I’m going to be moving this weekend. The weekend report probably won’t be out till Saturday night or Sunday.
I’m going to be busy so answering emails will be sporadic also.
Smart Money Tracker
I’m going to be moving this weekend. The weekend report probably won’t be out till Saturday night or Sunday.
I’m going to be busy so answering emails will be sporadic also.
http://www.zerohedge.com/article/surge-after-hours-selling-takes-gold-volatility-index-all-time-low
more strangeness at the end of today
TZ,
I would love to see the H&S play out with a reversal. That will set up a parabolic move to the upside.
Currently on the side lines waiting for an edge!!
Hope everybody has a great weekend.
Gary,
Over the past three years, as the dollar hit its yearly cycle low, it has rallied strongly. On the weekly chart, when the yearly trough coincided with the weekly RSI being oversold, the dollar rallied for 2 intermediate cycles.
I would say that seasonally, this appears to be a very bullish time for the dollar.
Now as you know gold peaked last December, consolidated – during this bullish time for the dollar – and it took two daily cycles before gold started rallying again.
It seems that gold and the dollar are setting up the same way this time except gold peaked a few weeks earlier or am I missing something?
Ike,
I think you need to expand your view past the last three years. Look at the last 30 years. You will see the dollar forms a major three year cycle low every 3 to 3 1/2 years.
Yes the recent bottom was probably a yearly cycle low but the three year cycle low is still ahead for the dollar. That will of course mark the yearly cycle low for 2011 when it arrives.
Trust me with two rounds of massive QE there’s no way Bernanke gets out of this without at least a mild currency crisis in the dollar.
Great weekend read for all traders/speculators
http://www.chicagosean.com/2010/11/there-is-epidemic-sweeping-retail.html
Coouldn’t have said it better myself. I just don’t think it’s possible to indicator your way to riches.
haha..you could have written that article Gary…in fact you probably have over the last few years, reiterating exactly what that author said.
Good article. Every single approach can be used well and every approach can be used badly. The trick is to pick a style and do it well. Without money management and risk control every trader will eventually go broke (the analog to Gary’s “Every user of huge leverage will eventually go broke.”) For a trader the rules are simple: stops, appropriate position sizing, let winners run, cut losses, don’t panic in or out, go counter overwhelming sentiment. Easy to say, hard to do, but if actually followed strictly anyone can trade.
glad everybody is liking the article. I remember those days of indicator over load.
Hope everybody has a great weekend and look forward to the Monday action.
Gary: “three year cycle low is still ahead for the dollar.”
200 EMA $80.5 going to reverse $USD, or i’ll just give up my GDXJ & SIL holdins
TZ / Gary / Anyone else with an opinion!
What do you make of thay Zero Hedge Article? Hard to decipher imo. Thanks
Steven
80.63 is the 38.2% restracement level of the entire move down in the dollar. I’m wondering whether this is a more important traget to look at rather than the round 80 number. For Friday, at least, it seemed to bounce off that number. Who knows what Monday will bring.
Also not sure if our carriers which are now in Korea will calm people down or cause people to be more alarmed (i.e., dollar up or dollar down).
Also curious the effect that this will have on gold AND silver as they may respond differently given the reactions.
TZ, Looks like you finally made some money on Friday if you pulled the trigger on your plan!
If you’re looking at $USD levels that might mark a pullback, if not a reversal, you might also keep in mind the 200dma (currently 81.74), which would also be the ballpark for an A=C move from the lows.
As for the ZH article, I have no opinion (other than to note that ZH isn’t afraid to go a bit overboard at times on their analysis and extrapolations)) except for the ending paragraph, where they note a last-minute buy of 2K Feb gold. The suggestion, I assume, was that some smart and large buyer was front-running a big move up next week.
The CME report for yesterday appears to show nothing quite so remarkable except a lot of contract rolling from Dec to Feb that actually netted a small reduction in OI between the two. The net add was mostly in April.
http://www.cmegroup.com/daily_bulletin/Section62_Metals_Futures_Products_2010229.pdf
Brian,
My buy point was lower than we went on fri. There was no action on my part.
I can’t just buy a ‘drop’. That’s too vague. I have to have specific entry and exit parameters. Mine were not met.
However, I’m still mindful that a continuation up in the metals right now would seem to catch many unaware. As I read and observe what I and others have done, it is clear that many people have lightened and sold down – if not completely out (the trader-types.)
A resumption to the upside would clearly fall into the category of the market’s faking out the most people, again.
The metals ARE going higher, it is just a question of if we get some kind of pullback for a few weeks first. I’m still betting on the pullback scenario, but I’m VERY closely watching for the opposite.
TZ,
When’s the actual last time you made a trade?
The odds would favor a decline right now, being that the dollar broke 80, and we’re in the timing band for an intermediate low in the next few weeks (I believe we’re now in week 21 (is it 22?) and trough to trough averages 20-25 weeks).
The previous miner pullbacks were very short lived. I will be patient but not greedy when it comes to the probable pullback upcoming.
I also don’t know where you get your sentiment readings from TZ, but I would say bulls outweigh bears significantly right now in PMs as well as stocks. One would think that it needs to completely inverse, bears need to significantly outnumber bulls for the next cycle to begin upwards.
I think the next few weeks will be significant (I’m wagering downwards).
Robert: I don’t believe the sentiment needs to reverse. That would need to happen to halt a major decline, but in the middle of an upmove you just need to work off the extreme bullishness before the rally resumes. “More bears than bulls”will come at the next intermediate low. At the next intermediate high we need to get to “tons of bulls” so we need to have “lots of bulls” and keep rallying even with all those bull present to get to a truly lopsided extreme.
TZ: I’m out and nervous about it because it is a lot easier to be out right now than in, so I agree that the biggest fooler would be a resumption. But there were also a lot of late buyers that have yet to be punished very much, so we’ll see…
i think we will be going up starting early next week. Sentiment is bearish right now stemming from cycle theory, dollar strength to the head and shoulders pattern on the metals.I re-entered long position in gold friday before the close and will re-enter silver sunday evening.
Seems to me gold is forming a triangle on the weekly chart, which would imply one more push higher before the int decline just to fool everybody that jumped out to jump back in before a bigger decline….
I don’t really see a triangle. I do see a possible bear flag that’s in the process of breaking down. But I think we’ve all gotten burned enough times to not trust chart patterns anymore.
Just follow the plan.
If the prior cycle low is violated then reduce to a minumum core position as the odds will have gone up tremedously that the intermediate cycle correction has begun.
DG,
You cover your OIH? I didn’t follow you on that trade but I am short energy. I felt like covering Friday, didn’t, but hopefully next week will lead us into an intermediate decline ;).
Gary you over or under 10 bedrooms with all your earnings?
The problem with technical patterns is that they are so watched now they rarely come true. Every software package out there identifies all the most popular patterns, and people are just waiting to suck you into them, and do the opposite of normal. The last 18 months of head and shoulder patterns that never confirmed pretty well sum it up.
You guys really think the market is opt to go higher right away, and the dollar immediately turn around? That is hard to see with the dollar busting through 80. I think we’ll be above 80 for some time, and I don’t think equities and gold can rally during this state.
Assuming we’re approaching, prior to Spring, the dollar’s 3-year cycle low, one would think that an intermediate decline, prior to this subsequent healthy rise in equities and PMs would be probable.
Contrary thoughts?
The only contrary thought is to see all these Head and Shoulder patterns that are appearing everywhere to not produce the expected results in an exact fashion. The int low will happen, no doubt about that.
The OEX put/call ratio 10 DMA has moved rapidly from a neutral/bullish stance 2 weeks ago to bearish. It is lower than it has been for three years and fell very steeply.
This is not considered to be a contrarian indicator as it’s not the money [the trading of OEX options is dominated by professional hedgers].
This looks a bit scary to me …. coupled with the unusually high selling last month by insiders.
Possibly smart money thinks the food riots etc starting to manifest in China will reverse the growth theme and deflate stock markets and commodities.
Presumably if we are in for a larger than anticipated correction, PMs and PM stocks will also be hit. 😮
Any thoughts about this, anyone?
I meant to say:
“This is not considered to be a contrarian indicator as it’s not the dumb money “
First off the OEX options data is very volatile so it could be nothing more than OEX traders expected a one or two day drop.
Insider selling is completely worthless for timing tops. Insiders sell for a whole host of reasons. I can assure you insiders aren’t any better at timing tops than anyone else and they are usually way too early.
Insider buying is a great timing tool for bottoms though.
The fact remains that we still don’t have a large SoS day and no significant intermediate top has begun without one of those in the last 5 years.
Despite the dollar rise I think everyone understands the dollar isn’t rallying because of deflationary forces it’s rising because currency traders are selling the Euro right now and that’s the only reason the dollar is rallying.
With Ben printing willy nilly it’s going to be tough to get a sustained correction. Case in point the dollar has rallied 4 points and the stock market is only down 3%.
Gary,
I understand your thoughts on the dollar leading most markets right now. However, isn’t the Korean situation something that would normally be gold positive (although maybe not so much gold equities). What do you think?
Also, do you think silver will act differently than gold in this situation?
Thanks Gary
I think if gold is ready to drop down into its intermediate cycle low it will use whatever situation is available at the time as an excuse to do so.
And I doubt silver will move contrary to gold. It may show relative strength, but it’s probably going to follow its big brother.
Gary
It seemed like THE DOC called the dollar low weeks ago ,but at that time you and him were experiencing different views of where we were in the dollar and the Gold cycles.
Since the dollar rallied (and you both do cycle analysis) , Are you and him now counting dollar lows from the same point regarding the dollar cycle low..or do you and him have different starting points?
Also, will you be reporting daily during the time you are in Hawii ( not the blog, I mean subscriptions).thx
Alex,
I will try to get something out daily while in Hawaii but there’s a good chance the nightly reports will be brief.
Yes Doc called this one correctly. There seems to be little doubt the dollar put in a very shortened intermediate cycle 3 weeks ago.
I’m going over the implications in the weekend report.
thanks 🙂
Gary,
I think you are putting too much emphasis in SoS.
You tell John that OEX option numbers are volatile as if that somehow explains the highest OEX put purchases since 2007.
Thinking through SoS will show why these numbers will not necessarily show what you are hoping. When the SoS becomes intense, the numbers can simply disappear.
Why? Because the intense selling results in a down day, and there are no clues left in SoS numbers. This is a dangerous statistic on which to rely.
I think I can make a very good case for the stock market moving into an intermediate cycle low. I wish you would entertain this idea and work on timing the low.
Wes,
I have been watching for a day where it was intense but turned the day positive and so far I haven’t seen one. But the fact remains that every single intermediate decline except one since 05 has seen one or more of these SoS days.
You can dismiss that if you want to. I find it pretty hard to dismiss something that has an almost perfect record.
Now that doesn’t mean we can’t get an intermediate decline. Heaven knows we have all the ingredients in place. Sentiment has become extremely bullish, we are 22 weeks into an intermediate rally, and the dollar has bounced out of an intermediate cycle low.
But with the Fed willing to print whatever it takes and no SoS numbers I wouldn’t be willing to bet heavily on a significant decline or an extended one.
We already got a very extended daily cycle. The odds are the current cycle will now be shortened. That suggests this intermediate correction could be over in another 2-3 weeks. And we may be lucky to even see a move back to the 200 DMA.
Robert: Nope. Still short OIH, SMH, and UNG. Interested in seeing what Monday brings. Which has more pull? Good Holiday retail numbers or Korea? I am not especially bearish so will likely honor my break-even stops if need be (I almost never put in actual stop orders).
Gary: Those OEX numbers, as Wes said, are quite extreme, and we are talking about the ten day MA, so it’s not a “daily volatility” situation. Also, there’s a big gap between a “one or two day decline” and an intermediate decline. My guess is a week or two down, which wouldn’t need a SoS day, but would still honor the OEX numbers. Then rally into New Year’s and then have our standard NDX tank in January. This connects all the dots (so probably won’t happen!)
If we get the intermediate correction now, then we shouldn’t see immediate weakness again in January. That should only happen if an intermediate cycle was going to fail and if an intermediate cycle fails this quickly there’s a good chance the secular bear market has returned.
The only way this works cyclically is if this is only a daily cycle correction and we will soon see stocks and gold rally back to new highs.
Then we get the intermediate top in January.
The problem is that for that to happen this has to be a a dead cat bounce in the dollar index that needs to roll over into the normal timing band for an intermediate bottom in late December.
I think the Korean situation threw a big monkey wrench in what was likely unfolding cyclically in the dollar, stocks and gold.
hi Gary,
you seem pretty pessimistic about North Korea…Do you really think that things could escalate from here?
Do I think we are going to see a war in Korea? Not really. Do I think tensions are going to ease overnight? Probably not.
If the market is ready to dip down into an intermeidate cycle low it needs a catalyst. Something that it can convince itself is bigger than Ben’s QE.
It won’t be bigger than QE but that’s not the point, we just need something to give the market an excuse to sell off despite Ben dumping in billions of dollars everyday.
I don’t think Ireland was ever going to be the catalyst because they pretty much setup the bailout immediately.
I look at more than just psychology indicators. I also look at monetary and valuation statistics as well as seasonal signals.
The early winter through spring of the second year of a presidential cycle has been particularly strong in the past. Coupled with the monetary and valuation numbers, I predict that when the market turns up, there will be no good entry points for a long time. I’m thinking straight up for months.
But, first we have to do something about those psychology indicators. About the only way they can be changed in in a hurry is for something really scary to happen.
I have sizable limit orders set in case of a flash crash.
from the weekend report:
whether Ben (and europe) can get the dollar turned back around on Monday or Tuesday………if that happens …then the USD is very close to a high and the next cycle being extremely left translated would probably not go higher than what we have right now which means the PMs could be in a position to be at a low now
so…..i might be worth dipping in yer toes
correct or possibly plausible ..?
Wes,
I think you can probably throw out all your presidential cycle data as being useless at this point. We are in the post credit bubble phase.
Credit bubbles have always in the past led to a depression. I doubt this one will be any different. The only difference will be whether we choose a deflationary or inflationary one.
If we continue to go down the inflationary path then commodity prices will continue to soar as liquidity continuously leaks out of the stock market and into the commodity markets. Eventually this will collapse the economy again just as it did in the summer of `08.
The place to be is in the sectors that will benefit from this liqudity leak. It certainly won’t be the general stock market. That will continue to underperform just as it has from the beginning of the commodity bull in 2001 and the underperformance will only intensify the more furiously Ben prints.
Remember the next 4 year cycle low is due in the March to Nov. time frame 2012. Most bear markets require at least a year to run their course with a year and a half being the norm.
That being the case and the dollar scheduled to put in a major 3 year cycle low next spring we should see the next true deflationary event begin as the dollar rallies out of the 3 year cycle low.
That should mark the start of the next leg down in the long term secular bear market that began in March of 2000.
But even if we still have a few months of gains ahead I doubt the stock market will make any huge gains, certainly nothing even vaguely approaching what we will see in the precious metal sector or commodity sector in general.
H,
Just follow the plan 🙂
Gary, Why would the Mar 09 low have not qualified as the 4 year cycle low in stocks instead of the 08 bottom?
Brian,
March 09 was the 4 year cycle low. But it was an extremely stretched and aborted cycle caused by the Fed’s extreme dollar debasement.
The four year cycle should have bottomed in 2006 but the Fed went on a massive debasing campaign and the cycle stretched to March 2008. Then the Ben really turned up the presses and aborted what should have been an extreme left translated cycle in March 09.
The end result is that we are now dealing with very distorted markets brought on by the Fed’s attempts to halt the secular bear market.
It has already caused a credit and real estate bubble of which we are now suffering the hangover from.
Bernanke has learned nothing from the mess he created so he’s now going to great an even bigger catastrophe with his printing press. That will start with a currency crisis next spring that should spike inflation enough to destroy the economy all over again.
That along with the continuing after effects of the credit bubble will trigger the next leg down in the secular bear market that is due to bottom sometime in 2012. (a shortened cycle almost always follows a stretched one. So we can expect the next 4 year cycle to run 3 years into 2012.
Gary, if the break below 1348 gets triggered overnight but then bounces back by morning do we still retreat to a minimum core position or do we wait to see what happens during the day tomorrow?
I would tend to wait. If the intermediate decline has begun then it will break it during the day also.
thanks Gary for answering my question despite a busy w/e for you!
good luck today
Gary
if you’re fairly confident that the intermediate decline has begun, why are you waiting for $1348 to be broken before lightening up on your positions?
How many times must we be surprised to the upside before we learn our lesson?
Gold and silver must be driven down today as much as possible to squeeze out any remaining longs.
Today is “first position day” meaning anyone still long the DEC contract at 5:15 is standing for (or indicating they are standing for) delivery.
OEX put buying is now about the highest in 20 years. Dumb money option traders are buying are at about a 5 year low in put buying.. Not a good recipe for further rally. Am holding my shorts. added TZA Friday.
I would believe that there are ways for the big guys to try to estimate, at least partially, how many people are looking to deliver based on volumes at particular firms, open interest now compared to historical norms, spys, system hacking, or whatever. But there is also probably enough unknown that surprises could result EOD today and into tomorrow as the true number becomes apparent. Clearly delivery surprises occur in all kinds of futures markets (cocoa being the most recent example i think), but this market is important enough that I would think steps have been taken to minimize such a surprise. We will see.
ROBERT,
>When’s the actual last time you made a trade?
>Gary you over or under 10 bedrooms with all your earnings?
Are you purposely going to continue trying to alpha-male people on this board who you feel may be either smarter or richer than you? I ask honestly cause you may not realize you are doing it.
It isn’t necessary to keep throwing out these slights or one-ups.
People do me a favor and proof your posts before you publish.
Having to go back and clean up all these multiple deletes is getting tiresome.
TZ: I have a serious question. Your long analysis of complicated situations is interesting, but does it actually help you make any money in the markets? There are always a few persuasive arguments on each side of an issue, so for me it just makes my head spin (which is why I am a primarily a technician except on major macro stuff, like gold being good—too much fundamental noise day to day. You have talked just a little about stops, money management, position sizing, etc. which seem infinitely more important to me. Does the complex analysis help you get into profitable situations, and if so how? Who can really figure out the delivery issues, and even so they might be price into the market already—or not. What am I missing here?
uup 200 ema 23.48
Probably a waste of time to watch UUP. Just track the actual dollar index. The 200 day simple moving average is at about 82.
That would be the next signficant resistance level.
DG,
Metals are a bull. That’s what I invest in. I pretty much do it technically.
My comment about delivery isn’t some sort of strategy. I have no trade or ‘play’ based on it.
I mention it here for those who might not have much knowledge of the futures markets (or less than I do), do not know when particular dates occur, or what they might mean.
There ARE delivery issues that arise in futures markets. We ARE expecting at *some point* to have delivery issues with gold and silver. It is at least worthwhile to know and be aware of small time frames when that possibility is highest – as it is NOW.
If, for example, we saw a surprise gap up today or tomorrow, we would need to conclude that an overwhelming and surprising (to those short) number of people are holding for delivery. If something like that occurred it would be critical to re-examine being reduced or at core, imo.
I’m at core position expecting lower prices and I will be entering (leveraged – like it appears you trade) using my own technicals in combination with gary’s assistance.
Does that answer things? You seem to think that every possible statement a person says needs to have a specific, immediately actionable trade attached to it. This doesn’t – unless something weird happens in next day or two.
GARY,
I’m responsible for many deleted posts. I was not aware that you were involved in that process or that it required action on your part. I have checked blogger.com help and can’t determine how comments work from your view. Can you elaborated?
If a person posts then deletes, do you get and view the deleted post?
Do you have to do something do it?
I thought this was just between me and blogger.
TZ: Oh no, certainly not “every possible statement” needs to be actionable, but I am unable to divine out an action strategy after so many of yours that I was wondering if I was missing something. I certainly don;t mind them being posted.
And Robert: I agree with TZ. We have a pretty civil blog here after getting rid of the anonymous posters a month or so ago, so if you can take the personal attacks down a notch it’d be more pleasant reading for everyone.
And Gary: Can you just leave the deleted comment? No one wants to give you more work! I’d rather just see them there than have you need to clean them up.
TZ.
You’re far too emotional for me to pay attention to you. You are a sensationalist, which almost always is a trait of a poor investor.
You mention all these things and then say that you are not making a play on the information you provided. If you were so adamant or confident about all the information you spew on here, and you’re not making a play on it, then you’re just creating unnecessary noise here IMO. Good day.
Sorry to ask such a novice question, but if the stop is at $1348 for gold and I have a position in SIL which requires a share price for a stop, how do I do that?
Elaine,
You should be able to set up a trade trigger to key off GLD. If GLD trades at or below $131 sell whatever you want to sell to return to a minimum core position.
If you aren’t familiar with trade triggers call your broker, he will be able to tell you how to set iut up.
OK, thank you, I will call them.
Wes: You covering anything? The short side is getting more interesting to me as we go down, not less (added some more TZA this morning). Do you have a target in mind?
gary ,
can you watch dollar index realtime?
I was tempted to cover S&P this morning, but seeing how the Irish news did calm the market we could be looking a few days of selling. Maybe a Portuguese bailout is needed sooner than later? 10yr above 7% this morning.
Live dollar index:
dollar index
The euro just popped up on my screen as close to a buy (Man I love stockcharts.com). Looks like about 129.50 on FXE would do it. I will post if/when i buy it.
If the S&P breaks 1173 we will have a failed daily cycle and that should mean at least another 2-3 weeks of downside.
92000,
dollar index
To those that do not understand TZ’s posts, or think they are frivilous, I would sugget be careful trading the precious metal bull. Clearly, TZ is an experienced futures trader and just shares his knowledge and opinion on the futures market. Not watching the futures market in gold and silver yet being invested in precious metals would be like…well, ignoring cycles analysis, not a good idea.
And to those that always want to know if TZ every makes a profit, give it a break. Let’s hear about some of your trade ideas and how they worked out.
TZ is an honest poster who shares his trade ideas and win or lose he owns up to it. What do you want from a blog discussion group?
The PMs’ resilience in the face of this dollar rally since last night is quite impressive. They could always break down further, of course, but you have to see this as a nice “high consolidation” that will lead to another nice leg up once the dollar breaks down again.
Of course waiting until the cycle timing bands are hit for a low before loading up again is the prudent course. But it’s been nice not to take as big a hit as would have been expected during this dollar rally. Just shows the depth/breadth of this gold/silver bull (i.e. across all currencies).
RBY is a good example of surprises coming the upside…
We came within a hair of breaking below the previous daily cycle low on the SPX (1173.64 vs. 1173.00). Soooo close, so far.
Interesting divergence elsewhere as the COMPQ and RUT are well above the previous low, and the DOW broke below. So smaller caps strength is bullish? Indicating a rally to come?
The VIX is in position to give one of it’s buy signals (buy stocks); i.e. a close outside the 20 BB and then a close back inside.
Robert:
Please let TZ post his views.
Do remember that cash is also a position.
A trader I know who primarily trades equities, is up about 30% this year, when his total average exposure to the market would be around 40%. i.e. he is never fully invested, and when invested it is rarely a large part of his portfolio. He just looks for high risk-reward opportunities, and even hedges those. His objective is to minimize draw-downs, and he is very profitable with very limited exposure to the market.
A lesson I learnt is that it is best to be a patient listener. You can always ignore what you do not agree with.
“If the S&P breaks 1173 we will have a failed daily”
Would that be intraday or close only?
Intraday.
getting cold …where can I get best Hawaii vacation deal?
Very strange cycle timing. The stock market looks like it wants to drop into an intermediate low. It is due and the dollar is rallying. However we don’t have a SoS day.
Oil has definitly put in its cycle low. Rising energy stocks are going to support the market.
I still think the Korea mess threw a monkey wrench into the dollar’s intermediate cycle.
I wonder how this will end up playing out.
Gary,
I have my trigger stop at $131.57. Is that too high? I see you mentioned 131 earlier today.
Yeah, so much contradiction/confusing, or it is “supposed” to come off that way today. Dollar up, Gold up, Oil up, stocks down. I think this dead time, market uncertainty for an extended period of time, can really create a situation where many traders make many mistakes (get too emotional). I’m holding my shorts now, it looks like I may have to hold them until next week, but we’ll see what happens. I have no problem getting back into silver if we see some healthy momentum upwards any day now.
TZ,
You’re still my favorite. I joined you in watching your 3 AM potential gold sabotage on Friday. I just find it silly that you put out so much information, it is usually good information too, that is extremely bias in one direction yet then you don’t even have the conviction to put your money where your mouth is. This is not an insult just an observation. To anyone else spewing hate towards me, I’ll kick your ass (unless of course you train with Gary) 😛
Now let me get back to work so I can afford another year of SMT.
:-7
USO (oil) has just popped up on my screen as a high-probability short-side trade. I know Gary is saying oil put in an intermediate low, but short-term it’s in trouble. Gary: have you ever figured out how to fax a burrito? I don’t get to Vegas, but if I short it I bet one I make money on my short trade (I am already ahead in OIH). You asked that I post my exits. The only one I am getting itchy in is UNG as I am up 6% in three days on that short, but am not seeing a reason to cover yet.
Onlooker “
Interesting divergence elsewhere as the COMPQ and RUT are well above the previous low, and the DOW broke below. So smaller caps strength is bullish? “
small caps are not impacted by dollar as much. In general, economy news are getting better, I suspect PMI tomorrow will be good. just my 2 cents
DG,
I’m pretty much committed to an intermediate cycle low being formed, based on the indicators I follow.
Owning puts instead of being short common creates some problems for me since the commissions are high on trades and the fills can be iffy.
My first target in price is around QQQQ=49.5, but my first target in fear is VXO=25.
Like pornography, I expect to know it when I see it.
While I’m short term bearish, I won’t expect the market to go down every day. I anticipate buying common against the puts for upside trades.
I’ve done nothing to date and will try to post my trades.
Thanks, Wes.
Just modestly shorted OIL at 24.03. Will likely add on further rally.
dg, short oil in winter???
I never look at things like the weather. The question is whether the winter seasonality is already priced into the price of oil. If everyone has already bought OIL and USO in anticipation of winter, the ETF’s have to go down, as there will be no new buying to support the price. I never wonder whether it’s in the price or not (no one can ever really know). I just know if I short it when it’s at an upside over-done extreme I am highly likely to win (if I don’t screw up my trading, that is!)
Gary, I guess you’re offline right now. You’re not going to bet me that burrito if OIL is down a lot by the time you respond. Oh well, I’ll just assume you made the bet (nice of me, eh?)
DG,
Anyone can short term trade and make a counter trend profit. Well some people can. Most won’t.
A better bet IMO would be that oil doesn’t drop below the recent low.
Oil bottoming at 80 for this intermediate cycle is a scary thing for the economy.
$120-$150 oil will ruin the economy. IMO.
Volume light on the green miners.
Could still be bottom, but wise to wait for momentum IMO.
DXY to hold 81 at least for a day or two near-future IMO.
Gary,
I have my trigger stop at $131.57. Is that too high? I see you mentioned 131 earlier today.
Fair enough, Gary. I have no idea whether oil will make a new low, and thanks for correcting “anyone can make counter trend profits” because as you well know that is NOT easy. It’s taken me 25 years to get the right set of indicators together. I do it for “lunch money” while waiting for a major setup. I have had a lot of lunches this year. O.K. no burrito on this one. I’ll have to make enough on the trade to buy one myself.
$131 was a ball park figure. If you want to get it exact you will need to watch Kitco.
we barely got any bears on this intermediate decline especially in gold and silver. Those getting in during this consolidation are going to get whipsawed as it goes down from here. They’ll feel the pain for a few days or week then sell early in the red or as it passes back up in the green. Long shot for it to go right back up again at break $1282, IMHO.
Folks it’s too late in the intermediate cycle to be pressing hard on the long side of gold. I think if we were going to get the parabolic move we needed to be over $1450 already. It is half way through the daily cycle and we aren’t even close to making new highs yet.
Gold can rally against a rising dollar but it can’t make a parabolic run against a rising dollar. If we do see a final cycle higher it will likely just make a marginal new high before moving down into an intermediate low.
The big move for this leg has already happened. The next big move will come out of the intermeidate cycle low, whenever that happens. For now just follow the plan.
We will look to step on the gas hard again at the next intermediate bottom.
Year-end fair value target for the S&P 500: Using EPS estimates from 91 to 92 and P/E multiples from 12 to 15. (1104-1375)
Just shorted CCJ at 36.92. Big intraday reversal on high volume (like SLV) then rallying into the reversal day on light volume. This is a good shorting pattern.
A question: Does anyone find these trading ideas useful? Happy to post if so, but if no one does I’ll only post my SPX buys and sells like I used to. (and go UNG!)
dg, “The euro just popped up on my screen as close to a buy (Man I love stockcharts.com).”
Mind to share where you see this?
DG,
I find them useful although I rarely trade them. I did buy some UNG puts the other day when you first posted your UNG trade and just finished closing them out. Was a good trade.
Hi DG,
I find your trading ideas useful..I have been following most of your posts and recently executed one of your trades..please continue posting your ideas..Thank you.
Man, I had some RBY but sold it.
SPY just hit 400 on SOS
$-452.56 SPY SOS.
Time to double up those shorts?
Ply, sorry to ask, what does that mean?
oa92000: I can’t share my screens because I am in the middle of starting a hedge fund base on them and my partners would be very unhappy! stockcharts lets you program your own screens and I have input the data I use.
There it is Gary. A big SoS day. I will be adding to my shorts as Poly suggests!
Agree, that’s a monster SOS, I’m adding to my S&P puts.
Sophia, it means there is a large money outflow out of SPY, being sold into strength.
tripple bottom on the S&P, plus a big hammer right on the lower channel line on big volume. I´m buying it if we close near the highs.
Added to my SMH and TZA shorts.
$-497.
That’s certainly well above Gary’s qualifying SoS mark, if I’m not mistaken. 🙂
Key reversal up days on the banking indices.
Poly: Yeah. Gary had been using $200mm, but was feeling that, given the money sloshing around and the volatility it’d take more, but this is surely plenty. Of course, it can change in the late after-the-close posting, so keep an eye out about two hours after the close for that final number. I hope it sticks!
End of day numbers on SOS is all that matters, so let’s see how it ends.
-$551m SoS as of 3:32 PM EST.
Gary,
Have you ever seen an SoS in the SPY of this magnitude that did not precede an intermediate decline?
I got just some real good fills. Thanks for the attentiveness guys.
DG, does that mean you’re going to have to go into the office daily? 😉
I’ve seen a larger SoS number that came almost two months too early.
Now at $-551 – Dec S&P puts are expensive as hell. I’m playing the rest via TZA too.
That sucker ain’t coming off the board.
Last year we saw SOS numbers like that in October and exited half of our positions just to see the market rally another 30% for a month and a half. SOS is not a timing tool.
That’s kind of unsettling Gary.
So you’d suggest now holding shorts until we see at least a move below 1173 at some point in the medium term?
wow…That 500 and 551 SOS number showed up as soon as the SPX turned positive for the day!! Now, as I type (3:58 EST), with the SPX in the RED, if it closes in the RED, that SOS number will just disappear from the End of Day data!!
Gary, thoughts on this? 551 SOS @ 3:30 pm, SPX finishes 1 point in RED and SOS number disappears from EOD data.
It’s money flows out of SPY, not tracking the SPX index.
Robert–You wrote: DG, does that mean you’re going to have to go into the office daily? 😉
Huh? I’m apparently to dense for your reference.
Gary: You’ve been saying you needed to see this to believe an intermediate decline is coming. Now that it’s here you are saying it may be 2 months early. Seems like you just don’t want to believe a decline here. Your holdout indicator just rolled over and bullishness is rampant. Why the hesitancy now?
What really doesn’t cause too much alarm in me right now is the value of the dollar. I don’t foresee a strong rally by any means while we’re over 80.
ah! Thanks Poly…my bad….
Was looking @ the SPX instead of the SPY.
Well, SPX is Red, SPY is green and SOS looks to be staying @ 551.
Interesting week ahead. I am still holding on to my core and not short.
Good Luck to DG and others who are short!
DG, I was referring to you starting a hedge fund.
Nick, SoS can occur even on red days. Upticks can occur at anytime an equity is moving up, being that it is down for the day or up for the day.
there will be no SoS numbers for SPY at the end of the day because there will be no strength.
I suspect this is what has been going on all along, and is why I said yesterday that SoS is a dangerous indicator on which to rely.
We did get another SOS in SPY today; we also had one last week or one before that.
http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html
Wow,
Sold my RBY a week ago (bummer!!) , but my MNEAF , AMOK , UXG had big surprize to the upside. Big surprize since I was going to hold them as they pulled back. volume up looked good too. crazy day.
KBX and HL not too bad either, but i dont own them
Robert: That’s the great thing. I’m launching it with an existing fund 50-50 but I get to stay home and call in orders to them in my underwear! No road show, no office, just my trading system and advising. I hope I can pull this off as it would be quite the deal.
Wes: the SPY was up 37 cents today. Remember it’s SPY not SPX, so we will get it, and there was “strength” (assuming it doesn’t change too much in the late posting)
aviat
It will disappear because the market closed down. This doesn’t, of course, mean that selling on strength didn’t happen. It most certainly did.
But this indicator is so flawed that we will not see it.
aviat72, but I believe they were all below $100 though, right?
Robert, the equity must end positive to constitute a technical SoS.
Obviously total money flow could be negative when the stock is negative for the day, as you point out.
Wes, SPY ended positive, it will be a SoS day.
Robert,
My suggestion has always been not to get tangled up in the mess that is the stock market. We have titanic forces pushing and pulling the market back and forth.
Does one really want to get sucked into that to maybe make some small profits on the short side, and then only if you time the exit perfectly?
DG,
My answer is kind of the same as what I said to Robert. We aren’t in a confirmed bear market so I’m not keen about trying to play the short side for the reasons I stated above.
In the long run I will make a lot more money (and lose a lot less) if I just let corrections happen and then buy the dip (in bull markets).
I learned a long time ago that trying to catch every swing up and down was mostly a losing proposition for me (and for most people).
Now maybe the large SoS number will signal the beginning of an intermediate decline and maybe it will be a poor timing tool again like it has many times in the past. With Bernanke printing like crazy how far can we really expect a correction to go?
For me it’s not worth trying to fight with something like that. I would rather just wait patiently for gold to dip down into an intermediate decline and then I will reload heavily knowing I have the safety net of a secular bull market under me.
Good point DG, so we will see it today. But, you have to admit that it is just blind luck that we do.
This could have been happening all along (the selling on strength) but we haven’t seen it because SPY closed down.
Wes,
The SoS numbers are compiled during the day and only disappear if the day ends down.
That doesn’t mean they weren’t there. If today had ended down and they vanished I would still take into account they were there during the day.
Gary,
QEII has been a non-event for the stock market (and I’d guess for gold,too). It was already priced in.
You seem to think that because the event hasn’t taken place yet, it cannot be priced in. You know that is not right. This happens all the time in markets.
Fair enough Gary. So it’s not that there is some reason not to expect an intermediate dip (other than Ben’s printing), just that you have no interest in allocating capital there. I am happy to make money on the short side while waiting for gold to bottom. At that point I will be all in in gold like I was until the recent bounce after the reversal day, but if I see money lying on the sidewalk I am happy to bend over and pick it up (so to speak—were that it were that easy!).
Wes, your point is fair, but that’s why it pays to look at it during the day. If it is big all day and then the SPY closes down a few cents, it’s still telling us something. I think the near $600mm is significant, but I’d never bet on just one indicator. Given everything else you and I have blogged about I am happy to see it.
Update, -582m SoS SPY @ 4:03 PM EST.
The last update will be @ 5:33 PM EST (delayed 15-30 minutes).
I don’t foresee the dollar able to move too much higher but even holding here could kill stocks.
Gary,
If the market hadn’t rallied, you would have never seen the data.
It’s a bad, unreliable indicator.
Wes,
It’s not possible to “price in” QE. This isn’t a jobs number that can be guessed at in advance. This is new money being constantly pumped into the market.
Haven’t you wondered why a 5 point rise in the dollar has had almost no effect on the stock market?
The reason of course is that the dollar is only strong because traders are irrationally selling the Euro. That doesn’t mean that dollars are becoming scarce, they aren’t. Quite the opposite. Ben is flooding the world with new ones.
It’s going to be tough to get a sustained correction in that kind of environment. I dare say if Bernanke hadn’t stopped QE in March we never would have seen the flash crash in May. It would have most likely just unfolded as a very mild correction.
Kind of like what we are seeing so far.
Wes,
Do you expect smart money to sell on weakness? Nobody ever wants to sell on weakness. Gary’s tested the SPY SoS prudently (I don’t think he lies). I also believe he’s tested many indicators and if this didn’t meet his criteria it wouldn’t obviously be of importance.
Gary,
Do you recall the largest SoS you’ve noted in GLD? Today is not worth looking at for GLD but I am curious. Thanks.
Wes,
Of course not. It’s because big money sells into strength. They aren’t unloading on down days. If they did that they would move the market even further against themselves.
And the indicator is actually one of the best tools we use even if it isn’t a perfect timing devise. On a pure price level it almost never has a losing trade.
So even if this signal turns out to be early it will most likely still turn out to be a winning signal because at some point the market will trun down into an intermediate decline and the smart money that sold today will be able to re-enter at lower prices.
Robert,
I haven’t really tested the money flows in GLD. But I suspect they probably aren’t going to be predictive.
By the way, the last huge SoS number I remember was exactly the day before the Dubai break. I had quite a nice day the next day!
Pima: You out there? You had mentioned you were going to look at GLD SoS and BoW days. Did you ever get to that? I’d love to know if you do it.
Robert,
You are missing the point. The SoS either occurs or not completely independent of whether the SPY closes positive or not.
But, when SPY never goes positive during the day, we cannot tell whether SoS is happening or not by looking at this source (WSJ) of data
That’s what makes it an unreliable indicator.
As a technical matter, the SoS data are generated when the SPY is sold on a downtick. Whether this downtick occurs above or below yesterday’s close is immaterial. Yet, the WSJ source only shows it on up days.
Wes,
You are missing the fact that 5 years worth of data strongly suggest that SoS days precede an intermediate correcction and BoW days usually precede an intermediate bottom.
Virtually no top or bottom occurs without seeing one or more of these days. So whether or not it’s happening intraday is irrelevant. History says we are going to see at least one or more prior to any major reversal.
So the wise thing to do is wait for one before taking positions against an intermediate trend.
Gary,
If you are proud of the fact that this indicator called the top 15 trading sessions after the fact, I am equally proud to call it all yours.
I don’t delude myself into thinking I can time every wiggle in the stock market. History is pretty clear that no one will do it on a consistent basis over a long period of time.
That’s why I’m mostly Old Turkey with my PM positions and it’s why I’m up well over 50% so far this year because I don’t try to time the daily wiggles.
Maybe for you losing 15 days is a big deal but for most people making money is a bigger deal and if one has to wait 15 days to do it…well that’s the cost of doing business 🙂
Realistically today’s SOS only missed the exact top by 3%. I doubt that anyone has done much better than 1.5 – 2% using other methods and if the market goes on to make new highs other methods will probably get stopped out for a loss whereas the SoS tool would keep one in the trade until it produces a profit.
I don’t know about you but I prefer the strategy that produces profits 🙂
Again let me be clear that I have no desire to short this market despite the large SoS number today.
Even as much of a trader as I am, I think there is value in knowing whether the correction has legs or will be just a few day affair. If the top was 1220 and I find out at 1190 that we are going a fair bit lower, that’s something I can use. Conversely, if there is no SoS day and that implies we cannot go much lower, that also has value to me. I am happy to short a stock at 50 on the way to 30 even if at one point it had been 60. Even more so if at 50 I know it’s going to 30 whereas at 60 I am only guessing how low it can go.
Not that it is perfect (no indicator is) but calling it late doesn’t matter much to me, at least. I just want to know where the next decent move is.
DG,
I’m frustrated by you guys not acknowledging that SoS could be happening (and I’ll bet has been happening) without us seeing it because the WSJ source doesn’t post the data unless the SPY closes up on the day.
Had the SPY not gone positive today, we wouldn’t have known about the SoS from this source. It would still have happened, but we would have never seen it.
I once used Interactive Data software that displayed money flow on every security. I’m guessing WSJ gets their data from ID. I still use ID as my data source, but I don’t use their software anymore.
The point is that money flow data shows net buying or selling regardless of whether the security is trading higher or lower. The WSJ uses this data and calls it SoS when the security is up on the day. When the security is down and the money flow data are down we don’t get to see it.
That doesn’t mean it (net selling) didn’t happen. It just means we can’t see it.
Wes, you’re 100% correct that SoS could be happening right under our nose(same for BoW) without it ever showing up and thus makes a poor “pseudo requirement” of an intermediate top/bottom.
In this case it worked in our favor, and if Gary is correct it preceded the 5 previous declines. But you’re right, being lucky 5 times earlier holds no future guarantee.
Thanks, Poly. I needed that. 🙂
Not sure I understand your frustration, Wes. SoS represents a fade, and that’s the notable part. Selling on a down day is sort of assumed, except when BoW appears, which is again notable as contra-action.
Wes, we’ve been watching SoS daily for months. There has never been too significant of number recently, nothing ever close to what we got today at -582, to holler about.
If my memory serves me right, a few times over the past weeks/months we saw some -100s and maybe one -300 that disappeared, but if you were really really really interested you could go back and search all daily comments (sometimes comments serve multiple days), because I can assure you they were commented on.
FYI the biggest BoWs previously came in on July 27th (185), July 28th (180), and Aug 24th (256). Those purchases average to around $109/SPY, which many were sold at $119/SPY today, bringing in ~8.5%. Not bad for 3 months work with mega millions. At this rate, if they were able to do that 3 times a year, that’d bring home 25.5% annually (sounds about right). Obviously this is one trial but you get the idea.
So if the intermediate decline in gold began on Nov 9th, we’re halfway through it already, right?
At other times Gary says “If we’re rolling over into an intermediate decline”, implying the decline has yet to begin or is just beginning. It’s kind of confusing.
It has nothing to do with selling on a down day. It’s about selling into upticks or strength, there is a difference.
His point (I believe) is if the market turned down only 1 more S&P point then SPY would have turned negative and disappeared off the SoS list. But the underlying selling or outflow of $-600 would still exist. If you’re waiting for a SoS day, as Gary repeatedly has called for as a prerequisite to a intermediate top, you could be found holding through the drop.
DG,
I had a busy week last week, had hoped to get to the SoS research on GLD over the weekend, but came down with the flu or bad cold or something. I’m on the mend, but not back to normal energy level yet.
I will try to take a look at that later this week or next weekend.
Hope you had a great T-day!
DG, If you give me a .2% stake in your hedge fund I’ll give you the SoS and BoW data as far back as it exists for GLD by the end of tonight 😉
Pima: Sorry about your cold. Glad you still plan to study money flows on GLD.
Wes: Yes, I agree, there can be a strong money flow day that doesn’t show up. BUt that doesn’t take away from it’s being effective so long as when it does show up it is meaningful. If in fact it has preceded every decline (but one) over the past five years, that’s impressive. I have a friend who is a naturalist. He often says, “When the bird and the book disagree, believe the bird!” No matter how much what you are saying makes sense a 95% track record over five years is what it is. The fact that some data doesn’t show up is true, but if Gary is right that it has always preceded a move, then there you have it. The bird has spoken, regardless of what the “book” says, even though I believe I under stand your point and it makes sense. If it stops working, I’m happy to drop it, but since I’ve been watching it it’s been a good, if not precise, indicator of a trend change.
and hopefully Gary will give the SoS signal and it’s consequences to stock traders/investors some good detail tonight, outside of “the plan”. I don’t believe we’ve all thrown 100% of our net worth behind the volatile PM’s 🙂
DG,
I like “believe the bird”. My point was that WSJ doesn’t allow us to see the bird all the time. But the bird is still there, nonetheless.
A value of -500 million is significant whether or not the SPY closed marginally up or down.
But we only see it on up days.
I have requested from my software vendor that he furnish me with the software formula for money flow. When he does, I’ll run it on my data feed.
If this happens, I’ll report money flow on SPY regardless of closing price.
I’m actually hoping this has merit. But I think we need it on both up and down days. Otherwise we run the risk of getting the word 15 days late.
Wes,
Even if today had ended down I would take the intraday numbers as a big warning.
I suspect the one time in the last 5 years the SoS didn’t catch the top was because it turned the day negative when it happened.
Really all the money flow data means to me is that smart money is either getting out or getting in. They won’t time tops or bottoms perfectly anymore than anyone else buit I figure they have much better info than I can possibly get. So when they move I want to take notice and prepare to follow their lead.
The only caveat is that I have no desire to short in bull markets. I save that for confirmed bear markets.
Gary,
I reviewed your work before I subscribed, and I have reviewed it even more since.
While you protest to the contrary, you are an excellent market timer.
ROBERT,
>I just find it silly that you put out so much information, it is usually good information too, that is extremely bias in one direction yet then you don’t even have the conviction to put your money where your mouth is.
I traded a **significant** amount of gold and silver futures on the evening breakout after the fed a few weeks ago. I posted them in real time and you can go back and look if you doubt me.
I made a ‘ferrari unit’ on those trades but, I’ll let you decide what model and whether new or used 🙂
(I did give back much of the profit on the margin hike and subsequent drop. But I was honest about that too, and overall it was well profitable. So I don’t understand your continuing comments about me not putting money to work. I also have a core position that I’ve held through this entire time.)
ROBERT,
My previous post deviated a bit from my norm and some was pushback at your repeated comments.
In general, it is simply best for people to not try to bump each other over amounts or gains.
Be happy with whatever sums you have. Really. We wish you the best.
There is no benefit to trying to one-up each other for a number of reasons:
– somebody is always richer
– somebody is always poorer
– nothing is verifiable anyway – so it usually just degrades into lying at some point as a person feels slighted and starts boasting.
– a LOT of people have been *both* richer and poorer and have a greater sensitivity to not broadcasting it in others faces.
– it isn’t necessary to the discussion
ROBERT,
None of this is a personal attack and I understand your comments to me aren’t either.
I just want you to understand why I (and gary it seems) and others probably won’t partake in the keeping score part of the game by posting totals. My ferrari thing was a cute line and all, but I’m mostly trying to make a point and I’ll be unlikely to bring it up again.
Wes,
I think you are mistaking a bit of good luck with market timing skill.
I understand that realistically I’m not going to get much better than 60% of my calls right over the long haul. That’s about the best anyone can do over any significant period of time.
The only way to do better is to either use a mechanical system that takes emotions out of the equation (requires strict discipline) or just ride a bull market (have to be willing to weather drawdowns).
All in all the reward from riding a bull market is so much greater than any other strategy, that for me, I’m willing to suffer through the draws to achieve the ultimate goal.
I think I can clearly explain ‘money flow’ to you guys (as I understand it).
Any security has a BID and ASK. People are PATIENTLY posting where they will buy and sell a security. There is a gap (spread) in the middle.
ASK->100
BID->99
When a trade OCCURS, a party has to go and TAKE either the bid or the ask with a marketable order. If they are buying they get the ASK, if they are selling the get the BID.
Any trade is a change of shares. Whether it is a buy or a sell doesn’t matter. It still represents one party giving their shares to the other party in exachange for money. But depending on WHICH PARTY WAS LESS PATIENT that transaction can occur at ONE OF TWO PRICES. Either 99 or 100.
If the trade occurs at 100, it means the BUYER was the LESS PATIENT (or more EXCITED) party. If the trade is at 99 then the SELLER was the initiating entity and MORE EXCITED/LESS PATIENT.
Remember, you can sell your shares by EITHER posting a limit order and taking the ask (being *patient*) or you can immediately take the bid. One way is fast and emotional. The other is slow and patient. Big money is slow and patient.
So, recapping…Trades happen at either the higher OR lower price. A trade is always the same – a transfer of money and shares. Thinking that one is a ‘buy’ and one is a ‘sell’ isn’t really correct in this situation.
The correct mechanism to think of is that one party was patiently waiting at the bid or ask. And the other party INITIATED the trade.
The MONEY FLOW is thus the balance of the trades initiated by people grabbing the higher numbers (to ‘buy’) and people grabbing the lower number (to ‘sell’).
The theory of money flow thus is that the party that is MORE EXCITED, LESS PATIENT, and more willing to “GET ME IN NOW!!! with a MARKET ORDER!!!” (either to buy OR to sell) is the party that is probably making the mistake and probably acting emotionally.
So…predominately seeing trades going off at the ASK (high number) shows impatient (greedy top?) people buying. Seeing the trade happen at the low number BID shows impatient (scared?) people selling.
The overwhelming balance of one or the other on particular days can show emotional buying tops and panic selling bottoms.
Gold & Silver Miner Short Interest Unusually High:
SVM 135% increase (.4 dtc)
EXK 49% increase (.5 dtc)
PAAS 43% increase (1.6 dtc)
SLW 40% increase (.6 dtc)
ABX 37% increase (.9 dtc)
NG 35% increase (1.8 dtc)
GG 20% increase (2 dtc)
AEM 15% increase (3.4 dtc)
I occasionally look at this data, but tonight struck me odd because 80% of the PM stocks I looked at had unusually high increases in shorts. We’ll see if this has any value over the coming days.
http://www.shortsqueeze.com
dtc = days to cover
Yes, prices of securities go up and down during the day, but there is ALWAYS a “high” and “low” number (ask/bid) and a trade (money/share transfer) always happens at one of those two prices.
The use of “uptick” and “downtick” in this dicussion I don’t like because it seems to suggest a security’s price is MOVING when it isn’t. The bid/ask can stay at:
ASK->100
BID->99
and can trade there all day. The trades back and forth at 100 and 99 are technically changes ‘up’ and ‘down’ in the price, hence the words uptick and downtick, but the price isn’t really going anywhere.
I think it is better to think of things as I presented. There are two prices with a spread and the price as which the security trades indicates who was the more emotional party wanting in or out.
Gary,
Just read your subscriber’s report for today and it brings up a question:
It looks like the chances are high that we will not see gold make new highs before it moves down into its intermediate cycle low. If the odds of gold moving into that cycle low are much higher than the odds of it making a new high first, wouldn’t it be a good idea to start unloading some of our positions at current prices rather than waiting for our stops to get hit?
Thanks!
Gary-
How long do dollar daily cycles typically run?
Is it possible today’s large SoS numbers were due at least in part to the fact that we are bumping up against the deadline (tomorrow) to sell losing stocks and avoid the effects of the wash-sale rule?
As an aside, I found parts of tonight’s update to be confusing, but maybe it’s just me being obtuse.
Like I said before, in bull markets the surprises come on the upside, so I will just continue to follow the plan and leave the second guessing to others.
Mag,
daily cycles 20-25 days on average.
James,
If you were long stocks go to cash. For precious metals just continue to follow the plan.
Pretty simple.
James and Gary,
Thank you, I guess I had the same confusion. I still think of SIL as basically a stock. I need to modify my preconceptions.
China’s benchmark short-term money market rate, the weighted average seven-day government bond repurchase rate, jumped over 57 basis points early on Tuesday to its highest level in more than two years, withtraders reporting an acute liquidity squeeze.
Gary,
Do you think the wikileaks of 2 of the banks in the US early next year( 1 being a very big bank they say) will have any effect on the market now or in a few months? I know the leaks have been about government and the war which is huge but has not cause any stir in the markets as of yet. Just wondering if something like this could be a factor when determining market conditions going forward
so…we are late in the gold cycle…looking for it to make a LOW
The dollar is up .50 and Gold has shot straight up about $20.00
what planet did I wake up on??
Like I said the surprises come on the upside. Now you see why I choose to stick to the plan instead of trying to second guess.
yes you did, and yes it did …but this late in the gold daily cycle, it still doesnt look like a valid break upwards…more like a suckers rally (selling opportunity). Double top for now? wouldnt even an ‘old turkey’ feel extra comfortable lightening up on positions in view of the timing here??
wait..I know what your going to say…
JUST FOLLOW THE PLAN, MAN!
Alex: Things jiggle. Gold will very likely make new lows before it makes new highs. If it rallies much more it will actually hit my shorts screen. I may not short it there as I wouldn’t want to unleash the Wrath of Gary (and because the world is collapsing, to be fair), but a one day surge based on imminent collapse fears doesn’t change a cycle that still needs to unfold.
I tend to agree with DG. If gold makes a new high it will probably just be a marginal new high like it did this summer before moving down into an intermediate cycle low.
But there’s no way I would ever sell my core position or short. It is a bull market after all.
Yes, I agree, but I do choose to just lighten up at the top a bit.Lock in profits. However , I do know that in GOLD , a cycle low can form with a couple of screaming $40 down days in a row, bounce and retest 🙂
Gary, nice work.
Gary,
Thanks for the feedback re whether to sell now or wait for stops to get hit.
My thinking was that if the odds were, say, only 1 in 10 that gold would make a new high here before moving into its intermediate cycle low, then I would take profits on all except my core position just to get the higher prices that gold is trading at now rather than the lower prices at the stop.
Of course, we can’t know for sure what the odds are, so there’s the rub. And as you have reminded us many times: In bull markets surprises always come on the upside.
Alex,
I hear what you’re saying and it’s similar to my thinking also. Maybe start reducing positions a little at a time, but do NOT go below your core position size.
I believe Gary will have us holding a core position thru the intermediate cycle. The only time we are going sell everything is when it becomes clear that a D wave is upon us.
P/C
Thats the plan for me too..I just hope we see that d-wave before it strikes too hard…they have a tendency to be BRUTAL 🙂
Gary and I obviously have two different ways of looking at the markets. I agree with him that his way will be better for most people. If you get out and try to get back in you have two decisions to make. Get either one of them wrong and you stand on the shore watching the boat sail off without you. Hold too much and you will panic out of fear at an intermediate bottom, sell, and do even worse. “Core” means what you can live with during a nasty correction without freaking out. Most people will definitely screw up trading, and be afraid to buy back at the bottom even if they timed the top perfectly (or will wait for a slightly better price, miss the gap up opening, and freeze). Decide what to do now and then stick with the plan. Know what kind of investor/trader you are.
FXE just showed up on my buy screen (!) That would mean a dollar drop and an asset rally, at least for a healthy bounce. I may need to cover some stuff today. Wes, you gonna hang in there?
That would fit with what I envisioned in last nights report. A quick break below the daily cycle low followed by a bounce as the dollar drops down into a cycle low.
This isn’t going to be an easy short.
Bounced hard right off 1,174, again, 3rd time in 10 days.
I sold a little TZA and bought some FXE as a hedge against a dollar drop. It’s never easy to short a bull, but corrections can be very nasty. Tight stops and good entry points are my best protection. I have break-even stops in on all six positions now, so virtually no risk.
Gary, there are widespread rumors on delivery shortages in the precious metals. something is definitely brewing. Couldnt this throw off the cycle? much like how the first QE threw off the market cycle?
I filled the 15 Dec puts @ $3.47. Holding TZA.
I hesitate to post this, but GDXJ just showed up on my short screen at 39.75. I bet it doesn’t cross 40 before having a nasty dip. This doesn’t mean anything other than that a lower low is probably coming. Ii tried to short it (with such a nice tight stop at 40), but couldn’t borrow it.
Potential breakdown from a crawl on IBB for anyone brave enough to short in this market.
Thanks, Gary! OEX traders are buying more calls than puts right now (smart money). I covered my SPY and 1/2 my SMH, but may do IBB on a bounce. FXE is rallying now so we’ll see if that sticks and gives the market upside legs.
“I filled the 15 Dec puts @ $3.47.”
Meant to say closed the 15.
slw, hl are so strong, make me scared..
Glad I’ve been covering all morning. Down to a modest short position (kept UNG as it has nothing to do with stocks). Only some TZA and SMH left after a good five day trade that went from lunch money to vacation money. I hope we get the bounce Gary mentioned. If we tank into the close (and I can’t spot it coming) let some other short make something off my covers. That’s enough trading posts for a while, unless I see something especially juicy.
Gary, do you have any comment on aaronpalang’s point regarding rumours of delivery shortages?
I’ve also been reading much about this issue and am not sure what to make of it.
There has been rumor shortages for YEARS! I don’t put it out of the question that the Comex might one day default but I can almost guarantee you it won’t be happening now or even in 2011.
shortages are supposed to be more than what comex has on hand for delivery from what I read.
Peter,
Rumors are a waste of time when it comes to trading/speculating.
Ask yourself a couple of questions when you read this stuff.
What is the probability of this occurring and how can you trade it?
What is the risk/reward ratio on the rumor?
How do you know if the rumor is true or not?
You will probably come up with a bunch of vague answers and a probability of 50%.
You would be better off flipping a coin!!!
Fine. Its not a rumor…
http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsReport.pdf
Fortunes are made from buying on “rumour” and selling on “news”
gary,
do you know where to see silver futures for December?
This blog analyzes the daily movement of silver/gold contracts and speculates on the reasons behind the action. Speculation aside, the numbers of open interest as of Monday speaks for itself.
http://harveyorgan.blogspot.com/
I still dont see what edge that reports gives a trader.
maybe somebody can help me out!
Covered my shorts as well today. Did pretty good, but not as well I as imagined (it is hard to beat the upside when gold and silver are really moving!).
Well I’ve had enough trading for a little while. All cash. Look forward to massively buying silver shares in the not too distant future and riding them to exhaustion! Good trading all.
Jerred, if you trade futures for a living and have been following the report for years, there are some interesting facts, if not though, it probably wont mean a thing.
Its simply another tool that I use, there are no 100% fool proof methods or tools, yet one tries to maximize thier edge in this market.
I just thought I would volunteer this.
I solely traded the dollar today (as an indicator). The stocks were moving in absolute lockstep with the DXY. I got out at 81.26 or thereabouts.
It is interesting, in the triple funds, as the dollar is clearly on an up spree (ex, 81.15, pushing through 81.20 and on its way up) they’ll sometimes move the triples down (triple bears) when you know they’re going to jump up. They make a huge spread and sure enough they jump to where they’re supposed to be based on dollar price action.
Thanks Aaron for the reply
I dont follow those reports, just trade off of volume and price.
Can you give me some insight on how that CME report gives a trader an edge?
Thanks
J
If they gave you an edge Gary would most likely follow them.
Harvey Organ says every single night he posts that Gold and Silver are going to the moon, and there are extreme shortage problems that will doom the Comex “very soon” (he literally says this every single day M-Sa). A lot of gold bugs are really emotional and they become sensationalists. When gold moves down they scream “manipulation”. These are not the type of guys you want to follow. These are the guys that would talk you into leveraging at a C-wave top because golds going to $5000 in a month. (right?, lol).
You’ll be much safer just following Gary, who right now is 70% in PMs. So if this crazy even were to happen you would be well positioned.
Personally, I use it for strength. If there is a strong physical demand/delivery notices, it means that there is limited downside risk. The paper price cant be pushed too low, since its meaningless for the shorts…they have to deliver the metal. Most of the shorts in silver are held by two banks, and when they dont deliver in time, it speaks volumes about a tightness in the market. Its a physical story.
not only is he 70% in P.M.
He’s prob 70% UP 🙂
You’re one to talk Robert, you were screaming bloody manipulation a few weeks back and now you are a 100% Gary convert. No one is suggesting harvey organ is the bible when it comes to PM movements but it gives one side of the story just like some gold bear posting gold is going to drop back below $1000. At least with him, he is speculating on actually numbers reported by the comex themselves.
Target to cover SMH
http://img443.imageshack.us/img443/4022/smhl.png
n1tro, we all know PMs are the only bull market around, they are the best bey anywhere, otherwise we all wouldn’t be on this blog. Gold and silver are very late in their cycles right now that’s why its not a very good bet to press to long side right now even if you all cash.
Following that manipulation shit would lose me money in the past, in a bull market.
I wasn’t screaming manipulation weeks ago, I was simply having an intelligent argument with Gary to see his counter-arguments against Gold manipulation.
Soros and Paulson, two of the most successful investors in the world who have much better info than us are heavily into gold. Would they if it was just manipulation to the downside? Gold on average increases 20% annually now since 2000, how is that manipulation?
Check out the largest institutions in the world, Van Eck, FMC LLC, JPM, GS, they all are HUGE GOLD OWNERS!
Folks if there were shortages then we would see it at the dealers. I can buy all the silver I want right now and premiums aren’t extreme. If someone was scrabbling to find silver for delivery then we wouldn’t be able to buy any.
That doens’ mean supply isn’t getting tight.
But we will get an intermediate correction. They have come like clockwork for 10 years now. Once we do that will be the time to get leveraged again.
Just follow the plan.
What’s the plan? ; )
I’ve updated the terminology document to include a brief discription of the money flow data and the dollar cycle for anyone interested.
I think the last few weeks have been good for Old Turkeys. But not for young turkeys. Ok, that was really stupid, sorry.
Mary,
The plan is to sit on a beach in Maui drinking strawberry margaritas.
Not that I would rub it in or anything 🙂
BTW how’s the weather in DC?
OK, thanks Gary … that’s the answer I like the best … something I can wrap my brain around.
When I, personally, cannot buy physical silver/gold for immediate delivery there may be a shortage brewing … I buy physical about once a month.
Gary,”The plan is to sit on a beach in Maui drinking strawberry margaritas.”
why not just move there?
DC is cold, but Thanksgiving in Florida was lovely. Not quite as nice as Maui, but I wasn’t jet lagged either.
gary, little guys buying coins on APMEX dont mean much, taking delivery of just one contract is 5000 ounces of silver. Its not the same.
Again, I am a believer of manipulation. The price will go up, simply due to physical demand. All that manipulation does, is lessen the rise/intensity.
i sold my hl too early..still going up..
This Silver moves smells a lot like the huge intra-day reversal we witness a few weeks back.
Ahh Mary you spoiled my fun 🙁
Serves you right for continually bringing up Maui to non-attendees, aka cold weather losers. Blackened mahi mahi is all I’ve got to say about that.
I like it a lot better if the tables aren’t turned on me.
I’m a great gloater but a poor loser 😉
I just got off the phone with CMI-gold-silver, they’re a huge bullion co. out of Phoenix. Eric King interviews them, I believe it’s always the owner, to discuss availability, sentiment, etc.
Just to see what’s up I asked for 5000 oz in 1000 oz bars. He said he could do it in 850 oz bars (I could buy 5000 oz. today for like 49 cents over spot). He wanted to sell me 100 oz bars instead because they have so many (also very easy to get)).
I told him Tulving was out of 1000 oz bars, and he basically told me that Tulving is just a middle-man, basically a trader, and gets low all the time because he’s in and out all the time (its high right now so he’ll sell most of his inventory).
Most Comex customers don’t take delivery, they’ll roll over, take cash, or get settled in SLV. Most of them don’t want the game to end because they’re traders. Crashing the comex would not be in their best interest.
Do you want to wager that there will be a Comex in January? I’ll even venture to say the Comex will be functioning in May (no way man! I must be crazy!).
Simmer down 😉
Notwithstanding all the discussion of cycles, etc., the charts of AGQ, SLW, HL, etc., are sure yelling “breakout”. I’m sticking with the plan, but still wishing I had kept the added leverage…
gary, gld is lagging..
http://finance.yahoo.com/q/bc?s=HL&t=5d&l=on&z=l&q=l&c=gdx,gdxj,sil
Well, I held on to my AGQ, guess I better get out now. $30 per share in a month is one heck of a return. Thank you to everyone, especially Gary.
With silver up, I doubt any of your readers are losers if they followed the plan. Gloating is fine though. You deserve it after moving over a holiday. Way to keep the newsletter on time and schedule!
Mary, please spare us! 🙂
looks to me like old turkeys got caught out of position or with soft hands. You can look at those pretty chart and argue all day well this is this, that is that, but the truth is this guy Bernake is monetizing 30 billion in depth every week!
Why are people taking delivery of their metal positions? because they want the hassle of security the physical or paying storage fees somewhere? Of course not!
So let me get this straight, stock market is going lower in the very near term?
Caraville: No one can really answer that question, certainly not Gary as he is not a short-term stock trader. If you want short-term stuff I’d say focusing on position sizing, risk management, and stops is much more important than where the mkt is going short term. That all said, my opinion is a 1-2 day bounce then lower, or merely the bounce we had this morning, then lower.
Gary,
USD looks like approaching a top. Gold is also perched more or less near the highs. How do you expect Gold to behave when USD starts its decline. You have mentioned that Gold is quite late into intermediate cycle.
Will we see both gold and USD come down?
Gary, in your 11/23 portfolio update you dropped your core position to 75%. Do you have a plan re taking it back to 100%?
Here’s the latest I saw from Prof Depew on Minyanville today:
DXY on bar 6 of 9 of a DAILY setup. This can record on Friday if the rules are met. If it does, then expect a 1-4 day reversal of the straight up it’s been doing lately. 81.34 is a resistance level, that if breached in Demark terms (down close, followed by up close, then 1 tick above on the following open), means a higher level can be reached. However, we are also in the final week of a WEEKLY buy setup, so this might be hard to accomplish.
SP futures could qualify if close is below 1174.15 to more downside. Target would then be 1123.80. This is the final week of a 1-4 bar WEEKLY setup, but we are also in a 12 week window of a sequential sell signal that lasts until the end of December.
Silver is on track toward a DAILY sequential sell signal – bar 7 of 13. These bars may not be consecutive, so we have at least a week of more upside. But the upside exhaust target is 28.25, so that is resistance. The MONTHLY is on bar 8 of 9 of a perfected sell setup – so after December, expect a 1-4 month downside reaction. I may have misspoke a few weeks ago, as Prof Depew says a Sell Setup will record on the YEARLY chart next year. So the reaction in Silver would be a 1-4 year starting in 2012. Interestingly, he says he expects silver after that point to make a “economics related-run” as opposed to a “currency-questioning run” so keep that in mind.
Sprott Silver Trust trading at over 8% premium…..getting frothy, again.
Hecla busting
It’s tempting to fade into an AGQ short right here. Feels like free money to me if you can stay on your toes. But I want to still continue to be able to login here so I’ll refrain 😉
I bet DG pulls the trigger but won’t tell any of us 🙂
No one is saying comex is going under. The suggestion is that given the open interest outstanding, the comex is short of the physical silver/gold to hold as reserves thus the conclusion from this would be silver/gold prices would go up, NOT that comex would go belly up.
Gary turn your head and ignore this post…
Fcuk it, I’m shorting AGQ here, very small, we’ll see what happens…
Changed my mind, stupid play, staying in cash. Don’t trust silver’s downside, lol. GLTA.
gld 138 call huge volumn,
http://finance.yahoo.com/q/op?s=gld
No Robert there are better things to short than PM’s, and in fact I am reloading here here on this silly rally. XLE, TZA back, holding SMH. Gary is right that PM’s are in a bull, and I’d rather short elsewhere. My fear is we rally a couple of days and I start to cover, but if so that’s life…
(and, yeah, I probably wouldn’t say if I did PM’s)
;>)
I took a small stab at the $27 Dec SLV puts, will play it very tight.
Boy, I really don’t like trading options. Between the spread and time decay, you get killed even if you’re right. Better to short the calls and let the decay work against the other people. Or short SLV during the day and get enough head start to hold overnight. Anyway, they’re not for me. Good luck!
You guys sweating a top in gold and silver do realize that a squeeze in COMEX is happening. A collapse of prices is the least of my concerns.
Either it’s a long term play with a high delta and you’re holding options that are expiring 3-5 beyond your intended exercise. This eliminates the time decay and spread, on a liquid security.
Or in this case(SLV) the spread is horrible and you’re playing it in hours, not days or month 🙂 It’s either going your way or you’re out.
In both cases getting the call right is extremely profitable.
This could turn into a fun day as re-shorting what I covered this morning into that silly-looking +8 Dow rally may work out if/when tank into the close. Oil may have made an intermediate bottom but OIH, XLE, and OIL are all doing well for the shorts today who shorted their morning strength. OIL is down 2% today.
As for the PM’s, they are popping up all over my short screen, so don’t buy into this.
DG,
I bought the Dec QQQQ puts because the indicators I follow, particularly the sentiment indicators, showed what looked like complacency. I see nothing so far that has changed that.
A break of SPX 1173 might cause me to make a move. But, until I’m ready to buy for the next move up, I see little reason to sell the puts.
I don’t sit by the computer all day, so I’m just a position trader. Catching the wiggles is too hard for the reward, IMHO.
I’m leaving that to you and Poly.
Good luck to us, Wes. I love trading and have constructed my consulting business so that I can play the greatest game in the world during the day. I’m in CA so the mkt closes at 1:00 for me. Let me know when you cover. For now it appears to me that the upside potential for the SPX is about zero.
DG,
What causes stocks and etf’s to pop up on your short screen?
Pima: I can’t share my screens because I am in the middle of starting a hedge fund based on them and my partners would be very unhappy! stockcharts.com lets you program your own screens and I have input the data I use.
Covered SLV puts, quick 10%.
put/call $CPCE very high…
oa92000: A standard deviation is at .80 so the $CPCE is not really that high. Higher than it has been but nothing noteworthy IMO.
Here’s the drop into the close I blogged. Tomorrow could be interesting. We have bounced off 1273 three times now, so there are probably not enough buyers left who haven’t yet expressed themselves at that level. Should e get there again I bet we fail. If we do, we may have a sharp drop, trip the stops, rally, and then tank harder.
Absolutely agree DG.
Having said what I did, I must admit that a weak close right before Dec 1 does excite me. (Dec 1 is traditionally strong.)
So, I’ve taken profits on the 40 Dec 53 puts and gone long 400 QLD.
We’re on opposite sides this time Wes. I am showing too many ETF’s still overdone on the upside so I think the shorts may get an early Christmas. Let’s see what happens.
TZ,
If you’re around today, I have a couple of questions re the uptick/downtick subject you discussed yesterday:
1) If we look at the WSJ SoS page for today, we see that GLD had -9.03 under the money flow column. The tick up was 6.78 and tick down 13.55. Does that mean that 6.78 million changed hands on a tick up (at the ask price) and 13.55 changed hands on a tick down (at the bid price)?
2) If the answer to #1 is yes, then the buyers were more confident and less emotional than the sellers, right, because more orders were filled at the buyer’s bid price than were filled at the seller’s ask price. Is this correct?
I wonder about this though, because stop loss orders would likely end up getting filled on a down tick because they are converted to market orders when the stop is hit.
If anyone else wants to chime in on this, I’m all ears.
Thanks!
Pima,
From a whale’s perspective (someone doing HUGE purchases or sales of equities).
Momentum is key. That is why it’s selling on strength and buying on weakness. When there’s tons of buyers we can pull more money out of a stock than put in that day even though the equity rose in share price, and vice-versa; On big selling days and panic days, we can come in with bundles of cash and end up putting more money into an equity than was sold this day (this will create upticks, the key is they’re small with big selling pressure so you don’t move the share price much, and again, vice-versa).
Make sense? It’s pretty much simple liquidity. If you buy 1x shares moving a stock from 10.15 to 10.16, and I sell 4x shares when its at 10.16 and it only moves down again back to 10.15 because there was a big buyer there at that time, we then in aggregate just pulled out 3x more than went in on a down-tick.
Smart money does this all the time.
I am a little bit superstitious. Every time my portfolio reaches a new high, the market crashes wickedly (think 2000 and 2008) and I get wiped out. Well, I’m at that point again and feeling like I should go straight to cash.
Elaine,
We’re counting on someone to stimulate the economy. You should go to cash and go shopping with most of it 😉
j/k, but I have no advice for you on what to do with your shares, they are yours after all. Are they all PMs? If they’re stocks Gary advised yesterday to sell than and go to cash. For PMs his plan is to hold until his support lines are broken (I’m sure in tonight’s report there will be a rehash of the Plan). Gary’s right more than most of any us so listening to him is a wise move.
Elaine,
Quit focusing on your p&l and focus on the process/plan.
that should take care of it
DG,
My trade is nominal, just lunch money with dessert.
It’s rare that when you buy weakness near the beginning of a month, you don’t have a chance to make a profit. I guess it’s the new money coming in over the transom.
But I by no means think that the decline is over. Like you, option trades tend to make me strike while I have a chance, especially when I think there will be a one or two day countertrend in the offing.
Since November 4, the dollar index is up appx 7%. Gold is even and Silver is up appx 1.5%.
Good strength in the metals given the strength in the dollar. It portends well for any weakness in our injured currency.
Let’s see what comes along to knock the dollar down/give the Euro strength.
Not intended to offend in anyway, but I get the feeling many peoples’ “plan” is to have ones entire net worth in PM’s and trading solely on one (very talented)person’s guidance. You need to be aware that you’re taking on massive and blind risk, I don’t care what anybody has to say in “the plan’s” defense.
Poly,
You can see it on the blog with the anxiety of every move in gold and silver.
As Gary has stated in the past it will be very difficult for most to walk away from gold and silver once this is over.
I think for the newer investors/traders this has been a money tree that gives and gives and gives. However, when the turn comes it will take it away and most will continue to buy the dips and add to the loser.
Should be interesting to watch
Silver and Gold essentially were flat for about 1 month until today. Anyone on the sidelines waiting for lower prices, after viewing today most likely freaked out and bought back in today.
For one to hold out for the month, see today’s price action, and still wait for lower prices would be extremely impressive and unlikely (maybe 20-30% are capable of this). This is of course assuming they are not familiar with cycle analysis which I can guarantee less than 10% (maybe 5% or under) are!
Most investors are not patient, that is why most investors lose money.
Poly,
“The plan” is all about risk management.
It’s about selling down one’s positions at certain stop-loss points. These stops are pretty tight.
If one is all-in with no stops, then one isn’t following the plan as Gary has repeatedly defined it.
If anything, Gary is counseling more discipline and risk management than most retail investors ever use.
Maybe it’s less than 1% overall for traders aware of cycle analysis’. Ironically I found this blog through reading the HL yahoo forum (someone referred to it, and cited Gary’s opinion). I’ve never posted there but do visit there for my own sentiment readings. HL is probably the most active PM board, at least silver.
Ironically if Gary were to pay me to link and cite this blog on message boards, success would be small because the most active boards tear through so many threads so rapidly that no information sticks. There is essentially no good information to be found on a super active boards because all good (and bad) information vanishes within hours.
Gary you should have a questionnaire when someone subscribes to see where they heard about this blog (“how did you hear about this subscription”?).
Robert,
Actually Gary did ask me that in an email when I joined. Maybe it was a one time question, only Gary can answer that.
David,
I disagree that is prudent risk mgmt, but will cease the conversation in respect of the authors blog.
I’m not faulting the plan, I’m trying to state that executing the plan is not as easy as reading the reports and making a few transactions, as evident on the comments section. My intention was to simply highlight that most people are in so deep ($$$ flashing) with their entire net worth and simply not capable of carrying out the stated plan in certain times of extreme panic and volatility. It’s all milk, honey and champagne while the bulls are rolling, until they turn.
Jarred,
“As Gary has stated in the past it will be very difficult for most to walk away from gold and silver once this is over.”
Yes I agree Gary has mentioned many times his job being to get subscribers out before any wrecks. His work on the comments blog re-assuring subscriber on sticking to the plan is very commendable too. I guess we’re just describing a common bull market phenomenon! Agree it will be interesting to observe.
To All … Gary has said over and over and over that each individual should execute based on his/her risk tolerance. I know what mine is … Gary carries 50% of his portfolio through all draw downs … even now he holds 70%. I know I can’t do that so I hold 30% when Gary holds 70% and hold 10% when Gary’s at 50%. I NEVER leverage and am never in PM’s EVER at more then 50% of my portfolio and ONLY when Gary’s fully leveraged.
If everyone executes based on their personal risk tolerance they should be fine.
I may not make as much as I could but I will sleep very well at night.
What’s funny is Gary is conservative compared to a lot of PM investors, even at 30% leveraged (it is hard to disagree with this number, it is pretty much a perfect medium- a draw back won’t give you a margin call (we avoid D-waves anyways), and advances give you awesome gains). I push Gary a little, I do 40% leverage on PMs with smart entries. Considering I’m allowed 200% leverage I’m okay and comfortable in this bull market. I’ve tried 100% and a little over leverage and the market freaks you out!
What’s cool though, if you put down a $250k bet on AGQ you basically are wagering close to 20000 ounces of silver. This is 1/50000 of the entire above ground silver supply! The silver market is definitely thin.
Robert, you rest my case 🙂
Poly, lol. I’m 95% cash right now. I’m 23 years old and can afford to risk more than most here. I only have a fraction of my capital invested. You should be wise enough to realize you can’t judge people’s risk levels through the message board.
If I were to go in 140% in silver miners close to an intermediate bottom and the market were to move against me I’d just put in the needed cash to bring my positions to leveraged levels. Then I’d wait (probably not long) for silver to explode.
If I may ask Poly, what percentage of your portfolio is PMs or what do you plan on it being? It sounds like you are very conservative, I think you are forgetting an important conjecture; we are in what’s probably going to turn out to be the biggest bull market in history!
Robert, percentage are meaningless.
It’s all about how much money you have and how much you are willing to risk.
If I had 10 million dollars I sure as hell wouldn’t be investing it all in PM’s … just think how long it would take to recover any losses?
On the other hand if I only had 10 thousand dollars a 100% position would be easy to recover … even if I lost it all.
Anyway, the point is 50% of x can be multiple times larger then 100% of y.
Sweet dreams 🙂
What you guys are trying to argue is that there is too much risk being in 70-100% right now in PMs if I can muddle through to your points.
That is simply wrong. Being un-leveraged in the only bull market around is not “too risky”. Enough said.
Peter, yes as your net worth increases your risk percentages change. If I were 10 million liquid right now I’d allocate small amounts to the Canadian, Swiss, and Australian currencies, the rest would be in PMs. A million liquid though is still probably not enough, IMO, to go there.
The OEX traders bought 5 calls for each put today.
That, plus positive season comparisons (9-5 for Dec 1 under these conditions, 11-3 for Dec 1-3}, have enticed me to add an additional 200 QLD in the after hours.
Peter: I agree with you completely. After all, ultimately it’s about money and it’s usefulness. I have gotten more conservative since I have now made enough. Why should I take a chance that might result in a big loss that might force me to change my lifestyle? I can do anything I want now, so why hock the house at what’s supposed to be a bottom? Besides, overly large positions mess with your emotions and increase the chances you’ll screw up. I always have lots of uninvested cash, which is great fun during panics like March of ’09. And I, like you, like sleeping at night!
Whether someones net worth is $10,000 or 10 million the percentages are the same. If you lose 10% of 10 million it’s not going to be any harder to recover that than if you lose 10% of $10,000.
Just simple math fellas.
Gary: I could care less about the math of recovering. If I am 25 years old and lose 30% of my life savings ($10,000) who cares? If I am 55 and lose 30% of my $1mm life savings it’s a big deal. It’s simple math, but I bet you can tell the difference between the two. Life is about having money to live and retire on not about screwing around with percentages. Ultimately money is about personal freedom, not keeping score and ego games. Even winning back what you lost (“recovering” as you call it) is just ego stuff. Who cares what you started with? Just your pride. What’s the point of recovering anything? The idea is to do the right thing starting now, not remembering what you used to have and trying to make it back. If one has more than he needs and risks it he is being greedy or foolish and likely both, IMO
DG,
You are speaking from the perspective of someone who has enough and isn’t willing to lose any of it(I suspect your large losse early in life has permanently latered how you look at risk).
That’s fine if you want to be ultra conservative. But there really is no need to trade like that.
You can take a 10% position in any trade with realistic stops and never have to worry about destroying your account. The percentages are the same no matter what you start out with and the risk management principles are the same whether you have $10,000 or 10 million.
If you are going to trade then you shouldn’t risk more than 2% of your total portfolio on any one trade. Obviously 2% of 10 milion is much larger than 2% of 10,000. But it really doesn’t matter. You can risk 2% and be fine no matter how large your account is.
If you have a profitable system then you will make money over the long term. As long as you don’t get greedy and accept a 2% risk management then you won’t do any signficant damage to your account and you will give yourself the best odds of increasing your portfolio within reasonable risk parameters.
Certainly one could reduce risk to .5% but it’s really not neccessary that is too small and the reward will be greatly reduced with those kind of positions.
As a matter of fact in the current environment you run the risk of underperforming inflation. And in that case you are just running really fast to go backward.
Now investing is a different ball game all together. No matter how big your stake you have to be willing to accept drawdowns, but the reward of course, is infintely greater.
Whereas a good trader with a 2% risk management standard might turn 10 million into 12-14 million in 5-10 years an investor riding a secular bull could easily turn 10 million into 50-100 million.
It all depends on ones goals. If you are happy where you are then by all means just trade very small and never worry about any signifcant drawdowns. All you will have to worry about is how much the Fed is going to debase the currency.
If however you want to trade to win big then up your risk to 2%.
If you want to become rich then be prepared to pay the price that a secular bull demands.
That means you don’t beat yourself up because you didn’t sell into a key reversal because you know the bull is going to correct that little timing error 🙂
Now lets talk about current trades ;).
After reading Doc’s submission tonight, he is pointing out a potential triangle breakout with silver, as well as moving the beginning of gold’s daily cycle up (today would be day 9!). This is making me itch to get back in, but if that is the case I think I need to wait. I will suffer a little watching gold and silver jump to $1400+ and $29+, but I really don’t think if they get there they’ll stay there for too long. The problem is, what if the intermediate decline only comes back to current levels? Tis’ interesting.
DG, some argue its about percentage gains/losses (I’m this boat) vs. having enough. Hence Wall St. quote “it’s a zero sum game pal. Somebody wins and somebody loses.” Of course some would call him greedy, he just calls himself a winner.
Gary, you must be a fast typer…
so now holding zero PMs, mostly cash, how long do you estimate it will take for another good entry in silver miners? Do you agree with Doc’s change to now Day 9, as today, of gold’s daily cycle?
I’ve never thought it wasn’t on day 9. The last cycle bottom was pretty obvious IMO. Gold tagged the 50 DMA and bounced. Pretty obvious place for a cycle bottom.
I agree with Peter. If i had a million dollars i would waste my day old turkey style doing the research and planning my trades for 20% profit but with under 50k its not worth my time. I rather play dominos or go fishing. I guess it also has to do with the investor’s age. As you get older you dont have as much time recovering from a big loss and become more cautious.
Gary;
Since you believe we have to finish this daily cycle and then another daily cycle before we hit the intermediate low in PM’s does that mean you won the burrito bet with Doc?
I take it that you don’t plan on adding any new PM positions until an intermediate low?
ROBERT,
>Hence Wall St. quote “it’s a zero sum game pal. Somebody wins and somebody loses.”
You’ve quoted this twice (combined with “money isn’t made or lost…simply transferred”)
I’m a big fan of the movie, but you do realize this is incorrect, right?
Yes…there *are* specific, limited environments such as the futures markets where the wealth payout is zero sum (actually negative due to commissions.) However those examples are manufactured and false.
The truth is that wealth (which is commonly equated with ‘money’. The definitions are different, but we can run with it here) is NOT simply “transferred”. This is a VERY common belief and politicians use it prolifically to try to convince people that if (greedy person) X made money, then it was because they TOOK it from YOU!
“Wealth” (value) can be (and IS) routinely both created and destroyed.
On BALANCE, the wealth of the world throughout history has increased at roughly single digit percents yearly – puncutuated by slices of time like maybe the industrial revolution, or use of fire and such to accellerate.
Wars, plagues, famine do the opposite, they cause wealth to be destroyed, consumed, or never created. So do oppressive laws and governments.
Wealth is CREATED (raising the sum total of it in the world) by the application of time, effort, resources, intellect, etc…by one or more people. The end result (if properly done) of this application of resources is something of HIGHER **VALUE* (wealth) than what was started with as individual components.
A person over time can cut down a tree (which itself was a form of ‘value creation’ by another living entity), saw it up, and work it into a chair….or house.
The end result of their time, intellect, work, and materials resulted in the new existance of a single house (a wealth or value).
That house didn’t exist previously. The total wealth of the world (and that person) has now increased.
Burn the house down, it disappears.
And, yes, you can of course TRANSFER the house. But the statement that wealth is neither created nor destroyed…JUST transferred is incorrect. The transferring is but a secondary action completely separated from the creation of wealth.