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Many thanks for keeping non-subs up to date with part of analysis and showing off some of the tools in your toolbox. If we just printed the cyclical bear market bottom in the context of the greatest secular bull market in history; investors can buy anything (gold or silver mining company) with a ticker symbol and come out smelling like roses.
Diversified Commodities (ex-gold) as measured by the S&P GSCI are one of the worst performing groups asset allocators could have been exposed to from 2002 to date. That building block in a diversified portfolio of stocks and bonds or traditional asset allocation had the worst performance and the highest amount of volatility.
Professionals (i.e. portfolio managers and financial advisors) like, better yet only recommend “safe” traditional assets like stocks and bonds because of the fear of being alone. It’s “safer” to herd the sheep into asset classes like stocks and bonds (based on historical returns) even in face of lower returns, than advising them to seek out alternatives.
It doesn’t “pay” to advise physical gold or silver in this word, it doesn’t pay to be a contrarian or lone wolf in this world. No, it’s safer to run with the herd, think like the group. When the systemic risk and dislocations come less than 1% of the population will benefit from the current paradigm shattering. Best to be a day early than a day late… 🙂
So: NIRP, QE4… or money paradrops as Citigroup shocked everyone with its modest proposal yesterday? Actually, why not all three – after all, what does the Fed have left to lose? It appears gold is finally getting the memo ? that the final debasement of the reserve currency is about to be unleashed! ???
http://www.zerohedge.com/news/2016-01-31/citi-why-negative-rates-are-potato-chips-no-one-can-have-just-one
Commercials reducing shorts into a rising price is a huge development. I have been waiting for this to occur to perhaps signal the bear market may be over. Good catch Gary!
Excellent commentary Gary. Thank you very much! Your message that we need to be vigilant in seeking out THE bottom is no different than the sound advice to be vigilant for a market top when one is due. If you were giddy and bullish with Nasdaq in 2000 you got killed. You will rarely find a market top or bottom that you are not looking for. It is a huge advantage to be prepared and preparing and not to be caught off guard. It gives you a jump on the masses.
Buy quality miners now and forget about it until your barber and the checkout clerk are giving you unsolicited gold investing tips…that’s a few years off.
…and Lady Market leaves the stop raised at 1107.9 well behind. Good!
I will not consider pyramiding, though, on the long gold trade until I see USX below Friday’s low of 98.60.
UUP may cast a first light into whether Friday produced an exhaustion upthrust for USX if UUP delivers a swing high today…
Alex, it’s always possible that gold rally along with USD right? Just like 2010. Odds not high but during gold true bull, it does that. So wouldn’t your methodology assures you that you miss the good run too?
I would suggest that the dollar has nothing to do with the fundamentals for gold. The dollar index is measured against other currencies so it can rise even if the dollar is being debased if other currencies are falling faster. A rising dollar just makes it a little easier for the bears to attack gold, and a falling dollar makes it a little easier for the fundamentals to push it higher.
At this stage of the game though I’m not paying too much attention to what the dollar is doing, just what gold is doing.
Hi, Gary! Hi Chris!
1) Chris, it does not look to me [now] that I am missing gold’s run. I am in the long gold trade. All I said was that I had moved the stop higher to the equivalent of 1107.9 which has not been touched and, if USX’ move on Friday is proven an exhaustion upthrust, then … I’ll be kept in the trade and even pyramid on it even if at a higher price –> I am happy to buy a strong asset at a more expensive price as long as I can place a low risk bet. IT IS NOT THE PRICE ITSELF THAT I AM CONCERNED ABOUT, I DO NOT CARE ABOUT TOPS OR BOTTOMS BUT ONLY ABOUT REALIZING MY REWARD-RISK RATIO AT A SMALL RISK AT THE MOMENT OF ENTRY.
Thus, this objective of mine does little to do with how far from a top or bottom I am but quite paradoxically, it favors a strong, higher entry price.
2) Gary, you may quite right about what you say and I do not contradict you. Here I am just taking Jesse Livermore’s advice that a trader should place a bet only when all odds are in your favor. This is why I would not enter a long gold trade unless I see USX at least in an IC decline. I would simply feel I am not respecting J.Livermore’s advice…he did not respect his own rules either and he did not turn out well, so that from this point of view I have NOT to follow him –> the old Romanian saying: “Do what the priest says not what the priest does”
…..one interesting word: USX [an UUP too] have an extremely low ADX-level !!!!!!!
THE DOLLAR MUST PRODUCE A TREND IN A VERY, VERY SHORT SPAN OF TIME, MOST LIKELY THIS WEEK. THIS IS A CERTAINTY NOT AN OPNINION!
The only question and debate is: in what direction ?
Considering the upthrust on Friday and the lack of follow-through today at least until now …and the potential swing high in UUP to be catered today … I would give 51% probability for USX to start trending down into YC decline. But that’s just a guess
lol. I expected this to be your answer exactly Alex.
Ok, I just found out Robert Kiyosaki is buying gold now. I am sure some “genius” here is going to say he is a snake oil salesman, no substance guy. But based on my wisdom of seeing people with substance, he is good enough.
Years ago, he has been saying buy silver when its $5 to $8. And within 1 or 2 years, it rallied. He said stocks will have a super bull run i think from 2010 onwards or something. Very spot on.
Bottom line, good that he is seeing gold’s bear market over. Oh, he sees stock market crashing in 2016. Hey, he said this i think last year.
it means you’ve got my trading style 🙂 that’s me as a trader, I couldn’t be otherwise.
yes, stocks down deep as USX will initiate [though most likely already has initiated] its YC decline.
last year I got 100% into cash out of stocks in FEB while expecting a top in SEP; it turned out to come somewhat earlier, in MAY, though.
Not to get off topic G-man, but you have mentioned Biotechs as being the place to be in the stock market when the blow off eventually materializes. With the IBB off 33% from the highs already, do you have any guess as to where a bottom may form?
I’d like to see the SPX test the 1600 level. If it does that then i would buy biotech at that point.
Gary,
If SPX tests 1600, don’t you think the dynamics of the market would have changed? Do you expect prior leaders to continue to be new leaders on a rally from 1600?
Do you guys think that the payroll numbers on Friday would be bad. The catalyst to crash the dollar?
I personally think so. Even a 200k notch in jobs would suffice to crash it.
I see a lot of fatigue in the USX; it has wanted to go higher, it was very stubborn, showed great relative strength against stocks but … that strength hasn’t been there to last, as Lady Market has revealed us in the last week and today.
And it is dragging stocks with it down.
USX down in YC decline will be stocks’ nightmare this year! …and gold’s moment to shine
Hope so. Also, Any insights to all these worldwide negative rates phenomenon? How will it affect different markets in different countries?
My understanding is negative rates apply to banks putting excess money with central banks. It hasn’t been imposed on retail depositors right? I would think so. For if not, they could be huge withdrawals like bank runs
YES, indeed. Friday was a blow-off both for USX and for stocks!
I’m faithful to my rules, though, and I’ll wait for USX to move below Friday’s low before I start searching for a low-risk pyramiding of my long-gold to position to a fully-fledged position.
This might be a stupid question – but if stocks crash, and Gold goes up, does that mean miners (GDX, NUGT…) will also go down? I’m a newbie to trading : )
I bought NUGT at $19 and holding – have a stop loss placed at $24.
Newbie, if you’re new to trading why are you in a 3x leveraged road to hell product? I know millionaire 20 year+ veteran traders who don’t go near them. Sign up for a service like Gary’s learn what he is offering and refrain from buying anything until you know exactly why you are in a trade and where your points of exit are in either a profit or loss scenario. It will save you your skin in a game where 90% of participants end up losers.
Thank you Al, I appreciate the advice. I am learning as I go. For now, I am investing $4k. 100% in NUGT now. I’ve been lucky so far and haven’t lost any money – been using basics of techincal trading and placing stops and benefiting from low-risk/high-reward entry/exits. I’ve made 40% profit so far…
wow, 100% in an amazingly volatile asset ?!!
I don’t trade but if I traded NUGT, I would not consider dedicating it a weight larger than 11% of my portfolio.
The 11% weight would be on a full, very optimistic position!
Gdx failed to sustain above 12.60…turning short here.
Only you can choose to give up your pot of gold…
Looks like I was wrong…stopped out.
That was short covering last Friday , of course
Low volume on the Dow
Oil imploding but criminal VIX slamming still in full force.
L@@ks like Cruz won Iowa… This (a Cruz win and a modern gold standard) wasn’t and isn’t “priced in”… yet! ?
“Should Cruz gain the nomination the gold standard could prove a powerful “secret weapon” in the general election.”
http://thehill.com/blogs/congress-blog/presidential-campaign/267244-cruz-is-smart-to-campaign-on-the-gold-standard
Gary, trends show the miners and even gold itself fell with the market in 2008-2009. With the charts looking like we are on a downward trend again for the general market, why do you expect gold and miners to NOT follow the same trend this time? Wouldn’t it make more sense to allow the market to drop and deflate the prices more before jumping all in (hopefully before everyone else)? Thanks for your insight.