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Sunday, July 31, 2011
Friday, July 29, 2011
Thursday, July 28, 2011
DEVILS ADVOCATE
The persistent and mindless bullishness on gold lately has got me nervous. When I get nervous the first thing I do is pull up a multi-year chart and look at the big picture.
A couple of things are apparent when one looks at the chart below. First as I've noted many times in the past gold has a tendency to move above a big round number before topping. It did it at $1025, $1225, $1432, and gold recently tagged $1630.
Another glaring discrepancy in that chart is the utter failure of the miners to participate in the last 200 point rally in gold. As a matter of fact the miners could possibly be forming a head and shoulders top.
We can also add to this the fact that sentiment has reached levels that in the past have triggered intermediate declines. Plus gold is now stretched above the 200 day moving average.
Now I don't want anybody to think that I have all of a sudden become bearish on gold, I haven't. Gold is quite obviously in a secular bull market. I am however beginning to question whether or not the low we saw three weeks ago was an intermediate bottom. I have been riding this bull market long enough to know that when everyone is rabidly bullish (especially me) it's about time for gold to throw a curveball.
Until the dollar breaks below the May bottom I think we need to be very careful in assuming that gold is going straight up.
A couple of things are apparent when one looks at the chart below. First as I've noted many times in the past gold has a tendency to move above a big round number before topping. It did it at $1025, $1225, $1432, and gold recently tagged $1630.
Another glaring discrepancy in that chart is the utter failure of the miners to participate in the last 200 point rally in gold. As a matter of fact the miners could possibly be forming a head and shoulders top.
We can also add to this the fact that sentiment has reached levels that in the past have triggered intermediate declines. Plus gold is now stretched above the 200 day moving average.
Now I don't want anybody to think that I have all of a sudden become bearish on gold, I haven't. Gold is quite obviously in a secular bull market. I am however beginning to question whether or not the low we saw three weeks ago was an intermediate bottom. I have been riding this bull market long enough to know that when everyone is rabidly bullish (especially me) it's about time for gold to throw a curveball.
Until the dollar breaks below the May bottom I think we need to be very careful in assuming that gold is going straight up.
Wednesday, July 27, 2011
Sunday, July 24, 2011
THE REAL STOCK MARKET AIN'T SO PRETTY
When priced in something that has real value and cannot be debased (gold), one can clearly see that stocks have been in a severe bear market since 2000. (If one were to look at PE valuations during the same period they would see the same bear market.)
In the chart below I have marked the final phase of several gold C-waves. These highly speculative periods tend to end as a parabolic blowoff rally with gold stretched quite far above the 200 day moving average. The final phase of a C wave rally also tends to correspond with another leg down in the Dow:gold ratio.
After an extended two year consolidation I think we are now due for that final explosive move that should drive the next repricing of stocks against gold.
I expect we will see a combination of gold rallying wildly higher while stocks rollover into the next cyclical bear market. I'm looking for a Dow:gold ratio somewhere around 6 to 1 later this fall. If gold rallies to $1800 (my best guess) then we can look for the Dow to drop down around 10,000.
As many of you may have noticed stocks tend to put in major intermediate lows in November and March. The dollar often forms it's yearly cycle low in November. If the dollars three-year cycle bottom is still ahead of us, and it's starting to appear that it is, then the currency crisis that we avoided in May should come in late October or November this year.
That currency crisis should drive the final parabolic C-wave move in gold and the first major leg down in the stock market.
We should then see a relief rally in stocks as the dollar crisis comes to an end and gold will enter a severe D-wave, regression to the mean, profit-taking event.
The relief rally in stocks unfortunately will be short-lived. With no true productivity to drive it the stock market is not going to be able to fight a rising dollar.
Now that the last true period of productivity has ended (the personal computer and Internet boom) the only way stocks can resist the forces of the secular bear is through expansion of the money supply. That becomes painfully obvious when one looks at a 10 year chart of the Dow priced in gold.
The problem of course is that printing money is not true productivity. Printing money has consequences, as we found out in 2008.
It won't be long before we begin to suffer the consequences of Bernanke churning out trillions of dollars to save the financial system.
But who's gonna save us from Bernanke!
In the chart below I have marked the final phase of several gold C-waves. These highly speculative periods tend to end as a parabolic blowoff rally with gold stretched quite far above the 200 day moving average. The final phase of a C wave rally also tends to correspond with another leg down in the Dow:gold ratio.
After an extended two year consolidation I think we are now due for that final explosive move that should drive the next repricing of stocks against gold.
I expect we will see a combination of gold rallying wildly higher while stocks rollover into the next cyclical bear market. I'm looking for a Dow:gold ratio somewhere around 6 to 1 later this fall. If gold rallies to $1800 (my best guess) then we can look for the Dow to drop down around 10,000.
As many of you may have noticed stocks tend to put in major intermediate lows in November and March. The dollar often forms it's yearly cycle low in November. If the dollars three-year cycle bottom is still ahead of us, and it's starting to appear that it is, then the currency crisis that we avoided in May should come in late October or November this year.
That currency crisis should drive the final parabolic C-wave move in gold and the first major leg down in the stock market.
We should then see a relief rally in stocks as the dollar crisis comes to an end and gold will enter a severe D-wave, regression to the mean, profit-taking event.
The relief rally in stocks unfortunately will be short-lived. With no true productivity to drive it the stock market is not going to be able to fight a rising dollar.
Now that the last true period of productivity has ended (the personal computer and Internet boom) the only way stocks can resist the forces of the secular bear is through expansion of the money supply. That becomes painfully obvious when one looks at a 10 year chart of the Dow priced in gold.
The problem of course is that printing money is not true productivity. Printing money has consequences, as we found out in 2008.
It won't be long before we begin to suffer the consequences of Bernanke churning out trillions of dollars to save the financial system.
But who's gonna save us from Bernanke!
Tuesday, July 19, 2011
MONEY FLOW DIVERGENCE
I often keep tabs on the weekly Chakin money flow indicator, especially when I'm expecting an intermediate degree correction. More often than not there will be a divergence in money flow at intermediate tops as smart money exits ahead of a correction.
This indicator also diverged at the last two bull market tops. It is now showing a huge divergence that I think is probably indicative of a third cyclical bull market top forming.
This indicator also diverged at the last two bull market tops. It is now showing a huge divergence that I think is probably indicative of a third cyclical bull market top forming.
Monday, July 18, 2011
TOURNAMENT
The tournament this weekend was a big success. Two of our lifters made it onto the winners platform. Our lightweight took the bronze medal and our superheavyweight took the gold.
Considering this was their first national championship that was some pretty strong lifting.
Considering this was their first national championship that was some pretty strong lifting.
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