SILVER BULL

I’ve pointed out in the past how consolidation size is usually predictive of how large a move will be once a breakout occurs. I thought I would take a quick look at the silver bull today using that criteria.

As most people know I’m mostly interested in silver during this bull market. I really doubt that I will ever buy another oz. of gold again.

So let’s start by taking a look at the long term chart of silver.


As you can see the consolidation principle works perfectly in the silver market. So far we’ve had three major consolidations and each one as been followed by a powerful rally driven by the size of the preceding consolidation.

The relevant fact is that the longest consolidation has also produced the biggest breakout. If that continues to hold (and I think it will) then the current rally is probably only half over.

A meager 46% breakout is way too small for a 30 month consolidation. If I had to guess I would say silver might be in the process of forming a triangle consolidation pattern, especially if gold has one more drop down into a final intermediate cycle low. 

Ultimately I expect this breakout to launch silver to somewhere between $43 and $50 before the next consolidation phase begins.

246 thoughts on “SILVER BULL

  1. catbird

    Your change of mind this week didn’t bother me. I want to follow someone who is never too comfortable in his position, who is always looking for reasons his thesis could be wrong. We should all feel fortunate to have found someone to keep us on an even keel as the PM bull bucks.

    In the future though, I’d appreciate a “portfolio change” notice in the members’ area.

    For the record, I went from 100% invested to about 35%, just in SIL and SLW. I sold all my AGQ, as I don’t want to ride that puppy down if silver is going to lose another buck or two.

    By my reckoning, if we could get silver back down to $27 or so, AGQ could be had somewhere in the 120s.

  2. catbird

    …and another thing (someone might have already pointed this out) but your REAL change of mind came when you stopped waiting for gold to retrace 50% (to 1293) when you went back to 100% invested just a couple weeks ago.

    Why weren’t these people complaining THEN about you being a flip-flopper? For the longest time you had been expecting gold to give us a 50% retracement.

    Really, all you did was flirt with the idea that the intermediate bottom had come for a couple weeks. You rolled the dice and got back in early. Those of us who followed you back to 100% in made some nice coin–not a fortune, but nice money. Now we’re out, waiting for the real intermediate correction you always expected to come.

    Again, those of us who followed you MADE MONEY these last couple weeks. If you get confirmation that 1308 was indeed the bottom, we’ll hop back on board the bull and probably make loads more money.

    Where’s the problem here? ; )

  3. Beanie

    Gary,

    You are fond of saying secular bear market all the time, yet you don’t seem to understand what a secular bull market is. It’s just the opposite, to put it succintly. Within the multidecade secular bull market, there obviously will be cyclical bear markets in between. The last 10 years weren’t all fun for the bulls (or bears in 2003-2007 and 2009-2010) — there were cyclical bear markets and cyclical bull markets. We were just “basing”, is what I like to think. Many people who bought stocks back in 1980’s and early 1990’s made a lot of money, even if they kept the stocks the last 10 years. They made a lot of money and their long term portfolios still did very well. What all the grieving is from are those who bought during the end of the internet bull market as well as those who bought before the 2007-2008 collapse.

    How do I know that we’re on the verge of another huge bull market? I learn to ask the question, “What does our government want (in terms of technology) for Americans to have so America can continue to achieve prosperity and be the nation of the world’s envy?” Whatever the government wants, it will get.

    Back in 1990, our government wanted us to have the internet. Did they think we would achieve productivity and prosperity if we built up the internet and most Americans get access? Hell yeah! The govt knew; after all, the internet technology were already used by the govt, specifically within the military. To get internet to the masses, the govt needed to fund it. And it did that via the money supply.

    So what is the govt seeing right now and want Americans to have? Internet 2.0 (continuation of the internet) and green energy revolution. Especially green energy. If we don’t build out our green energy technologies, the chinese (their govt is actively funding green tech) or another country will beat us to it. We don’t stay a super power by letting another country beat us to important technologies — and green energy is most definitely very important. This is why we will have the green energy super bull market, not the nonsense poluting peaked oil or “bridge fuel” natural gas.

    The chinese Suntech, for instance, is almost getting near grid parity within the next 2-3 years. Americans just aren’t the type that stand around and let others beat us. I have to believe our govt will most likely brew the green energy revolution.

  4. kmisak

    Most of my positions look good today, even after the end of week blues, for I got into my silver miners surprisingly close to the ‘first bottom’. Since there is a good chance they will fall back, I began lightening up Friday and will continue to do so on Monday, though I’m right now still over 100% in.

    I do not buy indexes or SIL or AGQ (but ironically up here there is a hot silver jr. acronymed AGQ that I’ll buy if it just drops a little more!). Small Canadian-owned miners is all I know – plus the one ‘biggy’ SLW. So if I reduce my portfolio then I have to sell shares in a bunch of companies.I do a few friend and family portfolios, and think those will have to ride it Old Turkey. They got in at good prices, and I don’t want to expose them to a(nother) whipsaw!

    If this is a fake out, then the next leg up after the dishearening ‘second bottom’ should be spectacular. Here’s hoping!

    K.

  5. n1tro

    why are people into miners?! even silver miners?? yes, potentially they can outperform the metal itself but potentially shit can hit the fan ie. environmental assesment, mine collaspe, no product, etc… holding silver ounces, I know it will never go to $0. Long 3500 paper ounces and 1000 physical ounces and loving it!

  6. james r

    Hi Gary,

    Nice report. It’s good to keep us mentally on our toes. You just never know what can happen.

    I am 100% invested now. I think last Friday’s action just formed the right shoulder of the inverse head-and-shoulder of gold. Now come Monday I would expect some sort of bounce. The intraday low from Friday should hold. If I see weakness or some sort of a selloff, then maybe we have yet to reach our inermediate low and I will lighten up.

    To me gold looks like a bull flag setting up. I thought by last Thursday or Friday we should have had a start of major selloff to drive us below 1300. But we didn’t. I think now probability is on the bull camp that we go higher Monday.

    So we will see I am ready for both scenarios to play out.

    James

  7. james r

    Oh and one more thing. I think we are going to hear more on Europe’s debt crisis in the coming weeks and we will see both gold and the dollar continue to rise.

    James

  8. William

    Nice post, Gary.

    You have a clear mind. I bet you get these ideas when you’re out on the rock, eh? πŸ˜‰ There’s nothing like hard exercise to clear the mind, allowing one to refocus on what’s important, and ignore the rest.

  9. jeff

    open question

    has the government ever introduce a bull market?
    you cant think green will be a bull market until it first does something cost effective.

  10. Shalom Bernanke

    nitro,

    I don’t necessarily prefer miners over the physical metals, but some believe miners are better because they own the metal in the ground. If paper traded metals collapse, default, etc, then in this case miners would be safer.

    Physical is still offers the most security, but unfortunately isn’t feasible for those that like to trade more frequently. There are times I consider doing gary’s Old Turkey with a maxed out position in physical which can’t be sold easily so will stay long, but the lure of beating the buy/hold/forget strategy is too great. I would want to exit in front of a D-wave like gary, even though I’m not sure it’s the best strategy overall.:)

  11. Gary

    Jeff,
    No of course the government can’t legislate a bull market. Any bull market is driven by a free market system.

    Government never made anything. Government is a parasite that drains resources from the market.

    Now government is prolonging the cleansing process that needs to run it’s course before the next bull can begin.

    No true long term bull market can begin in an environment of spiraling government debt. That debt will have to be paid either through huge tax increases or huge inflation. Either one is a detrimental to a new bull market forming.

    We will just continue on this roller-coaster ride of cyclical bulls within a long term bear just like Japan until the government decides to let the market operate freely and all this staggering debt is cleansed from the system.

  12. jeff

    didn’t pres clinton try to take credit, at one point ,for starting the internet? then shortly after got called out on that?

  13. marinho

    Gary,
    i think monday and tuesday will be crucial for Gold & Silver market. If the miners manage some gain I think we will be ok, otherwise is back down to the retest the lows. Everything rotates around gold cycle being right or left translated.

  14. T.J. Rand

    mission

    Not to speak for Gary, but if you are asking if this is the beginning of a D wave, anything is possible, but the c wave has not advanced far enough given the consolidation timescale, and c waves end with a blowoff spike rather than a rollover

  15. jeff

    gary,

    i am trying to wrap my head around old turkey in silver… so from entry point and no leverage. just 100%. could i get prepared for a $4 drawdown and be safe. Im just trying to say to myself. ok this is what it is going to take

  16. Gary

    Jeff,
    Here’s how I look at it.

    First off it’s a bull market. As long as one isn’t leveraged they can take a position at any time, even at the top of a C-wave and still be fine. The bull will eventually correct your timing error. In reality no one should ride a D-wave down if there is any chance to avoid it.

    If I feel there is a good chance of being able to re-enter lower I will allow a stop to take me out for a loss. If I don’t feel the odds are good for a lower entry then getting stopped out for a loss doesn’t make any sense. You are just buying high and selling low.

    The problem isn’t that the trade is wrong it’s just miss timed. You need to give it more room to work.

    The current situation is a little different. We don’t have a loss we have a fairly hefty gain. The market is throwing us warning signs. So we can lock in the gains until those warning signs are corrected (HUI moves above 543) or if the warning signs are predictive then we will get a chance to re-enter lower.

    I have a very clear plan for re-entry. If the HUI goes above 453 then I missed about 3% of the overall rally. Sure I would like to lock in an extra 3% but in the larger overall scheme of the bull market 3% is meaningless. And if not then we locked in a nice profit and we will (hopefully) time an even better entry at the true intermediate bottom.

  17. n1tro

    SB,

    I’m pretty sure if paper silver collapses, people holding paper silver will be paid in paper money! Little good it would do them given the hyperinflation at the time. But my point I was getting to was why are people going towards HUI or the silver equivalent when the basket of miners would have some good ones and some stinkers so the returns may be or may not outperform holding SLW or just AGQ if one can’t access paper silver futures

  18. mamaloshen

    Gary,

    Many thanks for the silver update. The charts are very helpful in seeing the big picture going on in silver.

    I had two questions, though: first, the silver/gold ratio broke out to a new all-time high last week. Do you think this has any predictive value for gold? When this happened last August, gold itself broke out to a new high 2 weeks or so later and just kept going.

    Second, the RSI, MACD and Stochastics on the daily gold chart all reached levels even more deeply oversold than the corrections last Feb. and July. Does this not lend weight to the view that any decline might halt above the $1308 bottom on Jan. 28?

    Thanks in advance for a great letter from one of your loyal British subscribers. Hope you keep calling ’em as you see them.

  19. jeff

    gary,

    got it. this time around i was in full old turkey. when you said lighten up i was just out =)
    i never knew clues could be had from the miners.
    thankyou for your help

  20. Gary

    Mam,
    You need to expand your charts a bit. the gold:silver ratio was lower in March 06 than at the recent low.

    One can play around with durations and make oscillators say pretty much whatever you want them to say so I don’t trade much based off of oscillators.

    One thing that does tend to happen is that after a very large move any market will usually do one of two things. It will correct (regress to the mean) or if the overall move isn’t finished it will form a high level consolidation to allow the mean to catch up to price.

    As you know from reading the weekend report I think gold probably has at least one fakeout to throw us. The poor action in miners is suggesting this could be the case.

    The relatively strong action in silver is suggesting silver may consolidate while gold corrects.

    If this turns out to be correct it will be wildly bullish for the silver market once gold puts in a final bottom and once silver breaks out of the consolidation.

  21. Strellsy

    I was just looking at the terminology page to read the explanation of the T1 pattern again. And it struck me that the Gold chart used to illustrate it, looks very much like the silver one does now.

    Gold had an 18mth consolidation during 06/07, brokeout with a parabolic move of about 30%, consolidated for a couple of months with some big swings, before breaking out again for the final leg up to $1000.

    It’s worth looking at to get an idea of what we are trying to catch here. And to ease the focus from the few % points that are on or off the table, depending on whether you followed Gary’s plan.

  22. Strellsy

    Interesting comments on investor psychology Gary. For me, this is the single most important aspect of the markets. You could give 100 people a winning strategy and only about 5% would profit from it in the long run, all because of their emotional state.

    I found it very hard to lighten up last week, as it felt like I was letting go of future profit, rather than locking in current gains.

    But I read something by a successful trader once which seems appropriate: If the market doesn’t behave the way you expect it to, then the reasons you placed your trade no longer exist. Which is the time to get busy reducing risk.

    Gary was right to change his mind, regardless of what went before or what comes after. It took me a few days to get my head around it, but I am in complete agreement now.

  23. mamaloshen

    Thanks, Gary.

    By the way, I think your mention of “regression to the mean” is important and seldom discussed elsewhere (I never thought about it much anyway). You talked about it a few weeks back with SLW and I ended up selling right near the high after I read your comments and looked at the chart, so thanks for that.

    As to the miners, I agree important to keep an eye on action there. I just wonder if HUI is so good anymore, what with people putting money into juniors, CEF, and double leveraged funds nowadays. One can make a case that the HUI might underperform the bull market for its duration, made up as it is mostly of the big gold miners like NEM, ABX and GG.

  24. Poly

    Only additional observation u would make I that in the previous silver tops, once the sharp, near vertical move topped, that was it. None of them have managed to stall, consolidate and then rocket higher another 50-80%. Could this be an issue?

    Just one comment regarding missing 3%. It’s NOT going to be 3%, it’s going to be a min 7% and up to 10-12%. That’s because were mainly getting all back into AGQ. As this post clearly shows, any move higher will likely (as it has) start with Silver exploding and AGQ tracking that 2x.

  25. Shalom Bernanke

    nitro,

    Now I get your point, and I’d have to agree. In fact, I only have 5 miners I’ve picked from what the etfs hold (SIL and GDXJ).

    In the past I was long mostly DGP, which is like AGQ but for gold. This was early 2010 when gold was doing better than silver. The last 6-8 months the focus has been on silver and I’d like to pick up some AGQ into a decline if we get one.

    I definitely agree there are some stinkers in every fund or etf so would rather have concentrated positions in just the ones I think are best. Years ago I saw a study (can’t remember where, but it was distributed to brokers at Smith Barney) about diversification. The jist was that anything more than 8 names didn’t reduce risk any, and most of the benefits of diversification were achieved with just 5.

    That study was distributed to brokers only, as the whole industry has sold the concept of more names being better. Mutual funds have hundreds of stocks, and this report went in the face of the advice pushed to the public.

  26. marinho

    One more thing I had not kept into account. Next week earnings start for the miners with PAAS on the 15, kgc, aem,hl on the 16th and au, abx, ng on the 17th after market close and EGO and gfi on the 18th befor e market opens. I guess earnings do not matter depending on where we are in the cycle, but they could be relevant this time around if they are as expect very good.

  27. William

    Hi Gary. Like and agree w/you notion that $HUI may make a higher low on the daily chart, though just in case you’re watching for a breakout above 543 (542.82).

    Question: on the 60 min chart, one can see that $HUI made a lower high after 543 at 533.37. I’m thinking for myself anyways that rather than wait for a break above 543, to aim for 533.5 or so. That’d be enough to 519 (on last Thurs am) the higher pivot low, wouldn’t it?

    Thoughts? Thanks.

  28. basil

    in a chartist’s colorful words, one could also see a bull flag that is also the handle of a cup and will lead to a decisive move up, once the gap is filled.

  29. basil

    Carlos,

    I am looking at the 6-months charts of SLV and AGQ.

    http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=slv&sid=0&o_symb=slv&freq=1&time=6

    SLV: There is a cup from mid Jan to early Feb, followed by a bull flag, which is also the handle of the cup.
    The gap is in the high 28s.
    Also, the upward trendline from the late January reversal is not broken.

    AGQ: same for the cup and the handle and for the trendline. The gap is around 141.

    Both could intraday fill the gap and then close above the trendline.

    Also, a bit bearish out here to suggest a move down. I won’t rule it out, but I personally trade on what seems a 50:50 speculation at best, at this point.

  30. basil

    and with 50:50 at best I mean that the guess that it will go down seems exactly that, a guess.
    For me, the trend is up unless the trendline is broken to the downside decisively.

  31. basil

    Carlos,

    this being said, I will watch closely and I’m willing to follow the downside argument as soon as I see that the case for more upside is broken; but it’s not at this point.

  32. Shalom Bernanke

    Although I see metals could easily go lower, I feel it won’t be too serious and will buy any shocks lower. 480-500 should hold on the HUI, if we’re able to get down there.

  33. Gary

    Poly,
    For me it’s worth missing 10% in AGQ to avoid downside risk of 20%+.

    If silver goes to $50 AGQ will rally to 350-400. The first 10-15 points of a move like that aren’t that big a deal to me.

  34. Gary

    William,
    I don’t waste time with intraday charts. IMO the sector is way to volatile to read anything into intraday wiggles.

  35. Gary

    Wes,
    If it was me I would have sold on Friday when the HUI was at 530-533. At that point all you were waiting for was a measly little 10 point move higher to confirm the trend.

    Missing 10 little points isn’t that big a deal.

    Now it’s a coin flip. Perhaps put a stop under Thursdays low (519). If that is broken then there’s definitely something wrong.

  36. Elaine

    Gary,

    I am still trying to learn and understand how to count the days in the cycles. Are we in a new cycle? I know you mentioned we have about 20 more days of this cycle.

    Thank you.

    e

  37. Gary

    Elaine,
    Yes gold has clearly started a new daily cycle. I’m not convinced yet that it’s started a new intermediate cycle.

    I suspect it probably has to give us the big head fake then smart money will drive it down and break below the $1307 bottom so they can enter big positions into liquid conditions as technical traders stops are run below $1307.

  38. basil

    Carlos,
    if it goes lower the day after the gap fill and when it stays more than one day under the trend line I will have my finger close to the trigger and then judge based on the circumstances.

    Also, the fact that China is bouncing here, and the fact that the Dow Transports are taking the Dow Theory non confirmation off the table by having rallied to the January highs are more reason for me to be still optimistic. If China continues the rally and if the Transports exceed its January highs I believe that neither the US stock market nor the PMs will correct yet.

    By overall bias over the past two weeks has been that Nasdaq, Russel, and Transport will start their run on their 2007 highs. If that is the case, I believe the PMs will just rally along.

  39. basil

    I think the markets will correct only once Transports, Nasdaq, and Russell will have taken out their 2007 highs with shocking decisiveness.

  40. Trader H

    Gary,

    I think you are doing a great job with this blog and your subscription. I have no problems with you changing your outlook or plan as you see fit as no one in the world has a crystal ball for whats to happen in the future. Keep up the good work and I am learning an immense amount of knowledge of the market from you and a few of your followers.

    Great Job Gary!

  41. wingwalker

    Gary,
    Not sure there is much behind the MUB move. TFI (another ETF) and the muni closed end funds didn’t really confirm that move. At least not from a volume standpoint. They were up but volume was nothing special. So I don’t see the muni mkt being the bailout du jour (at least not right now).

    Also I know you wondered in a previous post if Jan 28th was a daily low in the equity markets. It dosen’t look like your thinking that now in your weekly report since you have us at day 60 of daily. But does the pullback of the transports, many leading stocks, and alot of the sector ETF’s (minus the XLE and XLI) allow you to go with that short consolidation/pullback as a daily low? And maybe it doesn’t matter since most of the focus is on the metals. Just curious your thoughts on that. Thanks

  42. donald

    don said…
    thank you for excellant wkend and slv blog. Agree marrying your initial decision can destroy assets. In Zurich last week auditioning for legal private swiss accounts at the few banks that take US passports. They are seeing alot of interest. Exploring doing my trading from there.

  43. Patrik

    Hello!

    Hope you guys had a nice weekend.

    Today I was supposed to lightened up on position. But I did not expect the move in silver? Now im just sit tight and w8..:-)

    Gary often told us that the market know that the dollar will go down into the three year cycle low this year and then you could see this kind of reaction.

    I follow some blogs and many of them think that the PM:s will move down one more time. Maybe go as low as 1260. That kind of information is widely spread.

    And how far can the dollar rallying? 50Dma?

    I will w8 and see whats happen later in the day..

    Its time for some Coffe now..

    Take Care!

    /Patrik

  44. james r

    I am almost convinced we won’t see a market correction until the dow reaches 12,500 and sp 1300.

    At about that time gold will reach it’s high then pull back before proceeding higher.

    James

  45. Shawn

    Gary,

    I like your consolidation logic and breakout theory.

    However, if you look at the chart there is a major difference this round compared to the previous cases of consolidation.

    In the latest silver consolidation, it made a Lower LOW than previous consolidation range. Does this mean Nothing? os is it telling you a weakening trend?

    Could we be entering the megaphone pattern, with much larger volatility which typically is associated with change of trend??

  46. T.J. Rand

    I’m a conspiracy theorist about the PM markets (esp Silver) related to their manipulation by the bullion banks, esp JPM and HSBC. In fact, the massive shorts in a thin market have supported my view of PM fundamentals. Point is, I don’t know that normal technical reads hold up as well under such forces – I’d certainly want to be aware of them, and broader trends would probably be OK, but the more specific technical reads might be skewed by market participants with agendas.

  47. Gary

    If gold has bottomed and is going higher then the miners will join the metals. It’s no use guessing at this point as it would just be a guess. You might as well just flip a coin.

    Just set a trade trigger to buy if GDX rises above $57.70.

  48. DG

    Gary:A question regarding a possible plan (I agree it’s good to have a plan ahead of time so you can pull the trigger and not let emotions cloud your judgment.) Suppose GDX breaks to a new high and you (we) go heavily long. If the miners lag again and break down back below 530, what then? I’d like to know your thoughts on that before I buy the breakout for risk management purposes. Just hold to avoid another whipsaw? This is not an easy game! Breaking 543 does not, of course, ensure the bottom is in. Would you just cut back to 100% and go Old Turkey?

  49. n1tro

    Do you here that? It’s a popping noise…the sound of jpm/hsbc balls being short squeezed in silver. LOL. That and the sound of thousands of mouse clicks as people chase!!!

  50. Gary

    DG,
    I think it would be best to start with no more than 100% because we could get a dip down into a daily cycle low by day 18-20. As long as one isn’t leveraged yet they could ride out the daily cycle and add at that point.

    Realistically if the miners make a pattern of higher highs and higher lows then they shouldn’t turn around and make another lower low.

    If we saw that many curve balls I might even tear my hair out πŸ™‚

  51. TommyD

    All,
    I used this morning to go from 70% down to 28%. I am still making money on the 28% as we still do not have confirmation or sense of direction.

    Happy Monday everyone. Never know what life brings so play it safe physically and mentally out there.

    πŸ™‚

  52. basil

    Tommy D,

    I have a very clear sense of direction, and that is up.
    We have a cup and handle in both AGQ and SLV and we are breaking out of the handle this morning.

  53. basil

    Gary,

    if I understand you correctly, you are using the GDX as confirmation tool.
    What if the miners are just lagging the metal, and what if gold in general is just a little tired and silver is the leader that is the one to give confirmation?

    Thanks.

  54. kmisak

    Well, I for one was going to lighten up this morning, as per Gary’s wise observations, but my portfolio is up 2% as I write this, so it’s hard to sell! The one miner I sold a big chunk of on Friday is the best performer this morning, up 14% (doesn’t it seem to always work out that way?)

    I think I’ll wait; I can’t go in the red unless something drastic happens, and maybe the surprise is coming on the upside today…

    K.

  55. Gary

    Basil,
    The sector can’t make a serious move higher without the miners joining the party. I don’t mind waiting 10 measly points for that to happen before I re-enter heavily.

  56. $store

    Gary, I don’t know if you ever look at Potash. Today on the TSX it spilt 3 for 1. I bought some at $62.91
    in Canadian funds since I am from Toronto.
    The potash stock is splitting Feb 25th.in the US stock market. 3 for 1.

  57. DG

    Pima (and others that followed the idea): UNG is acting just right. Notice the previous bottoms (late Nov and late Dec) both started with small reversals (opened lower and closed higher, like today so far) Stiff rallies followed. First target is gap at 5.80 or so, up 10%, where I will sell 1-2,000. May hold the rest for 6+. COT numbers are at all-time highs (Gary’s “Blees rating” on NG would be 100%)
    See, Alex, I don’t just short!

  58. pimaCanyon

    Gary,

    If you had to give odds regarding whether PM’s go back down to recent lows for a retest (maybe double bottom, maybe slightly higher or slightly lower low) versus PM’s just continuing to grind higher and eventually making a right translated daily cycle low (at a price that’s quite a bit higher than the recent low near 1300), what odds would you give the retest scenario?

    Would you say greater than 50/50 chance of retesting that low?

  59. pimaCanyon

    Gary,

    Because I would act based on the odds.

    I know giving odds is a WAG, but based on your experience if you felt the odds were 70 percent or higher that we’re going down to retest the lows, I would dump part of my position. If you felt odds were only 30 percent chance we will test the lows, then I’d just old turkey with what I have.

    I am not fully loaded and my plan is to buy more once we have upside confirmation or buy more on a retest. But I have a little more than what I consider “core” for me right now, so just trying to get a feel for the odds one way or the other.

  60. Gary

    PC,
    I don’t know how to give any realistic odds right now. Silver is acting good and miners are acting bad. It’s a toss up.

  61. TZ(5288)

    GARY,

    >Why guess? The sector isn’t going to make a significant move higher without the miners participating.

    It did beginning 2004 blowoff C rally.

    Gold and $hui peaked end of 2003 and never made higher highs. Silver *screamed* higher for 3 more months.

  62. Gary

    TZ,
    I’m not talking about the end of a C-wave here. We are trying to decide whether the intermediate cycle has bottomed.

    If it has then miners will get in gear and everything will go up.

  63. Fergie

    The triangle consolidation is a compelling chart on silver. I took some profits earlier during the near vertical morning climb and put a stop at last week’s low for the rest. Figured this would also reduce my burrito debt if I had to tell Gary he was right. . .yet again.

  64. pimaCanyon

    If I’m reading the SoS numbers on GLD correctly, they imply that there is more selling going on by the smaller operators than big money.

    SoS -31.5, but block trades only -25.23.

  65. Poly

    If the goal is to mainly enter back into Silver via AGQ, then tracking GDX seems pointless and potentially costly, why not set triggers off of GLD, the driver of Silver?

    You also have the possibility of equities falling which could further extend (short run)the divergence of HUI:Silver.

  66. mamaloshen

    I’m wondering if big traders (hedge funds etc.) are buying silver and selling gold short in the futures market; this might partly explain silver’s strong move up and gold’s sluggish performance. Just a thought.

    Incidentally, silver tends to outperform gold anyway during economic expansions.

  67. Ben

    Tim, do you think money printing creates wealth? I don’t want to take the time to read your entire universe, just wondering about that bit which will tell me all I care to know.

  68. Beanie

    The gold bull market is essentially over.

    Down to sideways for a few years likely. Gold will re-assert itself when the multi-decade secular bull market in equities finally tops —sometime at the end of this decade.

  69. Beanie

    This precious metals rise was based on the premise that we started a secular bear market in equities in early 2000. When fund managers start to realize that equities were never in a secular bear market to begin with, they will likely dump their gold holdings.

  70. marinho

    not to make you feel bad beanie, but this is a good sign that the pm are going to break to the upside. I now may buy some more at the close, if we finish in green today.

  71. TZ(5288)

    T&J,

    Echoing BEN.

    Simple question obscured by your overly obfuscating writings:

    When either cash or treasury debt is created, does this create the corresponding wealth, goods, or items which the holders of that PAPER believe they are equivalent to?

    Try to answer in less than 4 pages.

  72. pimaCanyon

    Ben,

    What creates wealth is production of goods and services.

    Here’s an example of how “money printing” might have an effect on wealth.

    Say you have a population where some of the people are idle, out of a job. So the government “prints” money to pay them to do a job, maybe build a bridge.

    So, not only does that population now have more goods and services (they will soon have a bridge they didn’t have before), but the previously idle people now have money to spend which will spur creation of more goods and services in the areas where they spend their money.

  73. Dan

    Pima,
    But where does the money come from that the government spends to create the jobs?
    it comes from the already productive people. So really what has been created? It is a redistribution of that money according to what the government thinks is a good use of OUR money.
    remember, the government has no money of its own, It only gets money from taxes or printing it.

  74. TZ(5288)

    PIMA,

    Your comments are a joke. The printing of money does not create wealth.

    The people holding the paper THINK they are wealthy. But they are not.

    You are confusing the increase in people THINKING they have value (cause they are too stupid to realize the game), vs the increase in ACTUAL value of the system.

  75. LowTax

    Pima, it’s a bit more complicated than that unfortunately. It’s not just the production of goods and services but the production of PRODUCTIVE / USEFUL goods and services. If those people are paid to dig holes in the ground and fill them up, the printed money is bogus – it has no value to back it up because no-one will value the work performed. A bridge is better but it is still crap when the government does it – take the Bridge to Nowhere that was built in Alaska. This kind of “wealth creation” has been going on for decades and it has built up so much useless “production” with so much debt behind it that it is now collapsing. Think of all those houses that were built! Just paying people to do stupid things does not give money value.

  76. pimaCanyon

    Dan,

    You are wrong. The money does NOT come from the people who were already working. The money comes from the government that controls the currency.

    A government that controls its own fiat currency does not take tax dollars to pay for its expenditures. This is pretty obvious, no? What the US spends has nothing to do with how much tax it collects.

  77. pimaCanyon

    Gee, you’re right Lowtax. The Interstate highway system is crap, and I’m sure you wouldn’t dare drive on it. US highways are crap, I’m sure you don’t use those either.

  78. pimaCanyon

    TZ,

    Your comments are not only a joke, but usually rash and hasty and often deleted after the fact.

    I defined wealth as creation of goods and services. That’s it.

    Now you see if you can figure out how “money” enters into the picture and then explain it to me.

  79. Dan

    Pima,
    The only correct part of your statement is “What the US spends has nothing to do with how much tax it collects.”
    Thats part of our problem…the government spends more than it has.

    But the government certainly does get its money from the producers of the country, they take it in taxes or they print it which further hurts those producers, or they borrow it. (china) There is simply NO source of government money expect those 3…and if think there is another source of government money, tell me what it is

  80. jeff

    pima

    the word spur might have a point if there is a goods and services to chase. for it to spure something the goal should be to push onward to recapture a exsisting good or service, but we have devistated our banking ( thankyou barney frank and others)with their mandate for cheap money.
    in 2001 i was making 15 dollars a hour and they tried to tell me i could borow $225000 on a house. i ended up walking out yelling at the banker. i was shooting for $105000 for my buget.
    my father was a builder through the 70’s and went through the saveings and loan scandles then. (we were in florida)
    we just did the same thing all over but instead of 7ish states, i guess the thought that worked so well we would try it worldwide again.
    hey tz save the abtuse , irrelavant, section 8 comments

  81. catbird

    It’s comments like “The gold bull market is essentially over” that signal Beanie’s transition to a troll.

    The thing with trolls is, they don’t offer up any analysis to justify their provocative barbs (unless you count unsubstantiated claims of “green energy” and “internet 2.0” as enough to derail the strongest secular bull in the world.)

    It might be best to stop feeding this guy, my friends.

  82. LowTax

    Sorry Pima, highways are a straw man and an exagerration on your part. The reality is that you are defending the undefensible (a decades-long explosion of public debt and the “unfunded liabilities” that go with it) by pointing to something that is mostly good and which I did not attack. The Bridge to Nowhere is an example of something good taken too far, to extremes that ultimately prove disasterous. The same thing can be said of public sector unions, social security and Medicare – arguably good things that policians turned into evils that will haunt us for decades.

    So no, the printing of money to spur the production of stupidity does hot create wealth. It creates disasters.

  83. Romeo Bravo

    Gary:

    As if today I believe a left translated gold cycle is off the table, correct? So this means it should hold above the recent cycle low?

    Thanks in advance.

  84. pimaCanyon

    Lowtax, the strawman is actually all the fear around US government debt and “unfunded” liabilities!

    How can anything that the US government spends money on be considered “unfunded”?? The US government controls the currency! If it decided to spend here, or there, on whatever, it just spends. And that spending has absolutely nothing to do with taxes.

    The government controls the currency so it can spend whatever it damn well pleases.

    Now that doesn’t necessarily make it right or good, but that’s the system we have. We have a fiat currency (meaning not backed by anything) and the US government controls it. We can talk about how it sucks and how it shouldn’t be and blah blah blah all we want, but that’s the deal and until we see another US revolution and a new government I’m afraid we are stuck with it.

    (I’m in favor of low tax, by the way πŸ™‚

  85. Redwine

    Even Keynes didn’t believe governments should expand the money supply during debt crisis. He thought that government could dampen the excesses of booms and busts by paying down debt during economic expansions and borrowing during recessions.

    The MMT crowd are uber-keynesians who believe that government borrowing, spending, printing should be a routine government exercise that will, in and of itself, create wealth.

    IMO their theories are basically communism dressed up in a sports coat.

  86. LowTax

    Pima, two points:

    1. I do not disagree that USG controlls the currency and doesn’t technically need income. However, you must realize what this implies for the value of the dollar. While they can print to pay any bill/debt, the rest of us don’t have agree that those dollars are worth what USG says they’re worth. That fact nullifies your argument about “unpaid liabilities.”

    2. They are unpaid because our society does not have the productive capacity to pay them off with money THAT HAS ANY REAL VALUE! Yes, USG can print the money and pay them off. But it will cause rates to skyrocket and bring the whole house of cards down.

    You cannot promise that which you cannot deliver. What you are missing is the concept of value.

  87. TZ(5288)

    PIMA,

    Before I proceed, I want to make sure you are on the record with a few things:

    You are agreeing with me that when cash or debt is created there is NO creation of goods or real items of equvalent value?

    This is a simple question. Please answer YES or NO?

    I understand that you don’t wish to address this question and want to then argue that the creation of that fiat paper EVENTUALLY is beneficial. I will handle the EVENTUALLY argument in a moment. Please address the immediate question first though before I proceed.

  88. pimaCanyon

    Dan,

    If we go back to the example I used, let’s look at your complaint.

    You don’t like it that the working people taxes are now paying the formerly idle people to do something. (Let’s assume that this is true. It’s not, taxes do not equal government spending, we all know this, but let’s assume for the sake of argument that it is true.)

    Now if I’m a businessman in that population, say I manufacture skis. I hate paying taxes, but I pay them.

    Now if the government does not build that bridge, I still pay my taxes.

    But if the government builds the bridge, even if it’s a bridge I will NEVER use, what effect will that have on me?

    Well, if some of the folks building that bridge (the ones who were not working previously) come into my shop and buy some skis, then my bottom line goes up.

    Even if my tax bill is a percentage of income, my bottom line will still go up.

    If the bridge is not built, I may pay less taxes because I sell fewer skis, but my bottom line will be lower.

    As a businessman, which would I want, a higher or lower bottom line?

  89. pimaCanyon

    TZ,

    I would agree with you that when cash is created (money is printed), there is no change in wealth to that population. Wealth is the sum total of goods and services produced by a population.

    (I say that there are some services that don’t add anything of value to the population, but we’ll just keep things simple and not get into that can of worms. πŸ™‚

  90. Wes

    TZ,

    You remind me of President Obama, always lecturing us lesser souls about things only you truly understand.

    Is there nothing on which you are not the resident expert ?

  91. pimaCanyon

    TZ,

    But usually when someone asks about “printing money”, they are talking about printing money and then spending it on something, no?

    If we’re just printing it and putting it into a vault, no wealth has either been created or destoyed (except for may the tree that made the paper)

  92. Tim and Jeanene

    Pima:

    “But usually when someone asks about “printing money”, they are talking about printing money and then spending it on something, no?

    If we’re just printing it and putting it into a vault, no wealth has either been created or destoyed (except for may the tree that made the paper)”

    Ah yes, the all important velocity of money everyone forgets about….

  93. Tim and Jeanene

    Redwine:

    “The MMT crowd are uber-keynesians who believe that government borrowing, spending, printing should be a routine government exercise that will, in and of itself, create wealth.”

    The worlds most prolific living Keynesian doesn’t quite understand the MMT reality:

    http://www.creditwritedowns.com/2010/07/misunderstanding-modern-monetary-theory.html

    You should be careful lumping people you seemingly know nothing about together on a topic you clearly don’t have a clue on.

  94. pimaCanyon

    Lowtax,

    You are giving voice to the fear that’s been out there for several decades. Since the 60’s (or maybe since the 30??) we’ve been hearing about the deficit being out of control and we’re passing down this enormous debt to our grandchildren and we’re going to get sky high inflation. But when is that shoe going to drop?

    The deficit hawks that want to reduce spending and/or raise taxes claim they are doing this to spare our grandchildren this enormous debt burden.

    But how about this? Maybe they are successful in raising taxes and lowering spending and “balancing” the budget, but at a cost of 25 percent unemployment (we’re very close to that today, so maybe the cost would be higher unemployment). Doesn’t that also have a cost? Doesn’t that get passed down to our children and grandchildren?

    Here’s what I mean by that: If we as a people can produce a certain amount of goods and services at full employment, then with 25 percent unemployment we will produce 25 LESS. And so we will pass down 25 LESS wealth to our children and grandchildren.

    What is true wealth? And what does it have to do with how much the government spends versus how much it takes in in taxes?

  95. William

    Strong neg divergence on both RSI and PPO (MACD) for SLV/AGQ. Same for SPY and OIH. Over the last 3 days, GDX is still weaker than GLD in terms of price action.

    Looks like top in the daily cycle across the board to me. Glad I’m in cash.

  96. TZ(5288)

    WES,

    >You remind me of President Obama, always lecturing us lesser souls about things only you truly understand. Is there nothing on which you are not the resident
    expert ?

    There are many things you know which I do not.

    If you were to raise them in a discussion I would not chacterize you as Obama lecturing “lesser souls” as a “resident expert” on things only you “truly understand”.

    I’d actually just listen, think about it, and worry about fighting back if I suspected there was actually a flaw in what you said.

  97. TZ(5288)

    T&J,

    Waiting for your response as a simple yes or no before proceeding:

    When cash or treasury debt is printed does that create any real goods or items at the same time?

    If you want to answer “eventually”, fine, but please respond to the immediate question first.

    One step at a time so everybody can follow along.

  98. pimaCanyon

    William.

    Thanks for the heads up re negative divergences.

    Question: Have you tracked these indicators thru previous daily cycles? If so, are you seeing a pattern here that is similar to other daily cycle tops?

    Thanks in advance for your answer!

  99. LowTax

    Pima,

    >Maybe they are successful in raising taxes and lowering spending and “balancing” the budget, but at a cost of 25 percent unemployment (we’re very close to that today, so maybe the cost would be higher unemployment). Doesn’t that also have a cost? Doesn’t that get passed down to our children and grandchildren?

    Yes, the cost gets passed down to our children. But you’re confusing yourself: two wrongs do not make a right. The first wrong is to spend beyond our means. The second wrong is to keep doing that when the consequences of that first wrong come home to roost. If I don’t discipline my children and they become rotten, spoiled brats, it does not solve anything to keep giving them everything they want just because it would be difficult to deal with the consequnces of the first mistake.

    Regarding the decades of warnings by deficit hawks, I admit it has been a long time. But human nature is that way – we don’t see things until it is too late.

    >What is true wealth? And what does it have to do with how much the government spends versus how much it takes in in taxes?

    True wealth is the PRODUCTIVE use of capital to create goods and services. And it has everything to do with taxes and spending in the long run. As I predict will find out in the next few years.

  100. pimaCanyon

    William,

    Looking at only price, what I am seeing is a possible bull flag on the silver chart (60 min) after a strong runup.

    The price pattern in gold is just a continuation of what we’ve seen for the last week–sideways action.

    I don’t particularly like the look of the gold hourly chart chart, at least from an EW perspective, because the move up off the low of 1/27-28 does not look “impulsive”. That is, the waves have too much overlap. So just from an EW perspective, I would give high odds to the likelihood that this move up (in gold) is “corrective”, not the beginning of a new leg up. So I’m giving better than 50/50 odds to Gary’s scenario of another leg down playing out.

    However, TAKE THIS WITH A GRAIN OF SALT! EW can fool you.

  101. DG

    Wow, people are testy today. I hope I can make a comment on the market that doesn’t imply that anyone else is an idiot (except maybe myself!)

    If the Dow closes up I will get a sell signal. Yes, I know they have not been working, but then neither has any other damn thing the last few months. I will probably re-short a little FXI.

    BTW Gold has tried four times now to better $1367-8. Seems tired to me but maybe that’s just wishful thinking. And then there’s the daily cycle…and the divergences someone mentioned…and showing up on the SoS list. We’ll see.

  102. pimaCanyon

    lowtax,

    How can we “spend beyond our means”? The US government is not like a household that must balance spending and income. Thinking of the US budget in those terms is like comparing apples and oranges.

    Because the US government controls the currency, it does not use tax dollars to pay for its expenditures.

    The only restriction it might have on its expenditures comes from Congress, but that has nothing to do with using tax dollars to pay for expenditures.

  103. William

    Hi pimaCanyon.

    Divergences don’t always play out, but they do more often than they don’t. The one in SLV is a real warning to me. The rest (GLD, GDX, GDXJ, SLW) are just consolidating sideways – not a higher low (yet) as we’re all watching for.

    fyi I know Gary and probably many others don’t use 60 min charts, but I do because they help me better see what’s going on inside the daily candles. I use long term 60 min charts, so it actually looks more like a daily chart, in order to see where price is heading. It works for me, esp. to see trend changes that are harder (for me) to see on daily charts.

  104. Dan

    Pima,
    You said “Because the US government controls the currency, it does not use tax dollars to pay for its expenditures.”
    Tell me, what does the government use the tax money it collects for if not expenditures??
    And if they dont use it or need it…maybe you could have them send my taxes back to me? πŸ™‚

  105. pimaCanyon

    Thanks, William. I also use the 60 min chart (and sometimes even smaller time frames when trying to time an entry or exit).

    Maybe we are seeing a daily cycle top here. It’s possible that silver might correct to only 50 percent of its recent move up whereas gold could go all the way down and retest the 1308 low. The reason I say that is that silver’s move off the 1/28 bottom looks stronger than golds, more like what EW would call an impulsive advance of 5 waves up.

  106. William

    pimaCanyon,

    I’m not an EW’er, but using EW-speak, the wave action in SLV looks like a minor 5th wave was made today, w/an ABC correction following from here/now. Notice how that Thurs/Fri was a bull flag like you said, then the predictable pop up today, w/a divergent top. Looks like a finishing 5th wave to me. Wave 4’s are often times bull flags or pennants, w/the 5th wave being divergent – I learned this by watching Matthew Frailey of breakpoint trades a few yrs back. Pans out more often than not.

    Either way though, $HUI still lags $SILVER, so I think we’re still in the funk.

  107. pimaCanyon

    Dan,

    That is exactly right! If you pay your taxes in physical dollars, they either shred those dollars or if they are still in reasonable shape, they send them out to the banks. They do not take those dollars and pay one of their providers with them!

    They do not need those dollars to pay for their spending. (Should be obvious because they have been spending more than they collect in taxes for a long time now)

  108. pimaCanyon

    William, that’s exactly what I’m seeing which is why it would make sense for silver to correct (ABC) down to 50 percent of advance. Or 62 percent, or maybe even 78 percent.

  109. TZ(5288)

    DG,

    >BTW Gold has tried four times now to better $1367-8. Seems tired to me but maybe that’s just wishful thinking.

    I expect strong surge in next 48hrs.

  110. Poly

    Actually I see a lot of strength in gold.

    The dollar cycle bottomed on Feb 2nd and has rallied from 77 while gold still has managed to rise $30 during this period. The dollar is on day 7 and if it’s going to roll over it will do it very soon, which should release gold from it’s built up flag like position.

    We clearly do not have a swing high and this gold Int cycle is still only on Day 11. We’re $50 off the cycle bottom.

    Lately around here it seems like “the glass is half empty!”

  111. Tim and Jeanene

    James –

    Absolutely I think Greece will probably need another bailout.

    They are not on the same monetary system that we are on though. They owe debts in a foreign currency, and they can not issue their own currency.

    TZ- I don’t even know if I really understand the question you are asking or why it is relevant, but it seems pima is doing a fine job in handling your questions.

    Nice work pima in taking the time to get it!

  112. William

    pimaCanyon, agree, and can’t wait. πŸ˜‰

    Q: as the action on the daily chart from the low 2.5 weeks ago was very bullish, do you think this correction in SLV will be fast, as in by Thurs/Fri or what? Thanks.

  113. marinho

    to follow on Poly’s comment I see the same thing and especially today better strenght on the miners. I am unsure if HUI recaptured 530 or not, but it surely showed some strenght. This week is going to be weird with option expiration and at the same time miners beginning to report earnings starting with PAAS tomorrow and then KGC, aem,hl,on the 16th and au, ng,abx, ego at the end of the week. I feel the pm earnings are going to be explosive, so we will se what kind of curve balls are trown to us. In the meantime today was a good answer to the bears.

  114. Wes

    Poly,

    There is a lot to what you say about the dollar performance.

    I use the product of GLD multiplied by UUP to measure the true strength of gold.

    If gold were exactly tracking the dollar, the chart would be flat. It would be down if gold underperformed and up (like it is) if gold outperformed the dollar.

  115. Tim and Jeanene

    Dan:

    “Tell me, what does the government use the tax money it collects for if not expenditures??”

    To be clear, state and municipal governments do use tax revenue to pay for expenses. The US government, who issues the currency, use it only as a reserve and currency drain in the current monetary system. They don’t call up China and ask them if they can borrow some money to pay for all the items they want to buy over and above the taxes they collect.

    That seems logical, but it’s just not the way the current system works.

  116. Tim and Jeanene

    James –

    Another reason why Greece will need another bialout is their tax collection system is a joke. No one there seems to pay any taxes, and they don’t get thrown in jail for it.

    Because they can’t issue their own currency, they are no different than California. They can only spend what they collect, and they are terrible at collecting. The US government does not need our taxes, but it is the system that keeps the US dollar from having no value. Pay them, or go to jail. Therefore, you have to do something or provide something to the marketplace to get your hands on them.

    The US government, as weird as it sounds, could continue to function as it does if tomorrow they stopped issuing bonds AND eliminated most taxes.

    This would cause large dislocations and be painful, but they could continue to function.

  117. pimaCanyon

    Dan,

    Here’s a link to some interesting reading re our currency system and its relationship to taxes and spending. (Don’t want to take up any more blog space with this discussion, and this guy does a much better job of explaining it than I possibly could. See if you can shoot holes into his arguments. I was not able to, but maybe I’m missing something…)

    http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

    Note that when I say our government does not have to balance spending with taxes, I am talking about the Feds. State governments, city governments, etc.–they MUST balance expenses with income because they do NOT control the currency.

  118. DXB

    This easy to read article by Randy Wray of MMT fame will help clear up a lot of issues about the nature and ramifications of federal spending, which always seems wanton to most people, even in the financial industry.
    I linked to the article a couple weeks ago or so.
    It’s titled
    “The Federal Budget is NOT like a Household Budget – Here’s Why”

  119. pimaCanyon

    Dan,

    Now that you are suggesting I might be Beanie in disguise, I’m am really insulted (hides head in shame)!

    No, I’m not Beanie. And not here to “troll”. Was just trying to answer the question about money printing and wealth creation and it somehow exploded into taxes and currency and MMT.

    I am here because Gary has done a great job discovering and tracking this PM bull and I’m along for the ride. I’m here to make money!

    But I also enjoy reading about and thinking about and talking about the markets and economics in general. I have learned a few good things just from the comments on this blog–and not all of them from Gary alone. There are some good traders here!

  120. William

    Hi Poly. You’re right that the action in GLD is still strong – slow and steady. It’s not giving up any ground the way GDX/GDXJ/SIL are.

    Part of me is now saying to treat SLV and GLD and GDX all separate, instead of correlating them in my mind.

    W/this mindset, I’d be OK going long GLD w/a tight stop, though I’d wait for GDX, SIL and SLV to correct more. Ill think on it.

  121. DXB

    Re Federal Government debt, or as a lot of people put it, the US Gov being in debt to China, OPEC countries, or whoever.
    Countries that export stuff to the USA and denominate the value of that stuff in Dollars will obviously end up with a lot of dollars accumulating in SOME bank account.
    Whether that’s the Dollar bank account of, for instance, a Chinese exporting company, or the correspondent Dollar bank accounts of China’s central bank… Those dollars have to end up being parked somewhere to earn whatever interest it can earn. Ultimately that Dollar money goes to US Federal debt, i.e. Treasuries or T-Bills.
    That’s just the nature of the system. It’s structural.
    Banks holding people’s and companies, and nations’ dollars can’t just go and speculate with most of it.
    There are banking ratios and regulations to adhere to.
    You speculate with those Dollars, therefore you are an investment bank.
    So if a Chinese company that sells its dollars earned via exports to the Chinese central bank, the central bank still has to hold those dollars on American shores, so to speak.
    That money ends up at the Fed, and ultimately Treasuries or T-Bills.
    The important question is not whether exporter nations like China believe in US government debt, it’s which maturity (how long) they choose, 3 months, 2 years, 5 years, 30 years , etc.
    That’s what Central Banks think about. Not whether they should dump dollars wholesale and buy gold instead.

  122. DXB

    james r
    I second what Tim & Jeanene wrote about Greece and taxation.
    For all the talk of the UK’s economic and financial demise, it’s a reliable nation because of it’s efficient tax regime.
    You have to work very hard to be able to find loopholes in the taxation systems of US, UK and other very developed nations.
    These countries are very few in number. Most countries, corruption rules the day.
    That’s the problem Russia is facing nowadays. Implementation of its tax regime and decent regulation and proper legal frameworks to do business.

  123. Poly

    Wes & Willam,

    I agree. I’ve used this opportunity to exit most of my miners and concentrate primarily on AGQ, SLV and a series of SLV calls. It’s becoming clear, to me, that Silver (as Gary points out today) is the only game in town, meaning it will firmly lead this sector, up or down! The miners and the basket of ETF’s that track them require bullion to rally 1st before they have any chance of correlating or beating the metal. Waiting for GDX to move while watching Silver knock on the door of 30 year high’s seem pointless to me.

    Maybe the miners will be a better bet a few more years down the road when gold goes parabolic before bursting?

    Another note, take a look at the last intermediate cycle bottom (Aug 2010) and subsequent rally, the pattern is almost the same. Off the bottom gold moved higher for 7 days, consolidated for 4 and then started it’s run up on day 12 of the first daily cycle.

    Maybe we should be focusing a little more on the dollar here?

  124. William

    Hi Poly. By coincidence I’ve been watching the Aug 10 over and over, too. We could have a melt-up. FYI just like I’ve stopped looking at COT, I’ve also stopped looking at the $USD, as it’s correlation is broken of late.

    Gary, thinking about what Poly has said here about silver and all, maybe instead of watching the $HUI, we should be watching SIL, or SLW, for that higher high? I mean, $HUI/GDX/GDXJ are mostly about gold aren’t they? How about we just focus on SLV, AGQ, SIL and SLW as Poly suggests?

    FYI I’m also watching ag – DBA and MOO.

  125. Poly

    It’s correlation is out of sync I agree and gold has proven in can rise with a rising dollar.

    But if we’re looking for huge run to $1,600+ in this final int cycle, we’re going to need the dollar to plunge too, no?

  126. catbird

    When Gary gives the green light to go back to 100%, I’m seriously considering just going 60% AGQ, 20% SLW, 20% in a basket of EXK, SVM, GPR.

    I might add 25% leverage with more SLW and AGQ.

    Peanut gallery: Tell me why that’s a bad idea.

  127. Poly

    SLW has not come close to replicating AGQ’s performance. SLW is “one company”, granted they have a unique business model, but that does not make them immune to company specific risk.

    AGQ is tracking Silver 2x, Silver performs, AGQ performs. I would think AGQ continues to outperform, only question is how you adjust for risk and what does AGQ carry?

  128. Rob

    Catbird,

    What happens if Gary is wrong? I wouldn’t take on so much risk from a single source – all-be-it a knowledgeable source. Maybe add the leverage later into the move if things turn again? After the swing-low on Jan.28th we all thought that was it…off to the races. We were wrong as consolidation has persisted. Even now no one is sure which way $gold is going.

  129. William

    Hi Poly – up until last yr I’d fundamentally agree that the dollar has to fall if gold rises. However, as we’ve all seen, the last yr or so has shown that relationship to be broken, from a trading perspective. Fundamentally, I’ve read it described as the dollar and euro leapfrogging one over the other down the toilet. And whereas before the focus was on the dollar falling, now it’s on the dollar collapse, i.e. the rise of a new currency. I myself have no idea, I just read this stuff.

    Trading-wise, I myself can no longer rely on UUP to give a signal on GLD.

    Similary, since SLV has a supply/demand dynamic different from gold, plus the industrial use aspect as well, I no longer see GLD and SLV tightly correlated, though they are loosely, no doubt.

    I’m now focusing on SLV because it’s going up the most, the fastest, and w/the least volatility. Compare SLV vs. GLD. Compare SIL vs. GDX. SLV/SIL are much less volatile, and much more profitable, then GLD/GDX, in my eyes anyway.

  130. William

    catbird, if you know specific fundamental info about the equities you listed, then go for it. If not, like Gary said, isn’t SIL a safer bet, as it’s auto-diversified, yet has pretty much the same gains? SIL and SLW are good to go for me. The others might do better, but might not. SIL is safer, no?

  131. catbird

    @ Rob–

    Well, I personally believe in the secular bull in PMs. I don’t need Gary for that. I use Gary for timing entries/exits. I also listen to Doc. I certainly wouldn’t go from 35% (where I am now) to 125% invested all at once. I would add leverage later, maybe after a dip into a daily cycle.

    @William–

    SIL is actually 90% of my 35% position right now. So I’ve used it, but the question is what to do with that last 20% of my portfolio. The majority–at least 60% of my money will be in AGQ. I figured, why not put a mere 20% in 3 of the best companies? If one of them goes belly up I will survive.

    SIL frustrates me sometimes in that it usually lags SLW and even the tiny juniors like Great Panther. It holds a lot of uninspiring companies.

    If AGQ weren’t an option, then yes, I would put the bulk of my portfolio in SIL and not worry about picking stocks.

  132. kmisak

    Catbird, aren’t we all putting our eggs in one basket? PM’s are PM’s. If one goes up, the others will, too. If the PM universe turns down, all our portfolios go down.

    I’m no expert. However, in my basket of individual miners, mostly micro and small cap, the silver ones have really outperformed. Oh, I keep some gold miners, hoping for the light, but I think Gary may be right with his talk of the silver bull. If so, we are all going to make a killing, no matter where you park your money in the silver universe.

    K.

  133. Gary

    RB,
    Gold rallied 13 days. last year and still produced a left translated cycle. Plus gold didn’t make a higher high today. It needs to make a higher high some time after tomorrow or later to take the left translated cycle off the table and considering what happened last year I would feel better if it rallied at least 13 days.

  134. Gary

    William,
    to answer your question I think if gold turns back down then silver will follow, maybe reluctantly but I expect it will follow.

    If it could form a triangle consolidation like I showed in the post that would be incredibly bullish.

    I suspect we will have our answer in the next day or two.

  135. Steven

    FWIW, and for those that believe in embedded stochs (the slow stochs are used for this purpose), silver futures officially embedded. The theory behind something becoming embeded is that it changes its character from overbought (which is where the stochs would lead one to believe) to locking in and strengthening the trend and in silver’s case it is up obviously.

    Once something is embedded then breaks in the market are usually bear traps.

    This doesn’t always work but when it does the moves are unbelievable. Much of the silver mover last year was with an embedded stochs. Copper also has an embedded stochs. Gold is just overbought which can explain the difference in performance between gold and silver/copper. I’m not so sure right now the best place to look for direction is gold but perhaps it is better to look at silver and copper. Gold is actually very overbought which is a negative but it is so overbought that if it can manage to move up even just a reasonable amount over the next week or so then it can also become embedded as well.

  136. Steven

    Gary,

    Do you know what AGQ’s outperformance was to silver, meaning how much more than 2x did it do during last year’s run-up?

    Also, is it fair to say that on a run-up it can add 10%-20% premium?

  137. Steven

    Chinese inflation data is set to be released tonight which I would assume is a potential market-moving event. Does anyone know what time it will be release (EST or PST)?

  138. T.J. Rand

    I’d take the Chinese CPI # with a grain of salt…apparently they are changing the calculation methodology. From Zero Hedge :

    As we speculated earlier, China has just lowered the weighting of food in its CPI. The reason: the nearly 5% surge in food prices in the past 10 days. Turns out the US can still learn a thing or two about data manipulation from the Chinese…

  139. JM

    Your TA triangle consolidation is terribly flawed and appears you just determined the lower support line with no basis other than to justify your posistion. You’re usually never that careless Gary,,

  140. William

    Poly, the only risk I see on AGQ is liquidity, which has 1/10th the volume of SLV. Both are paper silver, so that’s the same.

    Gary, I’m not sure but though normally gold leads silver in the past yrs, SLV and SIL both bottomed ahead of GLD on Jan 25th, and SIL took off from there, leaving SLV to double bottom w/GLD on Jan 28th. So the latest is that SIL an actual leading indicator of SLV and GLD it seems, no? Maybe a 1 off …

  141. Gary

    JM,
    Try reading the post again.

    “If I had to guess I would say silver might be in the process of forming a triangle consolidation pattern, especially if gold has one more drop down into a final intermediate cycle low.”

    Emphasis on the “if gold has one more drop”

    If gold doesn’t move down then silver will likely just continue higher and that’s all the correction we will get.

    Just so you know, any time I draw a chart I’m usually just showing general trajectory not targets.

  142. William

    Gary et al, what is the liquidity risk in AGQ? Nil, or significant?

    For instance, when selling AAPL, one has to find a buyer. A lack of buying could cause price to fall until a buyer is found.

    Same for SLV, I assume, correct? Pls confirm.

    But how about AGQ? Is a buyer required, or does it just follow an index? So one can sell “to the house” as it were, meaning one can sell at anytime, w/or w/out buyers?

  143. Gary

    Will,
    I would say the silver market is showing relative strength.

    If gold has bottomed then silver will continue to lead. If not I would expect silver to continue showing strength and hold above the recent lows.

  144. n1tro

    William,

    Liquidity of AGQ is fine. If you want to get out, just place a market order or set a price that would smack a little below the bid price and you are out! Sides, what would it matter if it takes a little longer for your AGQ order to fill when it is at $200+?!

  145. Gary

    A normal intermediate cycle runs about 20 weeks (this is week 15) but seeing as how the last one was short this one could run long (maybe 25-30 weeks) which would put the three year cycle low around the end of April beginning of May.

  146. catbird

    Gary,

    In that case, and if as you predict this last leg of the C wave will be bigger than what the PMs did in the autumn, then silver *should* start turning in a lot of explosive days pretty much immediately. In other words, it has a lot of ground to cover, because even if the USD doesn’t bottom until early May that’s less then 3 months to surpass what happened from August to early January.

  147. Bede

    Groan. “which would put the three year cycle low around the end of April beginning of May.”

    I’m leaving to spend 2 1/2 weeks in France on May 8, so I think we can safely say that the C wave will top in the week of May 9-13. It will be well into the D wave by the time I return. πŸ™

  148. pimaCanyon

    William,

    I missed your question in a comment you posted this afternoon till now.

    You asked about timing of the correction of the impulsive move up in silver. Off the top, I don’t know. But I’ll do a quick review of one of my books this evening and see what it says about timing probabilities.

    If this 5 wave move up off the bottom is wave 1 of a larger pattern, then we’re looking at a wave 2 next (assuming the 5 wave advance is actually complete). Second waves are usually not long, drawn-out affairs like 4th waves can sometimes be, and they are never triangles. (In EW, triangles can appear only in the next to the last wave of a sequence, so either in 4th waves in an impulse or B waves of an ABC correction).

    I believe 2nd waves usually take less time than the time of wave 1, so we would expect this ABC (if it does indeed unfold) to take fewer days to complete than the number of days for the move up.

  149. trond56

    Silver has now broken the neckline of a reverse head and shoulder (neckline 30.30$, the head = the January low) with a very likely target of 34$.

  150. Patung

    Great guess in the report about gold popping today or tomorrow, 1374.90 high on my futures chart right now.

    As a contrarian view on silver though apparently Carlos Slim and some of the other silver manufacturers are pretty happy with $30 and are selling 2 to 3 year forward contracts at that price as a hedge against the price falling.

  151. vuvvy

    FYI,Small caution to MGC futures, it seems that buy stops entered at 1370 today had bad fills, around the highs at 1375. Anyone trading this should probably use stop limit orders.

  152. Gary

    Actually it’s day 12. But more to the point at day 12 the odds become high that the daily cycle has become right translated and shouldn’t drop below the prior cycle low.

  153. vuvvy

    Gary,You’re right Comex is day 12. I was looking at the mini YG and GLD and they look to be on 13.YG opens an hour later than Comex and the low was made close to the open at Comex on 1/28.

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