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
Thanks for the early report. It's so clear I can't think of anything to ask that doesn't require a crystal ball!
ReplyDeleteBest,
Le Fou
I know we still disagree on this Gary, but I mentioned how ending daily cycles (USD) tend to run short regardless of the previous cycle...and here we are. The intermediate count is also ripe for a new count regardless of what would suit the PM positions.
ReplyDeleteThe last 7 ICL's bottomed with a DCL on day 27, day 30, day 29, day 28, day 14, day 21, & day 28. So I'm not sure what you mean by ICL's bottom with short cycles.
ReplyDeleteOne could possibly make a case for a really long DCL at 33 days but it doesn't look like it on the chart.
No matter though we've traded this perfectly and if called for we will exit the remaining part of our metal position into the next rally. We even got out of the currency positions with a minimal gain.
Gary, Would you tell us when, in your opinion would be a good time (or even ideal) to start Old Turkey portfolios in both stocks and the metals? Or is that approach now passé? :-)
ReplyDeleteThere is no such thing as Old turkey in stocks IMO. Not until the next 6/7 year cycle low.
DeleteI wouldn't really consider OT in gold until the 8 year cycle low in 2016.
Daily recap
ReplyDeletehttp://www.kereport.com/2014/03/19/fomc-statement-recap-gary-chris-al-cory/
Gary -
ReplyDeleteYou said, " ...If this [breaking the IC trend line at 1,318] 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.
Aren't those "other portfolios" just the bond /TLT put position, because at that trend line break, all other portfolios (just LEAPS) would be closed, correct?
Commodity or stock portfolio.
DeleteGary
ReplyDeleteBased on the momentum divergence as illustrated by the 5 day and 14 day RSI I think it is safe to say the ICH is in.
http://stockcharts.com/h-sc/ui?s=GLD&p=D&yr=3&mn=0&dy=0&id=p40235288179&a=337215538
crap. its fooked now.
DeleteGary, what about those buble phases that were supposed to start in stocks and gold a while ago?
ReplyDeleteThe bubble phase in stocks has been underway for the last year and a half. I don't see any indication yet that it's over.
DeleteThe bubble phase in gold was never going to start until after the 8 year cycle low in 2016.
Like John Smith I am surprised that the bubble phase in gold was never going to start until after the 8 year cycle low in 2016. This is not my recollection of late 2012 posts.
DeleteI've gone over it multiple times. It's always been after the 8 year cycle low in 2016.
DeleteGary, don't you think the 8 YCL could occur in 2015 due to all the M that has skewered the gold & silver markets? Thanks.
DeleteJust 31 cents more and the weekly $GOLD chart will show an engulfing reversal candle.
ReplyDeleteBut the monthly $GOLD chart still shows a bottoming process, so this is just a correction.
In contrast, the monthly $SPX chart shows way overbought, as in 2007, and after that came massive decline.
Yellen slipped up when she indicated rates would rise 6 months after QE ends. So now the taper moves to $55B per month, they will be done in Sept 2014. This means rates rise in Feb 2015 and that is what sent stocks tumbling. She still has an out as she said QE must end... so she can keep $10B / month going for a while.
ReplyDeleteMy view is she will be forced to ramp it up once the economy rolls over or the equity markets sell off. The US dollar strength is in response to the belief of higher rates which will unwind the massive carry trade bringing $US home. It will also benefit from a flight to safety this summer as Putin ramps up the expansion and Chine makes a move on the Senkaku Islands knowing that the sanctions are not going to work and the US has no foreign policy or appetite for war. Let the financial war begin.....The Russians and the Chinese are working together and the indebted West are floundering under weak leadership.
I don't think she slipped up. She was testing the markets. Play chess 20x/day and you'll understand.
ReplyDeleteAgree the Fed will ramp up once they see the market start to fall. Gary has said the same before I believe.
Even if QE stopped today, the amount of debt, including unfunded liabilities, plus derivatives, means that we have to either print or default.
For that reason I myself will be buying gold bullion once the monthly $GOLD chart turns up.
And I don't think this has much longer to play out. I think that THIS year is the time to put 1/2 in gold bars. The match has not been lit, but I can smell kerosene all over the place. I wish it were not so, as I'm a patriot, but it is so, so gotta protect my family.
http://likesmoneycycletrading.wordpress.com/2014/03/19/this-changes-everything/
ReplyDeleteExcuse me if I'm mistaken, but both gold and the dollar completed swings today. Good, bad, or otherwise?
Gold hasn't completed a swing yet. The dollar has clearly printed a DCL. The jury is still out on whether it also printed an intermediate cycle low.
DeleteBill,
ReplyDeleteI agree with you I think today was all about stopping the fall in the dollar. Yellen did what Bernanke did all last year to drop gold and commodities and get people into stocks. What is troubling is gold has fallen since Sunday night at 1390 to 1328 with little show off resilience.
I don't think it was stopping the dollar's fall so much as keeping the major currencies falling at *roughly* the same pace. I think they want the dollar to fall v. goods and services. Financial repression, don't ya know... worldwide inflation and rising taxation. Welcome to the 21st century feudal economy where you are graciously allowed to keep 20% of your lifetime wealth accumulation--if you can accumulate anything.
DeleteGary...I'm surprised how you said that the easy money would come from the stock market and the gold market would be complicated. Fight now everything seem complicated and nothing easy....
ReplyDeleteTx
I was honestly expecting a hammer candle in gold just as Gary said, as it made perfect sense. Instead we got a hammer in the $SPX. It proves again to me to stop predicting anything, and just to accept and respond. Like riding about 8 positions back in a peleton.
ReplyDeleteStepping back, since 2009, QE has been the fuel for this entire S&P market run. But now we are tapering, and nearly 1/2 way into it, meaning that the fuel is running out, so odds are that I think Gary's got this exactly correct in that the S&P probably has a few more points higher before a major top is in.
But I am still bullish on gold, based on the monthly chart. I don't know about a few months of sitting on the sidelines, but Gary has this cycles stuff down pretty good, so probably that will happen, too. But for me myself, I'm just waiting for a) a buy signal in the monthly chart to buy physical, and b) a reversal in the daily chart to trade via GDX/GDXJ.
If you read the reports again you will see that no one was predicting a hammer candle. A hammer candle was what we needed to buy long positions. If it didn't happen then the plan was to continue sitting on the sidelines and wait for a swing. If that swing doesn't occur before gold moves below $1318 then we assume that the intermediate cycle has topped and it's time to go on vacation for the metals for a month or two.
DeleteGary
DeleteI think your belief that we have to be in bull market has clouded your long term views on gold but I think you still play the short game well. Sitting on the sidelines until we see a swing is the safe thing to do. Though I don't think we will see that swing for a while with Gold being on day 13 of a left translated daily cycle.
I know you don't agree with my position but with proper risk management we can both come out ok even with competing view.
I just don't see anything 13 days ago that looks like a DCL. Gold didn't even close below the 10 DMA. I'm not sure I've ever seen a DCL that didn't at least close below the 10 DMA. Neither silver, platinum or palladium show any indication of a DCL 13 days ago.
DeleteOops, my mis-communication. I didn't mean to say that you were predicting anything, like a hammer in this case. But I was just admitting that I myself sure as heck was predicting it. Was speaking about myself only there. ;-)
ReplyDeleteHow do we know Gold will reverse today\tommorow? Byt the ammount of pessimism in blogs..:)
ReplyDeleteWe don't know for sure, but we at least have to wait for a swing, and we may want to wait and see if gold makes a new high and does it quickly in the daily cycle before jumping back in.
DeleteGary, If this is still the second daily cycle in gold, don't you think the drop would be less severe, being it is so late in the cycle?
ReplyDeletemany thanks
4 day rule in gold Gary?
ReplyDeleteYes I think so.
Delete4 day rule ??? what does it entail ?
ReplyDeleteif we break the IC trend line and then make a swing low - and break the IC downtrend line - could this is an ICL ??? considered that potential ?
ReplyDeleteGary,
ReplyDelete"....The jury is still out on whether it also printed an intermediate cycle low....."
What price level or action you need to see to say we put dollar ICL yesterday?
Thank you.