THE BEAR WILL RETURN IN 2011

It’s almost impossible to find anyone who is long term bearish on the stock market or economy at this time. In the recent Barrons poll every single analyst expected a rise in stock prices next year and  continued economic expansion.

I think they are all going to be wrong, horribly wrong. I believe next year the stock market will begin the third leg down in the secular bear market. And the global economy will tip over into the next recession that will be much worse than the last one.

I’ve gone over the 3 year cycle in the dollar index many times. The dip down into the next 3 year cycle low this spring should drive the final leg up in golds massive C-wave. What I haven’t talked much about is what happens after the the dollar bottoms.

I actually expect this three year cycle in the dollar to play out almost exactly like it did during the last three year cycle. When the dollar collapses this spring it will not only drive the price of gold to a final C-wave top, it will drive virtually all commodity prices through the roof, the most important being energy and to some extent food.

It was the sudden massive spike in energy that drove the global economy over the edge into recession in late `07 and early `08. The implosion of the credit markets just exacerbated the problem. You can see on the following chart just as soon as Bernanke drove the dollar below long term historical support (80) oil took off on its parabolic move to $147.

What followed was a collapse in economic activity and the beginning of the second leg down in the long term secular bear market for stocks.

This was mirrored by the dollar rallying out of the 3 year cycle low. That rally was driven by the severe, but brief, deflationary pressures released as the global economy and then credit markets collapsed.

We will see the same thing happen again. In his attempt to print prosperity and reflate asset prices Ben is going to spike inflation horribly as the dollar collapses down into the three year cycle low next spring. Just like in `08 that will tip the global economy back into recession and another deflationary period as the dollar rallies out of the three year cycle low.

The stock market will begin the trip down into the next leg of the secular bear market that it’s been in since 2000. The global economy will roll over into the next recession. Which I expect to be much worse than the one we just suffered through mainly because it will begin with unemployment already at very high levels.

Contrary to what economists and analyst are telling you, at the dollars three year cycle low next year it will be time to put our bear hats back on, prepare for hard times, and the next leg down in the stock market bear.

I will leave the special Christmas subscription offer, (15 months for the price of 12), up for a few more days. If you want to take advantage of the discounted price click here.

206 thoughts on “THE BEAR WILL RETURN IN 2011

  1. Onlooker

    It is interesting to note that the only one’s who would agree with you here are those who’ve been sure this would come for a year and a half now (or more). Some of them have probably even given up on that outcome.

    If you nail this call, well, I’ll just have to tip my hat to you. I do agree with you though. We’re all going to pay dearly for the foolishness of the past couple of decades (or more); some worse than others.

  2. Gary

    TZ,
    I got an email notification that you posted but it’s not showing up here for some reason.

    FWIW I’m going to call godady on Monday and see how hard it is to automate the subscription, renewal and password process. That would solve some of the clerical headaches.

  3. TZ (7006)

    GoDaddy?

    But your payments are at Paypal on the right.
    GoDaddy handles your domain names (i gather), not the payments. Doublecheck.

    As for the payments in general, YES i notice you have “subscribe” button in addition to “buy”, however (using $200 yearly as example), both simply cause a $200 hit to occur to a person’s credit card. The “subscribe” option simply causes that hit to repeat yearly.

    That is NOT what I was proposing earlier. It’s human psychology (and money management).

    $200/yr is $16.99 a month. Same.
    However humans will generally stay longer and pay more if the $16.99 occurs continuously with no mental ‘SHOCK POINT’.

    $200 once a year causes a mental ‘shock point’ and a re-evaluation “Do I really want to continue this?” “Is it worth $200” (NOTE the process is it worth ->200<-! Even though it could also be equivalent to asking is it worth ->16.99-<)

    The person’s financial continuity is broken by the $200 interjection. Whereas the 16.99 monthly doesn’t cause that break and re-evaluation (with a % cancelling).

    This is why so many companies and programs practically BEG people to get them on smooth monthly billing – cause once it’s there the mental ‘shock’ events are removed and the evaluation is “Is this worth ->16.99-<?” instead of $200.

    It also makes it easier to raise prices. Changing to 19.99 or 21.99 doesn’t seem as large. Whereas bumping that yearly ‘mental shock point’ to $250 or $300 will drop many subscribers.

    I suggest you work on rolling new subs to monthly repeat billing. If you have such a feature, you might want the INITIAL month to be $25 or $30 or something. “First month $30. Each additional month $16.99”. This accomplishes something else which is preventing whipsaw subscriptions with a hurdle price (although you then have to do something special to give people monthly trials perhaps.)

  4. Bede

    TZ,

    I usually subscribe to a service, whether it’s my gym membership or SMT premium, based on price. I will go with whatever is cheaper. Usually, that’s the annual rate. But if the monthly rate was cheaper, I’d go with that. SMT subscribers are at least sharp enough to get that.

    It seems to me that Gary has two different issues. One is paperwork, which ought to have a clerical solution. The other is both more important and more difficult. He wants to get away for longer time periods while maintaining the service and its quality.

    That raises the issue of whether there are persons who could fill in while Gary is gone, and perhaps just as important to his subs continue the service after Gary no longer want to deal with all the hassles.

    I noticed that Tim Knight solicited others to make posts on the Slope. Another blog that I follow from time to time is Blue chip Bulldog. It was begun by “Moo”, but soon evolved into a co-op with a poster named “Brinkley.”

    Perhaps, there are other models that might work better for Gary. I don’t know if any of this appeals to Gary or not, but it doesn’t do any harm to brainstorm the possibilities.

    I just wonder if Gary’s methods and skills are unique to him or whether they’re transferable to others. If they are, how could that happen in a way that benefits everyone involved. At one point TK contemplated starting his own hedgefund. Perhaps, that’s another option to explore.

    My concern in this post is simply to express my appreciation for SMT, and my desire to see Gary and the service I have come to value so highly will continue into the future in a way that benefits Gary and his subs (Well, you know, me.).

    Merry Christmas to all!
    Bede

  5. TommyD

    Gary and Bede,
    My two cents,,,
    What’s the business plan? I get Richard Russell’s stuff, maybe twice a month, from a friend who shares important thoughts. He’s been in business FOREVER and has a great following. I admire what he has achieved. Gray may have the same stuff running through his veins.

    Yes, if long-term thoughts are there, then you will need a staff like — IT person for server – informix or Oracle,, with Cold fusion and other stuff. I am RETIRED and out to pasture but you get the picture. You need clerical and accounting persons too. Grow the business with partnerships but Gary, you must retain TOTAL CONTROL. It’s your baby. as business grows so does the employee base until you reach a curtain comfort level and freeze it with only periodic changes. It’s all doable IMHO, but putting your business plan, no matter how simple, out for your friends and family is a start.
    I personally see a self-educated and genuine person that’s doing phenomenal communications but UNDERSTAND you may be starting to get burned out a bit on all the customers you have attracted.

    Gary, good luck sir and please enjoy the holidays here and reflect on what you originally wanted to accomplish and see where you are in the process..

    God Bless Everyone

  6. TZ (7006)

    BEDE,

    From what I’ve see (and with over 10yrs of my own experience) I think gary’s mentality and approach are pretty unique and aren’t gonna be found in some employee or something.

    I think he just need to spend a few K on some tech to clean up and automate some of the tasks grinding him down.

  7. Prasad

    Thanks for the quick view on USD vs S&P vs OIL relation.

    you are right- The sentiment is at extreme and everyone is bullish. Although many agree we may have a small correction to ~ 1180-1170 area, but are anticipating a test to the OCT 2007 highs on market in the next leg up. Very obvious.

    It would be interesting to watch how this next debt bubble is going to play out… unlike last time lot more people aware of FED action and concerns are all over place and questioning the health of the US markets.

  8. DG

    I was the last post on the previous string and didn’t want this to get lost so I am reprinting my response to your post here:

    Thanks for the detailed answer, Gary. I bet the right person could “interview” you and get what was need rather than you having to dictate a finished newsletter from your head (a lot of people have trouble doing that, by the way.) You need someone who can type and edit…not a rare combination at all. As for the reports, you have a good sense of when you will be needed and when you won’t be (like now we are all just waiting for the decline). Trips could be planned for those times and if something odd happens AND you are without cell access AND don’t feel like making the trek to a reception area, then, in that 3rd order of probability, people will not get exactly timely advice. The goal shouldn’t be perfection but something that works for you. If people are dissatisfied the subscription base under the new plan will drop, and it’ll become obvious. Do what works for you and let the marketplace vote as to whether it has value. By compromising a little on your high standards, you can probably find a quite workable solution if you choose to. It would take some discipline (which you obviously have as an investor and weight lifter), but I bet you’d settle into a routine that you looked forward to without the feeling of being constrained and tied down.
    So,
    A)Let someone else write the letter after interviewing you
    B) Post the letter on an as-needed basis
    C) Hire a techie to deal with payments and stuff

    It seems to me that you’d still make good money with the letter, have fewer headaches, be infinitely freer, and still be helping a large chunk of your 1300 subs.

  9. Gary

    Thanks for all the suggestions everyone. For the most part I don’t mind writing the letter. That’s not my problem at all. Like I said I would do the analysis anyway because I have my own money invested and when I’m at home in Vegas I don’t do anything at night anyway. So I have all the time in the world to get the report out.

    I’m going to look into automating the subscription and renewal process. That would help a lot with the clerical work.

    Most of the problem arises if and when I want to take an extended climbing trip to some remote area. With no internet or cell reception in these areas I don’t see anyway to solve that problem.

    If I’m down in the Canyonlands for three weeks then there just isn’t going to be any way for me to write and publish the newsletter.

    How would you feel if you just subscribed to the SMT and then the author took a three week vacation and quit writing? Betrayed or scammed I suspect.

    I can’t think of anyway around that hurdle so for better or worse I will stick with this at least till the secular gold bull is finished and I will limit climbing trips to a week or less if I’m going to be in an area with no internet access.

  10. Gary

    Hook,
    The dollar should rally during a stock market correction not the Euro.

    The Euro will rally when the dollar collapses down into the three year cycle low next year.

  11. DG

    Not to beat a dead horse here, but YOU don’t need to decide whether people will feel betrayed or scammed; THEY will. Make clear at the beginning exactly what you have stated here: that sometimes you go away. If they don;t want to subscribe under those conditions they won’t. Offer a refund for the first time you go AWOL if you like. I just can’t see how it makes sense to drop the whole letter because some people would feel it wasn’t right for you to take off. Let the subs choose rather than deciding the issue for them without testing it. If it’s it clear up front how can people feel scammed?

  12. Razvan

    You cant have someone else write Gary’s newsletter, it makes no sense. This is the most critial part of the blog and needs to be written entirely by Gary.
    Gary, take a look at these two websites that connects you to freelancing web designers and programers odesk
    freelancer
    I have worked with people from these sites who designed for me websites and custom website scrips. They are mostly from India, are highly skilled, and work for about $10-$15 an hour.

  13. coolkevs

    Thanks Gary for your analysis. I first saw your stuff on Minyanville (Toby) and I’m trying to synthesize your analysis with the other professors there. I like Kevin Depew’s Demark analysis. As I’ve highlighted previously, he sees the dollar moving to 72.5 for a long term buy signal which agrees with your analysis here. On the general stock market, the SPX is emerging from a DeMark weekly sell signal, that really didn’t work this time – from October to December. Unfortunately, I don’t have access to DeMark software, so I can really only report what Depew shows on the Buzz and Banter (you can access it free on TD Ameritrade). But he has been repeatedly bullish on the stock market as he is seeing individual stocks with different patterns rather than the “all one market” meme, publishing articles like “The time for extreme bearishness is over”. Depew especially likes the German Dax market nearer term, and Japanesese stocks in 2011. Bearish on gold, but not silver so much. Now whether the “all one market” returns in 2011 or the dollar rallies on the US economy’s merits, I am not sure. I am getting the same feeling I did in 2008 when gas started going up above $3/gal, though. US was made on cheap gas, and if we don’t have it, we are going to get crushed.
    Other Minyanville analysts, like Smita Sadana, show that this is not like 2007/2008 yet. She saw tons of divergences in the Transports/Dow/etc. back then that currently aren’t there. And Jeff Saut has told Todd Harrison that he believes the economic crisis is over. Todd, on his part, thinks we are in the eye of the hurricane, but he takes things one step at a time. He was bearish for quite some time, but I think he kind-of threw up his hands.
    It’s interesting trying for me to try to synthesize everything together and Gary’s writings are part of my process. I was too bearish when the “short deflationary period” ended, so I am a little gun-shy about putting my bearish hat back on. Maybe it would be best just to sell everything and sit until the bear is over.
    Thanks for your blog!

  14. Gary

    Kev,
    I’ve learned over the years not to question the cycles too much. They can certainly stretch as we’ve seen but these big cycles always play out. Like the four year cycle in the stock market or the 3 year cycle in the dollar.

    Since the last stock cycle stretched incredibly long the odds are very heavily in favor of a short cycle this time. That means we should see the next 4 year cycle low sometime in 2012.

    The thing about human nature is that we simple aren’t equipped to see how a trend can end. We always project the past into the future.

    I think it’s safe to say no one, and I mean no could have visualized the bear market to come in Oct. 07. The market was making new all time highs, the economy was rolling along. The debt crisis was contained in the sub-prime market, etc. etc.

    But now with the benefit of hindsight it’s easy to see that the economy wasn’t really rolling along. It was built on the back of an unsustainable debt and housing bubble. And when that bubble collapsed, like they all do, everything that we believed to be true turned out to be unbelievably false.

    Well the fundamentals now are plain to see for anyone who has the eyes to see past the facade. The current economy is again built on massive government stimulus. No new industry has come online to create the millions and millions of jobs needed for a real and viable economic boom.

    So this is also a false economy just like the last one was and just like the last one this one will also come crashing down when something happens to break the fragile system.

    Since we don’t have a credit bubble to burst again. The shock this time will come from inflation as the Fed’s plan to inflate eventually comes back to bite us in the ass.

    The one thing I’ve always been pretty good at is being able to see how all the pieces fit into the big picture. If you step back and look at the forrest instead of the trees it’s obvious that we are doing the same thing that we did in 02-07 when the government tried to abort the bear market.

    It didn’t work then and it’s not going to work this time either. Only this time the underlying fundamentals are much worse with no chance of igniting another bubble to temporarily fix the jobs market. And this time we already have high unemployment. So this time the sugar high will be much shorter and the crash when it comes much more painful.

  15. Gurvir

    Gary,

    I will contact my friend who built the back-end content management system for my website. He is very reasonable. I paid $800 for him to build my entire site which allows me to place products on site and bill through a merchant/paypal. You need something very simple that just manages your subscribers and allows you to keep track of who has paid and which users should receive a new password every week. It should be a lot cheaper to build a simple app for you to do that.

  16. Bullion Baron

    Gary, curious as to your thoughts on whether this C Wave could infact be the end of the entire Gold bull market and end with a spectacular blow off… We’re at around the 10 year mark for the length of the bull market, Silver has pulled off a 100% run from the lows early this year (and unlike previous spikes in ’04, ’06 & ’08, this run looks set to continue), a few things pointing to us being at the business end of this bull market…

    Are you intending on exiting all positions at the peak of the C Wave or will you hold some core position?

    Cheers

    BB

  17. trond56

    Here is Clive Maund’s last analysis.

    http://www.clivemaund.com/article.php?art_id=68

    As visible on the Gdx and Hui charts, they both display a powerfully bullish falling wedge. The probable steep imminent uptrend will be further fuelled by those who have sold too early and then forced to chase. Too early top callers are important for every bull market in that it continuously replenishes the pool of buyers (consisting of recent sellers).

    Maybe the dream of JP Morgan, the financial terrorist and parasite, for a correction where they can dump their shorts will be upset πŸ™‚

  18. Slumdog

    Gary wrote: “I think it’s safe to say no one, and I mean no could have visualized the bear market to come in Oct. 07. The market was making new all time highs,”

    It’s not so safe to say that.
    At Mish’s blog, I called the top within 3 days after it occurred. And I called the monthly decline well in advance of its occurring, as it was forming. And I called the first drop. I referred to this as the most perfect set up I had ever seen as it had occurred on a monthly basis, so it would be huge. At the time, I even called the drop, a series of stretches that maxed out at about 6000 points down.

    I was without the “continuation” tool, so I could not understand the bounce back and left the first part of the trade flat, again reporting that.

    Then, when the market surged down the second time, again, I confirmed what I knew and stated that the market would fall significantly and that I was shorting it.

    And I called my exits, near the bottom of the decline, at 6000 pts down.

    Those were done in real time, reported regularly as Gaudia Ray at Mish’s blog.

    As an aside, I can’t see any pattern I recognize that I could apply to what’s happening now on a daily or monthly chart pattern. I’ve not looked at the weekly.

    So, your call of the reversal can’t be by me confirmed or opposed as I have no pattern recognition allowing me to see as you do, per your terminology and perception.

    I could only call recently, to myself, on the 1 minute, the oil pop of Wednesday, and prior to that, at Kitco, a couple of the gaps in gold that would fill, and they did in the time frames I posted there prior to their occurrence.

    So, while you didn’t see it, someone out there saw it and posted repeatedly about it. Few at Mish’s trade; so it was sewing golden threads into a garment that nobody there would wear.

    I wish you the best on this short. I can’t see it, save on faith based on your pattern recognition, myself, yet.

    IMO the low angle of ascent in the S&P is looking for collapse as it’s about 1 to 3-4 weeks away from being overextended, and that will break to the downside if the pattern doesn’t create a cup and handle as it attempts to drive higher.

  19. Gary

    Actually I spotted the bear market in Nov. 07 and I caught the bottom on the swing low out of the 666 bottom.

    But I don’t believe anyone in Oct. of 07 predicted the coming crash and second worst bear market in history.

  20. Slumdog

    Never in any monthly pattern prior to 1991 in then available tic data on the S&P did this pattern show up on a monthly basis. It was there on a daily basis but never on a monthly. 2007 was a tsunami. I even went back through the NY Times of 1929 and traced every single candle day and month leading up to the crash, from the July ’29 drop to the October drop, thinking I would find it on a chart. The crash happened differently in Oct ’29.

    My postings at Mish’s blog speak for themselves. It was an amazing once in a lifetime event. So, I entered it short, and posted my calls there. I was intensely scared as nobody else in that blog or at Calculated Risk could see the turn forming and then few, like one or two, saw the crash beging. I asked for dialogue repeatedly. Nobody stepped forward. This blog and your newsletter are the first I’ve ever encountered with what for me portends to be trustworthy

    A surprising group of knowledgeable traders are participating here. This too is a rare event. So, while I watch 5 people’s comments at Kitco’s gold section, I’m here and have ante’d some money as this is for me another amazing event that I’ve bumped into.

    Here, you have some very powerful tools, too, that you generously share.

    Lot’s has happened in my life since ’91, as I’ve written you; I left trading back then as I could not apply what I knew to a drifting, flat market and I was going nuts sitting there all day seeing nothing in the S&P except fake out after fake out (which most certainly will appear again at some point). I left trading back then in 91 and did nothing in trading until the top of the S&P in 2007. I basically want revenge for all the time spent unable to play the game in a trending market; for me, it’s a very long time coming. It’s sort’a crazy to be doing this as it’s tough to better my lifestyle, but I just don’t feel I’m done. Like you want to ride the golden bull, I want to be the guy I wanted to be, able to trade from a laptop at the beach, beeped by a computer when the pattern that I know appears, and then pull the trigger. I will use bollinger bands, MACD and stochastics plus your patterns, and mine.

    What I know and I trust is based on panic and greed when at extremes. That doesn’t happen often.

    Besides market knowledge, your obvious strength is your discipline. For me and I assume for many here, it’s wonderful to be repeatedly instructed to cool one’s jets, to honor your presentations of a known truth and to let the distractions pass by untouched. That is well worth the ticket. Your rock climbing must be very much like the market in terms of strategization required in order not to a bad fall.

    Your terminology is well worth the subscription. In the old days, the early 90’s, $50 to $135 of the older dollars just for a chart book was pretty common. Your subscription price is very attractive.

    I’ll post when I see a pattern I recognize. There’s so much to read as you offer a year of comments, and that’s days of reading and study.

    Thx again for this blog and your newsletter.

  21. Slumdog

    Gary wrote, “But I don’t believe anyone in Oct. of 07 predicted the coming crash and second worst bear market in history.”

    I have no reason whatsoever to BS you. Mish’s blog shows my posting agony as I was alone and pissed that there wasn’t a soul there who knew what you and DG and TZ and MLMT and others here know.

    Daily and weekly, I check the DJIA for any pattern I know. There’s been nothing I could safely trade. When asked at Mish’s what would happen on the S&P bounce, I said I was unsure it was a bounce but after seeing the market, I commented it had a real probability it would be a wide, low convex arc. That was among my last posts at Mish’s. Then I went to Calculated Risk, but they weren’t traders and I was boo’d out of there for discussing market movements.

    I’d like to hang here probably until you quit the game.

  22. Gary

    Bullion,
    Gold is a long long way from the end of the secular bull. It’s not unusual for a secular bull market to gain 2000%. Gold is up a little over 400%

    At secular bull market tops the public will be in a panic buying frenzy. They will believe they have found a no risk way to get rich.

    When we see people standing in line waiting for the local coin dealer to open then we will be close to the top.

    Historically the very long commodity cycle doesn’t top until gold becomes very overvalued and stocks become very undervalued. That historically as meant a Dow:gold ratio at, or close to 1:1. The current ratio is 8:1.

    Trust me when the real bubble phase starts you will know it. When the bull morphs into a bubble you have about 1 to 1 1/2 years before it reaches the end and pops.

  23. thedocument

    Gary, another consideration concerning vacations: I promise annual subscribers 225 posts per year, so vacation time is built into the subscription (although I tend to post while on vacation, anyway). However, for trial Members, who may only get 20 or so letters over the course of the subscription, I add a day to their expiration date for each day the letter is skipped.

    Of course, that’s a lot easier to do with a content management system which assigns each subscriber their own login, but it’s something to consider if you go that route.

  24. Mr.Mom

    Re: Silver bullion,
    I have been looking at buying silver for the long haul, but I am unsure whether to buy minted coins which are going for +$3 over spot or plain bullion which can be had for about a buck over.
    With plain bullion I would most likely have to exchange for paper currency in order to buy anything. Since Silver Eagles are technically only $1 legal tender how would that work for trying to buy a $100 loaf of bread?

  25. Nick

    Gary:

    The spike in oil was the tipping point last time round, which was further exacerbated by the credit crisis.

    Oil is spiking again and may well be the tipping point in late 2011 or 2012. However, what would exacerbate the next decline? Unemployment? Bond Markets? Why would the next recession be a “depression”?

    PS: Glad that you are taking steps to automate the billing / clerical process to take some workload off your shoulders! We need them strong shoulders and mind to guide us through this bull! πŸ™‚

  26. David

    Clive Maund has been wrong at every inflection point that I can remember. He was urging readers to get long in mid-2008 and warning of a crash in summer 2010.

  27. Gary

    Nick,
    I do think oil and probably food inflation will tip us back over into recession again. We just won’t have that big crash like we did in 08 when the credit markets imploded. The next bear should be a long grind down like most bears are.

    But this one will start with unemployment already at 10-15%. You add surging energy and food prices to an already high unemployment environment and a job market that has no ability to stay ahead of inflation (too little demand equals little or no ability to raise wages) and you get the ingredients for the next recession to send unemployment levels above 20%-25%.

    If a quarter of the country is out of work GDP will turn negative. Tax reciepts will fall off a cliff causing the government to print faster and faster to service debt. Which in turn will cause inflation to spike higher and higher.

    We have the potential for a vicious spiral that could lead to a hyperinflationary depression.

  28. Elaine

    Alex,

    Not sure if you are around today, but you asked about the cost of TurboTax. I think the cost to file the schedule C is about $129 plus you have to pay about $49 to file your state taxes. I think the most basic filing without itemizing is $79.

    I believe you can still enroll for free and enter all your information to get your final refund/amount owed. You only pay when you file. This is how I did it the first year that I decided to change from having the CPA do our taxes.

    Elaine

  29. Elaine

    Gary, Doc et. al.

    Thank you so much for sharing your knowledge, research, insight and wisdom.

    Please do take time off and enjoy your hobbies and families so that you still have the energy and enthusiasm to help the rest of the community in the new year.

    Best wishes to all for a safe, healthy and happy 2011.

    Elaine

  30. Gary

    After talking at length with the Godaddy company it’s apparent that the website buider I’m using just isn’t compatible with an automated subscription system.

    In order to convert I would have to start all over from the ground up which would include having to reproduce all those past reports. Needless to say I’m not going to spends thousands of hours re-doing all those charts and reports. So I guess the site will remain as is.

    Maybe when we get into the D-wave decline I will think about hiring someone to build a completely new site and I will just leave the present site up for a while as a free site for anyone who wants to browse the historical reports.

  31. Gary

    Sure if a new industry burst onto the world that drove real productivity or if governments around the world all of a sudden reversed policy and allowed the free market to cleanse the system of excess debt.

    It would of course mean the world would sink into a severe deflationary depression for the next 2-3 years but at least it would be over quick.

    If we were to see those things happen then I would change my mind.

  32. Gary

    It will have no effect. The market already knows China has an inflation problem and that they are going to be taking steps to curb it.

  33. Gary

    Fub,
    I’m not sure it’s so much rose colored glasses as just the inability to see the unintended consequences before they happen.

    At the moment things are much better than they were in March of 09 so the vast majority assume that the Fed fixed the problem.

    It’s not until everything unravels that everyone can see where the cracks in the system were.

  34. fubsy_cooter

    (I deleted this comment from above Gary’s respinse due to typos…have a one year old in my lap :)…

    Succinct. logical. This is sensible cause-effect analysis. What I question is why do we live in a world in which pundits/analysts insist on wearing rose colored glasses? Why is the presented view so lopsided toward recovery? Why do we not hear appropriate levels of fear regarding the unprecedented monetary stimulus that is primarily used to line the pockets of those who deserve it the least…the culprits who sell out our national and global prosperity without controlling for risk?

    Gary’s view of future economic events is in line with what appears obvious to me, that the printing of three trillion dollars will end badly. That a cleanse is inevitable. That paradigm shifts that lead to increases in frugality, and decreases in entitlements are unavoidable. Just as we see the investment world leaning strongly in the bullish camp, the pendulum is preparing to change directions, and unfortunately, the public will likely jump on board just before the markets roll over again.

    As a trader, the set ups are juicy. As an American, the set-ups are frightening.

  35. fubsy_cooter

    Gary,
    I agree that most don’t see the unintended consequences prior to them playing out, but it is amazing to me that the discussion doesn’t explore the possibility of unintended consequences with more fervor.

    It seems that many here are aware of the liklihood that events may not turn out so happy.

  36. Gary

    I dare say the vast majority of politicians don’t care about the unintended consequences. They just want to get re-elected.

    It’s one of the flaws with the democratic system. Basic human nature tends to sabotage an otherwise pretty good system.

  37. Gary

    Since we know that socialism doesn’t work I guess we are just destined to go through a depression about every 80 years because human nature just never changes.

  38. Beanie

    Don’t bet on it — a collapse of the market to new lows.

    Instead, we’re headed to new highs. A sideways market is the worse case scenario that I can see.

    In terms of sentiment, believe it or not, most people are still bearish. All you have to do is go read the comments in just about every popular blog (ie. Businessinsider, yahoo tech, etc). Bulls still get attacked just about every day. Popular bear blogs like Mish and Zerohedge still are very popular. When their popularity gets cut in half or more, then one should begin to worry the top is near. Meanwhile, “buy the dip”.

  39. Gary

    You were saying the same thing in 07. Actually if I remember right you were calling for Dow 36,000.

    Beanie you need to get a subscription to sentimentrader.com so you can monitor real sentiment levels instead of just trying to guess at them by following a couple of bear sites.

    The fact remains that never in history has the stock market entered a secular bull market without a new industry to drive real productivity. It’s just not possible to print our way to prosperity. The real world we live in doesn’t work that way. Magic only works in fairy tales.

    Until we resign ourselves to letting the system cleanse all this excess debt from the world we will just continue on the same rollercoaster ride that we’ve been on since 2000. And in the process we will eventually destroy our currency.

    We went through this in the 70’s until Volker finally had the guts to do what was necessary and we suffered through two severe recessions in a row. In the process the Dow dropped down to a true secular bear market bottom with trailing P/E’s below 10 and dividends above 5%.

    That is the way every secular bear market in history has ended. It will be no different this time either because human nature never changes.

    I told you this in 07 but you didn’t believe me. That was right before we entered the bear market and instead of going to 36000 we went to 6000. Are you really going to ignore me again?

  40. Beanie

    Gary,

    It is true I did not see the great recession coming back in 2007 because I did not see the extend of the mortgage industry fraud that was so widespread. Even Warren Buffett, and many great ivnestors like him, did not see the extent of the fraud. All the time, I had my eye on the prize, which is the coming Dow 36,000 triggered by the green energy revolution, which has already begun. I still see us still in a secular bull market that started in the 1980’s that won’t end until maybe the end of this decade. The 2008-2009 dip was merely a cyclical bear market within the context of the multidecade secular bull market. So that is why I’m still so bullish.

    Of course, you feel, like many bears, that we’re in a secular bear market that started back in 2000, and that 2009-2010 were merely a cyclical bull market and that cycle is about to end and that we continue the secular bear market next year.

    Well, whether I’m right or you’re right will ultimately be settled in the next few years. Of course, when Dow gets to 36,000 (or even just 20,000) it means I was correct all along, and that my bullishness even in 2007 was warranted.

    Eye on the prize (Dow 36,000), or as you would put it, ‘Old Turkey’.

  41. Beanie

    sentimentrader.com would have already gotten most people out of the market way back in 2009. So they’re not that great a judging sentiments especially coming from a near depression period.

  42. Beanie

    I would also add that the smartphone revolution will also help take the market to new highs. That is almost guaranteed, while the green energy revolution may take a little longer because it is so highly political.

  43. Prasad

    @Gary,

    One question on weekend report. While the market shows extreme overbought conditions and anytime correction, the FED has already shown their stregnths(previously) to take the markets further up supressing all technical details and bringing enough liquidity into the markets.

    What chances we may have for further market up from here ? The other magic figure i am hearing is 1313 by JAN end without a significant correction.

  44. Gary

    Anything is possible but if the Fed could really control the market then it wouldn’t have dropped down into the Aug. daily cycle low and we wouldn’t have had the flash crash in May.

  45. Gary

    Actually green energy will be part of the solution that will allow the next secular bull to begin but not the driver of the bull.

    A secular bull market can’t begin in an environment of rising energy costs. Energy is the lifeblood of any economy. Energy has to be in a bear market like it was from 1980 to 2000 for a secular stock bull to thrive.

    We need to solve our energy problems before we can have any hope of the next secular bull. But we also have to cleanse the massive debt problem the world has gotten itself into before we can proceed to the next bull.

    It’s just not possible to begin a secular period of prosperity with the world mired in an escalating debt spiral. That is just as much a poison to the global economy as soaring energy costs.

    History is pretty clear on this. When countries resign themselves to taking the pain then the depression is quick (2-3 years) the system is cleansed and the country can start over from a sound base. Those countries without fail end up being some of the most prosperous economies in history.

    However when a country does the opposite and tries to bailout the system they eventually end up bankrupting the entire country and the period of depression goes on for years and years.

    Japan tried this from 1990 to the present and they have managed to bankrupt what was once a very wealthy country. And it is still mired in an ongoing recession/depression.

    The US tried this approach in the 30’s and the depression lasted from 31 to the end of WWII.

    Now we are doing the same thing and we’ve been stuck in a bear market since 2000. We threw away trillions of dollars, wasted a decade and all to end up with unemployment stuck above 10% (15% is a more realisitic number).

    There really is no magical way to fix this. We need to suffer through the cleansing process. If we do then yes we will be miserable for 2-3 years. But it will only last 2-3 years. If we continue what we’ve been doing for the last 10 years we will continue to get the same result until eventually the US destroys it’s currency or the bond market breaks, or both.

    Eithe way that would be infinitely worse than just allowing the free market to do it’s job and fix the problem.

  46. Steven

    Gary,

    I understand you think we are in the process of the IT, however, do you still think the dollar and the PMs will have an inverse relationship during this time period meaning on days the dollar is up would one assume the PMs would be supported?

    Thanks.

  47. Gary

    As I’ve pointed out many times gold dips down into intermediate cycle lows like clockwork about every 20-25 weeks. I think it will do so again just like it always does no matter what the dollar does.

    This isn’t a fundamental event, this is a profit taking event, and completely separate from fundamentals.

    We saw gold dip down into an intermediate cycle low in July along with a falling dollar.

    As I said what the dollar does will be irrelevant.

  48. Gary

    Phil,
    If you do I’m going to come find you and beat you over the head with a silver bar. How many times are you going to make this mistake?

    If you want to take this trade then you do so by shorting the SPY or QQQQ with no more than 20% of your total portfolio. That way if the bull continues farther than you expect and your emotions kick you out for a loss before the trade goes your way you won’t put a serious dent in your account.

    The big money is going to be made riding the bull. Our only goal is to protect profits so we can invest heavily at intermediate cycle bottoms and at D-wave bottoms. If you concentrate on that then you will be rich in 5-8 years.

    If you continue to go all in trying to catch these meanigless little dips you will continue to be stuck in the mud year after year or worse you will slowely destroy your account.

    It’s time to stop letting emotions make your investment decisions and stay focused on the long term goal so you can actually win at this game.

  49. chrisskoglund

    So Gary, re: your response to Phil, when you say that the money will be made riding the bull, you’re talking about PM’s not the general market then? If you’re calling for the bear to return in 2011 then why wouldn’t money be made on the short side?

  50. DG

    O.K. Gary, I have a crash helmet on to protect myself from being beaten senseless with a silver bar, but I am short about 60% of my portfolio now, and may be 100% by the close Monday. After three small false starts, Thursday’s tape action looked almost perfect and then I posted the imminent sell signal at 3:55 Thursday, so what else could I do?. Hopefully the weak futures opening won’t reverse overnight. I plan to have a nice chunk extra to buy PM’s at the IT bottom. Wish me luck between your blows to my head.

  51. Gary

    Chris,
    For several reasons. To begin with the mathematics of the short side make it impossible to make any significant money without huge leverage and we all know what happens when one gets seduced by leverage (just ask Lehman or Bear Stearns)

    We just had the second worst bear market in history and if you caught the exact top and exact bottom you would have made a measly 60% in a year and a half.

    Another problem is that in bear markets you have these things called bear market rallies that make it very very hard to ride the bear.

    All in all I will sell short and try to make a little money if there isn’t a bull market somewhere and we are in a confirmed bear market, but one is never going to get rich shorting stocks (well at least none of us are. If you have a massive reaserch dept. that can find sick companies to short then maybe you can do OK on the short side. But no one is going to get rich by trying to short stocks using just TA.)

    We do have a secular bull to ride and as long as that remains the case then I’m going to continue to ride the uplegs, protect profits during corrections and when I think the bull is coming to an end I will get off and then start searching for the next secular bull to ride (biotech?)

  52. Gary

    DG,
    Me and Jake have a long history together. Jake has a bad habit of going all in and leveraged when he believes a correction is coming.

    He also has a bad habit of getting kicked out for a loss if the correction desn’t happen when he expects it. Probably because he’s heavily leveraged and the drawdown becomes too painful to bear. He needs to break this destructive habit.

    If he can and he just concentrates on riding the bull then Jake will walk away from this in 6-8 years financially free. But if he keeps making the same mistake over and over he’s going to keep getting the same result.

    It’s time to try something different.

  53. DG

    Ah, sorry Gary. I didn’t realize I was stepping into the middle of a conversation. Jake, if I may… Listen to Gary! You’re gambling for the action. Bad idea. The monumental hotels in Las Vegas have been built on stuff like that. Don;t pay for some other guy’s retirement.

  54. alex

    Gary

    I have a brother-in-law just like your buddy Chris-

    Its in his personality and he cant break free LOL seriously…we talk, discuss trades, discuss learning from what happened last time-etc etc

    He see’s what I see and so on and talks about the next trade quite rationally…BUT..as soon as I speak with conviction or he hears another reliable source with a good track record saying, “This market is going down to___ , by the end of next month..” BAMM!! His blood pressure rises and heart is pounding , and he is ALL IN!!! πŸ™‚

    He s that way playing Poker , etc , and he is a great guy to have around..always makes me laugh , a riot. But when it comes to trading, its like an all or nothing bet.

    Chris, not that I am describing you here, just my Bro who has that no fear / ‘all or nothing’ approach πŸ™‚

  55. alex

    Blizzard here tonight/tomorrow —

    ( 60+ M.P.H. WINDS, HEAVY WET SNOW 16 – 20 INCHES PILING UP ON TREES AND TELEPHONE WIRES) and we will lose power soon…good trading 2morrow guys , I feel I will be M.I.A. πŸ™

    Thanks Gary…

  56. ike

    Beainie you said

    > I would also add that the smartphone revolution will also help take the market to new highs. That is almost guaranteed, while the green energy revolution may take a little longer because it is so highly political.<

    I do see the meteoric rise in the use of smartphones and their apps. I think that Smartphones and their apps have to go beyond increasing productivity and truly transform the way we do business for it to make a significant contribution to the next secular bull market.

  57. pimaCanyon

    Gary,

    If you tell the subs in advance when you’re going to be gone and for how long and make it a policy that you extend everyone’s subs by the amount of time you’re away, I don’t see how the subs could be too upset over that.

    The only problem with that plan would be if you left during an important change in trend in the markets. But even there, if you are expecting that to happen, you could let the subs know what to look for and how to play it if it were to happen while you’re away.

    An alternative way of managing the subscriptions: Instead of having an end date to a subscriber’s subscription, you could count days left. Every time you put out a daily update, you subtract 1 from that number. If you’re gone for 3 weeks, that number doesn’t change, so it would effectively extend everyone’s sub by the length of time you were gone.

    Everyone needs vacations. You should be able to take them.

  58. Gary

    Easy to do in theory but a total nightmare to implenment in real time. Most subscriptions are set up to auto renew with Paypal.

    I would have to go through and cancel probably 800 to 1000 subscriptions and then find all those expirations on my calendar and move them to the new expiration dates.

    Not to mention I’m sure I would make countless mistakes trying to do something like that it would probably take me 50 to 100 hours to do. The thought of that alone would prevent me from ever taking a vacation.

    I have a current subscriber that has contacted me about building a site and incorporating the automated subscription and renewal process.

    It would create a separate username and password for each sub so I could do away with the Sunday emails and manually sending out renewal notices. That will help quite a bit and new subscribers would get login info immediately and not have to wait for me to get home from climbing and such before they receive a response from me.

    It would also be a big improvement if I did happen to be on a climbing trip and not able to get to my computer or laptop for a couple for days. They would still receive the login info.

    The problem of publishing reports is still unsurmountable though if I’m in an area with no internet or cell access. So I will just limit those times to a week or less and let everyone know prior to leaving.

  59. Elaine

    Alex,

    Not sure where you are, but my first year at Purdue we had -60 with wind chill, they closed the school for the first time in close to 100 years. I grew up in Cleveland so I understood winter, but I had never been as cold as when I went to Purdue.

    Elaine

  60. FreeBoundary

    Hi all. Allow me to introduce myself. I have been working as a quant at financial service companies for years and recently started trading PM stocks. I was fortunate to find this site thru ZH and started subscription yesterday. After I read ‘pit bull’ recommended by a member here, and also ‘market wizard’, I fantasized to be next Marty Schwarz or Paul Tudor Jones. Naturally, I became interested in trading futures on gold/silver with at most few hours holding period with tight stop. I thought that by trading futures I only need to worry about short term price movement of gold/silver without worrying about specifics of individual miners or the disparities between ETFs and PMs. I asked Gary about this idea, and he strongly discouraged me from trading futures and trying to time short term price movement with tight stop. Who am I to disagree with expert’s suggestion? So I decided to take more time to learn from Gary before starting futures trading. Meanwhile, it’s funny to see that some of members here have similar ideas as me in terms of timing the short term price movement of PM market. I again feel very fortunately to join this group and look forward to learning from all the experts. Cheers.

  61. alex

    Elaine

    hey , still have power here ( New England) but the storm has 60 m.p.h. gusts -3000+ lost power so far-and the snow is already8″deep and due to continue till 6 p.m. Monday, so I think my work day will be lost to a power outage πŸ™‚ good time to catch up on some reading , cocoa, and wood stove!

    I wanted to say THX, I did read your earlier post on Turbo tax. I looked into it, and you are right-it can be completed for free and you pay when you file. My brokerage offers a discount of 10% too, and it does just load your 1099 directly, so I am going to try it this year. I DO appreciate the feedback..it was a vote of confidence (turbo tax owes you a referral discount, no??

    and cheers to ‘Freeboundary’, welcome to 1 of the friendliest financial blogs I’ve seen

  62. thedocument

    FreeBoundary, I have to disagree with the bit about not trading futures. The advantages to using futures are tremendous, not the least of which is their treatment as 1256 contracts in the tax code. No matter how long you hold a contract (seconds, days, months, years…) you get a 60% LT and 40% ST tax treatment. Since the bulk of my PM trading tends to last about the length of an intermediate cycle (about 5-6 months), getting to claim 60% of my gains as long-term is a huge advantage. What’s more, this tax treatment applies to the short side, as well, so if I short the S&P via futures, 60% of my gain will be long-term! You can’t even get that on the NYSE by holding a short longer than a year.

    Furthermore, futures offer near round-the-clock liquidity, so if I get around to doing my analysis late in the evening and realize a change needs to be made, I don’t have to wait for 9:30 the next morning to make the adjustment.

    The only downside is position sizing. Contracts are standardized and cannot be divided. For example, the silver mini contract is for 1,000 ounces, so you pretty much have to buy silver $30k at a time. Similarly, the S&P mini is 50X the index, or $60k+ per contract. For smaller lots, you’re stuck with the equity markets, but if you’re looking to trade in larger increments, futures trading wins hands down.

  63. FreeBoundary

    Alex,
    thanks for your warm welcoming. Here in NY, I haven’t seen a snow storm like this for years, and am looking forward to a beautiful snow scenery at central park during the day.

    thedocument,
    thanks for the great news on futures. Good to know that tax benefit is still valid as I read that the tax benefit was the main reason why Marty Schwarz at ‘pit bull’ switched to trading S&P futures back in ‘70. I also agree with you that liquidity is one of the advantage of futures. A few mini futures contract is equivalent (risk-wise) to the portfolio of around 15 different PM stocks I used to hold until recently. It would be much easier to make adjustment on the futures than my old heavy portfolio. I guess I’d be better off with starting with mini silver futures. Would you have any recommendation on a reliable broker for futures trading? Much appreciated.

  64. Gary

    Doc,
    FB is novice trader wanting to day trade silver futures with tight stops.

    First off how many novice traders make money day trading in their first 5 or so years? None.

    How many people make money trading PM with tight stops? None.

    I got the impression his account isn’t that large as he’s just starting out so every time he makes a trade he’s going to be heavily positioned if not outright leveraged if he’s trading futures. How often does something like that work for a beginning trader?

    What works for a very seasoned trader with a large portfolio isn’t going to be the right advice for a novice trader with a much smaller account.

    FB,
    I’ll say it again. If you are patient and take what the market gives you you will come away from this bull with a small fortune. If you get seduced by the lure of leverage and short term day trading you will probably throw away the greatest bull market opportunity any of us will ever see in our lifetime.

  65. pimaCanyon

    Gary,

    You’re right about having to change all the subs expiration dates in paypal.

    However, if you decide have someone build a site for you and each sub has their own password, then he could build in a feature like I mentioned. Give each sub a number of days that their sub is to last. Decrement that number every time you publish a report (this would happen on a daily basis unless you’re on vacation). When you are on vacation, that number would just stay the same (that is, not get decremented) because you wouldn’t be publishing.

    When the number goes below some number–say below 10 or below 15–your site would automatically email the sub a renewal notice.

    My point is that if you’re getting someone to set up a site for you, they can pretty much set it up however you want it, so you have an opportunity to build it in a way that will allow you to take extended vacations.

  66. DG

    Gary: There’s been a lot of talk about the dollar caving in and inflation picking up over the next year or so. If the dollar makes a 3 year cycle bottom this coming Spring, does that undermine those possibilities? Might the dollar rally off the 3-year low and then have that low fail? If the bear in stocks returns, that implies a higher dollar as well, I assume, so everything else (oil, gold, etc.) tanks starting in the Spring. How do you see these puzzle pieces fitting together?

  67. Thomas Paine

    Hello,

    I am experimenting with PollDaddy and created a Sentiment Survey. It has 7 different responses. The poll closes on Sunday. My goal is to get at least 200 different voters in the poll.

    http://poll.fm/2k8da

    I am going to post this survey up on other places of the web. Feel free to share it. If I get enough voters then I will keep going doing a weekly sentiment survey.

    Thanks for your participation. If you don’t mind, I will post this up again a few times later in the day and tomorrow so as to get the max number of responses.

  68. Gary

    DG,
    Invariably the move down into the 3 year cycle low is a very scary event. At the bottom everyone expects the dollar to crash and hyperinflation to begin.

    When sentiment reaches those kind of extremes we usually get a rally lasting at least a year. That rally should corespond with the severe deflationary forces unleashed as stocks drop back down into their 4 year cycle low.

    The inflationary process has already begun. Actually it’s been building since Mar. 09. Oil is already flirting with $92.

    Inflation should peak as the dollar collaspes down into the three year cycle low. That surge in inflation will collapse the global economy and initiate the next deflationary period.

  69. DG

    Thanks, Gary, that makes sense. I assume that deflationary period will be marked by massive CB printing around the world, so that’s where it’s not clear to me that the deflation will last long enough to make much difference, though with a collapsed debt bubble, it may. I guess we’ll see. It’s far enough away yet that it’s just academic, I suppose, except to stay liquid to be able to play the massive asset price swings.

  70. Gary

    During the brief deflation I expect oil to get clobbered again because the fundamentals are still impaired in the energy markets. (lowered demand because of high global unemployment) The rest of the commodity complex should also get hammered. Gold will dip down into the D-wave decline Na then entered what will probably be an extended consolidation (A,B and initial C-wave) before rising hard again during the next big C-wave advance maybe in late 2012/early 2013.

  71. Steven

    Apologies to ask this question again but does anyone know the link I can find the open interest for the silver options expiring tomorrow at each strike price? Than you in advance for whoever gives me the link!

  72. Gary

    Well it will be tough for CB’s to print as the deflation gets started because it will be printing that causes the mess in the first place. If the dollar is collapsing the last thing you want to do is throw gas on the fire by printing another trillion dollars.

    Don’t expect the printing to start until we are well into the deflationary period and then it will take a while to turn the tide around. Just like it did in 08/09.

    I picture it like turing the Titanic. Something that big doesn’t turn on a dime.

  73. DG

    Makes, sense…thanks.

    By the way, for those of you who may be interested, both SPY and DBA just showed up on one of my “short now” screen. I added to my shorts, though I have to admit that it is rare to drop this week after a good December and year. In fact, there has only been one decline since 1950 under those conditions (and that was a whopping .1%!). Time for a change! Tight stops on 1/2 my position

  74. DG

    Makes, sense…thanks.

    By the way, for those of you who may be interested, both SPY and DBA just showed up on one of my “short now” screen. I added to my shorts, though I have to admit that it is rare to drop this week after a good December and year. In fact, there has only been one decline since 1950 under those conditions (and that was a whopping .1%!). Time for a change! Tight stops on 1/2 my position, near the 1260 Gary spoke about which I agree should hold.

  75. pvm999

    Gary,

    If stocks are going to work into an intermediate correction that would presuppose other sectors would need to correct as well?

    Would you say that the last bottom of the daily cycle for oil was 11/23? If so that would put oil at day 22 and a little early in the cycle to work down into a correction.

    B.T.W. how long is the intermediate cycle for oil and what week would that place it now?

  76. Gary

    There is no set time for a cycle top. Cycles can top at any time. They can be left or right translated. This is the reason why cycles are worthless for timing tops.

    The oil cycle runs on average 50 to 70 days. I should also point out that sentiment on energy has now reached extreme bullish levels. We could see a left translated cycle begin in the oil market at any time.

  77. Slumdog

    Gary, TZ, DG, question:

    What is the logic of your thinking for reversing a trade?

    I was long crude over the weekend. Last nite, it ran to 91.86. I exited at/near the top of the 60 min Bollinger Band, as I believed the run was over. But what I couldn’t do and wouldn’t do is reverse my long to a short.
    For an hour, I watched the market go back down, and kept trying to find an emotionally satisfying way to reverse direction.

    I argued with myself, and finally quit for the night. Of course, after the fact, the market dropped 100 ticks. And I react by wanting to be feeling the typical, wide range of not nice thoughts.

    Do you have a logic pattern you use to pull the trigger?

  78. Gary

    For myself I don’t get caught up in the need to trade every move in the market.

    In bull markets I trade the long side. When I think a correction is due I exit or trim and then wait for the correction before adding back in. The same goes for bear markets only the inverse.

    Although I will say I often do try to catch counter trend moves with at least a small trade in bear markets simply because the largest rallies occur in bear markets.

    In bull markets though I just leave the short side to someone else. The gains are never very large and the risk of upside surprises are to great.

  79. coolkevs

    From Prof Depew on Minyanville today:
    We are on bar 8 of 9 of a WEEKLY Sell Setup on the Dollar. We need a high above 80.83 this week or next to achieve a perfected setup (full exhaustion). From there, we can expect a 1-4 week reaction carrying us into February – dollar going down, everything else going up! DAILY: we are on bar 12 of 13 of a sell signal. If we record that, then that is a 12-day sell period according to DeMark rules.
    My thoughts: This is contrary to most everything I’m reading, but the WEEKLY dollar buy setup after QE2 was very accurate. SPX WEEKLY recorded a so-called Combo signal, which Depew says indicates an initial market high, but another sequential is coming up (bar 6 of 13) before the recovery high hits. So, don’t get too bearish on the general market yet – that might not hit until February!
    Depew remains bullish on the Japanese Nikkei, with a 1-4 week bearish interlude starting right now. But he sees shallow downside moves as there is an exhaustion target up at 11003.08. I’m looking at EWJ to play this, and if you’re on Ameritrade, buying that security is commission free!
    I know, I know, this is a gold/silver blog πŸ™‚ But, as Gary says, the surprises are to the upside in bull markets, so don’t be too underinvested there either given this news about the dollar!

  80. Gary

    Ahh if only picking tops were easy.

    If the dollar starts down now then it should be the beginning of the drop into the three year cycle low. There wouldn’t be another rally in Feb. to allow the stock market to correct after that.

    Although the stock market could fall along with a falling dollar simply because inflation would be in the process of destroying the ecomomy. We saw this very thing happen in early/mid 08.

  81. Slumdog

    Gary, if it’s of interest to you, would you post an oil chart showing where you think we might be?

    I’m checking the terminology as a sub, as I’m new here, for a clearer picture of the term, “translated”.

  82. Gary

    If I remember right oil is on day 22. Since there is no way to predict when a top should occur it’s usually better to just monitor sentiment. Sentiment for oil has reached bullish extremes.

    Oil should probably turn down along with the stock market.

  83. DG

    Slumdog: Ah, the $64000 question. Trading is asymmetrical. That is, you can choose when and whether to enter a trade, but once you are in you are making a decision every minute as to whether to continue to hold. Scaling out works. That is, if short, cover some every x% down. I usually try to nail the bottom. There might be a reversal, a going dead on light volume phase, a sentiment or oscillator extreme. It varies tremendously as to when to get out. I have to admit that after trading my whole life some is just tape feel.

    Pima, Yeah I noticed the OEXers today, but as you said the volume is very light, and the numbers are not especially lopsided. At .67 it’s noticeable but moderate. Under .5 would catch my attention more, but again with such light volume one guy’s trade can mess up the whole thing, so…?

  84. DG

    Slumdog: Misunderstood you about “reversing a trade.” I only ever place a trade when we get an extreme, so reversing isn’t the point. I buy on an oversold extreme and sell on an overbought one. Oil is now overbought to the extent that I started to place an order to short XLE, and chickened out. I usually wind up selling when we get close to overbought, so rarely reverse the same or next day, but do reverse after a sell if the thing keeps going (since i sold near overbought if it keeps going it becomes a short). Understand that the word” overbought” is thrown around a lot and means a lot of different things. I have developed things that have worked well over the years.

  85. FreeBoundary

    Thanks, Gary, for your endless patience to steer novice trader like me to the right direction. It would be indeed devastating for a beginner trader like me to start with big loss out of greed and throw away great bull opportunity. Lesson learned, and I will try my best to suppress my greed and try to improve my trading skill. I am also very grateful for Doc to take time to give me invaluable advice, which I believe to be very useful when I am ready to trade futures later. I am assured that this site is a true gem with so many experts’ willingness to educate beginners like me. Cheers.

  86. Quality Stocks

    It’s almost impossible to find anyone who is long term bearish on the stock market or economy at this time.

    Gary – They are all over the place you just need to know where to look. I have found an amazing amount of traders who are bearish and calling tops everyday. Then you have continued article on CNBC referring to corrections and overheated bulls etc.

  87. alex

    Power came back on πŸ™‚

    Sold my position of REE

    in @ $9.50 from triangle breakout…out at $11.84

    still holding GMO and ANO and TZA as trades

  88. DG

    Quality: Anecdotal evidence just does not work. Saying “there’s a bunch of articles and commentators” is not very scientific. There are sentiments surveys and other measures that have proven, tested, and quantifiable track records for decades. Why not check those out? Is just winging it better somehow?

  89. Gary

    QS,
    If you visit any bear site then yes you will find someone who is bearish on stocks. But as I pointed out every single analyst in the Barrons poll was long term bullish. Sentiment is at multi-year and in some cases multi-decade highs.

    That is the kind of stuff that bull market tops are made of.

    Not to mention we are going to be moving into the window for the stock market to begin the trip down into the next 4 year cycle low. That should align with the dollar rallying out of the three year cycle low.

    The longer term cycles are now lining up for the next bear market leg to begin at any time.

  90. TZ(5288)

    TZ is back.

    Got flagged as a spam.mer and account locked cause I was posting a link to a site that would have let gary update the tech/billing for his blog. Whatever.

    HINT: never post the same link more than once on here. Even if in two messages. It will lock your account cause they will think the account is compromised and somebody is posting links to drive traffic.

  91. TZ(5288)

    GAUDIA RAY,

    Yes..I remember you from mish where I lurked. I remember reading you plenty of times and thinking “this guy has got some game” (and the right attitude..if a bit rough an tumble.). You and Robert should become fast friends
    πŸ™‚

    As for “reversing trades”, I don’t really do that. I trade long only. It’s math and facts. Shorting is simply a factually more difficult way to make money. I detailed multi-reasons a few weeks back.

  92. TZ(5288)

    GARY,

    I can’t vouch exactly for Slumdog’s calls on the 2008 market crash, but he’s got skills and can hold his own based on his public comments years ago.

    Welcome to the board.

  93. Marc

    This morning my 12 year old daughter asked if she could take her Christmas money and buy gold with it. I haven’t been talking about gold with her or anyone else at home.
    When asked why, she said everyone’s buying gold.

    Isn’t that a sign of a top?

  94. TZ(5288)

    COOLKEVS,

    You keep comments on DEMARK’s system, but my understanding is that it’s technical and explicitly documented. That being the case, can you point to a backtest of the rules to simply show that they work and are profitable. If you can’t then does it have much value?

  95. David Kafrick

    Gary, DG and others who subscribe to sentiment research websites, what is the methodology used by them? Who do they interview?

    Being a contrarian based on sentiment levels is so common knowledge nowadays, that I ask myself why should anyone tell the truth? Why would someone give free information to other traders by expressing his true bias? If these people that are being interviewed know that other traders will react a certain way to these sentiment polls, than how can we be sure that they will not lie about their true bias in order not to be exploited by other traders?

  96. pimaCanyon

    OEX 1.58 call options to every put.

    SPX 2.74 PUT options for each call.

    OEX is usually right, SPX is usually a good contrarian indicator, so it looks like this thing will continue to melt up this week.

  97. TZ(5288)

    Gold and silver are in wedge/congestion patterns. It occurs to me that the less desirable direction to break is UP cause it will leave more bulls behind and surprise people.

    I’m not taking a position, but I’m keeping that scenario in mind so I’m open and ready for it if it happens.

  98. TZ(5288)

    GARY,

    I will compose an example ad you can post to craigslist which will get you the type of person you need.

    Keep talking to that other guy on the board (his software post looked like a pretty good program to manage subscribers), but you should also follow the craigs ad to and at least get a few options to compare.

  99. David Kafrick

    I just posted something 5 minutes ago and it is gone, deleted… that´s weird.

    I´ll just post it again:

    Gary, DG and others who follow websites that do sentiment research, what is their methodology? who do they interview?

    I am asking this because being a contrarian based on these sentiment polls is so common knowledge nowadays, that I don´t know why someone being interviewed would tell the truth about their biases. Why would you give out free information to be exploited by other traders? If you know that other traders will react a certain way to sentiment polls, than if you are being interviewed you have an incentive to not reveal your true bias.

  100. Gary

    David,
    Jason’s site is proprietary if you wanted to know how each indicator is constructed I guess you would have to ask him. Although some like the intermediate score is made up of multiple indicators like:
    Nasdaq/NYSE vol ratio
    stock/bond ratio
    Equity put/call ratio
    up issues ratio
    Up volume ratio
    new high/new low ratio
    cumulative tick
    Rydex ratio
    Investors Intelligence bull ratio
    Etc.

  101. TZ(5288)

    GARY,

    >Most subscriptions are set up to auto renew with Paypal. I would have to go through and cancel probably 800 to 1000 subscriptions and then find all those expirations on my calendar and move them to the new expiration dates.

    Again, you are looking at these things as person with no tech skills and no ability to program or manipulate stuff. It isn’t an insult. I have no rock climbing skills – it’s the same comparison.

    All these things you need are NOT hard and have been done a zillion times before on the net. You need to stop trying to do or understand tech stuff and simply get someone good who you can rely on who does.

    We all have limited skills. For what you can’t or don’t want to do you just fine someone else and pay them. Win/win.

  102. alex

    David

    If you dont mind my added thought here:

    You mentioned ,

    “…I don´t know why someone being interviewed would tell the truth about their biases. “

    Maybe true , but some ‘sentiment’ indicators are based on ‘action’ and not interviews on how they feel.

    Ex: Large Trading action by institutional investors can tell a lot without asking , and usually the little guy trader is doing the opposite πŸ™‚

  103. Gary

    A break below $1361 would confirm a failed daily cycle and continue the pattern of lower lows and lower highs.

    I’m already assuming gold has begun an intermediate degree correction though, so I don’t really need more confirmation.

    At this point we need confirmation that the intermediate trend has NOT reversed for us to do anything different than what we are doing.

  104. Movax

    I’m just practicing some of the things I’ve learned from you, Gary. I just see this as additional evidence that you are likely going to be proven correct despite many (most) gold blogs calling for an end to the correction.

    On the topic of too many subscribers, I think you are going to have an explosion as others tell their friends about your site (and great analysis), so I hope you get the tech angle figured out before it drives you mad.

    That, or let supply and demand come in to play and increase rates to stave of demand. (Kidding, please don’t.)

  105. ES

    Gary,
    You’ve mentioned ‘for the final rally into what should be the top of this gigantic C-wave.’

    Are you saying we are currently in a massive C-wave for PMs and that there are more C-waves to come after this over the next 5-8 yrs. Or are you saying this is the last C-wave for gold in the gold bull?

  106. Ollie

    Hi Gary, just wondering what do you think are going to be the fundamental drivers of turning the gold bull to bear in 5-8 years?

  107. TZ(5288)

    GARY,

    >I’m just waiting for you to tell me how to word the ad because I have no idea what I’m looking for.

    I’m writing it now. Might be day or so though. Monday issues.

  108. TZ(5288)

    GARY,

    The problem with most tech ads is they dont’ present the problem in enough detail. And they don’t narrow the results enough to take any action.

    Most ads just result in a few hundred responses of people saying “i’m good, pick me” with nothing much else to go on.

    The trick is to turn the ad DIRECTLY into a good part of the INTERVIEW/EVALUATION by sufficiently detailing the problem, soliciting a PLAN as a response and requiring more than a template type answer.

    It is also important to require PRICING in a response (but of course you have to give enough leeway and understand that computer help is hard to price.)

    Forcing a pricing response both hourly and with an estimate of a total price (combined with looking at their plan to tackle the problem) allows a strong weed-out before you ever pick up a phone or meet. The description of how they suggest to tackle the problem tells a lot of about where they are coming from mentally and from a competence angle.

    I’ll explain more when I get the ad.

  109. DG

    Pima: The final post close OEX numbers were:
    7764 PUTS and 5063 CALLS. The post close numbers change a lot also be careful to be sure that’s what you are getting. Too, the 5,10,and 21 day averages are also bearish.

  110. Karl

    Gary…
    In the 25 Dec Advisory you state: “… When the dollar collapses this spring it will not only drive the price of gold to a final C-wave top, it will drive virtually all commodity prices through the roof, the most important being energy and to some extent food.
    QUESTION: How do you advise playing these commodities when they are set to rise? That is what symbols for Oil ___? Food___? Other ____?

  111. Gary

    As I’ve said many times in the past I don’t recommend wasting time on energy. That was the leader of the last bull market, it’s not going to lead this one and in fact has been woefully underperforming.

    I would stick with the precious metals sector. They are trading at new all time highs and have been leading this bull since Nov. 08.

  112. GGuy

    AGCP, AIGC.

    to play commodities, quoted on LSE.

    These also:

    JE00B2NFT427
    JE00B2NFTG43
    JE00B2NFTW01

    Dunno why, on LSE these etcs have not so much volumes.

    By the way, the best way to play them is to SHORT the leveraged long etfs (not now, when they will be on top of the C-wave) if your broker allow you. Due to value erosion, it is a 100% win. Just sit and wait.

  113. TZ(5288)

    GARY,

    I’m suggesting an ad and a local person in vegas because I don’t think it would be as useful or suitable for you to do this remotely (or even so far as outsourcing to the other side of the world.)

    Someone you know and can work with who can meet with you, discuss, write on a whiteboard, check out your systems, help with backups, etc… is best for you I think.

    Remote work is better when the person needing the work has also technical skills, writes the specs, has processes to manage remote interactions, etc. That isn’t you, imo.

  114. Carlos

    Gary, you said:

    “A break below $1361 would confirm a failed daily cycle and continue the pattern of lower lows and lower highs.

    I’m already assuming gold has begun an intermediate degree correction though, so I don’t really need more confirmation.

    At this point we need confirmation that the intermediate trend has NOT reversed for us to do anything different than what we are doing.
    What could be the point that could may you think the intermediate trade has reversed ?

    Thks

  115. Gary

    GG,
    Yes I know you can short ETF’s but I don’t think you will be allowed to borrow shares of this one to short.

    The time decay on these things make it a virtually foolproof trade. So consequently you won’t be able to play it. Otherwise everyone would be doing it.

  116. Gary

    If so then our core position will catch the intial move and if it becomes apparent the move is going to continue we will re-enter larger positions.

    I have to say though that I’m not going to be comfortable with a large positon in anything that’s as stretched above the mean as silver. I certainly won’t be leveraging unless we get a true intermediate correction.

  117. TZ(5288)

    We *might* have just had a congestion breakout to the upside on gold and silver this evening.

    If these start subtly working themselves higher we might resume the bull. I would say it’s a scenario that not many people seem to be prepared for at this time.

  118. n1tro

    many people here aren’t prepared for metals and s&p to go up but the rest of the world seems to be. What if the money that was sitting on the sidelines are coming in on these dips and driving the prices/stocks up. Cycles and SOS be damned when you have fed printing and money that has been itching to get back into the market starting to come in. Thoughts?

  119. Gary

    It sounds like the rationalizations that happen at intermediate tops to me.

    But either way we are protected. If gold continues higher our core will catch it and it won’t be long before it becomes obvious and we can add back to our positions.

  120. Marky Marc

    I think your wrong on your short term view, we just had a correction in nov on the major indices, i don’t think this market will top anytime soon until well into Jan, probably mid Jan.

  121. Gary

    Mid Jan is the most likely spot.

    I’m just basing my guess on the current daily cycle running a normal duration.

    In order for the market to make it all the way into mid january we would have to get a second extremely stretched daily cycle in a row. I’m not sure if that’s ever happened before and if it has it’s certainly very rare.

  122. Marky Marc

    this week also tends to be a low vol week, most traders on the desk are on leave here, looking at the order flow and the price action on the market leaders definitely looks like the market wants to squeeze out another few percent before rolling over, also if you look at the price action of copper its a tell tale sign of higher prices to come in teh short term. even if its just marginally higher prices. never say never, daily cycles can stretch longer than most can stay solvent

  123. Slumdog

    Gold’s night session is creating a heckuv an opening NY Pit day over day gap.

    Those gaps don’t stay open, except on such extremely rare occasions that they’re memorable. They fill in 1 to 3 market sessions.

    It’s a very high probability drop back to 1386 range, the high for the day. So, I shorted the first position at 1391.3, and I’m waiting to see.

    The indicators in the 1, 5 and 60 min charts read “we’re all in stress now, across the board I look at.

    At kitco, the major gurus of chart patterns are not trading, last week nor this week.

    Gary doesn’t pick tops. I’m willing to take a somewhat premature risk for a few hundred as a risk.

    My target is 1386.6, about 4.5 bones.

  124. Slumdog

    With the thin volume, the traders are running stops. Price spreads that themselves would be real money if they could get volume behind them, or they think, like on the opening in the markets around the world, the panicked shorts will donate alms to the deeper pockets.

    It’s a great time to be teaching another to trade, which is what I’ve set out to do, one of my assistants. I’ll report back over time if a totally ignorant person can spot the rules being fulfilled by price movement so I don’t have to look. Over the next 30 days, I’ll share what I see happen.

  125. thedocument

    Gary,

    I wasn’t trying to give FB any advice. I was just stating a few facts about futures trading, and I did mention the drawback with regard to position-sizing when it comes to futures.

    FB,

    Marty Schwartz definitely didn’t switch to futures in 1970 for the tax advantage b/c it didn’t exist at that time. As for a broker (called a futures commission merchant in the world of futures), I have used both IB and Lind-Waldock (on their Lind Connect platform) and have been happy with both. I stuck with IB because their TWS platform is considerably more robust.

  126. Slumdog

    Apologies, I won’t post like this again. The risk of this current 60 min bar blowing out the top from where it is now 1392.1 is too high. Exited the gold trade at a small loss.

  127. Gary

    Now you see why I never short a bull market and why I keep some kind of core position πŸ™‚ The surprises come on the upside.

  128. Slumdog

    Last before I hit the hay… GC1G is at 1394.8, with a high at 1395.6 or 8.

    Gold is moving off of Mon morning’s double bottom low, with the extra fuel of the first low, on 12/23, a major reversal. I just noticed it because I’ve been so mesmerized by all these new measuring tools I didn’t “look”. Monday morning’s double low was one of the more powerful setups. The market target will be 3x. 1X at 1390 was reached later on Monday and there was a skirmish, and now the next targets are 1398.5 and 1405-1408. The stretch will be to the prior high, around 1425. That’s a 5x and the max on this run would be 1430-1435.

    I’m entering long at 1394.9 area, with a tight stop. I’ll exit the first position at 1399+ and the rest higher.

  129. Gary

    As someone who has watched the metals for a long time I can say from experience if you use a tight stop on volatile metal positions you are almost guranteeing yourself a loss.

    The metals seem to always wiggle enough to take out tight stops even if you have the direction right.

    Might I suggest you put your stop below $1361 so you don’t needlessly get knocked out of the trade.

  130. David Kafrick

    Gary,

    I have an off-topic question for you:

    How did you learn to mountain climb? I am thinking about giving it a try and would like to know what is the best way to approach it as a begginer. The city I live in (Rio, Brazil) has beautiful mountains, and I think it could be a lot of fun. πŸ™‚

    Any tips would be welcomed.

  131. Slumdog

    Hi, I didn’t hit the hay. I’ve been in gold and now out of some.

    I trade with tight stops because I only discuss trades which to me are very high probability. I have never been able to take loss well. Hence,the shrink every week.

    Even now, my stops are directly below this run, 99.5. If this is taking a break, so am I. I’m trading, not owning. I’m about to be hit.

    It’s ok. I’ll enter again very soon, if I can lose the darned nite of sleep.

    BTW, my mistake in the post above. The 2nd low was on the 26th, or however one reads this chart… technology and math are not my strengths. Pattern recognition is.

  132. Slumdog

    Isn’t it possible we just saw at 1400 an H&S, with this being the right shoulder? The market is sailing down. Every time frame and every measurement has stretches on the price and the tools. RSI was on the 5 min at an impressive tippy top a while ago. If one looks objectively, Bollinger would be pointing furiously at what just happened.

    But, based on what I know, the double bottom just completed a 2X and that’s not as common as a 2.3-3X, so that extra shove up may be coming, and I say “may be”, because the further out on the probability scale, the lower the probability.

  133. Slumdog

    We just witnessed this massive repudiation of the USD. It’s 79.9. Since yesterday afternoon, the RMB jumped dramatically (dramatically for the RMB). American’s sadly will not be experiencing a happy new year. Inflation just announced she will be joining us as our now long term spouse. Sigh. In my own biz, I hate jacking prices just to get what I’m as of 1/1 about to pony up just to get the same goods.

    Not fair. I despise the politicians who allowed the destruction of the integrity of savings.

  134. ike

    What is up with the dollar? It looks like the rug got pulled out from under it last night.

    Looking at the daily chart there was a swing high yesterday and on the weekly chart as well.

    Considering that the last daily cycle for the dollar was stretched, this one could be shorter. What are the chances that this is the start of the trip down into the three year low?

  135. Gary

    David,

    When I was a kid I started climbing some small cliffs by my house without a rope, Amamzingly I survived without breaking a leg or ankle.

    Then I got some books and learned basic safety techniques and somehow survived the learning process.

    Most people nowdays learn at a local rock climbing gym. Much safer!

  136. Slumdog

    Hi, I didn’t hit the hay. I’ve been in gold and now out of some.

    I trade with tight stops because I only discuss trades which to me are very high probability. I have never been able to take loss well. Hence,the shrink every week.

    Even now, my stops are directly below this run, 99.5. If this is taking a break, so am I. I’m trading, not owning. I’m about to be hit.

    It’s ok. I’ll enter again very soon, if I can lose the darned nite of sleep.

  137. Gary

    Ike,
    Anything is possible. It’s the reason we keep a core position.

    If the dollar breaks the prior cycle low then there is a good chance the collapse is on and gold will not correct.

  138. alex

    I know not everyone on here looks at charts with confidence or the same, but as I mentioned Thursday of last week..

    Gold formed a descending wedge pattern as it consolidated through DEC, and it broke above the top downtrend line , and dropped back to retest it. It now USUALLY goes all the way back up to retest the old high, since it wore off all its luster during that consolidation , but now everyone wants to jump back in and not miss this move.(sentiment short term)

    time will tell…still reminds me of 2007-2008 , when gold ran from Aug to March with just a pause at its 50dma (like we just did) and then the dollar went to 3 yrs low also

  139. Steven

    I’m just speculating here but something seems different on this China rate hike than the last one. The one in October saw the dollar rally well over 1% b/c the RMB is pegged to the dollar and that rose and presumably the Chinese (and perhaps others) went into the market and bought dollars. This time the dollar fell!? Perhaps the Chinese are taking a three-pronged approach to their inflation problems.

    First, raise reserve ratio requirements for the banks.

    Second, increase interest rates.

    And perhaps third is to loosen (even a bit) the peg to the dollar otherwise I don’t understand why the dollar would have fallen on their rate hike.

    IF (big IF) this is the case then perhaps this could be the catalyst for the dollar to drop into the 3 year low as China would finally begin exporting their inflation back to us after all these years.

    Thoughts?

  140. Gary

    I’ve got to say these wedge patterns have to be the most abused pattern of them all. It seems like no matter what the chart is someone somewhere can find a way to draw in a wedge.

    That being said things are happening today that shouldn’t be happening if our expectations are correct.

    I will post a morning update within a half hour.

  141. alex

    Yes Gary

    I believe it was DG that said something like …such patterns are self fullfilling ,

    but maybe because people see them and act accordingly. I usually dont act on a pattern unless volume confirms it ( high volume break above trend line, light volume retest ) then I am in and you either get a great ride up WITH volume, or a breakdown and stopped out …RISK MINIMAL.

    meanwhile, Gold and Silver just shot straight up

  142. MLMT

    Look at hourly on USD:

    http://www.finviz.com/futures_charts.ashx?t=DX&p=h1

    This looks like a major IT (intermediate term) top in dollar IMO. The way USD gapped down and never even “started” filling the gap tells me this is a separation gap. Go look at how major IT down moves start in equity indices (see the daily on SPY – you will see that such IT down moves start with what I call a separation gap).

  143. trond56

    The Hui and Gdx have been wedging downward, a falling wedge, very appearant too see. And silver have been converging within a symmetrical triangle. 3 of february is the chinese new year. And it is the year of the metal (or golden) tiger that ends that day. A lucky time for them to buy metal.

    My copper futures position have had a fantastic rise. Now I watch my PM positions grow by all the chasers who will now drive the prices up πŸ™‚ For tax reasons it is advantageous to cover and realize losing shorts in gold and silver before new year, therefore many will buy-stop gold and silver in the coming days (bullish).

  144. Steven

    Options expiration today for metal futures. I would normally think that the options futures people would try and keep the price under $30 and $1400 but there doesn’t seem to be much option activity this month. Then again, many of these people would sell their mothers for $1.

    Here is the current option activity for gold and silver as of yesterday:

    Open Interest — Calls on the Left / Puts on the Right

    SILVER

    308 28000 691
    0 28050 0
    4 28100 0
    0 28150 0
    0 28200 4
    12 28250 38
    0 28300 6
    5 28350 0
    12 28400 5
    8 28450 0
    433 28500 343
    4 28550 0
    5 28600 15
    2 28650 3
    6 28700 60
    23 28750 30
    0 28800 5
    0 28850 28
    0 28900 0
    0 28950 10
    353 29000 384
    3 29050 15
    14 29100 1
    4 29150 0
    0 29200 4
    39 29250 24
    7 29300 26
    4 29350 0
    16 29400 0
    5 29450 0
    409 29500 37
    14 29550 0
    6 29600 0
    6 29650 10
    5 29700 0
    56 29750 15
    4 29800 0
    4 29850 0
    5 29900 0
    0 29950 0
    724 30000 106
    1 30050 0
    0 30100 0
    5 30150 3
    14 30200 0
    29 30250 10
    0 30300 0
    0 30350 0
    0 30400 0
    1 30450 0
    57 30500 15
    0 30550 0
    5 30600 1
    3 30650 0
    9 30700 0
    46 30750 0
    0 30800 0
    476 31000 6

    GOLD

    33 130000 5996
    0 130500 353
    25 131000 1552
    5 131500 261
    33 132000 1622
    871 132500 4694
    43 133000 697
    33 133500 255
    287 134000 853
    244 134500 229
    2555 135000 3340
    1354 135500 861
    1002 136000 919
    522 136500 518
    872 137000 893
    866 137500 647
    1295 138000 803
    935 138500 713
    923 139000 618
    996 139500 808
    1998 140000 1345
    441 140500 461
    457 141000 358
    2215 141500 243
    1312 142000 471
    1515 142500 57
    1395 143000 235
    781 143500 58
    3348 144000 58
    343 144500 3
    2281 145000 22
    239 145500 23
    1511 146000 0
    1066 146500 5
    1308 147000 4
    371 147500 0
    2090 148000 0
    1984 148500 0
    1740 149000 0
    152 149500 0
    2892 150000 15

  145. pimaCanyon

    Gary,

    Wedge could be unfolding on gold. Look at the daily chart. The lows of 11/16 and 12/16 form the TL that is the lower TL of the wedge. The highs of 11/9 and 12/7 form the TL that is the upper TL of the wedge. Those two TL’s converge.

    –IF– this is a “wedge” (EW would call it an Ending Diagonal Triangle), then it should top out around 1450 – 1460, depending on whether the upper TL gets touched once more or twice.

  146. pimaCanyon

    A couple more comments on the possible wedge in gold:

    1) Gary is correct about these patterns being “abused”. It’s too easy to “see” a wedge developing only to have it morph into something else. An Ending Diagonal (wedge in EW lingo) is actually a rare pattern on the daily chart. So caveat trader.

    2) –IF– it does indeed turn out to be a wedge (and we won’t know for at least a few days, possibly a couple weeks or more), then once it completes, gold should move down quickly to at least the beginning point of the wedge which is either 1313 or 1329, depending on how the wedge ends up.

  147. Keys

    Finally something interesting. Gary, great call on the core position hold.

    I still remember the haunting moves of last winter. I am waiting to see how true today is. If I remember correctly, gold had finished its corrective move, and then the stock market decided to fall taking gold for the ride.

    I really do hate gold. πŸ™‚

  148. pimaCanyon

    DX is anyone’s call IMHO.

    I can draw a nice looking uptrending channel using the 11/3 low and today’s low for the lower channel line and the upper channel line touches both the highs of 10/27 and 11/30. I would want to see the dollar break below this lower channel line (at least, better would be a break below the 12/14 low) before I’d give up on the dollar rally.

  149. pimaCanyon

    In looking at the “wedge” on the gold chart, I’m thinking it’s not very likely. The reason is that the upper TL of the wedge is nearly horizontal. The classic Ending Diagonal pattern has the upper TL sloping upward a bit more than that.

  150. Shalom Bernanke

    Everybody back in the pool! πŸ™‚

    All kidding aside, I’m going to play it like Keys and see how today plays out. Still have my core position, so don’t feel any great rush to buy into low volume holiday trade.

  151. contulmmiv

    Gary, I just went through the alert, and I believe you are rushing to conclusions.

    1. Gold is going through the motions of a three legs movements visible on several time frames. This would be the second leg up starting from the low of December 16 and, more relevant, the 3rd leg up after the high reached on December 7. So far, we are bellow the high of the first leg, 1408 on December 14, and there is a good chance things will stay this way, considering the low and decreasing volume.

    2. In ‘cycle speak’, things look similarly; you seem to omit the fact that you correctly reset the previous cycle to end December 16, with the low at 1361. From this pov, we are on day 8 of the current cycle. Gold is making a swing high early in the cycle, therefore the cycle will remain left translated and potentially failed _even if gold takes out 1408 of December 14. That data point is irrelevant: for as long as gold stays bellow the high of the previous cycle, which is 1431, the bearish scenario is still in play.

    3. Mostly important, to me, is what the euro does: no matter whether the dollar declines versus the yen or swiss franc, or whatever, insofar as the euro goes down, the dollar index will raise, because the euro makes up 56% of it. As of now, euro indicates that it exhausted and reversed very quickly the thrust upwards which gold exploited today, drawing a “shooting star” candle at the end of trade in Europe. Gold is on its own!
    You correctly notice in the alert that the market does not believe in a dollar rally, but this has been the case ever since December 1st, when the euro temporarily reversed its decline!. Technically speaking, the euro is itself about to complete a failed cycle, and the high today may have well been the last chance to revert this dynamics. There are also fundamental reasons to believe that the saga of the euro decline is not over. All these combined, mean that the dollar rally _will_ continue to materialize: and _this_ is what truly makes the scenario of a continuation of the gold rally a la 2007-8 improbable. The critical point will be what gold will do when the euro will break the support at 1.29, moving towards 1.25-7: could it hold the 1340 area support, or not.

    You have a fundamental prejudice in favor of the dollar decline which I believe colors your interpretations. That decline will certainly happen, but not before the market finishes to penalize the euro. There still is unfinished business there.

    I would be glad to reading your reaction, especially to the ‘cycle’ interpretation, if you deem it worth your time.

  152. Gary

    I think you misunderstood. I’m not saying that gold has begun the next leg up…yet. I’m saying get back into ones core position if they were foolish enough to sell everything.

    The confirmation will come if the dollar breaks below the prior cycle low. When that happens then it will be time to re-enter full positions whether or not we’ve had an intermediate correction or not.

  153. contulmmiv

    “I’m saying get back into ones core position”

    Well, that’s what I meant by “rushing to conclusions”. Getting back in positions, core or not, at this juncture seems rushed to me, given the considerations I expounded upon…

  154. Gary

    One should have never left their core to begin with. The update was for those who were foolish enough to do so.

    I have maintained a 50% core position all along.

  155. contulmmiv

    I agree with you, namely that having closed core positions was foolish. But re-opening them now, at this price level, does not repair the foolishness: it magnifies it…

  156. Gary

    Unless the C-wave is over there is no way to create a “problem” by repairing one’s core position.

    It is exactly that inability to chase early that keeps people from riding a leg up. Not that we know whether this is the beginning of a leg up but it certainly isn’t the beginning of a D-wave.

  157. contulmmiv

    “It is exactly that inability to chase early “

    The question is “how much early is too early?”. Most people do not take well drawdown, and for some people a significant drawdown can be lethal.

    The maximum drawdown from here is 140$, to the maximum reasonable retracement to 1265.

    But my comment was _not_ a blame game. I have a vested, triple-fold interest in your objectivity: the fact that I chose to learn from you and not from someone else; the fact that I like and value (as a connoisseur) your efforts at what is essentially a philosophical exercise, namely to know yourself and to control your own emotions by the means of reason; and the least important one, the subscription.

    The problem is as follows: today there occurred some event in the dynamics of the gold price. Does this dynamics weaken in any way the long-term, reasoned, analysis, which concludes on an intermediate cycle low with a maximum target 1265?

    I argued that it does not, and I was hoping that you will address my analysis, and not get tangled in oblique considerations. If the movement today does not contradict the long-term, reasoned analysis, why all the excitement?… If it does, now that indeed would help me see what I miss and where I got it wrong. Thanks.

  158. contulmmiv

    “It is exactly that inability to chase early “

    The question is “how much early is too early?”. Most people do not take well drawdown, and for some people a significant drawdown can be lethal.

    The maximum drawdown from here is 140$, to the maximum reasonable retracement to 1265.

    But my comment was _not_ a blame game. I have a vested, triple-fold interest in your objectivity: the fact that I chose to learn from you and not from someone else; the fact that I like and value (as a connoisseur) your efforts at what is essentially a philosophical exercise, namely to know yourself and to control your own emotions by the means of reason; and the least important one, the subscription.

    The problem is as follows: today there occurred some event in the dynamics of the gold price. Does this dynamics weaken in any way the long-term, reasoned, analysis, which concludes on an intermediate cycle low with a maximum target 1265?

    I argued that it does not, and I was hoping that you will address my analysis, and not get tangled in oblique considerations. If the movement today does not contradict the long-term, reasoned analysis, why all the excitement?… If it does, now that indeed would help me see what I miss and where I got it wrong. Thanks.

  159. contulmmiv

    “It is exactly that inability to chase early “

    The question is “how much early is too early?”. Most people do not take well drawdown, and for some people a significant drawdown can be lethal.

    The maximum drawdown from here is 140$, to the maximum reasonable retracement to 1265.

    But my comment was _not_ a blame game. I have a vested, triple-fold interest in your objectivity: the fact that I chose to learn from you and not from someone else; the fact that I like and value (as a connoisseur) your efforts at what is essentially a philosophical exercise, namely to know yourself and to control your own emotions by the means of reason; and the least important one, the subscription.

    The problem is as follows: today there occurred some event in the dynamics of the gold price. Does this dynamics weaken in any way the long-term, reasoned, analysis, which concludes on an intermediate cycle low with a maximum target 1265?

    I argued that it does not, and I was hoping that you will address my analysis, and not get tangled in oblique considerations. If the movement today does not contradict the long-term, reasoned analysis, why all the excitement?… If it does, now that indeed would help me see what I miss and where I got it wrong. Thanks.

  160. Gary

    It’s not that the intermediate cycle low thesis is no longer valid. It’s that it will become irrelevant if the dollar is ready to move down into the three year cycle low.

  161. contulmmiv

    “It’s that it will become irrelevant if the dollar is ready to move down”

    This is true, and it _has been_ true regardless of the wiggle of gold today.

    What I believe that created the commotion was the fact that your very short-term expectation/prediction was too detailed: gold falling off the bearish flag today, etc. Perhaps it is that you did not consider the alternative of yet another swing high, the ‘true” swing high, since the high on December 21 would have made a very left translated daily cycle. Having been contradicted in your very short term prediction weakened the resolve of the calmly reasoned long term analysis. You _anticipated_ the market and this, when it works, is very satisfying indeed.

    Just my two cents, if this helps improving your self-control, I am glad to be able to reciprocate.

  162. Gary

    All that may be true, but the dollar formed a weekly swing high today on the 8th week of the rally. It’s pretty much a given that the intermediate cycle into the three year cycle low is going to be left translated so it will have to top in 10 weeks or less.

    It’s 8 weeks in and we now have a swing. Gold has exploded higher when it should be forming a left translated daily cycle.

    It’s very dangerous at this juncture not to have a core position.

  163. Prasad

    Gary- on your comment about dollar swing high and 8 weeks into the rally and todays price action , what wud it mean to equity markets ? Can we still expect a correction or should expect to see more highs?

  164. Gary

    If the dollar is ready to collapse down into the three year cycle low I wouldn’t look too hard for a major correction in stocks. I would expect them to continue to creep higher.

    The creep will likely be slower and slower as more and more liquidity leaks into the commodity markets. So I doubt the stock market will make any big gains and I expect at some point the creep will exhaust as the market recognizes the damage being done by the inflationary forces unleashed by the Fed. At that point the market should start to roll over into the next leg of the secular bear. That could be a couple months down the road though.

    NEW POST BTW

  165. contulmmiv

    Now this is something we can really work with.

    “Gold has exploded higher when it should be forming a left translated daily cycle”

    Gold is in the 8th day of the daily cycle: with the high today, I believe this is well into the timeband for forming a left translated cycle with additional room to go for at least another week. Don’t you? The same goes for the dollar.

    “the intermediate cycle into the three year cycle low is going to be left translated so it will have to top in 10 weeks or less”

    Agreed to that too. But two weeks is two weeks, and it is the first week of January which will matter, trade wise.

    “the dollar formed a weekly swing high today on the 8th week of the rally”

    For the life of me, I cannot follow you here. The swing high which makes of the current intermediate dollar cycle a candidate for the status of “left translated” occurred during the forth week, November 29-December 6, at 81.44. If it is to be left translated, there you have it already. And there are still 2 weeks left in order to keep the intermediate cycle left translated, while the dollar making _new_ highs. Even if the dollar makes new highs during the coming two weeks, the intermediate cycle will still be left translated. Two weeks will complete the current daily cycle of the dollar.

    So, I just don’t see this “weekly swing high” of “today” which would change the picture. I would be obliged if you could post a chart with some explanations on it. Thanks.

  166. Gary

    I will post the weekly dollar chart in tonights report.

    Gold has two days to top or the current daily cycle becomes right translated. Gold should have broken down from the crawl into an extreme left translated daily cycle if the intermediate correction was starting. It didn’t do it.

    Nothing is acting like it should if an intermediate correction was coming. Actually we had the perfect setup for an intermediate correction as the dollar rallied out of the yearly cycle low, but nothing corrected.

  167. Steven

    Another puzzling aspect is that rates rose today which should have put pressure on PMs (at least in theory). All of the normal correlations are not explaining the moves. None of this makes sense unless it is just the bull either faking us out or ready to roar.

  168. contulmmiv

    “I will post the weekly dollar chart in tonights report.”

    Thanks, looking forward to it.

    “Gold has two days to top or the current daily cycle becomes right translated”

    Are all right translated cycles bullish? I mean, how unlikely is it that after a “normal”, mid-cycle high, or after a right-translated cycle, a low lower than the low of the previous cycle to occur?…

    “Nothing is acting like it should if an intermediate correction was coming”

    Here, I can only defer to your much, much wider experience, which only the time will verify…
    However, I tend to trust the “praxeology” of money flows: profit taking events occur regardless, beating fundamentals, technicals, manipulations, etc I liked to see that you give them due regard. So, what could prevent things happening as they should ? I mean, apart from “money printing”, or something more specific by way of explanation… Thanks.

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