HUGE MISTAKE OR GOLDEN OPPORTUNITY?

Let’s face it almost every trader or investor dreads a draw down. Traders do everything they can to avoid them, even if it means they drastically reduce their ultimate gains.

It looks like the stop at $1361 will be hit and gold will begin the trip down into an intermediate low. I get the feeling that many traders assumed the stop was there only as a token gesture, but really had no chance of getting hit.

I’m also afraid that despite my many many warnings that too many traders took on way to much leverage. They never really planned on gold hitting the stop. When it does they are going to take a much larger loss than they planned on. I suspect they didn’t plan on a loss at all. They planned on huge profits.

If you are one of these people let this be a lesson. Always plan for the worst and hope for the best.

Now is this the end of the world. Was it a huge mistake …or is it a golden opportunity?

Without a doubt it is a golden opportunity! As soon as the stop is hit traders can return to a minimum core position and build up dry powder because there is going to be an amazing opportunity in the not too distant future. An opportunity that has the potential for 100%+ gains this year, just like last.

We’ve yet to see anything that looks like a final C-wave top so I think we will see one final leg up after this intermediate correction has run it’s course. By triggering our stops we now have the opportunity to re-enter at lower prices for a much larger ride up.

Look at the chart below and ask yourself does it really matter if one gets stopped out for a miner (sic) loss if it enables one to re-enter at the cycle bottom and ride a much larger final move higher?

Personally I’ll be ecstatic if I get stopped out of positions. It will virtually guarantee another hugely profitable year this year despite the fact that it may start out a little rough.

503 thoughts on “HUGE MISTAKE OR GOLDEN OPPORTUNITY?

  1. Nick

    Gary:

    Continuing from the previous post: Clearly my education is not complete!! Need to do more work! thanks for the Big Picture post!

  2. Keys

    As mentioned before, I am not selling. 100% invested, above 50% in metal bullion at this point. I will be adding leverage if Gary’s cycle analysis does as it does best and predicts a nice bottom in order to add with. Otherwise, simply riding the bull into the trenches. I feel like I am on a roller coaster at times, I am just going to buckle in and go for the ride.

    From a previous post from DG, bring on the troll meter. We may need some entertainment. lol

  3. DG

    Gary: I notice that you do not adjust your portfolio %ages based on what is being held. That is, long 5% SLV counts as 5%, and long 5% AGQ counts as 5% even though it’s a leveraged fund. Being long 100% AGQ is pretty different from being long 100% GLD. I guess I don’t really have a question just a comment that this approach seems perhaps not best.

    (also I posted a stat from sentimentrader on the previous string that never showed up. Maybe it got spammed?)

  4. Pseudopersona

    Gary, isn’t this basically exactly what you called a month ago, just stretched? A third trip up to test the highs before a drop into the intermediate low? Only difference I see is you had us buy into the bounce instead of sell into it.

  5. Gary

    P,
    Yes gold threw me a curveball with the big rally last Tuesday. It should have broken down from the crawl but instead it launched off the 50 DMA like a rocket. Completely fooled me.

    It looked like the dollar was ready to drop into a final daily cycle low which should have propelled gold to new highs.

    No such luck πŸ™

  6. Onlooker

    Tough call, no doubt. Hard to do this in real time, with accountability. Easier to poach from the sidelines after the fact.

    As for the stock market, I think we may see some more volatility and bucking up and down before it breaks down significantly. That’s generally the play book. As for now though, all news is good!

  7. pimaCanyon

    Gary,

    Seems likely the move down in gold could be the beginning of the move down into the yearly cycle low. This cycle normally runs a little less than one year and the last one was in Feb, 2010, so we’re due for one anytime in the next few weeks, right?

    Would we expect a yearly cycle low to be a deeper correction than an intermediate cycle low?

  8. Fergie

    Thanks for the big picture reminder Gary! I got stopped out at last week’s breakout. Lost the paper profits, but core is still in tact. My vacation home will have to wait a few more months. : )

  9. basil

    Gary,
    the stop hasn’t been hit yet, so why do you talk as if it has? Are you out of your positions yet before hitting that mark?
    Basil

  10. basil

    Gary,
    if this will turn into an intermediate correction, do you still think that the dollar will hit it’s 3-year cycle low this spring?
    Basil

  11. DG

    From sentimentrader.com: when gold drops 2% within 1% of a 52-week high, gold is down the next 1-2 weeks 72% of the time. The 2% drop has happened 25 times since 1975.

  12. Gary

    Basil,
    Still waiting. I have set a trade trigger to activate if GLD tags $132.50.

    The dollar is a tough one to call at this stage. It should bottom in March or April as that would be 3 years. But if it rallies during a stock market correction then it might end up being a long 3 year cycle that stretches into next fall.

    A few three year cycles have run 3 1/2 years. The normal duration is 3 to 3 1/2 years.

  13. Gary

    The market is due for a yearly cycle low soon. The question is whether or not the Fed can continue to keep it levitated despite overwelming sentiment extremes and a cycle low that is due.

  14. Fergie

    Sure! Pick off this next bottom and you’ll have base camp for your next climbing adventure. At this rate of market gaming, you maybe doing ice climbing in the winter though.

  15. pimaCanyon

    Gary,

    What about gold with respect to the yearly low? Is it likely that gold could be moving into its yearly low? If so, will that move down likely be deeper than your average intermediate low?

  16. Gary

    PC,
    Yes this should be a yearly cycle low for gold too. When and if the stock market corrects it will likely add pressure to gold like it did last year.

  17. Bob loves Hawaii

    Hey Gary, assume your stops trigger, and the gold price then reverses, when do you reenter new positions?

    Thanks

    Personally, I am holding through to the D Wave, I am tilted with juniors, gold, silver, and uranium. Big boys with cash will keep those prices higher than a normal correction.

  18. Gary

    Bob,
    That’s the kind of whipsaw I don’t want to consider right now πŸ™‚

    We’ll tackle that one only if it presents…let’s hope it doesn’t.

  19. Carlos

    Gary, since you will change AGQ to SLV, you think $1361 will be broke soon ? Or there is an another explanation to your portfolio change ?
    Thks

  20. Onlooker

    Folks are sure pumping up the premium in PSLV today. It’s up about 3+ percentage pts today to about 15%. Not a day to buy that as it’s been running at about 10% I believe.

    CEF is actually letting out some premium over the last several days. Sits at about 7.7% by my calculations here. Down about 2 percentage pts since Dec 30.

  21. thedocument

    Gary, very nice write-up. I noted much the same in my Member letter yesterday when I wrote that I was never so happy to lose a few grand. There is a lucrative opportunity lying 2-4 weeks in our future.

  22. Gary

    I doubt it will recover and put in the final leg up before going through an intermediate correction. Not after yesterday’s action.

  23. sophia

    thanks for your prompt answer Gary! I feel the same, but with this market, I am starting to lose my senses ( I am getting old as well…faster than you as I don’t rockclimb!! but my girls do!!)

  24. Ben

    I’m debating trimming positions too.

    Or is this yet another head fake?? It’s starting to feel like the opposite end of the dollar action last week which resulted in me raising my stake up from the core.

    Talk about whipsaw action…

  25. Gary

    JC,
    That went out the window when the S&P refused to correct two weeks ago.

    The coil should reverse soon (probably next week) but I’m not confident enough to bet on it.

    Let’s face it the Fed is going to dump billions and billions into the market trying to keep it elevated. Ultimately that will backfire horribly but who knows how long the party will last before it all comes crumbling down.

    Now you see why I don’t short bull markets.

  26. Gary

    It should go lower but I wouldn’t bet on anything when it comes to currencies. Too much Central bank intervention going on.

  27. Jayhawk91

    For now. This gaps downs are killers though. You start to see a chart recover and then slam, down again.

    Mini H&S on gold’s 5 minute chart shows it going back to 1364. /DX flag broke up.

  28. Jayhawk91

    ROD-

    What are you gonna do?

    Seems to be the selling is cooling off, overall market looks strong, 1161 didn’t break, HUI summer trend line still hanging in, key fib levels tagged. I’m thinking a few days of a relief rally and get a better exit.

  29. Jayhawk91

    From another site-

    The top three picks in the GDXJ portfolio of precious metal junior miners are now three silver miners:
    1) Hecla 4.76%
    2) Coeur d’Alene Mines 4.14%
    3) Silver Standard Resources 3.74%

    Those three (mainly) silver miners have been in the GDXJ portfolio since the start, but more shares were purchased over the last quarter and the stellar rise of silver propelled the trio to the top of the list.

  30. sophia

    Hi Gary,

    I need your help as your analysis is pretty good…so far, since Ben pulled the trigger, gold and stocks went up together…now, with the good adp number, gold and stocks are diverging…do you think that we could see the divergence continue and gold take a beating while stocks sky rock?..

  31. contulmmiv

    Gary said… “As an example when gold bounced hard out of the Oct. 08 […] That intermediate cycle had to be re-phased. “

    OK, I analyzed this last example. The first elements of pattern I extract from the situations which you characterize as “re-phasing” and I looked at would the something like this.
    A ‘cycle’ is the expectation of a low in a certain time band. The congruence between candidate lows and the respective time bands represents the ‘phase’ of the cycle. The ‘phase’ thus expresses the approximate constancy of the periods of time, and it is this _idealized_ regularity which allows one to speak of ‘cycles’.
    However, on situation, the cyclical expectation is negated by the subsequent price dynamics. Usually, this happens after well into the next ‘cycle’, when a new lower low is achieved. This shouldn’t happen too late, for in this case, one would just talk about a new cycle. In order to proceed forward with the right count of periods, one is obliged to revise the period (day, week) count _of the current_ cycle, the cycle one is currently in: to ‘re-phase’ it. Thus, the ‘rephasing’ is a ‘resetting of the counter’ of the current cycle. The result of the operation is that the previous cycle will appear stretched or shortened.

    You seem to endorse only the application of the concept (and of the operation) to the current cycle. You do not revise prior cycle counts, in order to obtain a “better fit”. The previous cycle just acts as a sort of buffer, getting longer or shorter, as the operation of ‘rephasing’ leads to. Which makes sense, upon a first inspection. I will have to look to your counts preliminary to the cycle rephasing episodes, but in order to do that, I will have to dig your reports from the epoch. And I never seem to be able to muster enough time for the historical part of my research…

    @ thedocument: I noticed that you are around. Perhaps you will want to help Gary explaining cycle ‘rephasing’? Thanks.

  32. Rod

    Jayhawk91,

    Hope you’re right on PMs moving up here a bit more as I would like to reduce some of my “over-price” PM holdings too. Using tight stops just in case.

  33. William

    Gary/all,

    What does a swing low/bottom look like? i.e. What would it take to make you go long GLD/SLV/GDX?

    Seasonality says gold goes up thru March, and w/Ben still printing, I can’t think of a fundamental reason why gold would go down here/now.

    Right now I see a lot of concern on this blog, that GLD might go down – indeed, gold has made a lower high, but it’s not made a lower low yet. GDX has. But sometimes GLD leads GDX, so GDX’s action to me isn’t a predictor of GLD. GLD has it’s own legs now.

    Today were seeing hollow red’s in GLD/SLV/GDX, and SLV has a hammer to boot. Maybe a bottom?

    I’m just saying that though GLD may go down here, it could also go up.

    If so, what do we look for? What does a swing low bottom look like?

    Thanks much

  34. TZ(5288)

    Rebounds like today often happen the day after gold initially starts sharp moves down. Look back on some charts if you want.

    Frequently the move down resumes strongly by the following day (tomorrow).

    What we are seeing so far is pretty violent emotions and whipsawing in both directions. And we are only in day 3 of the new year.

    This is going to take another few days to stabilize and clearly show direction on this stuff, in my opinion.

    If I had to bet, I’d say the metals are going lower just because of the action yesterday and today (even though today has recovered…like i said…it’s a pretty common pattern when moving to the downside). But I don’t have to bet really, so I’ll sit out with core for now and let things settle.

  35. Redwine

    Hopefully this doesn’t turn into a textbook case of why you should always “stick to the plan” rather than get emotional over a potentially small drawdown to the stop.

  36. DG

    I am virtually 100% cash everywhere. Cut back on my shorts, virtually out of bonds (that was fun the past two years), out of PM’s. Man, the Fed really is making things silly. I have always hated blaming things on “outside forces” but all the markets look goofy to me. The VIX just hit a 39 year low on the 20-day average! Lower than the dot.com bubble after adjusting for the new way they calculate the VIX. I have been buying intermediate bottoms in bears and shorting intermediate term tops in bulls for decades but, man, when we get a trend going these days it just doesn’t end. It’s cash for me…but now I am especially looking forward to the PM bottom!

  37. Gary

    Sophia,
    No the stock market will correct and when it does it will be vicious. The further anything gets stretched the harder it snaps back. The Fed is stretching all the cycles to extremes with it’s foolish monetary policy. It’s why the rally into Apr was so powerful and why the summer correction was so severe.

    The Fed is at it again. This will again lead to an extremely severe correction and maybe even to the start of the next bear market.

  38. Gary

    William,
    The correction in gold has nothing to do with fundamentals or people exiting the so called fear trade. What a load of nonsense that is.

    This will just be a profit taking event the same as lat Feb. and last July.

  39. Wes

    DG,

    Usually when markets are reluctant to move down even though a preponderance of indicators are signaling a correction, I try to concentrate on the dogs that haven’t barked. Usually, when one of those finally capitulates, the correction gets under way.

    Last time it was the Rydex ratio that was late to the party, and when it got high we got the down move, but that’s not the one this time.

    I’ve got my eye on the 15 dma of the OEX, which is getting close to giving a bearish signal.

  40. Wes

    TZ,

    I’m curious about your core position. After all the lectures on how much more advantageous futures are, in what form are you holding core ?

  41. Jayhawk91

    Gary-

    You seem pretty convinced the intermediate is here–why not just go to core now? (Doc pulled the plug instantly yesterday on his newer positions).

  42. David

    Gary,

    If this proves to be the intermediate correction, will we date yesterday, January 3 as the start of the correction, or December 6?

    I ask because these corrections have usually run about two months. If this one started on December 6, we could expect a reversal by early February.

  43. David Kafrick

    There is one thing that´s getting me worried about the future of PM and commodities bull market – The inflation trade is getting really crowded. 2009 and part of 2010 was all about deflation, but right now everyone talks about inflation, and things like “Don´t fight the Fed”. Everyone knows that PMs can only go up on the long term because the Fed is commited to printing money. Right now all of this is very common knowledge, and I really don´t like this.

    When I hear the mantra of not fighting the Fed and central banks, I think of George Soros. In his book The Alchemy of Finance he talks about how the central banks are the worst traders in the world, and that taking the other side of what they are doing is usually an excellent trade. He made a fortune fighting the bank of England.

    Maybe a deep correction in commodities will get people talking about deflation, I hope so. But I am not so sure.

  44. Gary

    David, The correction started on Dec. 7. Early Feb. sounds about right for both gold and stocks.

    Jay,
    I may sell more into tomorrow if we get a further bounce.

  45. Gary

    David,
    The CRB has already passed the half way point in this 3 year cycle. This is already a right translated cycle. That is usually a sign of a bull market.

    When we really need to worry is when people are standing in line outside the local coin dealer to buy gold. Once that starts we have about one year to step on the gas for all she’s worth then it will be over.

  46. DG

    Wes: I can’t believe I won’t be back shorting this thing at some point—-the numbers are too ridiculous—but I’ll probably wait for some price confirmation; break and weak bounce. Post when you take a shot.

    David K: A fair point but it seems to me that a powerful bull like the PM bull will end with tremendous exuberance. No one ever asks me about buying gold. At the SPX top in 2000 everyone was talking about stocks. At the housing top in 2007 everyone was talking about real estate. Both items were on magazine covers. Right now gold is only marginally in people’s awareness. Seems like we have a long way to go. Which of course says nothing about nasty corrections, just that the party ain’t over.

  47. Jayhawk91

    Thanks Gary…I was hoping to unload in the AM on some short term strength. Gonna have my finger in the trigger as this could be a quick gap up & roll over deal.

  48. Poly

    Gary,

    I know it sounds like more “work”, but it would serve your service well to have a dashboard of sorts on your secure website that listed the current cycle dates and day counts, your current portfolio in actual holdings (this could be a ratio if you need to mask actual holdings) and pending trade triggers. It wouldn’t take much at all to maintain, just an idea.

  49. Slumdog

    TZ:”If I had to bet, I’d say the metals are going lower just because of the action yesterday and today (even though today has recovered…like i said…it’s a pretty common pattern when moving to the downside).”

    IMO, we still haven’t reached $100 down from the high. There are still newbies and weak hands holding on.

    Sinclair’s site has gone dead silent on hyping gold for the past 2 days. Interesting.

    The price move today was around 15 points down, which is a medium sized day relative to yesterday.
    This creates massive indecision.

    The norm as you say is 3, and I’ll say 3 to 4 days of down direction, with the possibility that tomorrow will be slightly up and then a major and final break “down”, or just a clean out capitulation.

    Without seeing 1325, IMO, there is still “hope”. If we don’t see it soon, the canker of weak hands will still be present.

    The retracement of 650-1425, a move of 775-800 pts, at a fib number in the low 40’s would be 320 points off the high, and high 30’s would be 280-300 pts off the high. That brings us to MLMT’s number of 1150.

    I’m looking for a shorting position as the market inches its way back up, bringing in many new gamblers who hope for the halcyon days. It’s 1378+ and I’m waiting. The pain is real and the paint is drying.

    It would be easy to scare the weak hands to unload their positions here and into weakness.

    Today’s long move, instead of compression, let some steam off; so the move down won’t imo be spectacular but would clean house.

  50. Ben

    Poly, I like that idea. I lose track of some things that are important in the big picture — how far we are in the daily, intermediate, yearly, 3 yr cycle and so forth. I know they are subject to revision (the short term ones anyway), but it’s good to get a context for what to do when the market gyrates as it has of late.

  51. aaronpalang

    Just an FYI, for those of you speaking of weak hands, a 30 dollar drop usually results in margin calls. If a move like yesterday (8th biggest one day drop since 1975) didnt result in a major break the following day, it simply means most of the positions are held by stronger hands which arent as easy to push around.
    With silver having higher margin requirements installed recently, its almost impossible for the little guys to get in (thank god) and thus some of the volatility has been withdrawn.

  52. William

    I’m not an EW’er, but … the daily $USD move from June to Nov shows 5 waves down – could be a major wave 1 down. Then, from Nov to now looks like it could be an ABC correction, w/Nov to Dec as A up, and now we’re in B flagging down, w/C up – the length of wave A is 1 month, so that could mean C is also 1 month, leaving us w/the $USD topping in the major wave 2 up in Jan end or early Feb. This matches the timing you’re thinking of Gary.

  53. WalterW

    Gary (and Doc)

    Just a reminder of a member comment in thedocument.com some weeks ago (sorry, forgot his name, I’m paraphrasing here): if an intermediate low for gold is indeed ahead, is seems unlikely it would find it’s lowest point at the 200 DMA, currently at about $1260. Instead, check out the 150 DMA, currently at about $1300: all deeper corrections since July 2009 have bounced off that 150 DMA level, none has ever made it to the 200 DMA. (In the earlier April 2009 correction the 150 and 200 were crossing, i.e. at roughly equal levels.)

    So better keep an eye on that 150 DMA.

  54. WalterW

    Couldn’t stand my half empty memory, so I went searching and found him: credits to Signals for spotting the 150 DMA, on December 7 in thedocument.com.

    (Guess you’re the same guy here at SMT, Signals?)

  55. Poly

    Jobs Friday this week, one of, if not the biggest market mover and sentiment changer on the calendar.
    Could the massive ADP number and 10yr high sentiments be setting us up for a Friday intermediate top?

  56. Ben

    Gold miners bullish sentiment down to 73%. It’s only been lower just a day or two since September 14th. It’s still a bit high, but down significantly from the 93.3 reading in mid November.

    Also, I recall that on the flash crash day last May, PM stocks had a ferocious rally. However, they got hit I think the very next day.

  57. jc

    Anyone have an idea where silver will fall to? On the(3yr) chart there is 3 support points at @ $19.50 level. Or do you think the 200 mda will hold?

  58. Gary

    What difference does it make? one doesn’t pick bottoms by targeting a level. They pick them by looking for a swing low in the cycle timing band for a bottom.

    In the precious metals market gold is the driver. So whenever gold finds a bottom so will silver.

  59. GGuy

    Gary:

    about your last post, i think i know what’s “wrong” whith the cycle counting in dollar. I would like to discuss it with you if yu like. Sorry for my bad english:

    Dollar index is not a market in the pure sense of the word. It is a basket of markets.

    Now, imagine you have a room full of people who are talking each other in pair.

    You are at the entrance and pretend to listen and understand what everybody is saying. You cannot do that in detail.
    Of course, you can listen at the 2-3 nearest pairs, or the 2-3 who talk louder.
    Sometimes a new guest enter the room and they all stop talking. This is the moment when you can say CERTAINLY “everybody is NOT talking”.

    In my opinion, in usdindex you can grab the BIG cycles, because they force the pairs to syncronize, but smaller cycles, even daily ones, are “noised” by the behavior of the different pairs composing the index.

    If you look separately at EUR/USD, or USD/JPY (these 2 are enough couse they are the heavier in the basket), there are no strange patterns.

    Euro has done a half daily low 26th december , and now is finishing the second half, so it lacks about 6-9 days (about thirty “5 hours” candles) to close a daily cycle. And it is still where it has begun, although making higher lows.

    http://www.forexpros.com/charts/real-time-forex-charts

    There’s a clear trendline between the lows. THIS is the trendline to watch for breakout. If it go lower, we will have a failed intermediate on EUR/USD. That can drive the “true blood” intermediate corrections on stocks and preciouses.

    If Euro can manage to close the daily cycle mantaining a pattern of higher lows, the next one will shot it up to 1.40 at least.

    It’s 50/50 now. But there will be plenty of time to full leverage on long or short side. And move accordingly to the related market.

    Me, i give 51% to the short bet, because it fits better whith gold and stock cycles, with heavy decline starting in few days.

  60. David

    The Republicans will make a show of refusing to raise the debt ceiling for the benefit of the rubes in the Tea Party.

    This could certainly spark a brief panic in the bond market, tanking stocks before the whole charade is abandoned and the debt ceiling is raised again.

  61. contulmmiv

    @ LowTax: I appreciated your discussion of yesterday. The prognostic results can indeed be improved, without asking for a “full proof” method. Here are some thoughts, in case you are inclined to pursue your inquiry independently:
    1. “Europe” is not an external factor as the North Korean bombardments, etc. The euro _is_ the DXY, more than half of it, and it is the DXY that one uses when pondering about the fate of gold, not “the dollar”. I argued previously, in real time, that the DXY cannot move in the way expected here, because the euro was not supporting such a scenario. I would not repeat what I already wrote, but add some corroborating factors which one may want to keep under observation in the future. While the DXY was here expected to plunge, the euro made only a marginal move against the dollar (as seen on the chart of the forex pair, EURUSD), while _loosing ground_ to other major currencies such as the AUD and CHF. This indicated significant overall weakness in the euro, to be reflected in its attempted move against the dollar. At the same time that the DXY made the marginally lower low of December 31 at 78.77 (versus 78.81 on December 14), the ProShares UltraShort Euro (EUO) did not (20.12 versus 20.11). EUO may be useful to keep an eye on, apart from the EURUSD, as an independent benchmark for the market sentiment towards the currency.
    Therefore, no euro rally, no drop of the DXY, no plausible continuation of the gold rally.
    2. The determinant factor of the flow of _investment funds_ money into gold is the interest rates. Since Gary has an idiosyncrasy for this relation (“Rising interest rates have nothing at all to do with gold. Gold is simply moving down into a daily cycle low. It’s nothing more mysterious than that”, November 15, 2010, goldscents.blogspot.com/2010/11/im-not-buying-it.html), there isn’t much discussion about it here. Since Nov 04, the trend for bonds has reversed. The first peak of the current triple top of gold has been reached on November 9. Since then, yields go up, and gold goes sideways, and now down. As P. Hussman said, the gold bull community seems to not have realized that the rug has been pulled from underneath it… But, even without deferring to his authority, one could simply go at EquityClock.com and pull out the seasonal charts for gold futures and the CBOE 10-year T-Note (or take a look at my work on it http://www2.picfront.org/picture/sAqu8XdOjK/js/TheRefundingCycle.Goldvs.TreasuriesSeasonality.png NB it is not the seasonal factor which matters at present, but the character of the relationship).
    It is true, interest rates dynamics cannot be used for short term trading purposes: but when one has a nearly three months long drop in bond prices, one should be very skeptical about any furthering of the gold rally
    3. Interesting observation you made re. money out of stocks supporting the dollar: we are used to consider here that the causal relation is dollar up-stocks down, but the reciprocal is also true (the fact that at any time all the shares are owned by someone is irrelevant: they are owned at lower prices, therefore the price differential is in cash – while, of course, the said cash having changed pockets meanwhile…).
    4. David Kafrick raised today the additional concern about the inflation trade in commodities and its potential impact on gold. I also happen to ponder upon the issue, especially that the commodities trade is pure speculation, as it is reflected by the juxtaposition with real economic activity, for example, measured by the Baltic Dry Index, which today dropped bellow the July 2010 low (at the peak of the recessionary angst, just before the talk about QE2 started): http://stockcharts.com/h-sc/ui?s=$BDI&p=D&st=2009-07-06&en=%28today%29&id=p50171409340 Look at that overhang, and then say that it doesn’t matter…

  62. contulmmiv

    Gary, I do not think it’s the length. The other message, two days ago, was actually very short. I believe Blogger flags as spam comments which contain multiple links, which is primitive indeed, since this is the only reference method on the web.

  63. Gary

    You might try creating a link instead of pasting those long URL’s. I doubt anyone even bothers to click on them.

    And your posts would be much more readable if you would shorten them and use paragraphs.

    And split different ideas into another comment would help to shorten each post.

  64. Wes

    C,

    The stocks were purchased and sold for exactly the same amount of money. Please explain “the price differential in cash”.

  65. Gary

    Interest rates are completely meaningless to gold. What is the rate on the 10 year? 3.5%? The rate of return on gold every year since the bull began has crushed those meager returns.

    No one in their right mind would quit buying gold to invest in a bond that returns less than the rate of inflation.

  66. Elaine

    Gary,

    Thank you for the cycle count charts on the premium site. It really helps visualize what’s going on.

    I started with your service on September 9 and immediately made investments based on your advice. I got out of most of it on December 6.

    Looking at that on a chart is remarkable.

    Thank you for your excellent work.

  67. Shalom Bernanke

    David says “The Republicans will make a show of refusing to raise the debt ceiling for the benefit of the rubes in the Tea Party. “

    LOL! as opposed to the rubes that voted for Obama’s change. LMAO!

  68. contulmmiv

    @ GGuy: I agree with your reading, although I believe that if the trendline you mention gets broken through, that would be more meaningful. The first target area would be 1.25-27, but I believe the range of the movement could be to 1.22-23.
    @Wes: both stocks and banknotes are goods. When people sell stocks, they implicitly signify that they prefer to hold banknotes. That’s what the price drop ultimately means. At that particular moment, they value more the banknotes, the demand for which increases, thus pushing their value up.

  69. Bede

    Re: “Rubes”

    From Karl Denninger:
    Told ‘Ya So: Tea Party = DOUCHE NOZZLES

    It took less than six hours for me to be able to wave the “told ‘ya so” flag:

    An early push by New Jersey Republican Rep. Scott Garrett to add some “teeth” to the GOP’s new Constitution rule requiring every bill cite its specific constitutional authority failed in a Republican conference meeting Tuesday.

    What was the rule? That you couldn’t claim “general welfare” or “necessary and proper” as justification – you had to point to an actual enumerated power.

    The very so-called “Tea Party” and “Conservative” members of Congress could not even agree to cite a specific clause in The Constitution that enabled legislation to be brought to the floor.

    Oh, it gets better. Read the rest here:
    http://market-ticker.org/akcs-www?singlepost=2342711

  70. Robert

    Gary,

    Was the trough to trough for the SPY from late August to mid-November right around 58 days? So that one exceeded the average daily cycle time for stocks by 45%?

    What is the longest and shortest daily cycle in stocks you have recorded?

    Curious do you have a 10-year journal tracking cycles (I thought I remember you saying you got really involved in the markets right around 2000)? I’d buy a copy for $500 if so. πŸ˜‰ (would save me a lot of time)

  71. Bede

    Natanarchist,

    Supporting or opposing raising the debt ceiling is beside the point.

    The the point is that Republican opposition to raising the debt ceiling is just a pose. They will put it to a vote, but they’ll be happy to LOSE that vote, because they have no serious plans to reign in the debt. Their only interest is in retaining the tea party support.

  72. MLMT

    IMO GLD makes a trip back to 136.2 soon – but this may likely happen after 1361 is taken out on gold futures. Once GLD makes this trip, I expect it to close around 136 or so and have a massive gap down the next day.

    No matter what the underlying you are dealing with, in intermediate downturn, the price patterns are *similar*.

  73. Robert

    Also, if you don’t mind, what are the ranges, longest and shortest daily cycles for gold and the USD? That would give me a better picture of possible possibilities.

  74. Natanarchist

    got it bebe..I’m for starving Leviathan anyway. I have zero faith this will ever happen. we’ll just collapse first and start over. Human nature and all.

  75. David

    Nat,

    If we don’t raise the debt ceiling, the US defaults on its debt. Global economic Armageddon ensues. The Tea Party types — many of whom are dependent on unemployment, social security, and Medicare themselves –don’t understand the implications of this.

    I don’t like the idea of raising the debt ceiling any more than anyone else. What would be preferable is actually doing something about the growth of the debt itself. But this will happen only as a result of making difficult, politically unpopular choices, which is why it’s unlikely to happen.

  76. David

    (continued)

    In the absence of any real effort to get our debt under control, you will see more and more phony symbolism of the type the GOP is peddling.

    This allows them to run up debt and campaign as anti-spending at the same time. The Tea Party buys it, because it allows them to feel outraged while still suckling at the government tit. Symbolism substitutes for action, because no one even knows the difference anymore.

  77. Leilani

    Gary,

    In tonight’s update, you had stated ” I will go ahead and reduce the rest of my positions tomorrow, especially if gold is up.” So are you going back to a 50% core position? Thanks

  78. trond56

    The surge in the days just before new years eve was covering and taking accumulated short losses in the commodities for tax reasons. Similarly taking profits just after 1/1 because of the same tax reasons.
    Due to the large gains in commodities in 2010. When this dip starts the day after new year, some bells should start ringing. Also when the surge up happened just days before new year.

    Then this PM selloff is natural and not the start of a decline. I would have been more worried if the decline started around 15th of january (like last year), but when it starts the day after 1/1 it can’t be a coinidence. Not knowing about this tax phenomens before and after new year some have gotten whipsawed back and forth lately.

  79. Dan

    Bebe,David;
    You should reconsider who’s position is a “pose” and who is playing politics. In 2006, the last time we had a stand alone vote on debt limits here is what Obama said.“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”
    Obama voted AGAINST raising the limit then.
    What has changed?

  80. Shalom Bernanke

    Raising the debt ceiling is just another type of default. It’s just an attempt to delay taking responsibility long enough to get far from the problem before it blows sky high.

  81. DG

    It’s cute how people try to make sense of what politicians say and look for and find self-contradictions. They will say whatever needs to be said in order to get re-elected. If they have any interest in the welfare of the country it is lost into thinking that if they get back into power they can help things get better. Many probably don’t even get that far. If they really wanted to solve our problems they could, but then they’d get voted out by the public who selfishly also wants stuff just for themselves (ever see a union say, “You’re right. Times are tough. Let’s cut our wages along with everyone else.’) So it’s kick the can down the road and let the other guy make the tough decisions and get booted out. Makes no difference whether it’s a Dem or Rep, they just pander to different groups to get reelected. Very sad, but until people actually care more about the country than about their own pockets, we get this (don’t hold your breath). Unfortunately the politicians who actually do care don’t get very far because you need to pander to move up, so the ones who wind up with real power are complete prostitutes.

  82. Redwine

    I agree with trond56. The main reason gold and the dollar were not doing “what they were supposed to do” was massive tax related money movements.

    Just another example of how government interference plagues us and our markets. We are not free and neither are our economies. Far from it in fact.

  83. Redwine

    It seems to me that “sticking to the plan” makes more sense at this point than shooting from the hip.

    When I see 1361 is when the trigger gets pulled. I should have waited until we had a clear indication of an uptrend (higher high) before bagging AGQ @ $156.

    I think trading on emotions rather than rules is a big mistake.

  84. Gary

    Redwine,
    Waiting for “confirmation” just means one takes a bigger loss.

    Gold could have made a higher high and still rolled over into a left translated cycle. If you waited to buy when the trend was confirmed you would just have a much larger loss.

    The reality is that every once in a while everyone is going to get caught. No matter how good you are the market is always going to sneak a curve past you from time to time.

    I learned a long time ago not to second guess myself. I make my decisions as best as I can in real time and if they turn out to be wrong I recognize it as quickly as possible, correct it, and then get back to work making money.

    That’s the best anyone can do.

  85. Redwine

    Gary

    If historic chart data indicate the odds of continuing uptrends/downtrends based on certain criteria, higher highs and higher lows for example, it seems the odds only apply if those criteria are met. Anything else is pure gambling based on “do I feel lucky”.

    Am I wrong on this point? How do you keep the odds in your favor if not by trading based on rules?

  86. Poly

    The action (3 tops) the past 4-6 weeks is very similar to the action we witnessed the last time we starting into an intermediate decline in gold.

    Take a $gold chart from Mid May to mid Aug 2010, what do you think? The big $40 plunge on July 1st confirmed it all, similar to the Jan 2nd drop this week.

  87. Gary

    Red,
    Gold was making higher highs. That was the basis of my purchase.

    Now The HUI is already making lower lows. That’s the basis for selling. In hindsight I should have just done so the minute the HUI made a lower low instead of waiting.

    It’s not that big of a deal as it’s only a few percentage points that will be easily recovered during the next run. But I made the mistake of waiting for gold when I should have switched the trigger from GLD to GDX.

    The stupid thing was that I posted exactly that on the website and then didn’t act on what I had already recognized.

    Just goes to show you even old pros can do something stupid from time to time…and I doubt it will be the last dumb mistake I make in this business.

  88. Jesse

    The problem I have with a stop at 1361 is the possibility of just a whipsaw. Gary has commented he didn’t think the $HUI would ever go below 500 again for the rest of the bull market (about 55 on GDX). I happen to agree with that statement and GDX is approaching 57 now as we near the 1361 stop. So there isn’t much value in trying to game those 2 points on GDX and it does seem reasonable to have a pullback to that level to test that breakout. FWIW, gold looks like it is in a sideways consolidation to me and just working on throwing people off the bull. I sold a little but am mostly old turkey here, mt biggest fear is missing the move up, just a typical gold bug.

  89. Redwine

    Gary

    I was thinking of the 12/6 – 12/7 high of gold (which you called perfectly by the way) not being broken as a confirmation. I know the dollar broke down but it seems like a confirmation was in order before such a huge trade. Especially during tax adjustment period.

    I’m not blaming you by the way. You gave fair warning. My fear told me to wait but greed got the better of me.

  90. Gary

    Red,
    And if the trade had gone the other way like it was clearly set up to do, you would be patting yourself on the back knowing that you spotted the warning signs that were telling you to get back on the bull quick.

    Shoulda, woulda, coulda.

    I trust that given what I have to work with in real time I will always make the right choice.

    Sometimes the market won’t agree with me, and since the market is bigger than me I defer to his judgement but I never question a real time decision.

  91. Avann

    Lost 5% … no big deal compared to what I made last year.

    Time to focus on the next move.

    And, BTW, for those who hope/wish that Gary could be perfect … when that begins to happen it will be time to find another way to invest.

    Thanks for last year Gary and let’s hope for another one even remotely close.

  92. greg

    Gary’s 1361 stop still hasn’t been hit. Seems like a low risk entry to me for gold futures (stop at 1360) .I am addig mining shares here.

  93. Gary

    If this was day 20 in the gold daily cycle I would probably agree with you but it’s day 14. That’s probably a very low probability trade.

  94. Gary

    If the HUI closes the day here it will trigger a Bollinger band crash trade. I expect it would only result in a temporary bounce though and not the final bottom.

  95. DG

    I knew I couldn’t stand being almost out of shorts. Bought some FXP (China shorts) at the close yesterday, but not much. I hope to get some sort of a tape clue because this thing is going to break bad once it gets going. I agree with gary that these levitating markets that go way longer than they should end in min-crashes (like last May). When I am losing I just trade smaller and smaller with each successive trade and look to add to positions once I’m in the black. This thing ain’t gonna drop 800 points without me getting a good chunk of it!

  96. Gary

    Todd,
    The goal is to get out of the way of an intermediate decline, not time the perfect exit point. The sector should be much lower in the weeks to come. Does it really matter that you didn’t guess the exact intraday top on Jan. 6?

  97. greg

    By the way Gary, I will be re-subscribing in the next couple weeks. I think I was one of your earliest subscribers back in Dec. of 08. While I don’t trade like anyone else in the world I find your perspective a very valuable tool. Keep up the great work.

  98. Todd

    Thanks Gary. I just wish I would have sold yesterday with you. I am trying to follow your lead on everything. I tried selling in after hours and had an opportunity of selling at 144 on AGQ and then thought would if Gary is wrong. Didn’t stick to my plan.

  99. Shalom Bernanke

    I’m not convinced the 50 MA’s on SLW or SIL will provide too much support, as the $HUI index blew right through it’s 50 MA.

    We could be getting close to a temporary bounce, but I’m not trading that from the long side as it might only last a couple days. I’ll just remain patient for now.

  100. Gary

    Just back to a minimum core position, which is a little smaller this time because I’m more confident an intermediate correction has begun.

  101. Robert

    dxy hit 80.82, just barely, it touched 80.83. Swing high, baby. What’s better than a PM correction? Anything, really? X-Mas all over again. C’mon 1361.

  102. coolkevs

    Dollar has just perfected a Demark Weekly Sell Setup. This means there will be a 1-4 week bar reaction to the downside in the dollar, starting next week Now unless the correlations are not what they have been, this should mean we should see some upside in metals, stocks, etc. However, the major stock indices are in the midst of sell signals, reaching upward exhaustion. Silver and Gold are in Monthly Sell Setups themselves, good through April. Looks pretty muddy to me, but I wouldn’t be too short here or even sell your gold/silver/miners right now. Surprises are to the upside, and the jobs number tomorrow might be a doozy.

  103. Gary

    How is this Demark signal constructed?

    It seems to be some kind of oscillator. Oscillators are great for markets locked in a range but worthless during a strong up or down.

  104. David Kafrick

    The EURUSD has been stuck in a huge trading range – 5 cents – for more than 1 month. It has rotated through this trading range several times. Once it breaks up or down, a huge directional move should follow. If it breaks down it will be really scary for all risky assets.

  105. Slumdog

    Three is not a number. We have a double bottom in gold.

    What are the odds it will hold against a triple top?

    The target imo, is still $100 off of the high, $1325.

    I’m looking for another shorting entry point.

  106. n1tro

    steve,

    jobs report is suppose to be good tomorrow so the dollar should or is going up because of it. gold/silver still hanging tight because of the remaining open interests in the comex.

  107. Gary

    Nat,
    That’s what I thought an oscillator that tries to determine an overbought condition to sell and vice versa.

    Seems like it’s pretty well known. (may be discounted) I wonder how well it has performed in Ben’s ultra liquidity driven market.

  108. Natanarchist

    well I don’t much about it. I just googled the name Demark and started looking at the links. sped read…(you know Eveleyn Woodhead sped redding course..haha..if you know where that came from)

    Apparently the basics of the system are well known. And available to anyone. Seems its just another tool of technical analysis at least that is how it is described.

  109. Jayhawk91

    Gary-

    Can you give me the last 2 intermediate starting points and end points. (Not this last one from the summer to Dec.)

    We have weathered a major part of this correction already it seems. HUI is on the 38.2% retracement. I’ve noticed that gold tends to retrace 50% of it’s intermediate run, miners will dip down and touch the 61.8 line during the yearly cycle bottom/intermediate lows. (Around HUI 493-200DMA area–GDX is 53 at this price point).

    Could bounce around here though for a spell. The overall market corrects and these will get swept down to the 61.8 for sure.

    http://www.screencast.com/users/Jayhawk1991/folders/Jing/media/ea0e0c5a-92fc-441e-9929-4a68c809ea65

  110. Gary

    I would look for a more significant bounce once gold enters the timing band for a cycle bottom. That’s still at least a week away.

  111. Robert

    Gold’s done for. Forever.

    The stock market is where it’s at!

    Look at gold correct an equities hold their own. That’s thanks to the awesome increase we’ve seen in employment recently.

    I’m so happy the economy is back on track. Life is good.

    All j/k of course. God I love propaganda, aka BULLSHIT. Makes for an entertaining market…

  112. Robert

    We could still have a few higher days ahead of us. Who knows?

    Look at SM buy Russell and a little SPY today. Tomorrow’s report could up us tomorrow and for a few more days. Gold already correcting severely though is a tell-tale sign of the intermediate delcine. Also check out the swing highs in retail, amongst many other sectors and the dollar’s SL of course.

    SoS a lot recently in emerging markets, where else to put your money right now besides shorts, cash?

    I honestly don’t think the corrections will be severe as everyone here is thinking. I also think the market has another leg or two up and DEFINITELY, 100%, we’ll see QE3 in the not too distant future.

  113. Robert

    Real inflation this year was 7%. I’m told in 2011 it will spike to 21%. Gold and silver will go nuts. That’s of course after they go nuts to the downside here. SIL is getting creampied!

  114. Bruce

    Gary .. miners are down hard hard over last week .. I want to buy but I’m scared .. that’s when you say we should buy – when we’re too scared to buy: Is it time to buy?

  115. Jayhawk91

    Thanks Gary-I was hoping to got back a few more cycles than those you listed.

    (I think I see it, but the I-cycle from late 2009–looks like it started in July and peeked in early Dec as well. HUI actually went through the 61.8% level on that move (last Feb). The next intermediate gave us a 50% HUI retrace.) I know we will wait for price action, swing lows, etc. but I like to ballpark target zones and watch for things like the MACD to start to flatten on the daily charts in those areas

  116. Gary

    Bruce,
    The time to buy is when I’M scared. I’m not there yet. Not by a long shot.

    We have at least 3-4 weeks still.

    Robert,
    It’s exactly when people begin to think any correction that creates the kind of sentiment that produces the worst corrections. This one may produce enough bullish sentiment to drive stocks below the July bottom.

  117. Gary

    Jay,
    You will do better to look at the gold retracements. The HUI won’t stop going down until gold does and the miners are influenced by other things like selling pressure coming off the stock market.

  118. Jayhawk91

    Gold usually goes to the 50% in harsher bottoms-so I expect the miners to get pounded even harder.

    The last 2 years have been buy miners in July and sell in early Dec patterns.

  119. sophia

    I dont understand how tomorrow is going to play up… Very good number, dollar rallies, gold down, stocks up…bad number, dollar own as Ben starts the printing press again, gold up, stocks up…how the stocks are ever going to correct from here?

  120. Gary

    Sophia,
    The market is just waiting to sell into good news. That may be the jobs number tomorrow or it may be earnings season beginning. At some point the market will get scared and look to take profits.

    Especially with all indexes stretched this far above the mean. Trust me right now smart money is nervous as hell.

    The only people that are confident are emotional retail traders like Beanie.

  121. sophia

    Thank you Gary! I have to say that from Europe’s point of view, the Dax which was the best performer since August, has been suffering since its highs last week, so my feeling is that the Nsq is going to tank very soon, maybe after Alcoa’s earnings report on Monday….

  122. bamster

    Gary,

    the dollar is doing exactly what it did last week. it went over 80.82 and is now below it. it looks like it wants to sucker in people who were waiting for that swing and now looks like it will go the other way…down. what do you think?

  123. Jayhawk91

    There was some other guys who kept posting on Tim’s site in early 2009-He must have posted a 1000 times and they kept banning him. His message was an epic rally would be starting and you’d better get long. Hilarious how right he was.

  124. Rod

    Okay Gary, was able to unload the last of my two PMs on today’s “little” pop. Just going to sit now and wait for your all clear sign to reload. However, Do have a little $ catch up to do though, but we’ll get it back soon enough I’n sure.

  125. Bob loves Hawaii

    You know Shalom, the Tim bashing is getting old. Beanie constantly would post the same sentence over and over, like an annoying child.

    Tim is a stand up guy, who puts it out there under his own name, right or wrong.

    Give it a rest.

  126. William

    I’m starting to drool now. This correction is great. If SPY joins GDX, then GDX could hit it’s 200d EMA, and GLD it’s 150d EMA. What a gift if they do.

    Gary, at 8 am or so you wrote:

    “If this was day 20 in the gold daily cycle I would probably agree with you but it’s day 14. That’s probably a very low probability trade.”

    14 days ago was swing low in GLD at 132.86. I don’t get cycles yet – am trying to learn – I was expecting it to be the Dec 6 high. Am wondering now what day 20 will bring, 6 days from now. Is that your predicted swing low – time to load up the truck?

    Thanks.

  127. Gary

    Will,
    I doubt it. Gold probably has one very big fakeout coming. It will probably rally out of the next daily cycle low and then trade down to a lower low as the next daily cycle also fails and is left translated.

    We probably have a minimum of 3-4 weeks yet before it will be time to buy.

  128. Poly

    Relative the 4% gold correction, the 4 day decline in the $HUI and our 4 watched stocks was brutal, some 13% down. Clearly the $HUI has broken trend and shown it’s hand, but the RSI is also at levels seen only intermediate bottoms.

  129. William

    Thanks Gary, I’ll write that down and see it if pans out. If it does, I’ll be buying 20 subscriptions, and hand them out as early Christmas presents!

  130. bamster

    Bob from Hawaii,

    Don’t come to MY house and tell me what I can say or do, capice. My house includes Shalom. The only person who would come here and say Tim is a stand up guy would be Tim himself. GOT IT!

  131. Bob loves Hawaii

    Hey Gary, I like your cycle work, hence my subscription. A metal trader I know said gold bull seasonality peaks end of January. In your research does cycles trump seasonals?

    Thanks.

  132. Gary

    Poly,
    Like I said gold will most likely find a bottom in the next wee or so and bounce to relieve the oversold RSI. But then it will make one more trip down to a lower low.

    The stock market has a yearly cycle low to dip down into and I definitely don’t want to buy anything before that plays out.

  133. Bob loves Hawaii

    Bamster, excuse me, whose house? Are you also a child that likes to slam people?

    Been on this blog for quite some time myself. I just don’t post here everyday.

    Have a great day.

  134. Onlooker

    Poly

    Re: RSI Yes, but we also know that you will often see a positive divergence at an interm low. That would square with a big bounce from here or a bit lower (i.e. maybe next week or so when we enter the daily cycle low timing band) and then another push down to a lower price low with a higher RSI.

    I’m going to try to lighten up a bit on the bounce out of the daily cycle low as I’ve still got more exposure than I’d like but don’t want to sell into this weakness this late in the daily cycle.

  135. Poly

    Oh I agree, wasn’t suggesting in the least of buying due to RSI. I was thinking the same, to late to offload now, but if anything is left there may only be one last opportunity on the bounce.

  136. Shalom Bernanke

    Bamster,

    It’s not like the TK opinions are even a small part of this blog.

    NEVER tell somebody what to say or not say. That’s much worse than picking on a perma-bear in a creaming bull market. Stupid as your comment was, I’ll just point it out rather than tell you to shut your trap.

    Next you’ll demand I love him. LOL!

  137. William

    Gary, wish to learn more about your services. What sectors do you cover other than PM’s and S&P? Ag? Copper? Rare earths? Uranium? Energy? Thanks.

  138. William

    Actually, gold is the big bannana, so it’s the 1 right one to follow – the others can be a diversion – was just curious is all. Thanks.

  139. DG

    Bob: Don’t let SB push you around. He says never to tell anyone what they can say, but last time. I posted something he didn’t like he told me to, quote, “shut my pie hole.” He must have a different definition of “never.” Guys like this show up on blogs and there’s not much you can do about it. Just ignore them and post what you want. (Watch; he’ll come back and tell me essentially to mind my own business, but he’ll try to phrase it so he’s not actually telling me what to do, just “pointing it out.”) He doesn’t even get that saying “NEVER tell someone what to do or say” is telling someone what to do or say!! Pretty amazing, huh? He’s just an angry guy who pops off every once in a while. I’m guessing he’s old and crotchety or laid off and pissed (sometimes makes intelligent market comments, though)

  140. William

    blammo, you have more kahuna’s than I do. I see this as a bear market rally, so won’t trade this. I think Gary’s thoughts on only going long for bull markets suits me. Good luck though, as it looks like a good trade.

  141. Shalom Bernanke

    This will be my last word on the topic, Bob. What is really sad is that you take TK seriously, and can’t appreciate others pointing out his ridiculous “style”. You don’t have to believe me when I say Tim is an entertainer, not a profitable trader, but you should be open-minded enough to consider the comment.

  142. Bob loves Hawaii

    Gary, looking at the large cap miners, NEM, ABX, GG, AEM. They are trading for the same price or 10-15% higher than when gold was trading for 17% higher.

    Can you offer an opinion here?

  143. William

    Gary/all, regarding your core positions in PM’s, do you hold physical, or something like CEF? and is 30% something close to the norm? Thanks for helping.

  144. Gary

    Bob,
    Miners are leveraged to the price of gold. They go up and down by a greater percentage than gold. And at an intermediate selling climax they can get hit hard by selling pressure coming off the stock market.

    I wouldn’t make too much of anything the HUI does. It may dive below 500 it may not. None of it will have any significance. They will go right back up once gold bottoms and the stock market correction exhausts.

  145. DG

    SB. Thanks for your most recent post. You really do make some good points sometimes, but if you SCREAM them or hurl insults it gets in the way of your comment. I, for one, look forward to what you write but sometimes have a hard time getting past the other stuff. The blog is a lot better since we got rid of the anony-mice posters. It’d be great to keep it that way between those of us who are left.

    For you traders out there: FCX looks interesting as a short. Had the reversal and copper at all time highs in a bad economy is at least interesting. Volume is on the downside, the MACD was showing weakness at the recent new highs relative to the last top, and the MACD just bearishly crossed under.

  146. DG

    SB: Funny we crossed in cyberspace. Just as I thanked you for posting something that was not obnoxious (to Bob), you had to go and shoot off again. Oh well. I guess you’re just incorrigible. I tried. To everyone else: I am about to give up on SB. If I engage him he just shoots off more. Sorry. I’ll mostly just let him rant from now on—no sense enlongating the tantrums.

  147. Gary

    FWIW My buddy Tim has been trying to pick a top in gold for months and months.

    Try as I might I just can’t break him from shorting bull markets. If he wins big enough on this trade he may make back everything he lost trying to pick the top.

    One of these days I’ll convince him to quit picking on gold and just ride the bull…I hope.

  148. Bob loves Hawaii

    DG, I shorted the rare earths last week. MCP will allow insiders to sell their paper shares on the 21st of January, REE has 4 employees and is up 800%. Both trades are prfitable as of today.

    FCX looks good below 115 for me.

  149. bamster

    Like Shalom, this will be my final say on the subject of Tim.

    DG, Poly,

    Bob from Hawaii was off base to begin with. Shalom, in my opinion, posted an innocent opinion about TK. Some of us agree with it and some of us don’t. Bob felt he had to “discipline” SB which was not his place. If SB’s comment was targeted at Bob, then I have no problem with Bob’s response. One should always defend themselves.

    Personally, I think TK is self centered, egotistical, selfish, conceited person …among other things. He USES his blog to his advantage, and his alone. Yeah Poly, he called GDX as you can see from his multiple posts alluding to that fact. I have plenty of calls that he has missed but don’t hear about after the fact. Also he likes to mock Gary, which I don’t like.

    Now, lets all kiss and make up, be a happy family, AND MAKE SOME MONEY.

    XOXO

  150. William

    Bob in Hawaii, I also follow FCX, but won’t short as its in a bull market mode. Good luck. Regarding shorting it, I think it’s safe to do so here/now, w/a floor just above today’s candle high.

    I also follow MCP – thx for the info on the Jan 21 possible selloff – I missed the last run up – am waiting for today’s correction to finish off.

    FYI I think that FCX/BHP/etc.’s selloff now is a pre-cursor to the selloff in the SPY that Gary is speaking of. Copper often times leads the broad market, up and down. From what I’ve seen, anyways.

    That all said, I’m going to ignore all that now, and wait for GDX/GDXJ/SIL to bottom out here – I won’t want any distractions on this next major C wave up.

  151. William

    Gary, I only have 1 worry about watching the $USD in relation to $GOLD, which is I think about twice in the last 2 yrs $GOLD rallied when the $USD did, too. I worry that watching the $USD now would be cause to miss the bottoming in $GOLD in your 3-4 weeks. So I think its best to keep both eyes on $GOLD, and only periferal vision on $USD. Your thoughts please? Thanks.

  152. William

    Further, for clarification, I think the $USD is irrelevant now – it’s just paper or a number in a computer. It only has worthless value relative to the worthless Euro. While focusing on the $USD used to give good signals on $GOLD, in my book it’s now unpredictable and irrelevant.

  153. Gary

    Will,
    Picking tops is tough. Bottoms are much easier. So I will be concentrating on trying to spot the bottom for gold rather than the top for the dollar.

  154. Gary

    Sentiment has reached levels that could send the stock market down to test the July lows.

    If the bear is going to resume this year then one of these intermediate degree corrections is going to go down much farther than it should. This could be the one. We’ll just have to wait and see.

  155. Onlooker

    William

    I gather from your posts (i.e. questions of Gary) that you’re not a subscriber. I suggest you subscribe in order to be fully knowledgeable of Gary’s positions, etc. It’s well worth the cost and you won’t have to try to pull it out of him here. Cheers

  156. pimaCanyon

    Gary,

    From tonight’s report, it looks like you’re counting the 12/31 low on the dollar as the bottom of the daily cycle.

    Why wouldn’t you count the 12/14 low as the bottom of the daily? That one is 29 trading days from the November low which puts it right in the timing band for the daily cycle low.

    Seems like you could use either one (12/14 or 12/31) because they are essentially a double bottom. If it’s true you can use either one, then we will have to wait until the next daily cycle low to look back and determine which is the best fit.

    I bring this up because -IF- the daily cycle bottomed on 12/14, then we are already 16 days into the cycle, so the dollar could peak sooner rather than later.

  157. William

    Onlooker, yes, thanks, and point taken. I’ve asked too much here. Sorry about that.

    I’m not a cycles guy, but I see that Gary combines that w/several other tools, and that he’s been successful in the past. I’m new here, so if he’s successful in 3-4 weeks based on cycles/etc., then yes I’ll become a subscriber.

    FYI I currently don’t subscribe to anyone – I haven’t found anyone who can beat my own simple system yet – though Gary’s might – we’ll see.

  158. Wes

    I’ve figured out what the pitch looks like that I need to initiate the stock market lottery put trade. I’m leaning toward using a June put.

    Now, getting the right pitch, which is usually a two or three day affair, is another matter.

  159. JakeGint

    William —

    If your system is better than Gary’s then I’ll subscribe to yours as well. πŸ˜‰

    Hope everyone is doing well over here.

    ________

  160. Gary

    Jakester,
    Nice to hear from you. I peak in on you over at fly ever once in a while πŸ™‚

    The reason SLW is down hard is because it’s stretched so far above the mean. Now it is relieving that extremely overbought condition with a severe bought of profit taking.

  161. Shalom Bernanke

    Good to meet you, William.

    William already knows what most never learn. Keep it simple, the money is made in staying disciplined to follow the simple signals with proper sizing. Nothing else matters.

  162. JakeGint

    Hey Gary,

    Didn’t mean to be a stranger, but when I sold my biz, for some reason the new place was blocking your (regular, but not premium) site.

    But now you’re back. I hope it’s not temporary, I certainly would like to participate in any and all future Tim Knight debates!

    πŸ˜‰

  163. WalterW

    Jayhawk,

    [Let me repeat the url for others:
    http://tinyurl.com/39lwpu7 ]

    I doubt if this would be a conspiracy. These hedge fund traders are not acting in secrecy. On the contrary, they’re deliberately pushing the story, hoping for more funds to join them. Nor are they in it to try to blow up Comex – it’s just for the money, nothing illegal there either.

    I suppose that from a legal point of view it wouldn’t even qualify as blackmailing JPM: these hedge funds wouldn’t threat doing anything illegal to JPM – they would just perfectly legally be standing for delivery if JPM preferred not to pay them a hefty premium for setting in cash instead of silver.

    The beauty of it all is that it’s the bloody market itself calling JPM’s bluff, no need for ‘loony’ theories.

    From a business point of view, I’d say it would make sense for the hedge funds to act this way – particuarly because, probably to their own amazement, it turned out to be such an extraordinary profitable strategy for them on the DEC silver contract. But by paying a premium to them for settling in cash JPM has shot itself in the foot – what did they expect these hedge sharks to do but smell the blood dripping into the water and then com back for a second, third, fourth serving?

    If I remember correctly, one of Gary’s arguments against a PM suppressing conspiracy was that if there was and the PM prices were too low, then why didn’t anyone stand for delivery, and cash in on the ‘real’ price? Well, perhaps the real silver price IS indeed 30% higher, i.e. at least the amount those premiums are signaling. And more importantly, it may well be that these hedging geniuses have finally figured out what they have been too blind to see all along, and finally ARE indeed -albeit in their own paper type way- standing for delivery.

    If there is indeed PM price suppression, as I believe, then this arbitrage play by the hedgers is going to be extremely succesful +time and time again+ since it’s guaranteed to win, as it’s going to drive the silver price up to the ‘real’ market price. (If you know you can charge a premium for settling in cash, you can bid the silver price up to just below that premium.)

    If true -and to me it seems to make sense- silver will indeed explode in the coming months.

  164. JakeGint

    And regarding SLW — I’ve been “battening down the hatches” since early December, gradually selling down to about a 60% position (it’s my largest holding) and then selling calls on the rest. I sold February 33’s and 34’s.

    Today I covered all but a couple of them, and I think SLW is short term oversold here. Like Gary, however, I’m expecting more pain, but only after a decent 2-5 day rebound, until the RSI (5 day) gets healthy again.

  165. Gary

    The miners usually lead gold. GDX is leading gold down by making a lower low. That’s the signal that the intermediate decline has begun.

  166. Chicken Burrito

    Top this.

    I blew out my entire trading profits from last year in the last three days. Was not on board completely off the summer lows, traded in and out. Decided the next call when 100% was signaled to jump on board. So, lost more than I made last year.

  167. Gary

    If you know the rules and are prepared to stick to them then yes you could take the trade.

    Remember a trade is a trade and you never risk more than 2% on a trade. This isn’t a way to make back your loss in one fell swoop.

    You can risk 10% of your total portfolio max.

  168. Slumdog

    The daily pattern, as shown at JSMineset.com, by TraderDan, is long bar, lower short bar, lower short bar, each day with lower lows. I’m looking only at the darkened areas.

    That pattern militates only two outcomes; a dramatic move up, or a dramatic move down, tomorrow, Friday.

    I have no idea which way. The fact that 1361 was not taken out means to me, it’s gonna hit the skids. But that’s just a total guess.

    The bar length will be 35+ points.

  169. Slumdog

    But, the fact that this double bottomed on the daily chart does not support what I just posted. So, while I’m short, I’m trading with a tight 8 buck stop, enough to be kicked out because the logic failed. If there were no double bottom, the odds would be about 90:10 in favor of a long bar stretch tomorrow, down.

  170. blammo

    Over on his blog, Jake was much more dubious on jumping in based on golds recent spike. Turns out that was the right call. Nicely done.

  171. blammo

    Chicken Burrito, I have to say that 100% call by Gary on gold’s recent move was out of character and perhaps a bit giddy. I think even he would admit that. In fact, I’m somewhat curious that he hasn’t addressed this further.

    We all own our trades but if gold was going to do what he projected, we had a lot of time to put our buys in w/o going all in on one day.

    Just my opinion. Gary’s record speaks for itself I just found that particular call a little odd.

    I’m personally annoyed because I bought some HZU (Canadian version of AGQ) and couldn’t get out of it on Monday as the Canadian exchange (TSX) was closed. My stops are always quite tight with my initial buys on the double ETFs.

    Anyhow, this all comes with the territory. Last year was great. This year is starting off poorly but I believe in patience and waiting for the fat pitches. They always come.

  172. Slumdog

    Trading is bullogna. I was short here at the drop through 1361. The market dropped from 1365 to 1358.3 in under 5 seconds, and bounced back to 1363+ in 3 seconds. Now it’s trading at the 1361+ range.

    I couldn’t hit the buy button fast enough to get the full move.

    That’s such a rip!!!

  173. Slumdog

    The move I just exited again at 1358+ is like a skyhook. The market is dropping. It has nothing to hang its hat on, so, the most recent prior low is the reversal point. It’s comical.

    Unless one is agile, it’s tough to squeeze bennies.

    Trader Dan indicates 1245 as the next number. The old super support number 1361 is at least something the market can dream about as it reckons its way down to what I think without a chart in the world is the right number, 100 bucks down from 1425. I have said at Kitco repeatedly, the newbies have gotta be taken out to the woodshed and be spanked until they cough up their lucre. It’s happening now. That 100 dollars scars ’em so they let go. That’s the first stop. After that? No guess.

  174. Steven

    Chicken,

    I practically did the same thing. Now I’m not sure what to do tomorow. I’m ready to blow out the entire account before it it si $0!

    Very depressed over here aswell.

  175. Gary

    Blammo,
    That huge rally on the 28Th should not have happened if gold was going down. Many juniors were breaking out on heavy volume. Gold was forming a triangle consolidation pattern. The same as it had done during the last two C-waves. The dollar was setup with a failed daily cycle. Which should have signaled the intermediate decline into the three year cycle low was then in progress.

    In real time the only call to make was to go long there in preparation for the last leg up in the C-wave. It’s easy to Monday morning quarterback but we all have to make our decisions in real time.

    Given the circumstances and conditions I would have to make that same call 100 times out of 100. 90% of the time it would be the right call. We just happened to hit one of those 10.

  176. Gary

    Steven,
    How can you blowout your account? The drawdown hasn’t been more than 10% even if you were fairly heavily marginned, unless you chose to ignore my repeated warnings about massive leverage.

    Folks you simply can’t, can’t can’t, leverage to the moon. one mistake will cost you your portfolio. If you are going to do that you might as well go down to the casino and put your life savings on Red. It’s the same thing. Gambling!

    We aren’t gambling here. We are riding a bull market. If you listen to me you will come away from this with a fortune. If you ignore me you will come away from this with nothing, or worse, you will lose everything.

  177. Steven

    Unfortunately I listened to you when you said all in with the failed daily cycle and I was all in wih AGQ only heavily margined. So I listened to half of what you said and the I didn’t get out when you said to get out. Any advice for tomorrow. Very nervous over here. Have lost about 50% of my account this week.

  178. Gary

    Steven,
    If you hadn’t marginned you would be fine. eventually the bull would rescue you and you would end up with a huge winner even though you would have to weather a very nasty drawdown. But being on margin you are going to get margin calls that are going to force you to sell chunks of that position for losses.

    You’ve got a very tough 4-5 weeks in front of you. If you get any kind of bounce jettison that margin immediately. Then prepare to hang on for one very painful ride.

    No bounce and you are going to have to sell repeatedly to meet those margin calls.

    I’m not confident you are going to get a bounce because the gold cycle should still have a week or more before it bottoms.

    You now have an aligator on your leg. You can either sacrifice the leg or he will take you under. Decide quickly if you can lose the leg to save the body.

  179. Steven

    I don’t understand the allgator anlogy. I think I’m just going to sell out the account and wait for the all clear from you to get back in. Is this a good plan?

  180. Ollie

    Gary, I’m down to about 50% core at the mo, not too fussed about a drawdown as I’ve been through an IT correction with core last summer and I’ve got out fine.

    What I’m thinking about is there’s no point to hold a core at this point as it is very likely that I can buy back at much lower prices

    Shall I sell out of core completely and buy back lower? As at this point it seems quite unlikely that any upside surprise will happen…Thanks

  181. Gary

    That’s probably the best plan. Take the pain now and save what you can, and then don’t ever make that mistake again.

    This bull still has a long way to go yet. You will make all that back and then some before this is over, unless you do this again trying to recover everything in one trade.

    If you do that then you will probably lose everything. If you follow my game plans exactly you will be OK in the long run. If you make this mistake again I guarantee you will eventually lose your entire account.

    You’ve now got a long uphill battle in front of you. Just accept that fact, dig in your heels and be patient.

  182. Gary

    Ollie,
    I always keep some kind of core position, just in case. If I’m convinced an intermediate decline has begun then I will reduce to a fairly small core but I still keep a core position.

    The easiest way to do that is in physical. The next easiest way is to not even bother to look at your account while the intermediate decline is in progress.

  183. RA

    Looks like we have a failed cycle in gold in addition to the negation of the failed dollar cycle. Gold broke below 1361.

    Gary, thanks for the daily cycle count charts. I might be pushing it a bit like Oliver Twist and asking for some more but could you also add in the weekly intermediate cycle counts too. After all it is the Int cycles that are the key ones to watch πŸ™‚

    That’s a request with a pretty please but not a problem if you do not do it.

  184. Poly

    With the 130% (+margin) I believe it’s around 14% loss, but that’s only on the “alternative” stop. Of course the primary stop of $1,361 has yet to hit!

  185. RA

    Poly,

    Gold price at the moment is showing 1358. The stop has already been hit.

    As for the 14% drawdown, I assume you are measuring from the peak. If we had gone in at a lower price, then the drawdown to our portfolios might be less.

  186. Poly

    The stop has yet to hit in relation to the GLD stop in us market hours trading!

    Not from. The top, from the call to buy last week.

    It’s certainly not a complaint, it is what it is!

  187. RA

    Poly,

    Thanks for clarifying. I did not leverage thankfully but had some AGQ and miners. My drawdown is around 9%.

  188. Gary

    If your portfolio was placed exactly the same as mine percentage wise and you managed to enter at the exact top on Jan. 3 and you sold AGQ Wednesday like I did at or close to $141 and if you exited the rest of positions at the open yesterday then your account should only be down 10.3%.

    If you got a slightly better entry than the exact top and if you exited on the GDX stop then you should be down 5-7%.

    Either one of those are easily recovered during the next leg of the C-wave, probably in the first 3-5 days.

    If however you took on huge leverage and you didn’t exit till this morning then yes you are in trouble as you are caught in a very large gap down up on AGQ.

    I’m confident you will probably be able to recover everything by the time the next leg up is finished but because you ignored me about the hazards of leverage you’ve thrown away the largest C-wave we’ve had so far.

    Please don’t ever make that mistake again!

    Blind greed is what took down the financial system and is the reason the world is in the shape it’s in. And blind greed just put a huge dent in your portfolio. Do you really want to make the same mistakes that Lehman and Bear Stearns made?

  189. MLMT

    IMO gold will start its bounce today.
    That being said, Gold will likely trade below 1352 after UE data and will open under 1361 by 9:30am

    It should bounce to 1396 in regular hours. In globex it may see as high as 1404 in the coming days.

    The miners IMO may not see higher than 59.

  190. mamaloshen

    Gary,

    I got fooled by the dollar break below $78.82 and, having sold down to core earlier, got over-enthusiastic and went all in to a fully invested gold/silver position (though not on margin) at the end of Dec.

    It took a few days for the idea of a serious gold correction to sink in, so I only unloaded AGQ yesterday (as well as another miner). Now I have come down to 75% or so of my pm allocation. I have CEF (which I see as a core core as long as the bull market lasts). Also, a few miners including PAAS, SLW, SIL and GLDX.

    My question is: do you advise selling the rest here, or waiting for a bounce? From your latest report, a bounce in mid-Jan. looks like being in the $1350-$1360 area. I’d still like to keep 50% as core and don’t mind weathering a drawdown, but obviously I am above that to around 75% now.

    SLW has come down some 15% already (and today will likely be down another 5%). It seems to be approaching oversold levels which I don’t like selling into (I paid $38 recently). Anyway, I’d prefer to use an oversold bounce to lighten up but wondering whether you think it is better just to clear the decks now and just take my lumps.

    Thanks in advance.

  191. Gary

    Mam,
    Gold still has probably at least a week before a cycle bottoms so there’s no guarantee the bounce will bring it back above today’s level.

  192. OptionsOnly

    Gary, why do you think this impending correction will be an intermediate one rather than just a daily one? I’m considering to buy some Feb. ITM calls on QID.

  193. Gary

    Options,
    Because gold hasn’t had an intermediate correction yet and it’s way over due. And more importantly we now have a failed cycle in play. That is a sign of an intermediate correction starting.

    And we have a negated failed cycle on the dollar index.

  194. pimaCanyon

    MLMT: Your price target for the bounce (1396) — are you using volume analysis for that? It’s interesting that 1396 is also the 62 percent retrace of the move down.

  195. Steven

    Gary,

    Open ended question. Do you have any thoughts on today’s actions, specifically as it relates to silver (and perhaps the dollars). Many thanks!

  196. Natanarchist

    to the folks struggling with recently entered positions…many of us feel your pain. Many of us have made that mistake. I know I did. A couple years back in ’08 I gave back almost 90% of my profits in less than two weeks. Heavy margin, improper risk control, and hope to care of that. It is important to follow Gary’s advice on margin and risk control. And not just Gary’s advice. Listen to the folks on here who trade in and out regularly and you will see that they keep position sizes in line and proper risk and STRICT discipline on exiting losers. We all want to make sure we have lots of dry powder for the intermediate bottom. Then the fun begins…and the profits!

  197. Gary

    Yes don’t get suckered into thinking the bounce is the bottom and your mistake is going to get rescued, it’s not. Use the bounce as a gift and get rid of your margin.

  198. Uatatoka

    Gary,
    The cycle charts are great. Would it be possible to add the HUI index to that as well? That seems very relevant since we are mostly investing in miners and the majority of the recent downward action is in this sector (your adjusted trade stop was based on the lower low in the HUI for eg).
    Thanks!

  199. Gary

    U,
    There is no cycle in the HUI. The miners follow gold. Gold is the driver of the precious metal sector.

    SB,
    I went over that in last night’s report.

  200. Gary

    Jay,
    The rules of the BB crash trade require holding for 15 days or until the first profitable close. If you don’t follow the rules then the trade will have a negative expectancy.

    If you aren’t prepared to follow the rules then don’t take the trade.

  201. DG

    O.K., I’m taking an other shot (SPY and FCX). Gap up and small fade was enough. I am hoping to leg into a big short position as I believe a serious decline is coming. Sentiment, VIX, valuations, Spain…take your pick.

  202. Poly

    I’m with you DG, but I’m feeling, nothing but gut, a strong intraday rally first, maybe a final push higher before a reversal?

  203. MLMT

    @Pima Cannon

    1396 is not based on volume analysis.

    One principle that holds true in the market is “those who come late to the party AND then overstay get punished”

    Those who shorted the big gap down on gold the other day will get shaken out if they dont take their profits. The other day the highest tick gold registered in RH was 1396-ish. As much as your brain would tell you otherwise, we WILL get there. It is almost like a law of nature (no crystal-ball stuff here btw)… Just law of nature πŸ™‚

  204. greg

    I recently added about 200 percent cash to my brokerage (non IRA) account, so I am only about 30% invested in that account. This morning I looked at every holding in it and asked myself “if I didn’t already own it, would I want to buy that stock at the price I owned it at?”. In every case the answer was yes. In fact I would like to buy more at the those prices. So, come on down mining stocks – come on down!!

  205. DG

    Poly: I can’t remember the last time I had so many small false starts. Maybe we do get that one more spike (and then one more…and then one more…)

  206. Poly

    You don’t need to tell me about it, cost me a decent amount too and it’s now boarding a “controlled” obsession.

    (I can see Gary smiling and shaking his head)

  207. MLMT

    @Poly

    VIX was jacked up yesterday in anticipation of selloff triggered by NFP. It didn’t happen – so vix retreated.

    If you want to see a real classic example of this, go back in see what happened to VIX between 2:30pm and 3:30pm on the day Ben declared QE2 officially (Nov3 or Nov4 – can’t recall exactly)

  208. Rod

    Poly/DC,

    We should see one last big push before we start to rollover here. That is the time I will be looking to add shorts.

    Think Gary is correct, feel they may hold this up into the start of earning season.

    Thoughts?

  209. DG

    I always do a little less on each subsequent trade if I am in a cold streak, unless I get multiple clues that “this is it right here.” I did do a little more a few minutes ago (just added OIH at 140), but play with tight stops when i am running cold and not in the black yet. I am down about .75% on this shorting adventure so far, but expect (hope?) to make many times that when the drop hits. Well see…

  210. aaronpalang

    I say the USD is almost exhausted, and I base that on the parity analysis with the Canadian dollar. Either way I think this was a major head fake and that it cant keep this up. The game is inflationary, and even in overnight trading oil had sniffed it and wasnt budging… should get interesting.
    A heroic effort by gold here, loving the strength!

  211. Gary

    It’s human nature to seek order. Selling tends to come in at even numbers. One could take the short on the QQQQ’s at 56. If it gets significantly above that then buying pressure is going to overcome this psychological level and there’s a good chance it will then make it to $57 before the process repeats. Sooner or later a level will be found that brings in enough selling pressure that it halts the rally.

  212. pimaCanyon

    Thanks, MLMT. Appreciate the explanation.

    Now, how about that 1160 forecast, what’s the logic behind that? That would take gold all the way back to the late July low, the last IT low according to Gary’s cycle analysis. That’s a big drop and one we wouldn’t expect if Gary’s C wave is still in play.

  213. Gary

    Remember gold is now on the other side of the coin.

    During the rally it does everything it can to keep rides off. Now that an intermediate correction has begun it will do everything it can to keep riders on until …it kicks them off at the bottom.

  214. Gary

    One is kidding themselves if they think gold is going to 1160.

    The only time gold will drop that far below the 200 DMA is at the next 8 year cycle low. That isn’t due till 2016.

  215. pimaCanyon

    Makes sense, Gary. Going back as far as 2004 I see that the only time gold dropped substantially below the 200 DMA was in late 2008. The yearly cycles have not taken it below the 200, so cycle analysis would say that 1160 at this point is extremely unlikely.

    MLMT posted the 1160 forecast and I’m just trying to understand his logic, what’s behind his analysis.

  216. oa92000

    ” coolkevs said…
    Dollar has just perfected a Demark Weekly Sell Setup. This means there will be a 1-4 week bar reaction to the downside in the dollar, starting next week Now unless the correlations are not what they have been, this should mean we should see some upside in metals, stocks, etc”

    Anybody know demark here?

  217. aaronpalang

    Everyone who was complaining about having not exited when Gary predicted the beat down just got saved, Gold is at 1377, get out if you cant take the heat!
    Personally I think gold under 1300 is history, I have enough on to not get margined until that level. I guess its putting my money where my mouth is.
    Bring it!

  218. DG

    David K: You think it will try 1275-1278 again? It may, but after all this I kind of doubt it will give people a chance to get out again. After these endless ramp ups they tend to drop with a bang and close the trap door. At least that’s how it looks to me. (Maybe that’s wishful thinking as I am in in some size now and appreciate having some room).

  219. Onlooker

    Somebody asked about VXX. IMO stay the hell away from it. It’s a nasty “vampire” that just sucks money away, except for the Wall Streeters selling it. You’re victim of the contango effect in the futures, as well as some other headwinds.

    If you get the timing JUST RIGHT then yes, you can get a nice pop. But if you don’t then it’s terrible. You only get a portion of the upside of the VIX, and you get more downside than the VIX.

    Just chart it together with the VIX over some time period and you’ll see the disparity. Use the performance comparison in StockCharts for an even better look.

    You’d be better off just buying SPY puts, not that I recommend that because more often than not that’s a losing proposition for most retail traders (we’ve been over this discussion before so I don’t want to go there).

    Or just taking a stab on the short side with an inverse ETF, and we know how hard even that has been. With VXX, just as with buying straight naked options, you have to get the timing just right. It’s enticing, but many have been sorry for buying this thing since it’s introduction.

  220. DG

    Onlooker: VXX, puts, inverse ETF’s. Why not just short the SPY’s? Seems like everyone looks for exotic items. I just short stuff outright. I understand the math (the SPY’s can go to 400) but I play with stops so it’s not relevant. What am I missing here?

    By the way, this is our first down .5% in 26 trading days, a streak that has only happened about 20 times in the past 80 years!

  221. Onlooker

    Oh I agree DG. Some may not be able to short due to being in an IRA or non-margin account, so that’s one reason why buying the inverse ETF is preferable to outright shorting.

    Of course MOST should just stay away from the short side in general, as Gary has pounded the table about repeatedly.

  222. David Kafrick

    DG,

    I agree with you that the correction could just start right now without making another attempt at 1275. But I will only take a short position in this market if I can get a very good entry, in this case 1275-78. Right here, I figure is not a good place to initiate a short position, even though I agree with you that it could have started already.

  223. DG

    Trap door is shut. If they do not rally and close near even today, I believe next week is going to be a bloodbath (unless today is). Everyone who has been buying because “they can;t go down with POMO happening” is now caught and in disbelief. Usually after these relentless ramp ups there’s a sharp day that wipes out a week or two worth of gains (death by guillotine), and then the grind starts (death by sandpaper) until the caught longs can’t stand it any more and puke it out at the bottom. The only question is whether that was the top (I believe it was). We ought to know by day’s end.

  224. DG

    David K.

    I read a fascinating article years ago that I unfortunately have been unable to find again. It was a study done about the best medium-term market callers. It found that when the best bones said “one more rally and then we go down” or “One more dip and then we rally” THAT was the top or bottom. Seems like the best guys basically get it right but even for them it’s hard to pull the trigger. I thought about it when I saw your “one more little rally to 1275-1278” post this morning. Since you clearly know what you’re doing it reminded me of that article. Is this a great game or what?

  225. sophia

    it is surely going to be an interesting close…I am wondering if Gary sneaked out and is gone rockclimbing… good for you, Gary!

  226. blammo

    Thanks for your reply Gary.

    I’m only down 3.5% from the top so apparently I’m not doing too bad. My frustration is that I would not have entered the trade without your encouragement.

    On the one hand, we have to own the trades, and on the other hand, we have to trade ‘exactly like you’ in order to benefit from your advice.

    Anyhow, just rambling, trying to figure out how to incorporate your advice into my own trading.

  227. MBS

    Gary — Tell me if I have this correct with the current gold cycle.

    We are on day 15 on the daily cycle with 12/16/10 marking the start of a new daily cycle. Daily cycles usually last 20 days so we have about a week to go there.

    We are currently on week 23 of the intermediate cycle, which has been stretching long at 25 weeks recently.

    How many more daily cycles do you expect in this intermediate cycle? If we put one more daily cycle in lasting 20 days, that will get us to an intermediate cycle lasting 28 weeks (rather long). Is there a chance that this cycle bottoms in this daily cycle?

    Thanks for the help

  228. Gary

    I had to step out earlier and didn’t get to finish my response to M’s $1160 prediction.

    Intermediate degree corrections, especially in gold bull markets, don’t bottom because of technicals. This is why the retail technical crowd almost always gets taken to he cleaners.

    Because they don’t really have the resources to compete in the market against the big boys they convince themselves they can do so by watching lines on a chart (if only it was that easy).

    Intermediate degree corrections stop not because of a technical level. As I’ve pointed out many times technical levels usually get broken before gold bottoms. Intermediate corrections bottom because big money value investors step back into the market.

    When that kind of money starts buying it halts the decline and overwhelms the selling pressure and once big money has decided gold has reached a value level they keep buying even if it goes down further.

    They don’t think like a retail trader does. A draw down is meaningless to them. All they know is the market is doing something stupid and they have to take advantage of it as quickly as possible before the market comes to it’s senses.

    Our job is to try and guess where those value levels are at. There’s one right under $1300. And then there’s a huge one at the $1265 breakout. Every big money player in the world is going to be piling in if gold can make it to $1265.

    There’s no way gold will make it to $1160 because there’s no way the big money is going to pass up the bargain if gold can make it back to $1265.

    I know I won’t be letting that pass me by if the market is that stupid.

  229. Gary

    MBS,
    Only if the stock market suffers a very nasty correction and only if the current daily cycle in gold stretches long into the end of the month.

  230. Yash

    I don’t post but read regularliy here.

    Couple of dates in mind for silver PM.
    Jan 14 – 144 days after Aug bottom (day upmove started)
    Feb 18 – 377 days from last Feb bottom.
    If corelate with Gary then Jan 14 is first low of current daily cycle. Then bounce and then 2nd correction and low Feb 18 for intermediate low.
    Of course +/- always happens.
    Gary is final.

  231. auger

    Hi Gary, I understand your point about retail traders getting trapped, but those levels you mentioned are technical levels. I presume your point is that Intermediate corrections fall through the obvious technical levels, anticipated by retail traders, triggering undue panic.

  232. Gary

    Correct. Big money will run the stops below a technical level to trigger a selling panic.

    MLMT is trying to spot a bottom based on technicals but he is neglecting to take into account that bull markets don’t move based on technicals at major bottoms.

    Big value money will overwhelm the technical crowd making their strategies worthless at major bottoms.

    It’s why chart readers almost always get caught at bottoms and tops. There are different players in the market at these major turning points and those players aren’t concerned with lines on a chart.

  233. MLMT

    Thanks Gary for the good feedback – appreciate it a lot. (Honestly – no sarcasm intended). I am here to add arrows to my quiver.. not to sell you my arrow πŸ™‚

  234. David Kafrick

    Gary,

    I disagree when you say that technical analysis and charts are worthless for spotting bottoms. I´ve said this before, but what you are describing – that obvious support gets broken before uptrend resumes – is itself a form of technical analysis. Don´t mistake chart reading and technical analysis with common knowledge technical analysis – the kind that you read in books.

  235. Gary

    The thing is gold can trade through several technical levels. Technical levels aren’t what halts an intermediate correction.

    A valuation level being reached is what halts the decline. Breaking the technical level at that point is just an entry strategy for big money

  236. David Kafrick

    Gary,

    But how do you determine value areas? Based on previous swings, tops and bottoms?

    Have you read about market profile? I use it a lot in my analysis, as it helps identify value areas based on price rotation and trading ranges.

  237. Poly

    Gary, it just sounds to me like you’re simply describing a “technical level” not found in the standard textbook or followed by most people, beside the “big money”.

  238. Gary

    That is the trick, trying to figure out what level will bring in enough value investors to halt the decline.

    I think one level will be right below $1300. Big money will try to drive gold below that level to get a selling panic going. I don’t know if that will be low enough though.

    But I think that major breakout at $1265 will halt the correction in it’s tracks. I know I will be piling in heavily there if it can make it that far. Not that I will expect that to be the exact bottom but because it will be close enough. And I know that once the bull resumes I will have gotten an incredible bargain even if it doesn’t turn out to be the exact bottom.

  239. Gary

    Regarding today I think the market was prepared to sell a really good number. When it disappointed big money now needs to drive it back up before the little guys become fearless enough to buy the shares they are ready to dump.

    I won’t be surprised if the market closes green. Then next week sometime we see another SoS day.

  240. Wes

    I’m still waiting on my pitch. There seem to be certain characteristics that the market exhibits at tops, particularly at “extended tops” where the vast majority of technical indicators call for a decline.

    Until I see those markers, I’m not going to act.

    A possible consequence of being reactive instead of proactive is that I may miss the first part of the move down. But, that seems a small price to pay for avoiding the drawdowns and losses that guessing at the top entails. And there is considerably less than half a chance that I’ll miss much of the move at all.

    Until the dip buyers get burned, and probably more than once, they are just going to keep on coming IMHO.

    And, there’s always the Monday morning gap up to contemplate.

  241. Poly

    What a horrible week, so many losing trades across accounts and some really poor mistakes. I’m signing off until Monday, have a good weekend all.

  242. DG

    Gary: Nice call on the SPX rallying. You’re even more cynical than I am! How do you think the “big boys” rally them so they can sell into it? If it’s by buying that’s pretty risky as they want to get out, no? Do they rally them expecting enough feeding frenzy to be able to lighten up what they bought plus more?

  243. Wes

    DG,

    I’d rather not divulge details, but if you look carefully at the past times we’ve been overbought with the indicators screaming “correction”, the characteristics of the coming decline are pretty obvious.

  244. DG

    Fine, Wes. I’d love it if you post when you take your shot, if things line up. I shorted the rally this morning so am still in the black, but want to add. Looking forward to Monday. Have a great weekend.

  245. Jayhawk91

    Hang in there, Steven. We’ll get em next time. I know last years sell off had me down pretty hard and it paid a toll on me mentally. After the flash crash day I could barely pull the trigger when I needed to most (summer intermediate bottom).

    I’m trying to shake off this mistake and just get my head in the game for the next opportunity. We should be able to hit some home runs this year.

  246. Gary

    Yes I think smart money buys in order to drive the market higher giving them a chance to sell into strength.

    I expect we will see a large SoS day next week.

  247. David Kafrick

    The fact is that major tops, specially after such a huge rally, take a lot of time to form. Before finally rolling over, it will usually drop and bounce several times, not only because smart money waits for new highs to sell, but because on the first few drops there are a lot of buy orders under the market from dip buyers. The market will only tank hard after all buy orders from dip buyers have been filled.

  248. Steven

    Thanks Jayhawk. I’m still holding most of the position in AGQ althou i sold some of it. It just moved so fast that i was a deer in headlights. I’m a real mess right and hoping for a bit of a bounce early next week.

  249. Glen

    I see I am not the only one who took a beating this week. I was loaded up at the top with AGQ and SLW. When Gary switched from AGQ to SLV, fortunately I did the same.

    The problem is that I wasn’t able to exit when I wanted to because it would have resulted in a “settlement violation” – that’s when you use the proceeds from a sale for another purchase, and then sell that before the original sale has settled (3 business days later). That’s Vanguard’s rule for cash (IRA) accounts, and I assume it’s the same for other brokers.

    I sold some today, but still holding most of my SLV and SLW – I’m not too anxious to sell it at these prices. If we get a bounce next week, I will lighten up, otherwise I guess I will go Old Turkey…

  250. Mr.Mom

    After observing the past few days, it seems having stock stops based off of a related commodity isn’t the best idea.
    Gold found buyers today for a healthy bounce while the miners languished. So what is the best method for stops on etfs/stocks, their own price,or an index such as $HUI? Or it depends!

  251. Gary

    I gave you the stop on GDX already. As soon as it started making lower lows it confirmed a down trend. In yesterdays report I explained why I should have moved the trigger to GDX from GLD.

    Now that the intermediate degree correction has begun we can’t expect the miners to reverse the pattern of lower lows and highs until the correction is over.

    So the longer one makes excuses for hanging around the larger the drawdown is going to get.

  252. Chicken Burrito

    Gary, other experienced trader–

    I’m relatively new at trading…Am pretty naive and clueless it seems. I had just discovered ThinkorSwim has been raping me on trading fees. I’ve not really paid attention or when I saw the fee pop up for a trade, I just assumed it was because of the specific security I choose that the commisions were so sky high. Well, they inform today the the commissions tab was not checked to “flat fee”. Needless to say, after a year of pretty active trading you can only imagine high freaking high my costs have been. I’m physically ill right now looking at the number. (It was hidden and I didn’t see the costs adding up.)

    Any advice from you guys. I feel like TOS screwed me over by allowing their client to keep overpaying for so long. They offered to cut my trading comm moving forward. I really want to try and get some of this $ back. Ugh.

  253. Gary

    Maybe this year you just follow the intermediate trends so you can deprive them of all that money. I really hate making my broker rich.

    We should be able to keep trades down to 20 or less next year if one sticks with the ETFs and just follows the intermediate cycle.

    Now wait till your accountant gets through with you. If you have a ton of trades he’s going to charge you out the ass to do your taxes.

    Just another reason I have no desire to get sucked down into the trading quicksand.

  254. Wes

    Chicken B.,

    Why was the “flat fee” tab not checked ? Your fault or something they didn’t tell you about ?

    If they won’t be reasonable and refund or partially refund the money, your final recourse is to threaten to leave for another broker. Point out that you are an active trader. It might work.

    I think E*trade offers 500 free trades for some accounts. Bring this up with them. Maybe they will offer free trades for a year or more.

  255. Chicken Burrito

    Well, the box you check is quite hidden. Underneath several tabs in the right hand corner in the TOS desktop. The default is set to the other setting that charges a certain amt per share. The flat fee trading button is the the one you must select. I honestly had no clue nor was ever told to do that. I knew that had 9.99 stock trades and it’s on me to see that my commissions were out of whack way earlier, but I naively thought it was because of the type of stock security that I was being charge more for certain trades. Just for example–so far this year my commissions are 700 vs. what should have been around 200. So almost 3 & 1/2 time above what was fair.

  256. Robert

    Put some pressure on Gary and he’s forced to start figuring out this market! Lol, j/k but that was a nice call EOD for the rally today.

    You like pressure don’t you Gary?

    Anyways I was pondering how marvelous this is, the mining indexes prices already and what is to come on this correction. We’re already back to OCTOBER pricing on GDXJ, GDX, etc, and that is terrific IMO, with more to come.

    Silver will be interesting. It’s interesting too, not really, but needs to be observed, that it topped, significantly, topped gold’s move up weeks after. Gold was declining and silver was testing $31. I’m expecting vice versa on the way down. God knows how low silver will go, but to be honest, that is all I’m interested in. Never bought GDXJ or GDX, only hand picked silver miners which turned about 200% profit since July with some nice margin (about 150%). That was a nasty bet but it worked, and will work again. Guaranteed.

    Now I’m a little under water with my shorts- I’m f’in terrible at shorting, and I’ve had the balls and stupidity (more stuburness) to having held them since late November. I am determined to not lose on these shorts, and it’s been painful but it will work out in the end (the end should be next week? :). )

    My only fear is I’ll have to abandon ship from the shorts prior to hitting bottom because the PMs are coming out of their bottom. This is certainly a possibility, it is rare, according to Doc, to get both market and PM bottoms at the same time. Another reason to not short and just wait in cash!

    GLTA

  257. Wes

    So they charged you $35 per trade. Why would anyone ever not choose the flat fee ?

    I don’t see why there is even a choice, unless it was their intent to rip you off ?

    You can also ask (demand) arbitration. You can claim negligence on their part for not adequately explaining your options. Ask for triple your money back, and maybe they will just opt for a year of free trading.

    Good luck.

  258. Robert

    I’ve known about the gold bull, actually, I discovered it when I was in 8th grade, when I was 14, which was back in 2003. I still remember to this day looking at the paper most mornings seeing gold jump in the 300s. It’s volatility and prospect inspired me dearly. I knew fortunes would be made from it. Too bad of course I didn’t have money back then to invest, and who’s going to listen to a 14 year old?

    Funny thing is I don’t remember exactly what was so attractive about it and how I heard about it. I remember hearing about it and some voice at sometime was speaking truth about it, probably TV or net, and it just stuck with me.

    After all these years to see gold actually still in the 1300s (hopefully 1200s) soon, is an amazing opportunity! IMO, and from what I’ve studied, we are still in phase 2 of 4 of the bull. They are progressively more powerful as well. That is late stages of stage 2. Meaning HUGE, I mean way bigger than I can type HUGE money will be made over the next 5 or so years in gold.

    Exciting times.

  259. Robert

    This is actually why I dropped out of a good college and went to work for my dad’s company, so I could just build cash to buy the bull. I knew if I studied hard and got an excellent job I still would maybe only be pulling in $80k a year to start and it was worth it cost/benefit wise to just get on the bull for it’s remaining years. Obviously people question why I didn’t finish school, and I never tell them obvious b/c it’s for the opportunity in investing in PMs in the greatest bull in history, but they do see I am living well now and so we don’t really ever get into it.

    Just thought I’d share a story of a attempting to be patient young man about to get rich off this bull like the rest of you. Hang tight, pun intended.

  260. Jayhawk91

    Robert-

    Which silvers did you go with again?

    I’m thinking all in silver this next buy sign. I’ve got my watch list, but SIL, SLW, AGQ might do the trick.

  261. Robert

    Alright that was a little feminine the posts before, but I sometimes get too ecstatic when it comes to riches. Usually means exposure is too large.

    Anyways I was going to mention, for those of you that want to kill some time and watch a great documentary, assuming you haven’t seen it, on the inside to two of the best hockey teams in the world, and their charisma, check out HBO’s 24/7 Road To Winter Classic Pens vs Caps. YEs I am a diehard hockey fan, but I’ve played every sport and there is no better, hands down. I hope the Montrealans here will confirm this. Anyway here’s the link

    http://video.nhl.com/videocenter/console?id=87985Note that there is 4 episodes, each an hour, all HD, no commercials. You can find the other episode links on the net/tube if you’re interested.

    Secondly, a discovered a good site, if anyone wants to watch (this is more for young dudes I guess) any game, any sport, live you can go to http://atdhe.net/index.html and stream it. You may have to download a plug-in depending on the stream. Some HD some not. All pay per views are on this too. I tend just to frequently watch NHL.

    Lastly, if anyone wants to join me in 2014 in Sochi, Russia for the winter olympics I’ll be there watching hockey if any of you want to spend some of your silver profits. Nothing beats international hockey at the highest level.

    Good night. And no I didn’t spell check, Detriot and Calgary are in OT πŸ˜‰

  262. Robert

    Gary saved the day, as usual πŸ˜‰

    Jay, I’ll check my Schwab and get right back to you, BUT, I know I had

    FRMSF (now on the AMEX!, as AG)
    EXK
    HL
    SLW
    SVM
    SSRI
    PAAS
    SSRI
    GRPLF
    USSIF

    … and I’ll confirm the rest. At one time I was just real heavy the first 5, then I added most of the rest. I will confirm in a sec.

    I had some nasty buys though, I vividly remember my 4.93 HL buy, it seems like yesterday :). I actually saw the damn SP drop twice below that but just barely. HL is the most volatile thing on this planet besides Lindsay Lohan.

  263. Robert

    bought a few thou shares SSRI on 7/19 for $16 πŸ™‚

    HL 8/2 $4.93 πŸ™‚

    SLW a few thou shares on 8/25 for $21.23 :<)

    PAAS 8/25 23.76 πŸ™‚

    CDE 9/03 $17.26

    FRSMF 9/08 $5.05!!!! And I thought I was a little late, lol! This is one of my favs, but don’t f’around and take my shares!

    EXK 10/25 $4.8, that was ballsy, but it definitely paid off.

    GPRLF 10/25 $1.11!!!! Inflation(dot)us was pumping it, this was the $10000 stock they told you about for the donation. I should have just gone all in on this one right??? lol

    USSIF 10/25 $.48 (looks to be a dud now, I’ll probably avoid it on the next go around but I got rid of it for a 40% gain or so in like a month, go figure, that’s what the silver bull does)

    AXU 11/04 $6.8 (added this one real late, dumped it for a gain though, I do really like this one though, it is a big component of the Sprott fund, and he knows his shit).

    Did play around with RVMIF, but don’t think I’ll touch her next go around.

    I did trade in and out of a few of those positions and did well doing that, luckily!, but don’t, definitely don’t plan on doing that again.

    My buys weren’t probably better than most yours but I was heavy FRMSF SLW HL and EXK and that reaped big rewards. I also have pretty mondo leverage going on at the beginning. I took some losses in july doing some stupid shit and was trying to make up for it. Luckily silver only went up from there πŸ™‚

  264. Robert

    Next time around, I will play as follows, don’t know percentages,

    AG, EXK, SLW, HL, AGQ, SVM, SSRI, PAAS, CDE, GPRLF.

    I’m pretty sure that is a formula for massive bank, but don’t publish this or anything ;). RVMIF and USSIF semi stink to me. I might dump a little into USSIF just because it’s on inflation(dot)us’ site. I do remember your list you showed me, that’s actually why I originally added RVMIF, but to be honest I don’t have time or know enough about most of those (most too are already on the above list). I also don’t put too much into smalls or micros, why gamble when the sure money can be made big with the big silver producers?

  265. Robert

    Yeah, I need my TZA to hit $18, it’s been a killer. I saw you just entered- I’m now a Doc member too. It hit 16 today, briefly albeit. From there it would be like a 4% move down in the Russell for me to get to black, not very unrealistic. I’m not attached though, I have enough capital, if the opportunity presents itself I will jump ship and get back on silver. Frick’in Hi Ho Silver!

  266. Robert

    I don’t want to call anything out and I don’t have a price target, but I do honestly think if we see an intermediate decline soon TZA probably would reach 20+. I do have a bundle of shares so this would be nice. But in hindsight I won’t ever short this crazy fed-infused market ever again until we’re in bear mode and the gold bull is not bulling.

    I knew though that in order to be profitable in this TZA trade I’d have to not have a stop and hold out potentially much longer than I thought (I didn’t think this long though!). This has been painful, but hockey is a good remedy πŸ˜‰

  267. Robert

    I’m going to probably go 150% leverage at the bottom, this is not encouraged, but in all honestly, if shit turned, I could fund my account to make up for any calls. Hell at least I won’t touch options!

    150% in all reality is not too far leveraged. It also depends on what shares you are buying (obviously some offer more leverage than others). 150% is not for a retail investor though! Or a retiree! Don’t f around with that especially in one of the most volatile markets, silver, aka, “Don’t try this at home”. Yes it is easily 6 figures so not too easy to take the initiative to do, but DD is definitely involved, heavily…

  268. Jayhawk91

    This guy on Seeking Alpha does some nice work on the miners. I’ve emailed him and gotten his take on various silver juniors. Here’s his article on up & coming silver miners. Many have exploded, but could be good targets after this sell off.

    http://seekingalpha.com/article/227862-meet-the-next-generation-of-top-tier-silver-miners?source=qp_investment_views

    In addition, he told me he liked: Impact Silver, Arian (thinks these 2 will be home runs), Aurcana.

    I’m high on Fortuna.

    I had TZA a bit ago, then sold when the 4 day rule failed. Took a loss. Got some yesterday and sold it when the pop fell apart for 800 bucks. Hey, after taking a 12K loss early in the week I need some small victories. πŸ™‚ I’m hoping for a gap up Monday so I can reenter.

  269. Robert

    Side note. I knew the market was going to go sky high in August/July, because I do insane amount of internet DD, knew QE2 was already planned (QE3 is as well for those of you second guessing) and so I entered ERX heavy. That first whipsaw killed me and I had to dump it. Had I held onto it though I probably would be right at the same spot I’m at now, which is a great spot. ERX, triple energy, went form $24 to $60! Nutz!

    Also never play a triple ETF though ever again. They are semi-frauds. There was a massive suit, still is, for anyone that was in any of the triples for over a 100 grand, it is a class action, that they were not adjusting properly and they were not sufficiently explained to investors. They f’ed so many people! IMO one of the best scams to ever hit the street! I hate ETFs to death to be honest. The only one I’ll touch again is AGQ. Like DG says’ just short the stock! I actually tried shorting TNA recently and couldn’t get shares!

    Anyone here that article the other day, it was brushed off as conspiracy theory, but it was mainstream financial news, that, technically ETFs could go bust without their underlying derived asset going bust. Something to think about, and research.

    How can you pull gold and silver out of GLD and SLV when the share price keeps going up? How does that work? It doesn’t. Albeit it doesn’t happen that often but it has, many too many times. CEF and PSLV are nice though! Although miners will crush those in returns.

    Good night all, gotta go do some shit. I stopped drinking so less partying, more investing πŸ™‚

  270. Robert

    This guy that was connected with big oil and congress said that, and he predicted oils rise to $150 and its subsequent decline, before either move happened, and he predicted accurately the time they’d trade there, anyway, he said that the markets would basically keep going up for 2 years, he said this I thought it was in fall of 2009, but it could have been summer. That’s why I think that we’ll still have another leg up after this correction. Why wouldn’t we with QE3? That’s if the market can overcome $120 oil again (and yes it’s coming!). So this is either it right here or next intermediate top for the stock market, for a long time! I mean long time!

    He also said recently it would be gold $2000 soon, is that this C-wave top? Who knows? But I don’t forget stuff from this guy, because in all honesty he hasn’t been wrong. I would expect the worst though, the market to just keep going up and not correct, and gold to only go to $1650, silver $37, so just play it conservative, not too over zealous and you will do well. Emotions are a bad concoction with money as we all know. Just something to think about.

  271. Robert

    Jay,

    I don’t dump money into silver stocks unless they are currently mining at a respectable rate. This is a silver bull market and I only like buying silver producers. Non-producers are merely speculation. I don’t like speculation all too much. Their volatility is all the more insane of the most volatile sector. I just don’t feel comfortable putting much into non-producers.

    It is not a sure bet, they rely heavily on financing, continued, and respected high grades, and most important, advertisement. Their only product is mostly speculation. I’m not saying you won’t outperform me but I know this bull is one of the strongest of all time and I’m sure as heck not going to potentially waste any of it due to excess speculation.

  272. trond56

    Gdx has been an early indicator of Sp500 decline several times. 1 jan 2009 it started to decline 1 week before spx. 1 June 2009 it also started decline, more than 10 days ahead of spx.

    And most importantly, 1 year ago it started declining 11 january, 1 week before the spx.

    If that happens again, the miners and gold will continue down, (be dragged down by spx) like Gary says. But if the spx hold up this time, then the 1361 break will be a whipsaw that big money have used to trigger stops and get cheap shares, a ‘running the stops’.

    That’s the problem with cycles, a new bottom can be manipulated and whipsawed, like the $ break below 78.90, because so many know about and observes it.

    Interesting to see which of these 2 scenarios happens..

    Maybe the spx wil not break down now because it has broken down in the middle of january 2 years in a row. (The wolf don’t come the 3rd time..) Statistically, on the 50 and 100 years averages january is up 1%, an above average month.

    The AGQ decays over time. That doesen’ happen to DGP, which is Deutche Bank powershares. One can see it on yahoo finance – compare charts. When SLV and AGQ starts from the same level; some months late when SLV is back to the same price, then AGQ is considerably lower. But not so with DGP and GLD, there it is ok.

  273. sophia

    Gary,

    Do you really think that we could see the July’s lows in a matter of 3 weeks? It is what your charts are implying, I am not sure that it is what you meant?
    Thanks!

  274. Gary

    If the bull is about to come to an end then yes this correction will swing violently down to test the July low. The test should be successful but in a healthy bull market we should never even get close to testing the prior intermediate low.

  275. sophia

    Do you mean that you think that the market’s rally was unhealthy? I agree that it was pretty silly to rally 20-25% from the July’s lows, but 5-10% could bring the market to its sense…Even if deep inside, I hope for a nice purge …
    πŸ™‚

  276. Gary

    We certainly haven’t cured any of the underlying problems and in the process the Fed is spiking inflation in a high unemployment environment.

    If several municipalities default and Spain and Portugal tip over the edge combined with $100 oil we would certainly have the conditions in place for the next leg down in the bear market to begin.

  277. sophia

    I agree with this analysis, I am not as good as you, Gary, to price the markets levels if Spain is the next domino to fall…But I agree that the US and,to a certain extend some parts of Europe, have not solved their problems.
    Have a great w/e and thanks again for your support! It helped me a lot over the last 3 months.

  278. Bob loves Hawaii

    Hi Gary, I have been looking at charts yesterday and this morning, and I am struck by the fact that the large cap miners have had virtually zero share price growth from the Last December gold peak through today. They are actually sitting on that horizontal as support. The dollar thrugh UUP is an exacy mirror, the Euro is a mess.

    a question, is this common for the miners to break down like this for only an intermediate decline, that is fact has not even started yet for gold (1361 as my support)? Or did they already wash out and will hold here, or is something more insidious at play?

    I would think they would be year over year share growth in excess of gold’s price.

    Thanks.

  279. Gary

    Miners usually take a 20-25% hit during intermediate declines. The real expansion in the majors will come as the final C-wave rally unfolds.

    That being said why are you wasting time in the majors? The juniors an more importantly the silvers is where the real growth is.

  280. Bob loves Hawaii

    Europe is getting crushed with food and energy inflation worse than us. Euro rolling over again, this can’t be good for anyone. Our large cap exporters should really start feeling it soon.

  281. Gary

    The majors are held back to some extent by rising oil prices. It’s why they underperformed so much during the 02-08 period. Oil was spiking and compressing profit margins.

    Oil isn’t back to $147 but it is high enough to prevent wild margin expansion.

  282. Bob loves Hawaii

    One more comment before I start my day. Bernanke stated yesterday that debt destruction in this country has exceeded all of the fiscal stimulus created in the past twelve months.

  283. Gary

    I wonder how that could be since they changed the mark to market rule. Banks don’t have to write down bad debt. In the mean time they can take the Fed’s free money, leverage up, and make huge profits again.

    It’s just sad what the banking industry has done to our Fed chairman. He’s prostituted himself to the banking industry and the rest of us are going to pay the price.

  284. mamaloshen

    Gary,

    Thanks for a really excellent weekend report. You make a compelling case for an imminent stock market decline.

    They say pre-election years almost always end up positive overall, but that doesn’t mean we couldn’t get a sharp correction into the spring which I think would really catch most players off guard (every time you turn on CNBC someone invariably mentions the third yr of a presidential cycle always being positive).

    On another point I am just curious, though, when you say silver has held up better than gold recently. To me it looks as though silver just ended its rally 3 weeks later than gold and is just now catching up on the downside.

    The silver/gold ratio looks to me like it’s broken down badly on the daily charts and could decline further, maybe to .019 (equiv. to 52 on the gold/silver ratio). So we could see silver in the $24-$25 area if gold gets down to $1280-$1300. What do you think, is silver not just playing catch up to the correction in gold rather than outperforming?

    Finally, I just want to say how extraordinary it is that you take the time to answer subscriber questions individually. Most who write market letters rarely do that and one I know charges $250 to take a phone call! So thank you in advance–this goes well beyond the call of duty, and I do appreciate it as I’m sure many of your other subscribers do. I will try not to pester you more than once in a while:-)

  285. Gary

    Gold is already below the 50 DMA while silver is still above. Silver kept making higher highs even after gold had already topped.

    Usually by now silver is getting hit hard. It’s not happening. Silver is showing relative strength just like it was in July before the monster rally started.

  286. Steven

    Gary,

    Does this relative strength in silver give you an indications on the short-term (I still have some to sell as I’m not down to core yet)?

    Thanks.

  287. Gary

    Steve,
    If you read the weekend report you know where I think gold is going next. Gold is moving into the timing band for a cycle low now isn’t the best time to look for a rally, other than intraday…which you got yesterday.

    If when you get an intraday rally and you sit there hoping for more you will probably just end up riding the entire correction.

    Your goal at this pint isn’t to catch the exact top of an intraday bounce. Your goal is to get out of the way of the intermediate correction and then protect your capital until its time to re-enter for the last leg up.

    At that point you should be able to repair your account but understand what greed did to you. It cost you a priceless opportunity that you are never going to get back.

    I strongly suggest you never make that mistake again. If you will just heed my warning about leverage then you will make a fortune during this bull.

    If you don’t you will blow the greatest money making opportunity any of us are ever going to see.

  288. Steven

    You’re so right. I just didn’t follow the plan. Got it. So just sell the rest on Monday I guess is the best plan, right?

  289. Steven

    For me it would be silver (AGQ). But if it is not up in the morning then would you wait or just sell anyway or wait for an intraday bounce?

  290. Gary

    You can keep waiting until you ride the entire correction.

    The only way I would wait is if there is a big gap down. That should recover some but anything else just rip the bandaid off and get it over with.

  291. Romeo Bravo

    Steven, we have all been where you are. Sorry to hear about your situation. As Gary points out, there are no guarantees in this business,and it should be thought of as such, a business. Otherwise you are just gambling and letting others tell you were to put your poker chips. I believe he delivers some incredible insights , but anything can and will happen. Rallies go on much longer than you think, the market can fall all of a sudden.

    The thing that keeps people in this business for more than one turn is risk and position management. ONlY YOU can determine that. Keep thinking what would happen if the opposite of what you expect happens. And have a plan for that.

  292. wingman

    Robert,

    I like your list. AG (which is actually on the big board) is my SLW. It’s where I put the bulk of my $. I would say to not discout RVMID (I think that’s what you meant when you put RVMIF). These guys are producing 1.2 million oz. silver this year (not silver eq/oz.), and 9 mil/lb. copper. They also have one of the largest undeveloped silver mines in the U.S. with over 200 million/oz. ag and 2 billion/lb. copper, and this with a $100 million market cap.
    As for the other juniors I like, I’ll wait until I’m fully leveraged back into them before I list them. Thanks to Gary, I cleared many of my profits and now I’ve got plenty of dry powder on the side after enjoying the autumn run up.

  293. Mr.Mom

    So what happens after wave-c gold $1500-1600? Gold back down to 3 digits? I would like to by bullion but what is the point if deflation hits…?
    Will we ever get deflation though? The U.S. gov. is talking about another 10 years before they can get the federal budget deficit down to reasonable levels,roflol! By then we should be ~ 25 trillion in debt.

  294. Gary

    The d-wave usually retraces about 50% of the entire C-wave. If gold makes it to $1650 that would be a D-wave move down to about $1250-$1300.

  295. Wes

    Gary,

    I think the next big thing is already upon us. It’s the exploitation of natural gas.

    The US has already discovered enough NG to last 100 years, even though some states have prevented exploration (NY is one).

    I believe compressed NG engines will replace diesel in the big rigs and CNG engines will become commonplace in automobiles.

    The work involved in fitting service stations for CNG will employ many. Private homes will have their own refueling stations for those that can afford it.

    The US will become energy sufficient, and the energy will be cheap, again.

    That will make almost anything possible.

    This will be much bigger than the computer industry.

    Just my prediction.

  296. Bob loves Hawaii

    Wes, I have been buying 100 shares every month of oil MLP’s that have a large natural gas mix, forever. Nat gas companies are cheap. SJT pays you while you wait, monthly.

  297. Gary

    I doubt it. Energy exploration has been around for 100 years. Its not going to suddenly create 10 million jobs and alter the way the human race lives.

    We will have to solve our energy problems before the next bull market can begin though. A cheap and ease supply of energy is essential for an economy to grow and no secular bull market is going to bloom in the environment of rising energy costs.

    The next new thing is always a new and world changing technology. in the 1800’s it wast the railroad. At the turn of the century it was the automobile and mass production. 47-66 electronics and plastics. 80’s and 90’s the personal computer and internet.

    I would be willing to bet the next bull will be driven by as yet unimaginable advances in biotech. Maybe even at some point breaking through the death barrier.

  298. Wes

    In Atlanta, all the public buses run on CNG, and many private bus companies are also converting.

    In addition, all the trucks and cars of the gas company are CNG.

    All of this with only one refueling station in town.

    Bob, I’m not sure the gas companies will pay off big because their product is so plentiful and the barrier to entry by competitors is minimal.

  299. Gary

    The auto industry will just retool to run on NG but it’s not going to all of a sudden give birth to a whole new industry that will create millions and millions of jobs worldwide. The existing jobs in the current industry will just convert and that industry is already highly automated.

  300. Brian

    Wes, I was involved in installing Nat Gas conversion kits in cars 30 years ago. Plenty of technology. There are nat gas fueling stations in Oklahoma City and several other cities that are reliant on natty.

    Bottom line is that until oil companies are on board it won’t happen. They pass out more money in Congress than any industry. To date, regardless of the abundance, big oil has squashed these programs.

  301. Wes

    There is no real reason to retool. The conversion kits for converting to CNG from gasoline are not expensive.

    The jobs will come by the millions from the money saved from oil dependency and invested in multiple industries. Cheap fuel will make this country bloom.

  302. Brian

    The other thing is until the infrastructure is all in place it really isn’t cheaper. The tanks take up a huge amount of space, so it isn’t as viable in passenger vehicles. Lots of weight involved.

    The big calling card is the abundance, and clean burning.

  303. Gary

    Yes it certainly will allow prosperous times but we still need a new industry to create jobs, millions and millions of jobs.

    That’s not going to come from the 100 year old energy sector. The day we solve our energy problems will be the day the secular bull market in energy will come to an end.

    And sectors that enter long term bear markets lose jobs not create them.

    In 1980 the north sea oil field came on line effectively solving the worlds energy supply problem. That was the end of the commodity bull market. Commodities generally moved down from that point until the next commodity bull began in 2001.

  304. Gary

    Price will only go up if demand is greater then supply. At the moment the world has a glut of nat gas. The high prices from 06/07 brought on a huge surge in exploration increasing supply radically.

    It’s why nat gas just can’t seem to make any headway for the last 2 years. There’s quite simply too much supply.

  305. David

    The drivers of a secular bull market are:

    1) P/E expansion
    2) Falling interest rates
    3) falling commodity prices
    4) technological innovation
    5) productivity growth as a result of #4
    6) secular changes in sentiment as the public re-embraces stocks
    7) population growth
    8) disinflation

    We are presently going in the opposite direction on most of these, which is why we’re in a secular bear and will be for a while. But at some point, valuations will reach an extreme — think S&P P/E’s of 4-5, with dividend yields of %8 — and stocks will have nowhere to go but up.

    #4 — new technology — is a component, but not necessarily the main driver of a secular bull market.

    For instance, for most of the 1980-2000 bull technology stocks underperformed. It was only in the final blowoff phase that they exploded. You would have been much better off owning something like Coke, which was a 72-bagger and was the basis of much of Warren Buffett’s wealth. Even stocks like Clorox would have served you better than tech in the 1980s.

    I suspect that the driver of the next bull market will be the emergence of a real middle class in much of what is now the “developing” world. Right now, America is feeling the pain of globalization as jobs are outsourced to low-wage workers, but as these workers become more prosperous and can afford a middle-class existence, American brands like P&G will have a new 2-billion-strong middle class to sell to.

    I wonder if Gary’s read “The Singularity is Near” by Ray Kurzweil….?

  306. greg

    This pull back in silver mining stocks in a buying opertunity. There is a shortage that isn’t being shown in this weekness. The Sprott Silver trust has been waiting 2.5 months to get the silver they have delivered. I will be adding on continued weekness.

  307. Gary

    I wouldn’t convince oneself this is the bottom. This isn’t done yet. We probably still have 3-5 weeks and silver will go down along with gold but it appears to be going to hold up much better than it usually does during a correction.

    That means we will be concentrating heavily on silver again once the correction has run it’s course.

  308. Ollie

    Gary, do you find it possible that there’s just so much demand on the sidelines for physical silver and buyers flooding in on the physical market that the silver bottom will arive much sooner that the usual 3-5 weeks?

    I’ve been reading that during last week there was no reduction at all in silver net longs and only the paper silver declined due to naked shorting in SLV.

    And ultimately the physical silver demand/shortage supply situation will propel silver to highs very soon

  309. Gary

    If there was a silver shortage then you wouldn’t be able to buy silver.I’ve looked at several coin dealers. I don’t see any shortage.

    This is probably just normal human behavior. After a big move traders find reasons for why the trend will continue indefinitely, whether they have any merit or not.

    It’s what keeps people riding a bear market all the way to the bottom. Not that silver is in a bear market. But I think it is definitely in an intermediate correction.

  310. Bob loves Hawaii

    Good morning Gary, I am still trying to wrap my mind around your expectations for how far miners will fall in a intermediate correction. Looking at SLW, it has already fallen over 25% and retraced across its six months channel. Is there a fib retracement percent, or a moving average, or just time, and what ever the price in the timing window, that is it.

    Thanks.

  311. Ollie

    Gary, sorry I meant Comex open interest (James Turk’s Friday market review) as opposed to coin dealers…does that make a difference?

  312. Gary

    Bob,
    SLW is going to continue down for as long as silver is correcting.

    It got stretched way too far above the mean so it’s going to correct more severely than most silver miners.

    Ollie,
    If a big player was at risk of default they would be buying silver from anywhere they could get it. That would clear silver from the coin dealers.

    We saw this happen in 09. You couldn’t buy silver because there was none. Price dropped to unrealistic levels. This is why the manipulation theories are nonsense. Anything that forces price below true market valuation will spike demand and a shortage will develop.

  313. Jayhawk91

    Bob-

    What Gary said, but I’ve looked at some other intermediate cycles and noticed the metals themselves retrace about 50% of the move (ex-last July to Dec). During milder intermediates, the miners do around 50%. During the more severe corrections (yearly low) it seems they correct to the 61.8% Fib line. This usually is at the tail end and it doesn’t spend a lot of time around that level before starting the new cycle. This would put the HUI at under 500 & GDX around 54. I’m sure once the timing band is being hit we will know much more. Just some guidelines I watch, doesn’t mean I will trade off it.

  314. Gary

    My guess is they will. This is a yearly cycle low that gold is moving into. is only a 16% decline fro the intraday top. That’s a very mild decline for miners. I would expect the HUI at least tests 490 and maybe lower if the stock market correction is particularly severe.

  315. Shalom Bernanke

    My focus is on being patient to buy metals and miners wherever they wash out, even if it’s a current levels after a few more weeks. So the level is we end up getting in is not as important as the direction has started up again.

    When do you think we should start looking to short bonds, as they are close to entering a bear market if they haven’t already. Of course, the Fed funny money buying bonds keeps them high, but that’s been baked in the cake for awhile now. There will still be rallies, but when might you hop on the short side for a secular bear in bonds?

  316. Gary

    Why would I ever want to short anything as long as there is a bull market in gold.

    Shorting is something I only do as a last resort when nothing else is working. There just isn’t any money on the short side. The mathematics are against you.

    The second worst bear market in history only dropped 60% and it took a year and a half to do so. SLW did over 100% in 4 months.

  317. Shalom Bernanke

    I understand the bull has more upside than a bear has downside. Does that mean you always find the next bull market rather than look to make money on shorts b/c of the percentages?

    After all, “there’s always a bull market someplace”.

  318. Gary

    There was no bull from July 08 to March 09. During that time I was short. But I never waste time and capital fighting with a bear market if I don’t have to.

  319. vuvvy

    DG, would the hedge fund you’re affiliated with be interested in a GDX system that has returned 350% since GDX’s inception and has an 89% win ratio on longs and 84% on shorts?

  320. DG

    Vuvvy: I am frustrated myself because the HF is moving so slowly on my own system. The guy I’m working with has too much on his plate already and doesn’t seem to be able to even handle that much. Adding another thing doesn’t seem the best idea. The backtesting and systematizing is also a big job, as they want it to be Black Box (no human intervention; completely mechanical).

  321. Wes

    I’ve discovered something I don’t believe. Apparently, it seems that when you buy puts or calls, the strike price doesn’t really matter.

    Using June options, I discovered this by dividing the chart of one option by the chart of another option, day for day. What I get is a jagged line centered about a horizontal best fit line.

    The jaggedness is caused by the contracts trading at different times of the day with some trades being at the ask and others at the bid. My software uses the last trade of each day.

    All this implies that for a given dollar purchase, the strike price doesn’t matter. This seems counter intuitive to me.

    Anyone with options experience please help.

    I’ve done this with both puts and calls. One study involved calls at different strikes, both out of the money in November, and now with the higher in the money and the lower still out. Same thing, equal percent gains.

  322. Gary

    The delta controls price movements…There are other factors but this is the biggie.

    The deeper in the money an option (higher delta) is the closer to par it will trade compared to the underlying asset.

  323. Wes

    Gary,

    The deltas seem to be exactly proportional to the current price of the option.

    I’ve discovered something that redeems the whole exercise.

    While the out months behave as I’ve described (strike doesn’t matter), as the options get closer to maturity, the strikes do matter, and quite a bit.

    I’ll study this some more.

  324. Gary

    As the option gets closer to expiration time decay accelerates faster and faster. This is more pronounced in options that are at or especially out of the money.

    The exception is if the option is very deep in the money (delta of 90+) in that case there is virtually no time value in the option to begin with so there is no premium to decay.

  325. catbird

    Options question:

    Any thoughts on buying some Jan 2013 out of the money calls on SLW when we think gold has bottomed?

    Note: I’m not about to go long anything until Gary is satisfied gold has reached the intermediate bottom, just trying to get my ducks in a row for that moment.

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