the first major new long-side buying since last April and June's carnage as well. This greatly increases the odds that we are witnessing the birth of a major new mean-reversion upleg in gold. And incredibly even to mean revert to average levels, this futures buying is only half done so far.
    But mean reversions out of market extremes never simply stop at averages, they overshoot in an often dramatic fashion. So there is likely a lot more futures gold buying coming than merely a return to normalcy would suggest."
    ___________

    You have projected gold will probably drop in early April for two months or so, before the back-up-the-truck opportunity in June/July. What might you see in about three weeks that would tell you "mean reversion" forces are causing gold (and I hope silver also) to keep rising steadily over the next several months (I.e., no two-month drop down?) Thanks.

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    Replies
    1. A normal intermediate degree rally for gold is 20%. That would put gold a little above $1400. Considering they entire bear market was manufactured and it damaged the supply side of the market I too expect a more forceful mean regression event and think we could see a 30% rise to test 1520 during this IC. We're going to be cautious once gold goes above $1425 though.

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    2. FWIW the 38.2% Fibonacci retracement comes in at about $1460. I think this IC will at least make it to there, and there is a decent chance it makes it to the 50% Fibonacci retracement at $1550 (more likely it will run into resistance at 1520 and stall just a little short of $1550.

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    3. Thanks,Gary, for the detailed and valuable answer.

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    4. Gary do you believe that we can get to 1520 before this IC is over?...that would be the next two to threee weeks

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  19. Here's an interesting opinion I read recently:

    "The idea that the stock market will end its rally with a near-vertical advance is appearing in articles, interviews, newsletters, web posts, and even emails to EWI. It is especially popular among super-bears who have long recognized that the market is in a bubble.

    The problem with this idea is that the Dow and S&P have never blown off. The stock market as a whole has never accelerated upward at a market top. It often accelerates off bottoms, and it always accelerates in the center of a third wave; but it has always lost momentum in a fifth wave relative to the third wave. Predictions for a blow-off defy history."

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  20. This is pure stuff for PHD in economics..

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  21. Weekly Chart Bullish Engulfings

    NUGT, HUI, GDX, GDXJ

    Here we go :D

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    Replies
    1. My daily set-up in Silver has a positive fire in the $22.50 range - which requires large gains just to get there.... I really don't see silver taking off much higher then that this week.... It could but that would be too much too fast..... Rather I would prefer to see gain this week & a Positive fire the following week.... however stranger things have happened...

      Cheers Schmed,

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  22. Gary -

    You observed in yesterday's report, "We already have a warning shot [something more serious than a half cycle decline in US markets] as the German DAX has signaled a failed intermediate cycle. A major stock market signalling a failed IC is a serious red flag."

    China is also looking overextended and ready to slide (FXI puts, anyone?) ... as highlighted in this article: http://www.zerohedge.com/news/2014-03-14/chinas-credit-nightmare-explained-one-chart

    Interconnected world markets > dominoes falling one by one. Agreed, a "Doom and Gloom" perspective, and I'm thinking the PMs alone will not protect us?

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    Replies
    1. Markets aren't going to just crash as CB's will ramp up QE. That will make the topping process long and drawn out. The exception is if we get a sharp spike to 5000 very quickly. In that scenario we could see the parabola crash.

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    2. I'd welcome such a "sharp spike", but cannot envision what could lead to that, given all the global tensions, problems and slowdown. Thank you for responding with your views. The weather here, north of S.Fran., is gorgeous by the way, but we are WAY low on annual rainfall.

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  23. Gary,
    When can we anticipate having the premium site back on operation again?

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    Replies
    1. I was hoping to have it operational by Monday but I still haven't heard back from the developed.

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  24. Gary, Are we still having A B C D waves, or is there too much volatility? If we still are, it would help my confidence to see them occasionally. TIA

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    1. I think we are in an A-wave advance right now.

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  25. I wonder if the Ukraine/Crimea situation will be resolved enough by markets opening tomorrow to have a good idea of the effect their voting might cause. (At the time the US stock markets open, it will be 3:30 PM in Kiev.) Then again, we could see Putin and Obama "posturing" for a few days. A-a-a-h, geopolitics.

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  26. The more I read the more I believe that we will have some very power full moves in PM the next weeks.....

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  27. Vaco
    powerfull but to which direction??
    when everyone is so sure...expect the opposite? this friday ugly candle is worrysome

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  28. If the metals had faded into the close I might be worried too. But they rallied into the close. This was just another manipulation event that got mostly turned back by the end of the day.

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  29. Gary,
    Do we have a four-day rule in effect for the stock market?

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  30. Gary, with your site hacked, is there any concern of personal information theft?

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  31. Look at the divergence in the TSI on the $USD chart. To me metals/miners are overbought and I'm hoping they go sideways for a few days this week before continuing higher.

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  32. http://stockcharts.com/h-sc/ui?s=$USD&p=D&b=5&g=0&id=t56825354372&r=1394996365838&cmd=print

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  33. The gold:silver ratio is 64.4 . . . hardly higher anytime during the past year, so if gold is strong, we silver buyers are hoping for some reversion of a g.s.r. to more like 58.

    FWIW, Silver Guru David Morgan in a recent interview believes the bottoms are in for both gold and silver, and their steep accent will begin around Fall 2015 as the general public finally awakens to the fact it needs some of each, with the blow-off top occurring in 2016 through 2017.

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  34. Gary, I hope you get the site back soon. It feels like we are camping out; missing the finer things in life... The posturing with the big powers could be the excuse to dump the dollar and reset our financial house. This week looks to be very interesting to say the least. You have refrained from discussing the geopolitics, which has kept you on a roll with cycles, I must say. Dealing with the facts is probably the smart course to take...

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    1. Off-topic but I've camped all my life along the West coast, even though I now have the money for "formal" vacations, so I would argue that camping INCLUDES "the finer things in life" . . . starry nights, crisp clean air, gentle streams and wide rivers, and nature minimally f---ed with by mankind's obsession to dominate and "manage."

      Now ... how 'bout those Mets?

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  35. When does global gold buying begin its day? It's 6:15 AM Monday in Singapore. And does this market often portend the likely direction of gold for the day? Just curious . . . on this quiet Sunday afternoon.

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    1. It's a toss up. Quite often they will hit gold in the overnight session only to have it reverse when the US opens.

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    2. So, "overnight" means OUR (the US) overnight. But it's then daytime throughout the middle east. Maybe no markets or buying gets done in that region.

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  36. Gold up $4.50 in 30 minutes. Can't crab about the direction. I hope it is not due just to the Crimea situation.

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  37. The comments are back up on the website. But still not fully repaired yet.

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  38. Few bank analysts believe in this gold rally. They said it is just another corrective rally in a bear market. As soon as this Ukraine situation clearing up, they said gold is going back down to $1050 like Goldman Sach predicted. Then stock market is going for another record high this year. Sounds like gold has to prove itself or else it is 2013 all over gain. Too many bears are still out there.

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  39. Who cares what analysts think? They dont make the market go up or down. Golds going to do what its going to do silver as well. No one believed the 2009 rally would get this far and here we are. Analysts make 60k per year and are idiots.

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  40. where do we get Gary's comments now..... ?????

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  41. Gold won't be in a confirmed new bull until the 50 is above the 200 day for sometime...like a minimum of 3 months. Sure, it may be in a new bull now....but it certainly isn't confirmed and won't be until ....well, like I said above. I've seen plenty of "golden crosses" before...that failed within a short period of time. Of note...recently some people were crowing about the new bull market in Argentinian stocks as the 50 dma went above the 200....it lasted a month or two and then went back down....now the 50 is back below the 200DMA. So, don't get too excited with a "golden cross" until it lasts a prolonged period of time. The stock market hit the 50 DMA and of course...this was perfect support , so today you're getting a resumption of the bull trend. I won't be loading up on gold and silver stocks until we're in a confirmed bull. Sure...I'll be paying higher prices...but I won't keep getting whipsawed out...wasting time

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  42. I BTFD this morning like I always do...

    Long JNUG and NUGT



    Good trading.



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