Semis

The leading sector is still consolidating around the 2000 high of 1362. It’s above that level today and while I’m not sure it’s quite ready to produce a sustained breakout just yet, once it does, a basing pattern this huge should drive at least a 10-15 year rally.

ALWAYS ANOTHER LEG DOWN

This is what ICL’s do, they convince everyone there will always be another leg down. Then if that happens to play out everyone will start looking for another leg down after that. This is why most traders miss these ICL turns. It’s why I place cycles so high on my list of tools. When price is in the timing band for an ICL and sentiment is excessive I stop looking for another leg down and start looking for a bottom.

I have to admit some of you are starting to learn. Fewer people are panicking and selling at the bottom. Fewer people are becoming frustrated and cancelling their subscriptions right before we start making money on the next intermediate rally. Of course some people are just hopeless and will forever trade with their emotions. These people are destined to always buy high and sell low.

But more and more of you are starting to see the light. You are drifting away from the retail day trader/gambler mentality and moving towards longer term position trades. Timing perfect entries is becoming less important. Many are now able to recognize when something is “close enough” and you aren’t panicking if price doesn’t immediately go in your favor the second you enter a trade. Many are starting to learn if it’s late in a daily cycle you don’t have to make a perfect entry to make money. You just have to wait until the cycle turns.

Congratulations you are now on the road to leaving the dumb money camp and graduating to smart money traders.

CUP AND HANDLE?

Notice that the miners haven’t followed gold to lower lows during this intermediate decline. When was the last time miners didn’t get obliterated during an ICL?

WASH RINSE REPEAT

Without fail dumb money just repeats the same mistakes over and over. At bottoms their emotions convince them that price can never go up, so they sell. At tops their emotions convince them that price can never go down, so they buy.

At bottoms people cancel their subscription because they get frustrated or the move doesn’t happen quick enough for them. At tops I see huge inflows of new subscribers after the move has already happened and it’s too late.

Seriously people the time to buy, and or buy a subscription to the SMT is when the weekly charts are oversold, not when they are overbought. Short of beating people over the head with a hammer what must I do to change your behavior? How many times must you make this same mistake over and over before you learn and move into the smart money category?

 

Bull confirmed

Now that the small caps have broken out to new all time highs there’s no longer any doubt at all that the perma bears got it wrong again. We are in a long term bull market and currently in a consolidation after the big run post election. The Nasdaq might make higher highs as well but I don’t think we are quite ready for the entire market to deliver a big sustained move just yet. My guess is it won’t be until after the next rate hike before a sustained breakout can begin. I’m still seeing people calling for a market crash due to rising interest rates. Apparently these people don’t have time to study history. Markets always rise during the initial phase of a rate hiking cycle. Maybe once rates reach 5-7% we might have to become concerned, but not at 3%.

If you’re still listening to an analyst telling you to short the market, run far and fast in the other direction. The proper strategy in a bull market is to buy dips not sell short.

Change of character?

When was the last time we saw miners holding up this well during an intermediate degree decline in gold? GDX is only down 4% from it’s recent high despite gold breaking below $1300. Gold is down over 5%. The miners are down less than gold during an ICL.

Something is brewing….

Panic phase starting?

It’s certainly taking a long time to unfold, but remember last week when I suggested that a move below $1300 in gold would create panic? Most people will sell or sell short, but this is when bottoms occur.

The time to buy is when you’re scared. We’re about to get a whole lot of scared gold bugs. Some time soon the buying opportunity will arrive.

Recipe for losses

This is how so many traders lose money. They get frustrated, panicked, or overly emotional at major bottoms and they end up selling into oversold conditions when they should be buying, and then they buy into overbought conditions expecting the market to continue higher indefinitely when they should be selling.

 

This is how so many people managed to miss out on tremendous gains. The SMT metal portfolio has gone from +50% in December of 2016 to +371%. We didn’t time perfect entries on any of those trades but we got “close enough” to make a lot of money. Almost without fail we had to hold through a temporary drawdown during the bottoming process. Many many traders sold or cancelled right at the bottom because they lost sight of the big picture and panicked during the bottoming process. Look at the unbelievable opportunity they missed. All because they couldn’t control their emotions and think logically.

They are doing it again. Human nature never changes. Just like death and taxes, some things are inevitable. Many (if not most) traders will always sell when they should be buying, and buying when they should be selling. In 6 months the metal portfolio will be up another 25-50 or 100% and most will have missed it again. If people could think logically I would see a huge influx of new subscribers every time the weekly stochastics became oversold. They would learn how cycles work and take advantage of them at the bottom. But that’s never how it plays out. Instead I get traders cancelling at bottoms and the big influx of new subscribers occurs only after the weekly stochastics cycle back up to overbought. Let’s face it most people are, to put it bluntly, stupid. Logically they can see what they should do, but emotionally they just can’t do it.

This will play out all over again during the next intermediate cycle low and those very few that have learned to control their emotions will just keep racking up more and more profits while most just keep missing one opportunity after another.

Time for a correction soon

At some point soon it should be time for stocks to turn back down and correct again keeping the bears hoping, and the top calls coming.

It won’t be a final top but only a continuation of the sideways consolidation we’ve been in since February. Like I said, I think we probably still have a couple more months of this before we’re ready to breakout and head to 10,000.