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. 


  1. DG

    Gary: I get why you would want to be in a bull market rather than shorting stocks, but as you are virtually out of gold, why not short the SPX for the “doozie of a decline?” Surprises come to the upside during bulls, but if we are 85% likely to drop…? It’s just math. If I offer you a bet: “Flip a coin twice. I pay you $10 if you flip anything other than 2 heads. Flip two head and you pay me $10.” You are 75% likely to win and you’ve got to take that bet. Given the hysterical bullish sentiment and cycle conditions, why not short now and cover when gold/stocks bottom? Whatever is made during the dip will multiply the PM gains, no?

  2. Gary

    Oh I suppose I could take a nothing little short of maybe a couple hundred shares just to give me something to do while I wait.

    But I’m not willing to commit real money to the short side until we are in a confirmed bear market and the cyclical trend is in my favor.

    Then the trend will rescue any timing errors. Timing errors while still in a bull market get magnified.

    We’ve already seen how hard it is to time a top. What if it takes another 5 to 10 tries before one finally catches the move? By then one will have whittled away so much of their account that they are going to be lucky if they ultimately break even on their shorting attempts.

    Just not my cup of tea. I have no pressing need to always be in the market. If I think the odds are heavily in my favor I will swing. But until then I’m content to sit in the bleachers and watch others play the game.

  3. 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.

  4. Gary

    Why would you want to go that far out? The C-wave should end sometime this year, probably in late spring.

    Just buy a few deep in the money calls (delta of 90+) expiring in the summer and you should be OK.

  5. Gary

    If you’re inexperienced then just leave them for someone else to play with. Options are very sophisticated financial instruments. If used improperly (leverage) they are a great way to turn ones portfolio to dust in the blink of an eye.

  6. Robert

    If you had to guess Gary what percentage of fund managers are aware of cycle theory and abide close to it?

    It is ironic because this insider connection that publishes on the net and his been right on, now that I think of it, is making all his long term predictions on cycle theory- it’s just that basically they know which way it’s going to turn at that inflection.

  7. David Kafrick

    I really don´t understand why people want to use options as a directional bet on the underlying asset. It is a losing game. Traders who make a fortune trading options are basically doing non-directional trades and pricing arbitrage. In order to win money doing directional trades you have to be right about the direction of the underlying asset and you have to be right about the pricing of the option.
    You should not be trading options if you don´t understand the mathematics of how it is priced.

  8. Robert

    Is it a secret? Is it something that is a truth that once more people find out about it, they will all abide to it? If it has been around for so long I guess the answer might be no, because it is rarely spoken about. Please elaborate if you may. Thanks in advance.

  9. catbird

    I know. I’m thinking about putting 5% or so of my portfolio on some June 2011 calls in SLW when we hit the intermediate bottom. It just seemed like a golden opportunity, no?

  10. Robert

    I never have touched options, but whenever I think about them or hear about them my eyes grow very large- that is a sign that I should not be using them! 😉

  11. Frank

    SLW in of itself is a call option on silver.

    The only way to get experience is to get your feet wet. In the end the important thing is to get your timing right and know how to exit the trade (if it is going right). Unless it is mad melt-down or -up like certain times and stocks in 2008 when put options on financials were just magic then I have a rule to reassess the trade at 100% profit and usually take a chunk off the table, sometimes all of it.

    And you need to be 100% committed that you can stomach the fact that there is a relatively high probability that you lose all of your money, but hopefully this probability is less than 50%….

  12. Robert

    If it seems to good to be true it usually is. The exception I have truthfully found with this is the PM bull. Honestly. And that is in spite of our currency and our neighbor’s dollar denominated wealth. We are basically wagering against our neighbor’s, and most of the world for that matter, struggling with their fiat denominated assets.

    We are not cynical is it just that this is what the Fed and ECB is doing- destroying most everyone. It may seem to good be to true with reaping in all these large sums of money betting on gold and silver, but let me tell you, for every gold/silver winner right now there are 1 million or more losers.

    You might say you’re lucky to be here?

  13. Elaine

    “Just not my cup of tea. I have no pressing need to always be in the market.”

    Thank you for saying that. I went against your advice in December and pretty much went all to cash. I know, I know… I did miss some upside, but I have been a very poor trader over the last decade and to see my small retirement funds at an all time high, was just too much to risk.

    I am so relieved to not worry about the market every single day.

    I’ll get back in when you tell us it’s time.

    Thank you for your hard work.

  14. Gary

    Since I can’t speak for everyone else I have no idea how many traders are using cycle theory. It’s not the holy grail by nay means.

    The daily stock market cycle seems to be elongating probably caused by the Fed’s monetary policy.

  15. Robert

    After I make my fortune in the markets, I’ll tell most people that it’s from just normal stock speculation- Nexflix, Rare Earth, etc., I’ll never even mention gold/silver. Gold/silver and dollar devaluation will be a sore subject for most people in the coming years. I’d rather have them think of me as just another stock market wizard versus a gold bug that turned out to be right. Gold bugs aren’t too popular status quo-wise. I’m sure most of you know that.

    99% of Americans think that the dollar will never cease to exist. 99% of Americans lost.

  16. catbird

    Frank and Robert,

    Yeah, I’m conflicted! My tentative plan remains to have my portfolio in 50% SIL, 30% AGQ, 20% SLW whenever Gary decides gold has hit the intermediate bottom.

    Then I got to thinking, why not reduce your SLW position to only 5% but put it in June calls.

    Options definitely are nothing to be cavalier with, that much I appreciate. : )

  17. Robert

    Gary, When you and Doc talk about an index returning to the lower Bollinger Band, are you using a 1-year, 5-year, or what time-frame for the Bollinger Bands?

  18. Gary

    There are any number of time frames. I have no idea which one Doc is referring to.

    The only reason I ever look at the Bollinger bands is if a BB crash trade signals.

  19. Robert


    Side note. You’re probably one of the most honest people I’ve ever encountered, and I’ve never even met you personally. You are genuinely honest and help anyone at almost anytime, even amongst these crazy days of dollar devaluation. Big props to you man.

  20. Robert

    Oh okay, Doc talks about intermediate declines, and for example for this upcoming SPY decline he predicts using BB 65,2 in the 6-month. That number would be 1150 or thereabouts.

    I guess the more I think about it you have to adapt to what the market has given you to “fit” the best BBs.

  21. JakeGint


    I’ll tell you I’ve been lucky enough to meet Gary in person and he’s exactly what he’s like on these boards.

    A real gentleman.


  22. ALEX


    Just got back from a week away and spent a good part of Sunday reading all the posts I missed 🙂

    some of that was really funny.

    To update for those who care..

    sold TZA for a 3% loss, sold @ $14.70!! Thought spx was going to rally

    sold REE for 70% gain

    sold FTK @ open mky order 1/03/11 for 47% gain

    still in GMO

    Bought ldk and EXK on Friday for quick trades (bounce on EXK to 20 dma near $7??)Very risky, I know…

  23. ALEX

    Oh Also, while reading posts -I read Stevens.
    Felt horrible to hear that kind of loss, but you cant be THAT down on yourself. That is the cost of learning,You just paid your huge college tuition…and now you learn from that mistake (we all make them).

    you may be able to save a little grace this wk with a bounce and really, if you can sell and get your head clear…we start again in a couple weeks off the low and get some $$ back.

  24. Onlooker


    I don’t understand what you mean by “what time frame” for the BBs. It doesn’t matter what time period you have selected for the chart, the BB calculations don’t change, just as withe the MA or other indicators.

    Maybe I’m misreading you though.

  25. Bob loves Hawaii

    OK, you are caling for a intermediate decline in gold/silver until the end of January, and you are calling for a major decline per your post.

    so my question is are we going to move higher in gold and silver before or after this major low.


  26. thedocument


    I should emphasize that the Bollinger you mention from my analysis is typically approached during intermediate declines, but it should not be considered a target. The decline does not have to halt once that BB is tagged… it could go much lower.

  27. Onlooker


    I fully understand that. My confusion was in Robert’s reference: “are you using a 1-year, 5-year, or what time-frame for the Bollinger Bands?” and “using BB 65,2 in the 6-month.”

    That infers that the chart time period makes a difference; which it doesn’t.

  28. Brian


    One more thing on cars and natty. Every manufacturer that I know has chosen electrification as the wave of the future. Batteries could be a big thing, but once again this has been going on for awhile. We do a lot of R&D here, but once again, it is not producing millions of jobs…. No manufacturer that I know of is putting big bucks into natty.

  29. Brian

    Onlooker, It seems people use what has worked for them. The standard or default in stockcharts is 20,2,0. Doc uses a 65,2,0, and Gary uses another period for the crash trade assessment.

    The time frame shouldn’t matter much. I checked with the default and it didn’t matter if it was one year or 2, daily or weekly, the outcome was the same. Could be Robert hasn’t used them much when he posed the question.

  30. Wes


    I think electric cars are like windmills in the sense that they couldn’t exists without subsidies.

    Windmills and electric cars (no range) will go the way of that other low carbon mode of transportation, the horse and buggy.

  31. wingman


    In your post you said sometime between early February and early April the market should drop down into a major yearly cycle low. But you have also said we are now in the intermediate correction. Are the intermediate correction and the yearly low two different events? If so, does that mean the next leg up (the big move you’ve referring to) will only last for the time between when this intermediate correction ends and the move into the yearly low begins? Please help me understand this if you would. Thanks in advance.

  32. Brian


    Perhaps you will be right, but most new technologies start with a government R&D grant (think Al Gore and the internet). Certainly not all, but a vast majority these days.

    Weekend WSJ had article about China stealing Renault’s electrification tech. Another article about GM had the Chevy Volt going 460 miles and using 1.2 gallons of gas.

    The proof of this will be if you can charge at home, drive your normal day without interruption, and be priced affordably. Time will answer these questions soon.

    Gas will probably have to stay over 3 to 4 bucks for Americans to give up their SUV’s. Lot’s of lip service, but actions show most could care less about the environment.

  33. Robert

    You’re correct Onlooker they don’t move. It was a glitch in Google charts that would move them when you’d start looking at the 5-year. This was throwing me off, but I guess it is just some faulty programming on their part. Thanks for the response though that clears things up a lot. I checked with Yahoo charts and they remain constant for all time-frames.

  34. ALEX


    Yeah,the story just showed up on Yahoo finance now too. Doesn’t seem to be contagious to other markets yet, but it keeps one alert , especially where we are in the ‘timing’ of our markets, and they’re talking about bailing out Portugal now.

  35. Wes


    I think that Renault story concluded that R’s managers gave specs to favored suppliers – probably for money, but that’s not stated.

    That’s hardly China stealing trade secrets.

    I’m not sure GM would be so involved in the electric car business if they weren’t government owned. Of course, I could be wrong about all of this.

    In going from Atlanta to Bar Harbor, Maine, I just don’t see driving all day, stopping and plugging my car in for 24 hours, and then continuing.

  36. basil

    what are the hard facts that make your prediction of a revival of the bear market any more than just utter speculation? So often you do write that you don’t have a cristal ball. Where did you find the cristal ball to predict that another bear market is around the corner?

  37. coolkevs

    Prof Depew’s commentary on the Dollar today on Minyanville is a must read – See point 3 in
    This highlights the QUARTERLY buy signal on the dollar recorded – implying at least 3 years of dollar strength! And no, these were not times when the stock market collapsed!!

    3. Dollar Rally Spells Tough Times for Emerging Markets, Gold and Commodities

    Shifting gears, let’s talk about the US dollar for a moment. Sentiment is strongly favoring a collapse of the once-mighty greenback… that, despite the fact that the dollar has already collapsed… twice since 1985.

    The chart below of the US Dollar Index features a form of technical analysis called DeMark price exhaustion techniques overlaid. In simple terms, DeMark analysis compares market opens, highs, lows, and closes to one another, counting based on explicit rules toward specific price patterns. But you don’t need to worry about all that. All you need to worry about is that whenever the dollar reaches a count of 13 (noted in red on the chart below), a long-term rally has ensued. This has only happened three times going back to the late 1960s — the most recent being the fourth quarter of 2010.

    Click to enlarge

    The first time saw the dollar rally more than 60%, the second more than 45%. This has implications for emerging markets, which are showing upside exhaustion using this analysis, gold, and commodities. There, see that? I’ve named the three most popular long-trading ideas of 2011… all showing upside exhaustion in various long-term time frames.

    Related: This American Life teamed up with NPR’s Planet Money team to explore the US dollar in a great audio report, titled, “What is money?”

  38. Gary

    We are in a secular bear market and have been since 2000. Everything the government is doing is prolonging and intensifying the bear not fixing it. Unless that changes then the move into 4 year cycle lows should correspond with legs down in the secular bear market.

    The next 4 year cycle low is due in 2012. That is how I predict the next bear should begin sometime this year.

    The process could stretch but it can’t be aborted. The Fed was able to stretch it extremely long during the last four year cycle by creating a real estate and credit bubble. I think we all know that isn’t going to happen again.

    So I really doubt this cycle will stretch like the last one did.

  39. Glen

    Robert said…

    “It may seem too good to be true with reaping in all these large sums of money betting on gold and silver…”

    Not to quibble about words, but the dictionary definition of “betting” is “a pledge of a forfeit risked on some UNCERTAIN outcome.”

    Betting is what gamblers do at the casino. The outcome is based almost entirely on chance.

    On the other hand, investors base their decisions on a careful study of the markets. There is a huge difference between investing, and betting (or gambling).

    I believe most of us would rather consider ourselves “investors” rather than “bettors.”

  40. Gary

    There is more to the market than just technical analysis. The fact that the Fed is printing dollars like crazy will eventually overwhelm any technical signal.

    In the end the market is driven by fundamentals even though technical counter trend moves do happen quite often.

  41. DG

    If the Dow closes down for the day I will get a buy signal! (unless it tanks…over 100?) These are worth paying attention to as they have been 80%+ accurate since 1980. The signal calls for an immediate 1%+ rally and optimal holding period is five days. I will cover all my shorts should we get it. If we close down big I will post near the close, because the signal could abort on a big decline.

  42. basil

    it’s still an awful long time until say fall 2012. Many sectors are still very much in the toilet and haven’t rallied far. Why do you a) expect a long grind down of over 1.5 years starting some time soon and b) expect a low beyond the 2009 low. Why would the next four-year cycle low have to exceed the previous?

  43. Gary

    Because bear markets don’t happen instantaneously. They need time to work down to a bottom. Usually it lasts about a year and a half.

    In nominal terms the market could hold above the 09 bottom but in inflation adjusted and valuation terms the bear still has a long way to go before this is done.

  44. Robert


    Fine you are an investor. I am a bettor. Makes no difference to me :). For all those also out there not wanting to be called betters, you are also investors :). Now go dress up all nicely and go out on the town, meet some people, and share with them how savvy of an investor you are 🙂

  45. ALEX

    Just sold LDK up 19% , but volume up was STRONG , believe more upside potential likely ( a lot more)

    Solars look good…see SOL, SOLF, JASO, LDK for example

  46. DG

    I plan to go flat if I get the buy. The OEX traders have been very hot and cold the past month or two. I may wind up slightly net long, butt certainly 80%+ accuracy is a bit stiff to buck.

  47. Gary

    As long as AAPL continues to climb it’s going to be tough to get the NDX headed down. Right now the stock is busy discounting another blowout quarter.

    So either we will see a sell the news type event when AAPl reports or if they miss the bottom will fall out.

    Barring some other credit event we may see the market hang on till AAPL reports next week.

  48. DG

    Poly: 80% is very good but I don’t like a 1 in 5 chance of getting tooled. Yeah, maybe the garage. The signal is generated somewhat randomly, but typically about 10-15 times a year. It has been backtested to 1980, an is just for trading, though if you are bullish and get a 1% head start it’s helpful for setting stops. It’s really been a while. The last two were 8/26/10 (up 165 the next day) and 7/30/10 (up 208 the next day). We’ll see…

  49. mamaloshen

    Silver moving up nicely today. I sold a bunch of silver miners just the other day. Hope I won’t have to buy in higher. Is there a danger of a whipsaw here?

    Gary, what do you think? Or maybe it is just an oversold bounce with another leg down.

  50. William

    Gary, looking at a monthly chart of the $SPX, knowing almost nothing about cycles, just looking at the chart, I count a period of 6.5 yrs between the trough of 2002 and 2009. Looking back earlier, 20 yrs worth, I just don’t see dips every 4 yrs. The dip of 1998 looks like a dip, not a trough. What are you looking at to count 4 yrs? Thanks.

  51. ALEX

    Bought BORN at 12.10 p.m. on High Volume surge above Todays 10 a.m. high on a 5 minutes chart

    In BORN at $ 11.35

    bought SOLF @ $ 8.72

  52. oa92000

    Marc Faber :US Treasuries Outlook: Bearish Long Term, May Rally Short Term
    “Us Treasuries Outlook: Dr Marc Faber reiterates his bearish long-term view on US Treasuries, but notes that they are currently oversold and could be a good trade at this point. But this would only be a short-term bounce as rates have likely bottomed and higher inflation will erode future returns.”

  53. Gary

    Four year cycle lows starting with 82, 87, 90, 94, 98, 02, 09 (extremely stretched cycle due to Fed intervention in the currency markets)

    The next 4 year low should come a little early in 2012 instead of 2013 because of the extreme stretch into 09.

    Often a stretched cycle is followed by a short one. Case in point the 1990 cycle low followed only three years after the 87 low. The 87 low stretched to 5 years.

  54. William

    Hmmm… well, I do believe the market moves in waves/breathes, as you’ve described for us before, but the periods aren’t precise enough for me.

    Matching your numbers to the charts:

    82 to 87 – was actually 5 yrs long
    87 to 90 – was 3 yrs long
    90 to 94 – was 4 yrs long – bingo
    94 to 98 – 4 yrs long – bingo again
    98 to 02 – 4 yrs long – bingo again
    02 to 09 – 6 yrs long

    Again, I see the wave action, but I still see cycles as a guideline and not a hard/fast trading rule. If that’s what they are meant for then yes I’d agree they exist and are useful. Thanks.

  55. Gary

    One certainly can’t time tops with cycles. That would be a waste of time.

    Cycles have timing bands not exact troughs. the 4 year cycle runs 3-5 years with the majority bottoming in 4 years. But cycles can stretch or contract depending on how much government intervention there is in the market.

    We’ve got extreme intervention right now and it’s why most cycles are elongating. We may have to adjust the timing band for stocks from 35-45 days to 45-60 days.

  56. William

    Thanks Gary, now I understand better.

    If the last cycle was stretched due to Fed QE, and if they’re still doing QE, w/no end in sight, it must make it hard to figure in.

    I’ll sit tight and continue learning. Thanks again.

  57. Rod


    I think you’re right. They’ll hold this market up till AAPL reports next week. That would be the time to look at a small short position.

  58. Gary

    QE can’t fix our problems. Just look what it gave us last time. Yes the stock cycle stretched 7 years but that brief period of phony prosperity was followed by the second worst bear market in history and the second worst recession since the Great Depression.

    Quite a price to pay for a fleeting and phony economy.

  59. Gary

    I think big money wants one more up day somewhere to unload another batch of SPYDER’s.

    I expect to see another SoS day soon.

  60. William

    Good post on the market tipping over soon, Gary.

    Check out AA’s black candle today, even though it beat earnings. If good news can’t make a stock rise, it will then fall. AAPL also showed selling in the last 30 mins.

    I’m 100% in cash, waiting for the bottom in PM’s, spending my days cycling and powerlifting – tho not rock climbing as I prefer to live. 😉

  61. Gary

    It’s been cold and or raining in Vegas for the last three weeks so I have just been olympic lifting hard in preparation for my next tournament in Feb and the Nationals in April.

    Hoping to get out later this week and do some climbing as it’s supposed to get back up to 60 later in the week.

  62. William

    Olympic lifting is rare in the US isn’t it? Is it finally taking root?

    FYI I added 20 kg to my squat last week just by focusing on one small technique – at age 51 I was surprised.

    Olympic lifting looks like it has a ton of technique – amazing lifts.

  63. William

    I mean, I can bench 150 kg pretty easily, but it takes a special kind of insanity to try to snatch it. Just unbelievable. One false move and you can be sipping out of a straw the rest of your life.

  64. Bob loves Hawaii

    Thanks, it just seems like this window between these cycles and this massive push up in the miners are condensing, so I was not sure if was am missing something.

    Earlier posts had us rocketing higher into March coming out of this intermediate bottom, and now this yearly low is coming in Feb-April.

    Seems like the yearly low is creeping backwards.

  65. Gary

    We haven’t put in an intermediate low in stock or gold yet. We have to get by that before the final leg up caa begin.

  66. Gary

    Yes olympic lifting isn’t extremely popular in this country. It’s a fairly hard sport to master and requires speed and flexibility on top of strength.

    Most lifters have or can develop strength but they often lack flexibility and speed. Sprinters usually make excellent olympic lifters.

    Throw in that it often takes several months to learn how to do the lifts properly and you have the recipe for most people just sticking to bodybuilding or powerlifting.

  67. Onlooker

    SPY was on the BOW list early in the day as big money pushed the market back up to distribute into; theoretically at least. Then it disappeared towards the end of the day, adding more evidence to that theory.

    Also AAPL ended up at the top of the SOS list with a pretty big number of about 384 million. It’s all adding up.

  68. William

    AA falling further in aftermarket … more than erasing today’s gains on the black candle. Gary, you got this one spot on.

    Gary, good resource on sports medicine if you don’t know already: Dr. Gabe Mirkin – see He’s Lance Armstrong’s sports doctor – a former runner, he now rides (a bike) as he blew out his knees. He speaks a lot about a wide range of subjects. For instance, I learned from him to eat protein and carbs immediately after a hard workout. Before, it took 7 days to recover from a hard squat day, now it takes only 5. He taught me that recovery is just as important as the tearing down, in order to increase. My cycling is also much better now, as I mix up long rides (100 mi/2X week) with interval training (for cardio, 3X/week). He doesn’t speak to olympic lifting, but I’m guessing the same stuff applies. FYI.

  69. Gary

    A recovery method I often use is 2-3 minutes in either a hot tub or shower followed by 15-20 seconds in cold pool or coldest setting on the shower.

    The warm water causes the muscles to expand and take in fluids diluting the lactic acid produced during a hard workout. Then the cold bath contracts the muscles squeezing out some of the acid.

    Do that 3-4 times in a row after hard workouts and you will recover quicker and be a lot less sore the next day.

    You do have to wait at least a half hour to hour after the workout though so the body can recognize the strain on the system and adapt before cleansing the toxins.

  70. William

    … fixed a typo …

    That sounds like some kind of Norwegian torture system from 24. It must work though, as Norwegians are super strong/flexible/fast, as in cross country and jumping. All of our best jumpers at the Univ of Colorado were Norwegians. Good luck w/it, but I’ll pass as I can’t handle the pain!

    FYI I just realized an analogy between sports and trading – that downtime and doing nothing is just as important as doing the activity. Come to think of it, isn’t that a Jessie Livermore quote?

  71. Gary

    The only thing that has any significance is the Spyder’s. Everything else is probably just one or two funds adjusting positions.

  72. William

    I am blown away. Absolutely blown away. Most folks have no idea what this is. Thanks for sharing.

    If his fingers are thin enough, I wonder how well he’d do on a rock.

    FYI, from Boulder, I rock climbed for 15 yrs, and I practiced powerlifting to get stronger w/out adding weight. Alas, after my 3rd ground fall at age 35, I switched to cycling.

  73. Gary

    He’s really short. About 5’1″. Most good climbers are tall and extremely skinny. So probably not so good.

    I met him at a tournament in Hungary years ago. He was still a teenager at the time and two classes lighter than me (132 lbs.)

    I watched him toy with my best ever clean & jerk (385 lbs.). It was humbling to say the least.

  74. Bede

    “The Pocket Hercules” due to his small stature (1.47 meters, approx. 4 feet 10 inches) is the second of only seven lifters to clean and jerk three times their bodyweight.

  75. TZ(5288)

    Some thoughts…

    Before the last leg up in a move (what we expect is coming soon starting in a few weeks) there is a congestion that is usually a triangle or a channel. NOT so much a *correction* or pullback.

    The difference is that one retraces much of the previous move to shake people out. The other doesn’t go down much. Instead it simply goes sideways and then resumes up after whipping people around multiple times.

    July was a correction example – we pulled back and retraced much of the move up.

    Nov/Dec 07 and Feb/Mar 06 however show the triangle/congestion action before resumption higher (into a final surge to a top).

    In those examples you did *NOT* get much retracement of the previous move. Just like is occuring now (so far).

    I’m aware of Gary’s scenario (and others) of pullbacks to 1300 or 1265. I’m also NOT saying that my congestion-then-up scenario here is the most probable outcome.

    What I *AM* saying is it has historical merit and also the current market environment makes it feel very possible. The odds of what I suggest here are high enough to warrant consideration.

    I’m thus suggesting, perhaps, that the low on friday might be the lowest to expect as a pullback (or something close to it). You can draw both congestion channels and triangles which include gold’s trading zone of the last 2 months. These draws would look very similar to the previous 06 and 07 examples.

    Gold does not HAVE to pullback to 1256 or 1300. That’s what I’m saying.

    If, for example, my congestion theory here is right, then we could easily see friday be a low that HOLDS. We could see a return back up to the trendline high (last two gold tops) around 1420. Gold would then dip down again (to keep up appearances of still more pullback coming). And then….BAM…shoot higher off and up to $1650.

    I didn’t say this is the most likely scenario, but those who aren’t pondering it or looking out for may be making a mistake.

    Also, I would be open to comments of anybody who wants to explain the 07 and 06 congestion examples. I’m assuming those were intermediate lows, but neither one of them retraced much of the previous move which now seems to be what gary is expecting.

    Gary: If those *were* INT pullbacks and they didn’t really come down much, then does my alternate scenario here have credibility?

    For the record, I’m considering an entry on the metals here with the idea that friday was a low that *will* hold (either within a channel or triangle). Such an entry (if I do it) will have a small stop and won’t hurt me if I’m wrong.

    I haven’t yet. And I’m also aware of people who will say “The market is moving exactly like it has to to make you THINK it could resume going up.” Maybe. But those two earlier examples show it can to *exactly that*.

  76. TZ(5288)

    When looking at or pondering the chart for the channels or triangle congestions which I suggest we may be in, consider (as I am) that the EARLY congestion in gold (oct and first-november) were trashed by the surprise silver hike and crash as well as the QE2 anticipation and announce.

    So, I look more at the resulting action from mid nov to now when pondering a congestion. I think the earlier time is a bit messed up.

    Using the period after the margin hikes and QE2 junk, there is clearly both a possible symmetrical triangle and/or slight downsloping channel to gold.

    Same patterns as 06 and 07.

  77. TZ(5288)

    James Turk is also in the camp of what I’m suggesting. In fact he even put high odds of the 2011 YEARLY low of gold being in the first week of Jan. I.E…..that same friday.

  78. TZ(5288)


    Your opinions as to how the INT cycle pullback applied to the 06 and 07 dates I mentioned above welcome too.

    Specifically how they didn’t really show much of a pullback before resuming higher and how that might be happening now.

  79. Gary

    Intermediate cycle lows are almost always easily spotted on a weekly chart. We have nothing that qualifies yet. As a matter of fact we only just did get a weekly swing high. Intermediate lows usually last 3-6 weeks not one.

  80. DG

    Brian: I bet a single tire, not even the garage. I bought 500 SPY at the close, but more importantly I covered my moderate short stake (about $200k), and I am dying to be short, so that was much more of a concession to the buy signal than the small purchase.

  81. TZ(5288)


    Looking at Nov 07, I gather the INT low was the week of 11/18/07.
    It made a swing low and never went lower…then proceeding to rally up to the final top.

    Using that week as an example, why couldn’t 11/14/10 be an equivalent INT low. We have already traded higher than it and we haven’t gone lower since.

    What am I missing cyclewise. And if the INT lows are easy to spot, then which week is the INT low end of 07? And why does that example not hold for now?

  82. Gary

    For one the stock market hasn’t corrected yet. When it does the dollar will almost certainly surge higher. I made this mistake last year, getting in ahead of the stock market correction and had to suffer a pretty stiff draw down.

    This time I will just wait patiently. Gold won’t get away from me. I will know a new cycle has begun long before gold reaches $1500 and probably long before it reaches $1400.

    So for now I’ll continue to bide my time until the stock market correction runs it’s course. And gold dips down into what I consider a major yearly cycle low.

    I don’t think that minor little dip in Dec. qualifies.

  83. TZ(5288)


    I went back to the old blog site to see if i could find a chart where you showed daily and int cycle calls on gold from sep 07 through december 07. Can’t find anything.

    Can you tell me where you marked them. My best guess is:

    10/4/07 – daily

    then I get lost. Either:
    10/22, or 11/20 as the next daily

    Then I assume 11/20 is the INT low too.

    12/17 – another daily low?

    1/22/08 – daily it seems obvious.


  84. Rebecca

    Just my two cents. Gold closed below 50 DMA for four days now. 50 DMA has been support in the last rally and now has become resistance. What is happening here is that Gold is going to retest the resistance, i.e. 50 DMA (currently at $1381). I agree with Gary’s cycle analysis that the correction is far from over and that the retest should fail and the correction will resume.

  85. TZ(5288)

    Are the subscriber daily’s from back then available somewhere? (I’m a current subscriber now but it isn’t on either of the two current sites I have links to).

  86. Gary

    I don’t think I would make the mistake of thinking this C-wave is going to be the same as the last one.

    I already made that mistake last year. There’s no need to make it again.

  87. TZ(5288)

    My argument was that before the final surge upward in a C there isn’t as much of a correction as there is a sideways consolidation.

    I obviously don’t know what will happen, but I gave two past examples where we went sideways instead of a significant drop before the last leg up.

    I’m just trying to gather why you are more expecting a large drop despite two examples seemingly different. I’m also trying to apply cycles to those examples and it isn’t as easy for me.

  88. TZ(5288)

    My NUMERICAL opinion that we have already seen the lows on this pullback (perhaps fri; or perhaps one more close retest) are, say, 25%.

    If we rally back up to 1420 I would raise that to maybe 60-75%.

    But obviously 25% isn’t me saying something is certain. It just seems plausible for reasons I said. I’m well open for disagreement and pointing out errors.

  89. DG

    Wes, Brian: The most likely buy signal failure is a gap down the next day. If we open flat to slightly up tomorrow I may buy another 500-1000 SPY for a few-days trade.

  90. Gary

    because both of those examples were T-1 patterns this on isn’t. It has or will have three legs instead of two.

    Those two corrections didn’t occur in the timing band for a yearly cycle low. This one will.

    Both of those times the dollar was dropping into a yearly cycle low. This time it’s rallying out of a yearly cycle low.

  91. TZ(5288)

    PS: Like I said…i’m NOT long or doing anything stupid. I’m simply open to alternate scenarios as a good trader.

    If you remember, my similar thinking got me in BEFORE others here on this board as we shot up in the last week of the year….cause I was looking for it. (I also exited nicely and still managed a small profit by being in early with tight stops.) I’m not bragging. I’ve had my share of bad calls too. But looking out for the unexpected has benefits.

    So my ponderings here I simply see as good strategy. I haven’t deviated from the plan or gone off the deep end…yet. But when I do, I’ll have a reason and a tight stop.

  92. TZ(5288)

    I have a system with specific entry points that allow small stops. The entries are picked to increase the odds of accurately hitting a low beyond simply random.

    I will illustrate as gold drops in real time into the INT low so we can all see the results – for better or worse. I’m willing to let the calls speak for themselves.

  93. William

    TZ – side note on James Turk – he’s a great man, with absolutely impeccable integrity, and he has perhaps the best mind and fundamental grasp of the whole gold & fiat currency story.

    I met him here in Tokyo once, as he treated me to 2 breakfasts, so I was able to pick his brain a bit. A younger inexperienced trader then (vs. older and inexperienced now), I’ll have to tell you that his preferred trading style w/regard to gold is to cost average in – buying $x every week or month.

    Yes I heard him too say that gold could be hitting the low now for 2011 (on Chris King’s blog), but the net is that he’s a cost average trader, and he’s not really trying to be a pro trader here by announcing the correction is over, believe me.

  94. RA


    I am trying to understand how you determine yearly cycle lows on the SPX.

    You mentioned that the last yearly cycle low was in Feb 2010.

    I noticed that SPX went on to make a new high in Apr 1010. This is followed by a drop to a new low below the yearly low of Feb 2010. The new low was about 1010 in Jun 2010.

    So my question is shouldn’t the last yearly cycle low be the June 2010 low instead?

  95. RA


    I also want to highlight that your chart indicates Jun 2010 to be the SPX yearly low although your text says Feb 2010.

  96. TZ(5288)


    Yes…Turk says “keep buying”.

    However as founder and CEO of goldmoney and as someone who has to manage the buying/flow/and inventory of over 1.5billion in metals, I suspect he has a pretty good amount of inside (the legal kind) information. I think he’s plugged in a way many other aren’t. (I would say Eric Sprott is similarly plugged in due to his funds and buying).

    Anyway…Turk also made excellent calls since Aug that have gone well beyond simply saying “buy and hold”. He really excelled on silver.

    So…he’s falible like anybody, but I’m willing to weight his comments highly.

  97. Gary

    The 09 yearly cycle low came in March. Barring the BP oil spill I think the 2010 yearly cycle low would have come in Feb.

    But those times where it has stretched into the summer like it did last year it has meant the next yearly cycle arrives in the spring not summer.

    The current daily cycle is going to be on day 37 so the market is starting to get very long in the tooth for a top (unless one has already been made.)

  98. Gary

    Because I know the question will be asked today. No we will not be re-entering until I either see something that looks like a true intermediate cycle low or gold reverses the pattern of lower lows and lower highs.

  99. Steven


    Do you think that the big players are going for one more push above a big round number to create the liquidity? $1400 ad $30 are within easy reach if they wanted to push the markets above those numbers. Perhaps they are seeing just what you are seeing in the ITor for other reasons think the PMs wil correct.

  100. Steven

    Any opinions on the effect of all thse Euro financings his week on the PMs. On the one hand if they go well (and I assume they will because the ECB willstep in if need be and alot of the tading partners have already pledged to paricipate such as China and Japan). If it goes well then I will assume the Euro will appreciate and the DXY will go down which is normally positive for the PMs. On the other hand I don’t know how much buying has been doneby Europeans concerned about the Euro and this demand may decrease which is not positive for the PMs. Thoughts?

  101. Gary

    You’re just going to drive yourself nuts with woulda, shoulda, coulda scenarios.

    I explained our game plan in the earlier comment.

  102. DG

    Looks like another good buy signal shaping up. Glad to have covered all my shorts yesterday, and should net enough on my SPY purchase to buy toothpaste for the week. I hope to get some sort of a clue to reenter my shorts, and that we get more than the past few minor down days when I do…

  103. ALEX


    In BORN at $ 11.35

    In EXK @ $6.35 Friday

    still in GMO

    bought SOLF @ $ 8.72

    bought JASO @ $7.56

    solars look very good chart wise ( see ldk, sol, solf, jaso, )

    still trading this mkt when set-ups look right

  104. Driver


    In order to see that gold reverses the pattern of lower lows and lower highs, what will fulfill that in your thinking? Thanks.

  105. DG

    Alex: two things—nice looking chart patterns. How do you find them?
    Also, much more interesting and useful if you post the setups before they break out, or at least right when you buy. saying “Bought XYZ this morning at 12” when it is now 13 is, well, who cares? SOLF was close to when you bought it and I might have ought that one had you posted it in a timely way. (Nice trade, by the way).

  106. Redwine


    We still haven’t had the move below 1361…not in NY trading anyway. I still don’t understand the reasoning of switching the hard stop from gold to GDX and then to HUI. Isn’t gold the primary indicator due to it’s price stability relative to the highly volatile miners?

  107. Gary

    Yes gold did move below $1361. I’m using stockcharts for my data and I show the intraday low on Friday at $1353.

    Both gold and miners are making lower lows and lower highs. That is the definition of a down trend. I either need to see that reverse or something that looks like a true yearly cycle low before I’m ready to jump back in.

  108. DG

    Looks like $BPGDM (gold miners bullish percentage) had the right idea again for gold. It gave a sell at the november peak and we finally have started down. Well, $BPENER (oil sector) is also now on a sell. Didn;t get as overdone as gold (it’s now 82) but anything above 80 is a sell once it turns down (which it has).

  109. Gary

    The energy stocks seem to have more or less decoupled from oil and are now just trading along with the stock market.

    I expect they will head down when the stock market does even though oil may have already topped.

  110. ALEX


    2 things –

    I DO usually post as I buy or see a set up, but I was away last week and didnt remember my password to this blog ( my home p.c. usually logs in automatically ) so i couldnt post here then. 🙂

    And I have also mentioned ‘set ups’ and how I have developed them when asked by ELAINE in the past , but to save time , I just post and if someone asks…I explain
    Only Jayhawks and Elaine have had discussion with me about my trades.

    On this blog I value thoughts by GARY, you DG , Jayhwaks , William, TZ , and MANY others , so I am here often and post often. Look back and you’ll see…I post as I buy or before usually. Even yesterday…1st day back from vaca I posted buys….no one asked what I saw. so I saved time and kept trading. (see yesterdays posts)

    2nd thing, WASNT IT YOU that was asked once and you said…”I cant tell you how I see set-ups. Its propitiatory and my boys want me to keep it secret ,but I got a buy signal” …. very vague 😉

    no offense, I respect that.

  111. ALEX


    Semi apology here..i looked at yesterdays posts…this was all I said about Solars. Didnt say I had bought it yet.(SORRY) Earlier I announced I bought LDK…and was selling it…I wrote –

    Blogger ALEX said…

    Just sold LDK up 19% , but volume up was STRONG , believe more upside potential likely ( a lot more)

    Solars look good…see SOL, SOLF, JASO, LDK for example

    January 10, 2011 10:42 AM

  112. ALEX


    quickly I replied to you that I usually DO call set ups and buys ahead or as I buy, but was on vacation last week, and forgot my log on ( home p.c. logs on automatically) so yesterday was stating what I bought.

    I dont detail set up to save time , unless asked (Elaine and Jayhawks have asked in the past).

    then I said…DG, DIDNT someone ask you about your ‘buy set up’ and you said, “its proprietary and my boys wont allow me to reveal it” ?? I think that was you.

    😉 no offense, just saying

  113. DG

    Alex: I am setting up a hedge fund and am under a non-disclosure contract not to reveal HOW my buys and sells work, not WHEN I get them. I see not point in doing something g illegal. What would you have me do? I post my buys and sells both ahead of time and when I get them (as I did with the buy yesterday.) I also posted, ahead of time, that I would add on a pullback after a positive opening, which I did. Your buys look like obvious chart patterns to me, and I am not asking how you decided they were worth buying (I can do that myself). I was asking how you found them, and to post “Hey, here’s a good looking setup that may be coming.” Otherwise, what’s the point of posting? I post to help other bloggers. If my buy signal helped Wes hold off on shorting, or Poly to take a trade, that’s great. Otherwise it’s just “look at the great trade I made last week.” No point. Especially since people trend to only post their winners. I hope this makes sense.

  114. DG

    Re the buy signal: It calls for a 1% move, which we are probably going to get now. Backtesting has shown that the optimal holding period is five days, after which it randomizes, but I am not sure. There has to be some number of days that’s optimal and this may just be data mining. I have no good exit strategy. I will probably just sell when it looks right to on the tape after the 1% has been tagged (which means I am 52% likely to get it right).

  115. ALEX


    Makes sense , and I agree. I post all my trades, I just dont have many losers. I posted that my TZA was a loser yesterday.
    And I said “no offense, I respect that” when I said I thought you wouldn’t reveal how you found your set ups 🙂

  116. DG

    I wasn’t offended Alex, it’s just your comment seemed apples to oranges to me. I like flat base breakouts on volume myself and would love to see them when you do. Do you just look at a lot of charts? I have programmed some of my stuff into and can scan for certain setups, but not those.

  117. DG

    David K: Yes, but again, I have no firm system for it. Most of the failures come with a gap down, so I tend to cut them off before 1% down based on that. But 1% down means it has failed for sure.
    The only thing I can’t go into is how the signals are generated. Everything else is fine. It’s very expensive to set up a fund and the last thing they’d want is for me to post the guts of it and have someone across the street start one. Using options, the buy signals generated at 27% annual return with a 9% maximum drawdown. for 1980 to 2005.

  118. ALEX

    YES DG

    I scan for certain set ups
    ( example: alerts from High volume % gainers)- but then I put them through a number of criteria , eliminating any that fail , and it leaves me with a hand full of stocks that I feel are ready to break out NOW. LARGE volume at that breakout is KEY!

    At that point, risk is minimal , because if they do not do what the chart said they should, I am out.If they DO breakout, I jump in with price projections and ride . I will give you an example in a new post.

  119. GGuy

    Gary,about gold:

    Have you considered that we could have just started a new intermediate?

    My cyclical indicators say so, but they tend to anticipate so it’s 50/50 now.

    PS: remember when i told you that 11 Nov we had the intermediate low on stocks? If you try counting cycles this way, all movements since then fit perfectly. And we have just started a new daily cycle, so unless it fails in 1st week, 1300 here we are…

  120. Gary

    Anything is possible, but at this point nothing has happened to confirm that so one would just be rolling the dice.

    Without seeing something that looks like a true yearly cycle low then I have to see a pattern of higher highs and higher lows develop.

    If that happens then I will jump back in. Right now gold is just in no mans land and it’s still a little early for a daily cycle low. We should see one more push to lower lows sometime this week or early next.

  121. DG

    David K: No, unfortunately. The 1% is the Dow movement. Since you are buying calls your risk is much higher. You calculate delta so that you buy enough calls to go long 3 X your account value. Still, at a 9% maximum drawdown and 83% accuracy rate of signals, you never sweat.

    SB: We plan to do 2/20. The system is entirely non-correlated which makes it super-valuable. In fact the buys worked great in 2008. Best buy in history was 10/10/08. Dow was up over 900 points the next day! No fees are set yet as we have more testing to do (exit strategy for example).

    Alex: Great. I’d love to see whatever you feel to post in real time. Hell, buy it first and I’ll push the price up for you!

  122. Gary

    regarding the stock market one can always arbitrarily pick a spot and call it a cycle low just so they can make it fit in the normal timing band.

    I don’t do that. If it doesn’t look like a standard intermediate correction (ie test the 200 dma) then I consider that the cycle is stretching.

    About 9 times out of 10 this turns out to be the case.

    There was nothing about the Nov. dip that looked anything at all like an intermediate correction so I won’t count it as such.

    I will just continue to wait for a correction that fits the normal depth and duration parameters of an intermediate cycle decline.

    And more importantly it will have to skew sentiment back to bearish extremes. The November correction hardly even made a dent in sentiment.

  123. DG

    SB: Sorry I didn’t t answer the 2nd part of your question. I will post here when the doors open. Frankly, at this point, the damn thing is taking so long I am a little discouraged. but I just got an email yesterday for one of the partners saying we are back on track after a long delay (they have a lot of stuff going on sand while it’s a big deal for me, i am just one item on their to do list). Sometimes something is close enough you can just taste it, but getting the damn thing to birth is frustrating.

  124. ALEX


    Your question was how do I find them? I guess I do look at a lot of charts and create a list for future reference..and alert to trigger price action or high volume.

    EX;GMO Its previous run up from $3 to $6 on 6x avg volume catches my alert. then it consolidates (flat base) on light volume. Then it breaks out on huge volume.

    If I look at GMO on a 6 month wkly, I see A-B-C-D with proper volume , and that says it went from $3 to $6 (a-b), then $6 to $5 (b to c) , now it should go $5 to $8 (c to d) unless it tells me otherwise.

    And it pulled back to its 20sma on daily chart, and took off with volume today.So on a daily it went from $5 to $7 , back to $6 , now to $8. confirmed daily and weekly target of $8…until it tells me otherwise.

  125. ALEX

    I will post current targets as I see/prepare to buy them.

    I fail to post what I’m looking at for fear that someone jumps in early and it fails. These patterns CAN FAIL OBVIOUSLY, but I have no problem posting as I buy or even right before.

    no recommendations ever given, just what I’m doing 🙂

  126. DG

    Great Alex. I also like those patterns and would love to see them. As for people jumping in ahead of time and it failing, from my perspective, that’s their problem. People who trade without discipline will lose money one way or another. Not posting to protect them is thoughtful but unnecessary. Gary screams NOT TOO MUCH LEVERAGE, or GET OUT NOW and people still don’t listen. Losses are a great motivational learning tool—perhaps the only motivational learning tool.

  127. DG

    Wes: I don’t know about Alex, but…DROOL…that was a great buy at 14.50. It had gone dead and flat, volume started to build, and then it broke out on big volume. Post these things earlier guys!! (if you seem them before the breakout)

  128. ALEX


    It would’ve , but I have a hard time trading stocks with lightish volume, because when they peak or sell off, its so hard to unload quickly.

    good volume today, but some days are 4,000 , 3000, and 10,000 and trying to get out when others are selling hurts. you’d need to sell on the way up, for sure.

  129. DG

    Possible short: FCX near 122.50 (the high). Light volume rally today after high volume decline a few days ago. MACD negative divergence and bearish cross over. Reversal off the new high last week to close down for the day. Stop at 122.50, so shorting near there is very small risk for 5-7 point drop.

  130. Wes


    Your system will certainly be tested over the next two days, based on historical data.

    For times when the trailing month is positive, the Tuesday and Wednesday after the January unemployment numbers are as follows:

    Tuesday is up 4 times, down 13 (since 1980).

    Wednesday is 8-9.

    Tuesday-Wednesday is 5-12.

    One percent moves are 0-6.

    The last 6 Tuesdays in this spot were down.

    There have not been any back to back positive days (Tuesday+Wednesday) since 1980.

    I’m pulling for your system to beat these odds. If it does, I think you should point out to your partners how unlikely it was.

  131. Wes

    Alex, DG,

    CVU is the only stock I own, and I own it in size.

    I just don’t believe in investing in my second best idea.

  132. TZ(5288)


    Congrats on the stock buy trade. A question….

    Earlier you said that the system was backtested and worked 80% of the time (when long), but the actual trades were somewhat random and unexpected at times. You would simply get triggers here and there but without much foreknowledge or seeming correlation to anything else.

    If someone looked at your system, would they say the setup parameters actually made some sort of logical SENSE? Or do the parameters themselves work, but from objective view seem totally RANDOM?

    For example, a logical setup might be like this:

    “I wait for stocks to go up straight 6 days in a row, then I look for the first day after that where the dow opens, rises high, then collapses back to within 0.25% of the open (putting in a spike top) and then go short for a 1% gain.”

    This makes logical sense as to WHY it might work.

    Contrarily, your system might be:

    “I wait until the dow trades in the following daily pattern: down, up, up, down, down, up, up, up, and then down, but only if the last down is on the first monday of a month. If it is, then I go short for a 1% gain”.

    The second example might work as well, but it completely defies logic as to WHY and your comments suggest you have a system that is in that second category instead of the first.

    I’m just curious which it is and how you found it. If it is a logical system then I would guess hard work and a bit of luck. If it seems totally random instead I have no idea.

  133. ALEX

    well in that case , CVU

    nice run Oct to Dec , and nice flat base. Solid volume break out today, so supply/demand looks right. for a possible a-b-c trade, you could say:

    a) $9.35 to b) $14.30 = roughly $5 run up
    …flat base at $13/$14 area, Solid break out w/volume today , could run –
    c) $13.25 + $5 = to d)$18.25

    ( it could extend and run higher), but if you re going to sell, be ready. Light volume stocks sell off fast.

  134. EricH

    We’re in uncharted territory in regards to patterns, systems, chart patterns, planet alignments, palm reading, etc. with what the fed is doing.

  135. DG

    Wes. Interesting stats. Let[‘s see what happens.

    TZ: It is logical and based on divergences. That is, the Dow is down off a specific (but common) pattern and some other items are not. I started 35 years ago with something that was better than random, but not great. Tinkered and tinkered, and then one day—light bulb. I “knew” it worked but couldn’t prove it till the HF tested it some years ago. The rules are remarkably simple so clearly no data fitting or data mining involved. In fact after testing it, the head guy went back to his quant and said, “This can’t be right. run it again” so they redid the study and still got a 27%ROE/9%Max DD. On some level I don’t know “why” it works (that is, why those indicators and not some other ones) but after 25 years of data who am I to argue?

  136. TZ(5288)


    What is your preferred testing platform? I’ve used Metastock, Tradestation, and even some custom programming. Tend to use mostly Amibroker at this poin.

  137. DG

    TZ: I don’t have one. I just tell the HF, “Hey, test this” and their quant does it. I don’t know what they use. My trading none-system trading is based on some stuff I programmed into stockcharts to use as screens. I have an opinion based on sentiment and then looks for tape-reading clues (reversals, light volume rallies, declines to a rising 200 day line, etc.) and some chart patterns.

  138. Jayhawk91


    I was long 5000 JASO last week and sold it too early. Solars are looking very strong…My fear of intermediate top caused me to cut this one. I hate being long anything with the intermediate top looming large.

    What other sectors/stocks are on your watch list these days?

    CDE looks tempting to short here.

  139. MBS

    You may have mentioned his somwhere on the stream, but we now have a swing high in the dollar and swing low in gold. The looming yearly low in SPX is keeping you on the sidelines?

  140. ALEX


    Please dont..

    CDE looks a bit more like someone knows something…

    no news yet its up on what will be double avg daily vol ( 7 millionish end of day)

    I see the gap you may think will fill, but this could break out tomorrow over that $28 high, and you’ll see people piling in, that would hurt. Risk/reward wise…doesnt look favorable

    looking mostly at solar/metals/energy (NEP, FFHL , etc)

  141. DG

    O.K. I wimped out and sold all my SPY. If I buy something and get decently in the black I tend to get out at break even, unless I am confident of the trend. What I really want to do is short, so holding 1000 SPY is not my cup of tea right now. It’s unusual for a buy signal to start out that well and not work, so someone else can make some money if it rallies later. I am happy to be in cash and keep looking for a short entry for now.

  142. Wes


    A couple of interesting things happen to CVU when it starts closing above $15.

    First, the market cap goes above a million dollars, making many, many more funds potential buyers.

    Second, and I think this is a biggie, it starts being listed on IBD’s 100. Then, almost anything can happen.

    I’m in this one for the long haul.

  143. DG

    O.K. I wimped out and sold all my SPY at break-even. If I buy something and get decently in the black I tend to get out at cost, unless I am confident of the trend. What I really want to do is short, so holding 1000 SPY is not my cup of tea right now. It’s unusual for a buy signal to start out that well and not work, so someone else can make some money if it rallies later. I am happy to be in cash and keep looking for a short entry for now.

  144. ALEX


    I wasnt aware of that , and it s true that funds mostly look at stocks over $10 or $15
    I follow I.B.D. too. thats interesting.

    Jayhawks , thanks for the chart. I was looking at GDX,SIL, that way too (along with 20sma and 50 sma) maybe THATS why you thought CDE looked good short here, but I still think someone knows something there…buying volume is large going UP.

  145. Brian


    I own CDE. Cut it in half after the breakout over 24.86 stalled on the weekly chart. It is now against a 5 year downtrend line on the monthly chart.

    Jay, You know better than to short silver. Short something ugly!

  146. Brian

    Wes, What makes this one special? It is a crowded playground and the military is talking huge cut backs. Margins are what could be expected. Is there some explosive growth coming from somewhere?

  147. TZ(5288)


    I assume when you went seeking someone to partner with and start a hedge fund one of the issues was how to securely reveal your technique while still protecting it.

    How did you handle that situation?
    Did you simply trust them and know them personally? Or did you have a non-discosure/non-compete? How hard was it to negotiate and get such a contract signed? Did you go to multiple parties and have this issue?

    (Obviously don’t answer anything if i’m prying. Or just be vague.)

  148. ALEX


    I see what you said , its resting on that trend-line after breaking above. Thats good, I thought you meant overhead resistance, but it should be support now.

    CDCE on a wkly also looks like from the
    High of Oct 2009 to High of Nov 1 2010 – was a cup, then a small handle formed, and a nice break above to $28 , then a retest of that handle/break. I like the way it looks.

  149. Brian

    Alex, I think it has good potential given the big picture, but it has been a laggard. Seems at the end of intermediate cycles, players head to these laggards for some quick cash, since they know people will jump on breakouts. Then they sell down as the int low looms. Lots of these stocks had huge vol then sell off.

  150. DG

    Yes, security was a big issue. I have a close friend in NYC who is very well connected. He has a close friend I had not met who is a partner in an options trading HF that’s been around for many years. My friend, who is a completely stand-up guy, said he would trust the guy with his life, so I signed a simple non-disclosure agreement. He was happy to sign it and I’m sure he’d never use it without me or share it. Lucky he came with such high marks for integrity. . I did look around a little and the question you raised was a real stumper. I went to a law firm and they wanted about $50k to work it all for me if I found someone else. They said to reveal only parts to individuals who swore not to share what they each knew, etc. I lucked out, frankly.

  151. Wes


    CVU is a nitch company. Their main business is making structural replacement parts for existing (not currently manufactured) aircraft. If the desert sand has pitted the wing leading edge of your C-5 and you’re getting poor gas millage, CVU is your cup of tea.

    Recently, they have started making structural parts for new commercial planes.

    Government cutbacks can actually benefit CVU.

  152. mamaloshen

    I know many look at daily charts, but the weekly gold chart looks somewhat bearish to me, MACD crossover, RSI divergences (I know Gary doesn’t put much faith in divergences).

    However, one thing that caught my eye was that gold has bounced off the 34 week ema 8 times since 2006 (though not during the late 2008 debacle). Last time was the late July 2010 low at $1156.

    Right now the 34 wk ema is $1302.29.

  153. Onlooker

    You’ve got to admit, there’s a nice rounded bottoming pattern best seen on the hourly charts for gold/silver. Makes it interesting here. It’s just that friggen wild card stock market…

  154. ALEX


    I noticed exactly the same thing..on the Gld too. So I have been playing some P.M. stocks as a bounce. They look like a-b-c’s down, so for ex

    Bought EXK when it went $7,69 to $ was quite oversold on stochastics (as was many of them) and did intraday reversal , and volume down got lighter…now we had a reversal on 1/7/11 , and the bounce could go to the 20sma , or near $7 (50% up from that move down) Thats a .70cent move.

    I am selling 1/2 now since volume up looks meager , maybe sell the rest tomorrow.

    Its the same as 150 SMA on Daily GLD & GOLD for the last few yrs too. I DO NOT think we re done to the downside yet, unless upside volume increases dramatically tomorrow.

  155. Gary

    With no indication of a severe yearly cycle low yet then until the sector makes a higher high one would just be throwing the dice at this point.

    If you want to gamble just go down to the local casino. The action will be a lot faster.

  156. Haggerty

    Still holding on to March options on Spxu at 19 dollars and am down 60% on the trade. Really hoping this market starts to tumble soon. Going to be patient.

  157. Jayhawk91

    Good eye on the 34 MA. I watch the 13 & 34 weekly EMA as well as many other weekly EMAs.

    That 34 on gold has been solid and also lines up with the 50% Fib line (which most intermediates hit).

    On the HUI I’m showing a trend line on the weekly chart from the 2008 low, 40 weekly EMA around 505 right now, 61.8% Fib at 494ish. So, my prediction is a long tail on the candle stick tagging that 494 number and closing above the 40 EMA for the week at the end of this sell off. (Fun to make estimates…I hope we get there and the shares get really cheap!)

  158. Wes


    The 15dma of the OEX put/call ratio is now bearish. It may not mean anything, but it is the first time it’s happened since April.

    All of this is because I’m looking for dogs that haven’t barked yet. Maybe one of them will be the key. Obviously, the rest haven’t amounted to anything.

  159. james r

    double top on the dollar?

    not to say that the dollar and gold could roll over, but i am getting trigger happy if the mining stocks close the gap tomorrow or worse have to chase it..

  160. Gary

    There’s no need to jump the gun. If you wait till the pattern of lower lows and lower highs is broken you will still have a huge move from $1422 to over $1600 and you will drastically improve your odds of not getting caught in a severe yearly cycle decline.

    Don’t let impatience cause you to do something you shouldn’t do.

  161. james r


    The markets look like they may make a run to 1200-1250 before they start to correct. This would coincide with gold’s final C run.

    Just making sure I am mentally prepare to quickly change course if this comes to pass.

  162. Gary

    The stock market is already above 1250. that’s the problem. We still don’t have a stock market correction. It should be a doozie when it comes.

    That kind of selling pressure affects everything. Go look what it did the the precious metal sector last year.

    Just wait for the down trend to reverse before jumping in.

  163. ALEX


    You seem to see things the way I do a lot.When I read your posts,I saw that too.

    when you posted your HUI thoughts , with your 2008 trendline, and your 40sma on the wkly chart…

    now draw a line from 3/09/08 TOP to 11/29/09 top to 5/09/10and onward. Perfect breakout and now retest right to the area you pointed out. CUP/HANDLE…BREAK OUT & RETEST -Thats confluence and I would bet that is the exact bottom (intra day)also.

    If you see this post, will you post that chart with lines drwn please?? Its such a pretty picture 🙂

  164. Jayhawk91


    I might have buy orders in for that exact level if the sell off continues and the timing is right for when a swing low should go down.

    I think this is the level you are looking at for the C&H

    Also, the 40WEMA is about the 200 DMA. Both are right at the rising trend line off the 08 low. Also, Gary had shown this large triangle pattern last summer–we already tested it once and one more back test would correspond with the levels we are targeting. Notice too the 61.8% fib line off the summer rally too. I hope we get it set up like this.

    Gary’s Triangle Backtest

  165. ALEX


    Yeah, I love it when a number of things technically line up…You can wait for the swing low as Gary recommends to be safe and sure…or you can do a low risk buy order with maybe a not so tight stop, and get in. The downside risk at that point is prob MINIMAL.

    I trade almost daily anyways , but I wont trade unless I am confident.

    I also use the 150 sma on GOLD for the last 2 yrs it has NAILED it.

    Got a blizzard coming tonight/wed in the Boston area…just hope I dont lose power 🙂 …goodnight

  166. DG

    Wes: I like the idea of something that has been holding out turning bearish, but it doesn’t seem to me that the OEX PCR will be it. We may need a big reversal or a breakdown and short the bounce out of it.

  167. Ollie

    Gary, regarding the impending USD crisis, isn’t that a concern to you that the USD has been making higher lows since 2008? (72 in 2008, 74 in 2009, 76 in 2010)

    So do you just see the USD slice through all these 3 resistance levels in the next few months?

    Also just read that some Fed members are turning more hawkish and a raise in interest rates is likely in 2011?


  168. sophia

    good morning Gary,

    I have a stupid question, but it is bugging me so I will ask it: if th stock market and gold continue to stick around here for the next few weeks, doesn’t it make the 200MA move towards a higher level and therefore releasing the overbought conditions that we have currently? In that case, both markets could have more breath to continue higher without a total meltdown?

  169. Gary

    It would take a couple of months of going nowhere for the 200 DMA to catch up.

    It wouldn’t necessarily relieve the extreme bullish sentiment levels though. That is at least, if not more, troubling than the stretch above the mean.

    Ben’s monetary policy has convinced everyone that the market can’t go down. So when it does it will likely go down hard and catch everyone by surprise. This is how a potential crash scenario is born.

    And it’s exactly what caused the flash crash in May.

    Ben just never seems to learn anything. He just keeps making the same mistakes over and over.

  170. Driver

    Perhaps Ben knows exactly what he’s doing and when the drop comes, his buddies (the banks) will know when and profit from it while the sheeple suck it again. Transfer of wealth. As they say, think like a criminal.

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