TEST?

History says we should test the lows at some point in the next few weeks. The fact that we ended well off the lows does muddy the picture at bit, as most “crash” days have ended at or close to the lows of the day. So perhaps this time will be different.

I’m going to point to an interesting parallel that I’ve been watching.

I’ve noted that the first and second leg of this bull roughly followed the same pattern as the 03-07 market. The correction following the second leg copied the 04 correction if not in duration in magnitude.
I’ve speculated that this bull would bypass the middle phase of a “normal” bull and move straight into the final phase.
In 06 the final phase began with a 7 month runaway move. We certainly saw a runaway move out of the February 5th bottom. I must admit I thought it would last a bit longer than 2 1/2 months but I guess we shouldn’t be surprised as everything has been unfolding much faster during this bull.
In 07 the runaway move ended with the mini-crash in February. Yesterday certainly qualifies as a mini-crash. So we are still following the 03-07 template. If the pattern holds then we should expect a recovery soon and a final surge higher into an ending blow off top.
From there we should roll over into the next leg down in the secular bear market.
Not that I want to buy into a secular bear market, but sometime in the next couple of weeks we should get a intermediate buying opportunity…unless this time is different and we just continue higher from here.

89 thoughts on “TEST?

  1. knifecatcher

    Yesterdays action means that the wednesday low of 1160 in gold will never in our lifetime be breached.
    We will probably never drop below the wednesday high of 1175 either.

  2. Tom

    Gary, the ball is in Trichet’s court right now. What if he won’t print like Ben? That could start a deflationary event worldwide.

  3. TommyD

    Gary, That chart you posted, I see all over the place. Look at RDS-b royal dutch shell. I was thinking of investing in it for the long term. Is what I see from 2/8 to 4/26 wave A then what we just went through wave B?
    Thanks

  4. Todd R

    My fingers are crossed that this chart will be right, Gary. If this down draft continues for too long, I think it really hurts any chance of further economic recovery.

  5. Todd R

    This could be a great time for the Fed to sell those treasury’s it bought last year.

  6. What Gives?

    Gary, GLD has been heading to all time high but why is the miners not moving up as GLD? What gives?

  7. What Gives?

    Gary, I am patient. It could be the reason that gold price will collapse and it is reflecting in the price of miner shares.

  8. Gary

    The gold price already collapsed once and it came right back and made new highs. I don’t think it will but I’m not worried if it does. This is a secular bull market that isn’t done yet. The debt crisis we are witnessing can only be halted temporarily by one thing lots and lots of money printing.

    I’m confident the powers that be will choose that path.

  9. khalid

    Tom:
    re Trichet. If he has to do QE, he sure will. Also, the ECB may not be allowed to buy government bonds directly, but they sure can from the secondary markets or using some other mechanisms designed to be too abstruse for your average person to understand.

    Read Mish’s global economic analysis blog. Trichet has already surrendered his so-called hawkishness.
    TommyD:
    Gary’s A-B-C-D talk refers to patterns in gold only, not stocks, in your case, energy stocks. He also doesn’t do Elliot Waves (I believe it’s hogwash too)

  10. Onlooker

    Gary

    I had been noticing the parallels as well. It’s like we’re running through the same credit and stock market cycles all over again but in a compressed timeline. No certainty in the continuation of that but it sure is kind of eerie to see.

    It looks like gold is getting a bit of a let down today after yesterday’s fun. But it has clearly shown it’s stripes in the last several weeks, going up even with the strong dollar. I’m a converted believer in the secular bull thesis and have been accumulating miner shares since mid-March, including some over the past couple of days.

  11. Onlooker

    It’s also interesting that copper is up significantly today. I picked up some FCX just under 67. BHP & RTP are strong today. Almost pulled the buy trigger earlier today; wish I had.

  12. Marc

    So just noticed that SLV is up 1% today and yet the silver miners aren’t. I figure they’ll whoosh back up at some point because if you’re mining silver and the price of silver goes up…well it’s pretty obvious.

    I’ve also read a lot of stories on how many of the PM repositories are running on a fractional reserve system, kinda like our banking system. While folks generally don’t want to take physical possession of dollars, PMs are a different matter plus you can’t just print more PMs.

    The PM sector is about to take off.

  13. Frank

    My qualitative impression is that SLW responds more to gold than silver. I guess we had a buying opportunity here again, but I can’t pull the trigger.

    My limit order on MFN failed yesterday.

    Gold’s near 1210. The gold miners are sadly lagging. Have to check to see why GFI is being hammered. Surely USD strength is bullish for SA miner? That’s another laggard that I need to purge.

  14. Jayhawk91

    This is nucking futs.

    I dumped my last 15% of my positions last Friday and on Tuesday of this week….These were positions in CDE, HL and EXK. Also, had some GDXJ. These were all lagging the other miners, so I was hoping to reposition into some of my favorites. I moved that capital into some physical, which I had not had until now. Now in all cash freaked out because of yesterday’s bizarre action.

  15. LowTax

    Jay, you gotta calm down man. If you don’t, you’re gonna get whipsawed right off this bull. I don’t think this is the time to trim losers – do that when the bull is running again and when you can compare true growth trajectories. The market is too volatile now to decide which ones to cut out. Better to be all-in and not miss the big pop.

    I just dumped another load of cash into miners early this morning and am up solidly – almost all in now. I’ll hold off on the last little bit for new highs or maybe a swing low.

    Remember, there is NOTHING the central banks can do to calm the markets except to pour in more cash. Any way you cut it, gold/silver wins. It’s either that or they let the system collapse – not gonna happen.

  16. Anonymous

    Hellow fellers…
    ya gotta luv volatility…just let some more yeller go around 1212…lightly…somethings gotta give between the dawler and yeller…outta buck…gamma traddin short equities…just havin a blast…abuve 86 in dawler will sell lightly…
    hope all r snitzeling away…

    the dawler guy

  17. Anonymous

    This is insane. Crude has fallen 20% from its top. Gary, some of us are really hurting. please help us through this phase. do you think we get an equally fast pull back in Crude/Equities?

  18. Anonymous

    i took advantage of yesterdays debacle to reposition … out SIL … replaced with SLW … out with AUY in with GDXJ

  19. Frank

    Good move on GDXJ and SLW. That’s exactly what I bought for another account that I have at the Feb lows.

  20. Jayhawk91

    LowTax-

    I’m with you, my emotions are actually in check. I just don’t like the silvers overall at this point, especially those that are lagging as badly as CDE, HL, SSRI. I’d rather be heavier on the gold front and wait for silver to show us some thing. I’ll grab SLW for sure…maybe a smaller one like SVM.

    I jumped into the physical side to strap me onto the bull for the duration. I plan on adding more as we go. ๐Ÿ™‚

  21. Anonymous

    Gary, can you set the comment post times to EASTERN so they match the market and make more sense when reading?

  22. Gary

    Anon,
    Sorry it’s easier for me to keep it on Pacific and since it’s my blog you’r going to have to add +3 ๐Ÿ™‚

    Anon,
    I don’t know what to tell you. Why you want to buy into secular bear markets I have no idea. At some point the bear will come back. Maybe he has and maybe he hasn’t. If he hasn’t then your positions will eventually recover. If he has then you bought the top.

    I prefer to stay with the one secular bull so I don’t have to worry about things like that.

  23. Anonymous

    Shorting gold here for a trade wouldn’t negate the bull case. $GOLD has nudged up to last year’s highs this week and is hitting ST overbought readings. An orderly pullback for a few days/weeks would give the technicians watching the huge cup-and-handle pattern something to shoot for.

  24. iliketorunaftermidnight

    I now personally think that April was the top for the S&P, and now we start to roll over in a topping process.

    I used to agree with Gary about one more upleg but imo too much momentum has gotten knocked out of the markets, the next ‘upleg’ will just be a bounce and not surpass the April highs.

  25. Gary

    I’m not sure I would put much faith in anything technical at this point. This is a market that is running on out of control emotions.

    And I’m pretty sure it won’t take much more weakness before Ben starts printing heavily again. They’ve gone way to far down this path to just give up.

  26. Anonymous

    Another key weekend ahead. The obvious question is whether some combo of ECB bond purchases, credit extension, Fed swap lines et al will come down and calm things down in the eurozone for more than a day or so. The euro chart is hideous, but the last two days on the FXE might mark a capitulation bottom, at least short term.

  27. thedocument

    There is a big difference between the 2010 mini-crash and February 2007. In 2007, the crash marked a yearly cycle low. Currently, we are only due for a daily cycle low, so the market cannot necessarily be expected to behave similarly coming out of this crash.

  28. Anonymous

    “Gary, can you set the comment post times to EASTERN so they match the market and make more sense when reading?”

    Come on. Everybody knows that the only official time is UTC.

  29. Gary

    Doc,
    I have to say if I just look at it in a cycles perspective then we now have a failed and left translated yearly cycle. That would be a strong signal the bear has returned.

    Jim Rogers thinks the market is due for an extended correction and Richard Russell thinks the market has topped.

    I don’t believe the Fed will just give up. They’ve come to far down this path so I have to think continued weakness will crank of the money machine soon.

    I will say that it seems kind of foolish to try and guess whats going to happen with the stock market. If one goes short you risk getting cuaght in the Fed’s efforts to prop everything up.

    If your long well then one is buying a long term secular bear market that is going to end at some time. Maybe that sometime is now.

    The risks are huge either way.

    We all know what the response is going to be, so the only logical thing to do and the path with the least risk is to stay invested in line with the one remaining bull market.

    That is going to be my strategy.

  30. Marc

    Reading this blog and others I’m seeing a lot of bearish comments. I appears that sentiment is being reset very quickly.

    The way I look at it, we’ve had, to the chagrin of the bears, improving economic numbers. Companies are making more money (the ability to lay off millions in 08, 09 really helped the bottom line), consumers are seeing their 401k back to pre-crash levels and the govt is keeping it’s easy money policy.

    Until a more serious catalyst occurs, this will just be another correction. The deeper this correction, the stronger the next push up will be.

    To really bring the bear back, we’ll need inflation (or worse…deflation) As long as the govt can print it’s way out of the problem it will. PMs are the one thing they can’t print.

  31. Anonymous

    Marc-

    The catalyst is here and now. Greece is the tipping point to get the sovereign debt dominos falling.

  32. Gary

    I doubt the powers that be are just going to sit and watch the dominos fall. They are going to start printing like mad to halt the process.

  33. Basil

    Seems like deflation part 2 is underway; the question is whether or not it is going to be as severe as the last whiff in 08/09 and if the PMs are going to behave differently this time.

    Currently PMs seem to remain popular as a currency crisis and sovereign default hedge; however PM stocks still got a little bruised during the recent stock market dive, and the question remains whether they will indeed refuse do go down much even if the markets collapse some more.

    The March 09 lows are not off the table; it’s almost more a question of when rather than if; and if indeed we see them again or at least come close, it’s hard to imagine that PM stocks will still be up where they are now.

    Gary, in the chart you posted you also foresee a continuation of the bear; on the other hand you keep mentioning that the Fed will succeed fighting off a market collapse with the printing press. I see a contradiction there, or is it just a matter of timing? You believe the bear will continue, just not now?

    Also, a while ago you said that you don’t believe the market has more than this third leg up in it; we could argue the third leg has just come to an end; however, now you’re saying that you think there is more to go. Could you clarify?

    I think that, at this stage, it seems impossible to forecast how quickly the biggest threats to the continuation of the cyclical bull will unfold. Sovereign debt crisis, currency crisis, China crash, new deflation wave, all these can easily materialize within the next few months.

  34. Gary

    I thought we would have at least three legs not neccessarily only three.

    We are obviously still in a secular bear market so we will head down again sometime. I’m just not sure we are beginning the next phase of the secular bear just yet. Many of the signs of bull market tops are not present which makes me think we aren’t done yet.

    One of the keys that I went over in the weekend report is the 1044 level. That is an important level cyclically.

    I think the PM markets are doing everything but hitting people over the head trying to let us know something has changed.

    At any other time this kind of selling would have crushed miners and especially silver. It’s not happening. One has to take notice that something different is happening in the mining sector.

    It is the one remaining secular bull market.

  35. Anonymous

    Gary,

    Don’t you think that miners will get crushed, along with broader market, if the market was to go down substantially.

    I am looking at building a portfolio of GLD, GDX, GDXJ and SLV and leave some part of portfolio in cash. What ratio do you think would be a good idea at this point in time amongst these ETFs and cash.

    Appreciate your good work.

  36. Gary

    Well we just saw the market get hit for 10%. Gold went up and miners barely budged. Seems like something different is happening to me.

    You just have to decide how much you are willing to invest by your own personal risk tolerance

  37. Marc

    Gary,

    What do you think of the news about the investigation into silver manipulation by JPM? I’d say that news (or leak of it) was responsible for silver jumping last week.

    At the very least, if there is any concerted effort to pressure PMs lower, it will be under more scrutiny.

  38. Gary

    I haven’t read anything about it but I suspect it’s just the resident conspiracy nut Murphy doing his thing.

    If JPM is trying to manipulate silver then I say let em. It will only make the price go all that much higher, faster.

  39. Marc

    “EU Crafts $962 Billion Show of Force to Halt Euro Crisis”

    And just where did they happen to find $962 billion? Under the sofa cushions? Can you say “inflation”?

    This week will be very interesting…

  40. Anonymous

    It will be interesting to see if this Euro bailout is the catalyst to spur the market up to new highs (from March 2009) as per Gary’s prediction. I hope so.

    US futures looking VERY green, currently almost +400

    Joseph

  41. Anonymous

    Equity shorts are vap-o-rized again. sheesh!
    and now that the printing presses are back on, gold steps lower?

  42. Gary

    Just a reaction to the gold trade coming off in Europe as the Euro rallies.

    Plus gold is now due for a daily cycle low.

    We have a nice cup and handle forming. The move down into the cycle low could form the handle.

  43. Anonymous

    gary —

    what day is this in the daily cycle? typically how long are daily’s and whats the timing band look like for a potential bottom of daily?

  44. Gary

    I will add the gold cycles to the terminology document on the premium site today for anyone wanting to study it.

    I should have it finished in a couple of hours.

  45. TommyD

    khalid,

    Thank you for the response and explanation.
    Stock market looks strong today. My guess is – TPTB will take this back up to a good consolidation point and then slowly take it higher.

  46. khalid

    Can anyone here shed some light on the exchange or settlement risk of buying or selling OTC / Pink Sheet miners? Are they covered by SIPC?
    Gary, Do you buy OT/PK shares?
    I already own American OTC/PK shares of 3-4 juniors that are listed in Toronto. But I thought it might be a better idea for risk management reasons to get direct access to Canadian exchanges, so went with Frank’s Questrade suggestion.
    Let’s just say they Questrade didn’t seem intent on doing business, unlike American companies…

  47. Frank

    SIPC protects you against the broker…. The main problem with pinksheets is liquidity — if the company is listed in Canada then you are not taking extraordinary risk. I haven’t looked into these issues but I expect that they have wide bid/ask spread relative to Canada.

    TD Ameritrade, for example, will also buy on the Canadian exchanges but you have to place the order on the phone so it will cost $20 or $30 instead of $10.

    If you are U.S. based then Interactive Brokers is the way to go in Canada.

  48. Gary

    I’ve been able to buy canadian’s with Ameritrade. Usually it has to be a limit order and you will have to call and get the symbol as it is usually different than stockcharts.

  49. Gary

    I just checked Ameritrade and I was correct you can buy Canadian juniors. You just have to call for the Ameritrade symbol and place limit orders.

  50. Anonymous

    Uh oh, the Euro$ can’t hang onto it’s gains. So long Sarkozy, to your New World Order and it’s singular government!

  51. Anonymous

    Schizophrenic attitude toward risk today. Buying frenzy in equities with yields on US debt down across the board. Question is, who’s the smart money and who’s the dumb money?

  52. Anonymous

    smart money dumb money .. thats the interesting question … for months I have heard constantly how the retail investor has not bought into this rally .. how money inflows into bonds was still going up … now, I am hearing that the dumb money all got in so the smart money sold … which one is it .. ?

  53. Jayhawk91

    “We have a nice cup and handle forming. The move down into the cycle low could form the handle.”

    I think we can forget about technical patterns, technical indicators, etc…A wise man once told me. :p

  54. Gary

    Jay,
    The secular trend is up, the intermediate trend is up, and the short term trend is up.

    Would I base an investment on a cup and handle pattern alone. No way. Would I base a counter trend trade on a bearish pattern in a bull market? Certainly not.

    Would I point out a bullish pattern in a secular bull market with every trend pointing up? You betcha!

    In bull markets the surprises come on the upside. For the most part I will ignore negative technicals and consiously look for bullish signs. Hey it is a bull market after all. I want to do whatever it takes to remain focused on that one simple fact.

  55. Frank

    I noted some interesting developments in the mainstream media.

    An opinion in the WSJ supporting the gold standard, Larry Kudlow (Mr. King Dollar) in the doldrums about fiat currencies, etc.

    I tell you that this Euro bailout is not done and dusted. The aversion to this in Germany is deep in the DNA and Merkel will have hell to pay, although the irony is that her opposition is the socialists. Although there may be a rebellion on the right within the CDU and the CSU in Bavaria is not happy.

    I was talking to this retired German doctor at a dinner party in Sweden last summer. From an American and Swedish perspective he was perceived as a fringe lunatic gold bug. He was buying physical gold and storing it in a safe at his house, and he paid a very large sum to insure it. As I probed further, he is apparently not on the fringe in Germany. This is relatively common among middle class (maybe upper middle class) Germans. Many of his friends and colleagues are doing the same.

    In the US (or Sweden or most western countries) this kind of thinking is on the fringe and you probably would not want to admit it in mixed company…… yet.

  56. Jayhawk91

    Gary-

    I see it too and think it’s a beautiful pattern lining up. Just for kicks, what is the target price of that cup & handle if confirmed?

  57. Gary

    I don’t know that C&H patterns have a target.

    I’ll just watch the HUI. When it gets stretched 40-60% above the 200 DMA it’s time to start thinking about exiting the C-wave.

    Of course gold still has to breakout to new all time highs. But I think the strength in miners is clearly suggesting that is going to happen.

  58. khalid

    Anonymous 8:40 AM:
    Allow me to answer that on Gary’s behalf ๐Ÿ˜‰

    YES!
    Buy GLD

  59. TommyD

    What a day!!! Yesterday I cleaned up and started exiting my equity longs. Now looks like a great run on the PMs.

    Happy Days Are Here Again, Happy days are here again..

  60. Anonymous

    Great perspectives Gary – – I couldn’t agree with you more, on this article. Thank you for it.
    pH

  61. Frank

    SLW today.. wow!

    Sometimes I get these hedging urges to sell calls on my SLW holdings. Up to now, thank goodness for not doing so.

    One stock that I was contemplating in February was GSS. Take a look at that chart and cry……..

  62. Bede

    A bit frustrated today, but only a bit. I decided to add to my account, and the cash was ready to invest yesterday, but I hesitated, and now I’m afraid of picking a top. Grrr.

    The saving grace is that I had buys in at low prices when the market dropped last Thursday.

    Patiently biding my time.

  63. Frank

    Recall Gary’s comments (?) on the crappy miners as the place to be going forward.

    Here’s one. I have a tiny position in my IRA at like -50% of this exploration stage silver miner in Montana: MGN. Up 11.65% today.

  64. TommyD

    Good days, aye? I am planning on holding SIVR and SGOL for a while but on the miners,,, what’s the best play that has worked for you guys? take a little profit and wait for a dip?
    Let’s discuss strategies shall we?

  65. Anonymous

    Gary, continuation of C-wave confirmed, right? Also, please suggest a strategy to book profits as some of us are worried about the impending correction into the daily cycle low…so should we book out now or just sit tight? or is this going to be the runaway move that you had mentioned and everything including miners, equities, gold would take off to new highs one last time?

  66. Frank

    I sold 20% of my NGD today at 6.10.

    I don’t do the will swings like Gary does. I go from 55-60% up to 75-80%.

  67. Jayhawk91

    Gary-

    Contrats on your calls…Just an outstanding day! I wish I would have been old turkey the past month or so, but I turned into young chicken. ๐Ÿ™‚ I’ve been adding via the physical front recently for a longer term play.

    Congrats to all the others here, you guys deserve this day.

  68. zstock Pro Select!

    “The debt crisis we are witnessing can only be halted temporarily by one thing lots and lots of money printing.”
    Gary, did you see FXE drop and GLD go up…
    It’s a new signal. Role reversal of sorts.
    I guess the GLD pits, see the FXE drop..( Euro printing machine dial is at max) ..How soon do we see $1300-$1400?
    Do I need to raise my NEM target price from 58 to 63 / 68?

  69. LowTax

    You’re right Jay – there’s no way to analyze this kind of stuff – it’s crisis mode and PMs are going to blow through the roof. The ECB has just broken its own laws and started to monetize (they are forbidden to do so except under ‘Acts of God’). And it sounds like the Fed has re-opened the swap lines from ’08-’09 which means we should see a double whammy – both the Euro AND the dollar will be devalued at the same time. Hang on boys, we’re going to the moon!

  70. Jayhawk91

    Just posted this on BlueChip…Read Armstrong’s analysis on hyperinflation. Hyperinflation is not just “printing” of fiat currency. It’s when the public’s confidence in the money collapses and the velocity of money in the economy explodes.

    http://www.martinarmstrong.org/files/Sometimes-the-Lunatic-Fringe-Do-Get-It-Right-5-1-10.pdf

    I think this will start to unfold with the Euro and then the dollar eventually. Not going to be pretty…Massive H&S on the EUR-USD. Target on this pattern is .84 (Chart courtesy of Brinkley at BCB

    http://4.bp.blogspot.com/_oqKj7JIlUso/S-K59DBXHcI/AAAAAAAAA4w/mbSPLL_t15g/s1600/2010-05-06_EUR-USD.png

    Not to get all GG on you guys, but I’m starting to think you have got to go physical on at least a 5-10% position.

  71. Gary

    The most dangerous thing to do right now is lose positions because you are worried about a meaningless daily cycle.

    That will be an opportunity to buy not to sell. We will exit at the top of the C-wave.

    Let me say again and I can tell you from bitter experience you don’t, don’t, don’t ever lose a position for any reason as a C-wave or C-wave continuation is getting started.

    You hold and or add until we get some kind of sign the C-wave is done.

  72. Gary

    I went over a little bit in tonight’s report what we should expect. And I will go over it in more depth tomorrow.

    You need to have some kind of position though. So at least get something.

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