Monthly Archives: January 2011

YEARLY CYCLE LOW APPROACHING

Sometime between early February and early April the market should drop down into a major yearly cycle low. Last year that cycle low came during the first week of February.

Since the current daily cycle is now in the timing band for a bottom we should see an intermediate top fairly soon.

Yearly cycle corrections are major corrections, only exceeded by the four year cycle low in severity. So once the correction begins it should be a doozie. The severity of the impending correction will tell us whether the cyclical bull is on it’s last legs or not.

If the correction retraces back to or maybe a little below the 200 DMA then it will be a normal intermediate correction within a cyclical bull market.

If, however, the market were to retrace all of the autumn rally and test the summer lows that will be a very strong sign that all the stimulus and money printing was for naught.

Keep in mind the next four year cycle low is due sometime in 2012. And since bear markets tend to last about a year and a half I strongly suspect this cyclical bull will top sometime this year.

As a matter of fact the market is already potentially forming a megaphone topping pattern. This pattern of wildly expanding volatility is caused by the underlying debt cancer and inflation trying to pull the market down while at the same time the Fed tries to counter the bear market forces with ever larger monetary stimulus.

The result is a market being whipped back and forth in larger and larger swings.


In the end the Fed will fail and the next leg down in the secular bear will begin, only this time will be much worse than the last one. All the Fed will have succeeded in doing is making the problem bigger.

I would suggest if one has retirement funds still invested in the stock market they get them out and back into a money market at this time until we see just how far down the market drops as it moves into the yearly cycle trough. 

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.