83 thoughts on “CHART OF THE DAY – NASDAQ, QE AND 0% INTEREST RATES

  1. tallboy

    Agree with your analysis Gary just looking forward to see how you handle the end of this bubble. From that chart I see a pretty good correction around 4250 then another 1000 points which was approximately 25% more!!! So will it be your gut or some other reading for you?

    1. Gary Post author

      We will be tracking sentiment and how far the indexes are above their 200 day moving average.

  2. JJHarmen

    This market is getting quite predictable. It opens with an upside gap, sells down for a bit and then a strong last five minute finish for another green day. The moment I start playing that predictability , it will change. LOL

  3. Jimsee

    Thanks Gary – I must say with the economy doing poorly on a capital-adjusted basis (low return on capital/ever rising corporate debt) – there is no alternative for the FED but to keep on bubbling.

  4. rborna

    Gary,
    You show October 1998 as the comparison of where we are today. How do we know if we are not at October of 1999 or even later as point of comparison since the market has gone up so much in the past few years?
    i.e., how do you rule out of the vertical phase is almost over already?

    1. Gary Post author

      At a bubble top the index will be 40 to 60% or higher above the 200 day moving average and the Robo ratio will be showing extreme optimism for months at a time.

  5. Don

    This blog site is becoming comatose. Gary, it looks like no one wants to argue with you anymore. I guess that’s that’s the price you have to pay for being ‘right’ too often. Sort of reminds me of the day’s of Joseph Granville who made correct calls one after the other based on his ‘on balance volume’ thoeries and was widely followed as a market genius. Then he started being wrong and never stopped being wrong.

        1. Christian

          Really? I found that most of it was USELESS BABBLE (from people that don’t understand market psychology) and combative to satisfy one’s BIG EGO.

          But that’s just me ๐Ÿ™‚

          1. Christian

            Granted — useless babble is what drives traffic to a Website, probably why Gary puts up with it.

    1. Steffmeister

      hahaha …

      Yeah what the heck I will be back later day with a post of humble pie, first I thought to skip it, but then .. what the heck …

      Welcome back Don!

  6. Christian

    Where’s my good friend Nada?! Probably curled up under a blanket, Lol!

    When do I get to collect on that yummy BURRITO btw..? Man, I can already taste it ๐Ÿ™‚

  7. Don

    Boeing is a good example of what is wrong with the SM. Revenue has been basically flat with earnings per share looking better thanks to stock buybacks. It has increased it’s dividend payout while at the same time been steadily increasing it’s debt load. The stock is going vertical and has already doubled in the last 12 months. Boeing is not unique but rather typical of many many companies who have utilized financial tricks in order to enhance their stock price.

    Where and when it will end is anyone’s guess at this point but there very definitely is no fundamental reason for the insane valuations we are currently seeing for so many of the world’s biggest corporations.

    1. Jimsee

      Indeed, buy back stock, reduce or move personnel to cheaper locales – heck now u only need 3 or 4 part time gigs to afford a nice apartment – It’s nirvana :0)

  8. JJHarmen

    Welcome back Don! I have to ask… did you ever close out your short positions or are still enjoying the beatings?

    1. Don

      JJ: There have been so many “beatings” that I can’t feel them anymore. I am still adding to my short positions in small increments. I actually have had not a bad year thanks to my extensive penny stock holdings. You may recall me mentioning one called BKX? I loaded up big when it was between 17 and 25 cents and recently sold half the position at 38 cents. That one huge win plus a few other penny winners has put me in the black thus far for the year despite the losses on the SM short positions.

      The market will eventually crack. The final leg of just about all bull markets appear as if they are never going to end and that’s just how this one looks now. Will the SM go vertical more yet? I don’t know but I don’t see it doubling from this point . I figure another 10% max.

  9. Jimsee

    a much stronger gold bounce than ‘expected’ is projected by this Oct20 low above 1260…24 hours to make/break from here imo…

  10. JJHarmen

    Trump (or his military masters) is putting our B52’s back on 24 hour alert. WTF? That should give the Russians a bad case of nerves. These war mongering bastards here in the US are going to get us all killed. What’s next?

    1. Jimsee

      don’t worry = more war fear = bigger profits for pentagon/langley contractors – just git yerself a ‘killer’ job with one of them.

  11. Lenapowich

    Many of my colleagues have been making big dollars in the stock market and all think the really big profits are yet to come. Here I am going no where with GDXJ. I hate being the only loser in the crowd.

  12. Goild

    The tale that USD is going up is wrong.
    Trump wants the dollar down and it will stay down for a while.

    1. bginvestor

      Goild,

      This dollar ICL has to playout. Based on my analysis, it shouls go up more before rolling over. But, I agree that it should be a left translated cycle (weekly).

  13. ziasDad

    The buck: If the September low was a intermediate term low, and it looks like it was, there’s an IHS which will get confirmed when the dollar closes above 94.31. If/when that happens, the IHS target is 98.40, which is somewhere between a 50 percent and a 62 percent retracement of the move down from the January high to the September low.

    Also, from a wave perspective, if that move down (January to September) was a wave A, then this rally could be a wave B, with a C wave to follow (after the dollar tops out around 98).

    If this scenario turns out to be correct, then PM’s will likely have a rough time until the dollar puts in an IT top at 98. After that, as the buck heads lower to tag a double bottom or lower (at or below the September low), PM should rally like a SOB.

    Time-wise, it could take the dollar maybe half as much time to get back to 98 as it did for it to drop from the Jan high to the Sept low, so a wild ass guess as to when the dollar might hit 98 or thereabouts would be end of December/early January.

  14. Jimsee

    Christian – C down may not have started yet – hold 1270 –> 1320–>1248 a C of B potential. 1320 now would have gold longs very excited I’d think.

  15. vin

    Goild, did you buy jnug? It went down to 16.35. I had put an order at 16.32, did not get filled. May be as well.

    1. Gary Post author

      All bubbles implode. Bitcoin will be no different, especially since it is a pure Ponzi scheme backed by nothing other than speculators willingness to bid the market up.

      Real currencies have to be backed by the productive capacity of the country issuing them and the governments ability to tax.

      Years from now we will look back and wonder how we could have possibly repeated the Tulip mania all over again.

        1. Gary Post author

          At $50 bitcoin was not stretched 300% above the 200 day moving average and exhibiting signs of a mature bubble.

          There are characteristics that virtually all bubbles exhibit.

          Most all bubbles will rally at least 100% or more in a year or less. Bitcoin definitely qualifies as it has rallied 500% in a year or less.

          During bubbles price will stretch extremely far above the mean. At the most recent high bitcion was stretched over 300% above its 200 day moving average.

          And during a bubble the public starts to pile into what they believe is a foolproof way to make money and they start to rationalize fundamental reasons for price to continue to the moon. We are clearly seeing both of these now in bitcoin.

          1. Bluebellkid

            Climax Runs
            Just as a stock chart can tell you the best time to buy, charts will also let you know when a stock is coming to the end of its run.
            In fact, there’s an old stock market saying: “Buy on fundamentals, but sell on technicals.”
            It means that sell signals often show up on a stock chart before they appear in fundamental reports like quarterly earnings releases.
            The climax run chart pattern is one of the surest signs a stock is nearing its peak. Think of it as a sort of last hurrah before the party ends.
            If a stock in your portfolio makes a climax run, it’s probably time to consider selling and locking in your profit.
            Climax runs often appear before other weaknesses surface in the firm’s quarterly earnings or sales results. But if you ignore the sell signals a stock is flashing and instead wait until it actually issues the bad news, your stock may have already cratered โ€” taking much of your profit with it.
            Chapter 2 – The Basics
            Climax runs are easy to spot on daily and week stock charts.
            They occur when, after a long run-up of 18 weeks or more, a stock suddenly bolts up 25% to 50% or so in just one to three weeks.
            The stock may also experience the largest one-day price gain of its entire run. If this happens, watch out. It’s probably nearing its peak. This hefty one-day gain may also occur on the heaviest single day of volume since it began its advance.
            That big jump may take the form of an exhaustion gap as its price opens significantly higher than the prior day’s close. Such upward gaps are a sign of strength when they occur at the start of a stock’s run. But they’re a red flag if they happen after a stock already staged a big advance.
            The climax run can also be seen on a stock’s weekly chart as the stock rapidly runs up for two or three weeks. The price spread from the stock’s low to high in those weeks will be greater than during any others since the beginning of the original move, many months earlier.

            Let’s take a look at a climax run in action. Hansen scored some big share price gains in 2005-06.
            The company had found a niche that other beverage makers had missed and bottles of its Monster energy drink were flying off the shelves. As a result, investors had pushed the stock up more than 400% in just one year.
            The stock cleared a base on March 13, 2006 and began what would become the last leg of its climb. In early March, its rise suddenly steepened and the stock shot up 55% between April 28 and May 10.
            During those last throes, Hansen logged an exhaustion gap on May 9, jumping 16% on huge volume. That was its biggest one-day move since the breakout. It gapped up again the next day.
            As we mentioned earlier, a gap up is sign of strength in the early part of a stock’s run. But if the stock has already had a big run, a big gap up can be a sign the stock is nearing its peak.

            Looking at Hansen’s weekly chart, we can see that during the week it scored those giant upward gaps, its high was $50.53 and its low was $37.25. The difference โ€” or price spread โ€” between them was $13.28, the largest since Hansen began its run.
            After hitting a new high May 10, Hansen formed another base and tried to breakout. But its advance was over. The stock suffered a brutal 28% drop in early August and by November had fallen more than 50% from its peak.
            And Hansen wasn’t an isolated case. Other big winners have also experienced climax runs and exhaustion gaps as they reached the end of their climb.

            Hologic more than doubled between mid-2005 and early 2006. Then on January 24, 2006, it underwent an exhaustion gap. The move came amid a climax run as its price surged 35% in just three weeks. The stock hit its peak a few months later, then fell into a long downturn.

            Peabody had a spectacular run in 2004 and early 2006 as its share price scaled the charts. Then during the first two weeks of May 2006, it experienced not one, but two exhaustion gaps. Not surprisingly, they came during a climax run.
            These were the stock’s way of telling investors it was time to sell. Peabody hit its peak on May 12, 2006, then began a long decline.

          2. espresso

            One of the signs of the crypto currency bubble is the rush to get into new ones that hit the market. Reminds me of the rush to get into IPOs in the late 90s. I felt the high water mark (doom coming soon) was VA Linux, which hit it’s ALL TIME and FOREVER high 60 seconds into it’s trading. After 1 minute of being a public company it was all downhill. And the price they fetched was just obscene.

            Fear there isn’t enough to go around was rampant. Fear of not getting one’s share was acute. Stock tips where everywhere. In my own life, minivan moms at my kid’s grade school actually had stock tips for me! My wife came home with them from work!

            Can’t wait to see those days in the general market again. I plan to hang on longer this time around.

      1. bginvestor

        The real smarts is when people figure out which markets to invest to make HUGE $$. Anyone not choosing to invest in Bitcoin was not only dead wrong, but deep down inside kicking themselves. There’s a lot of new millionaires thanks for Bitcoin.

        SM is in a bubble phase right now. Bitcoin is in a bubble phase right now.

        1. Gary Post author

          The problem is almost none of them will keep their gains. Most investors hang on too long and get caught when the bubble implodes.

          Like I always say, human nature never changes.

          1. ziasDad

            many long term investors have seen the crashes of the early 2000’s and 2008, they’ve seen that the market “always” recovers and goes on to make new all time highs, so they’ve gotten back in with the idea that they are truly going to buy and hold this time. No selling at the bottom. No selling until well into retirement and then only a little at a time when they need the money. They may get lucky and the stock market continues to make new all time highs year after year, decade after decade with only a 10 percent or 20 percent pullback. But what will these buy and holders do if we get a 50 percent pullback like we did in 2008/2009?

          2. Gary Post author

            The magnitude of the crash is usually dependent on how big the party is that precedes it. We had one hell of a party in the housing bubble so it’s no surprise that the crash was huge. If we have a huge bubble in the stock market then yes we can expect a massive crash to follow.

            And I do think we are going to get a massive bubble in the stock market.

  16. vin

    That is the first real positive I have EVER heard on Bitcoin. I will consider buying it, never thought I would.

  17. Gary Post author

    The juniors have clearly signaled a failed daily cycle in progress. The rest of the sector will follow. However we still have a ways to go before the bloodbath phase. Bulls will remain in denial and every little bounce will be viewed as the bottom. It wont be. The bottom will only come after the bloodbath phase has run it’s course.

    This is why I say it’s hard to make money on the short side and why traders ride markets all the way down into ICL’s and finally panic and sell at bottoms. Human nature never changes.

  18. Goild

    Vin,

    Early in the morning I thought there was going to be an opportunity to make big bucks. As JNUG went down I started the usual routine of getting into the falling knife. When Jnug hit $16.41 I had 23500 shares. I was down $1k. Then I sold too early to make like $1.3K. I should be happy. Though it is way too much risk, and not played so well on the way up. Safety is more important than gain?!
    Good trading to all.
    I also sold too early the 2.2 K shares of UVXY.

  19. Nada

    Afternoon peeps. As I said Friday, gold looking for a green close on Monday. Beautiful bounce off the trendline from the July low (green dotted line). Picture perfect Bull Gartley has formed off the low this morning. 1348 target on xauusd remains;

    https://gyazo.com/e47b72fc416fd17a1fcb0a6720949508

    USDJPY gapped up on the election results but looks like it is forming a nice pin bar close.

    1. jyoung3759

      Probably another bull trap. It is not unusual for these things to temporarily find support but overall unless the dollar is ready to crash now then Gold continues to move lower.

    2. jyoung3759

      Your sweet trend line is about burst my friend. Gary has very sound discipline and reasoning to accompany his analysis. He also seems to understand he fundamental structure behind trend pattern.

  20. JJHarmen

    What the hell? No last minute rescue? The DOW and S&P closed down after making new highs? What kind of sorcery is this?

  21. Don

    Some of the indexes made interesting and bearish candlesticks today. Also, the Russell 2000 has failed to make a new high since October 5. Divergences can sometime have a meaning that only becomes apparent down the road.

    On the other hand, this market has been produced a multitude of divergences since it started more than 8 years ago and none of them meant a damm thing in the traditional sense. I think machine trading has changed the whole character of the markets. It’s tough to think and act like a machine, without the handicap of human emotion.

    Just my opinion but I think the playing field is very much tilted against us.

    1. Gary Post author

      It’s only tilted against you if you insist on fighting the bullish trend. I’ve been saying for years that the Fed has your back on the long side of this market. If the central bank with its printing press is going to guarantee your investments it makes sense to stay long.

      1. Gary Post author

        Some indexes are trying to move down into a normal daily cycle low. The Russell for example, energy stocks, possibly the tech sector, etc.

        I’ll say the same thing I’ve been saying for several years now. Buy the dip (if we get one).

  22. Bv

    In a little known one- horse East Texas town near Long View Texas there is one road in and one road out. The town is suffering severely from the great depression of 2009. Money is as scarce as hen’s teeth. A wealthy traveling salesman walks into the ancient hotel, the only hotel in town and lays a nice crisp $100 dollar bill on the hotel counter and announces to the hotel owner that he is going to walk upstairs to inspect the rooms.

    The hotel owner picks up the $100 dollar bill, smiles, and sticks it in his shirt pocket. He walks out of the hotel and enters the Cafe next door. The entire town has been running on credit since the depression began. The hotel owner owes the Cafe owner a $100 dollar bill for services rendered at the hotel.

    The Cafe owner picks up the $100 dollar bill, smiles, and sticks it in his shirt pocket. He walks out of the Cafe and walks next door to the butcher shop. The entire town has been running on credit since the depression began. The Cafe owner owes a $100 dollar bill to the butcher for meat that was served at the hotel.

    The butcher picks up the $100 dollar bill, smiles, and sticks it in his shirt pocket. He walks out of the butcher shop and walks across the street to a prostitute standing on the corner. The entire town has been running on credit since the depression began. The butcher owes a $100 dollar bill to the prostitute for secret services rendered on credit.

    The prostitute picks up the $100 dollar bill, smiles, and sticks it inside her bra. She walks across the street to the hotel. The entire town has been running on credit since the depression began. The prostitute owes a $100 dollar bill to the hotel owner for rooms she used on credit. The hotel owner smiled, accepted the money and laid the nice crisp $100 dollar bill back on the counter.

    The wealthy salesman comes back downstairs, and states that the rooms were not acceptable, picked up the $100 bill from the counter, and walked out the door.

    The moral is that all of the debts were paid, all the books were balanced, the economy continued as normal, and everyone was happy, except for the salesman who still needed a room. This is the story of the American Economy.

    1. Gary Post author

      Well not exactly accurate. To begin with the hotel owner could not take the hundred dollar bill and pay his debtor until the salesman actually rented the room. At that point the hotel owner actually offered a real service. He rented out a room in his hotel. Once the hundred dollar bill came back around to the hotel owner he not only got paid for his room but got paid some of the debt owed to him.

      And we have to assume that the salesman didn’t just print the hundred dollar bill out of thin air but instead sold some of his products and earned that hundred dollar bill. So while at first glance the whole series of transactions seems like financial hocus-pocus there is actually real production in the story. The salesman sold a product and the hotel owner rented his room. If the hotel owner had not rented his room then none of the transactions could have occurred. And everyone’s debt would have remained at the same level as before the salesman rode into town.

      1. espresso

        Change the story to “The hotel owner places an IOU on the counter and takes the $100 bill next door” and finish with “The hotel owner takes the $100 bill from the prostitute and buys back his IOU.”

        The point of the story is how everybody’s debt was paid off but nothing actually happened. Meaning there’s something fundamentally wrong with the debt based system. And with the US $20 trillion in debt and rising, that ‘something’ is the ever decreasing value of the dollar compared to retail goods and services.

    2. vin

      Thank you. Very interesting. Makes sense.

      Unfortunately, to-day in America there are very few who are owed money. Everyone owes it to the so called “bank”. In a simple economy your story would have a made more sense. In a complex economy there are players who have the advantage of taking wealth out of the economy and store it elsewhere.

      In short all the money in America is NOT owed to each other. In fact most of it is owed to those who have plenty and they are probably not the “banks” LOL!

    3. vin

      In fact what this story describes is the modern currency system and not the debt ridden economy.

      If everyone was owed money then people wouldn’t be paying 24+% interest on credit cards years after years, or pay 30% for advance against paycheck month after month…… An average person doesn’t have much wealth except for the equity in the house if it is worth anything under dire conditions.

  23. Simo83

    IT WON’T HAPPEN. a lot of that money is in the bond market…if it crashes, stocks will too. take DIA and divide it for MZM, you’ll see this ratio is NOT LOW AT ALL. THE GREATEST MANIA IN THE TECH SECTOR HAS OCCURRED IN THE PAST, AND IT WILL NOT BE MATCHED. 10000 maybe 5-6 years from now, if ALL GOES WELL.

    1. Gary Post author

      Well despite the all cap letters which I assume means you’re making a statement in a very loud voice you don’t seem to be paying attention to what’s going on. The NASDAQ is already over a quarter of the way there in less than a year and we’ve barely even started the vertical phase.

      1. Gary Post author

        The McClellan oscillator never did move back above zero so I would say we are now getting our long overdue daily cycle low.

        Don’t forget: buy the dip.

    1. vin

      To-day it did look like that, and labu was butchered again, even soxl came down quite a bit from the peak. Looks like party is becoming quieter unless some new guests decide to drop in.

      1. Gary Post author

        Runaway moves don’t give traders many chances to get in, and when they do most fail to pull the trigger either because they are looking for a larger pullback, which doesn’t come, or they think the market is topping.

        Buy the dip, and don’t wait too long because the dip may not drop very far.

        1. vin

          Gary I have taken your advise seriously. I am “invested” reasonable amount of money. But, I am not convinced that we are headed straight up 100%+ in a year or so. Well, we will see. So, far you have been excellent in predicting the trends. Let us hope it continues.

          I certainly don’t plan to put more money in at this stage.

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