It has been my contention all along that the Fed would print until something breaks. Once that break occurs we will enter the next leg down in the secular bear market. This time I don’t expect it to be the credit markets, although we will almost certainly have trouble in the municipal and state bond markets. Some may even default. 

I actually think the greater risk is from massive layoffs by state and local governments in an effort to cut expenses and avoid default. When that begins we will see unemployment levels start to spike again.

The real danger is going to come from inflationary pressures unleashed by the Fed’s QE programs. We are already starting to see severe inflationary pressures in food and energy and it’s already causing social unrest in many third world countries. Expect this to continue and intensify as we move into the summer months.

Besides starting an inflationary spiral QE is also stretching the stock market cycles.

To explain; The `09 yearly cycle low occurred in March. The 2010 yearly cycle low should have arrived in the early spring roughly 12 months after the March `09 bottom. We did have a decent correction in early February. That should have marked the yearly cycle low. However, because of QE1 that cycle stretched into July, and was more severe that it should have been absent Fed meddling. We even witnessed another mini-crash. A direct result of the extreme complacency generated by the QE driven rally in March and April.

Under normal conditions the cycles would adjust and we would get a shortened cycle this year that should have bottomed right about now. Obviously that isn’t going to happen since we don’t even have a top yet.

It’s now clear that QE2 is going to stretch this cycle also. I now look for the next intermediate bottom to arrive this summer sometime around July (roughly 12 months after the 2010 bottom).

This should correspond with the violent rally as the dollar blasts out of the three year cycle low.

This should mark the beginning of the next leg down in the secular bear market. Confirmation will come if the correction is severe enough to test the July 2010 lows. In a healthy bull market each intermediate correction should bottom well above the prior low (higher highs and higher lows). A move down to the 1050-1000 level will be a clear sign the bull is in trouble.

We should also see the dollar rally out of the three year cycle low force the CRB down into it’s 3 year cycle low (actually the cycle runs about 2 1/2 years on average).

And gold down into a severe D-wave correction. (We still have one more parabolic leg up before the D-wave starts.)

Even though I have been expecting the market to correct (into the normal yearly cycle timing band) I’ve been warning subscribers not to short the market because the dollar is dropping down into a major cycle low. There was always the possibility the dollar collapse would stretch the cycles and make selling short very risky.

The time to short will come once the dollar puts in the three year cycle low and all markets begin the move down into the timing band for the next yearly cycle low this summer.

I will be watching for signs the dollar cycle has bottomed sometime in April or even as late as early May. At that point one might consider looking for a sector, or sectors, that are extremely stretched above the mean to sell short. (Not precious metals though. I never short a bull market.)

Until that time its still too early to play the short side. The odds are better positioning for the final leg up in gold’s massive C-wave advance.

250 thoughts on “SUMMER BREAK

  1. Beanie

    I’ve said several times already that you will keep on moving up your timeframes. Jan-feb was the call for a break, and now it is being stretched to summer (june-july). Come summer, it will again be stretched likely to Oct-Nov.

    It has been my experience that whenever I have to keep changing my timeframes, it usually means I’m wrong about my thesis or that the timeframe may be off for years.

    Another way to look at your shift in timeframe is that the market (SPX) is going to have a good year in 2011.

    And to DG who wonders why I’m here if i don’t own gold. Sometimes I love to chat about where the market is headed. The bull blogs aren’t anywhere near chatty. Besides, I always like to know what the “other” side is thinking.

  2. Gary

    The confirmation will come if the next intermediate degree correction pushes the market down to test the July lows.

    I think everyone can agree that the longer the Fed continues with it’s insane monetary policies the more volatile the world will become. We are already seeing riots in third world countries as a direct result of food inflation caused by Ben’s QE programs.

    How much longer do you think this can continue before this becomes a major global catastrophe?

    If the global social structure continues to unravel how long do think the stock market can hold up.

    There are always consequences that must be paid when governments meddle in the free market. We are just now starting to see the unintended consequences of Bernanke’s money printing strategy.

    And it’s not pretty.

    It’s costing lives.

  3. Shalom Bernanke

    “it usually means I’m wrong about my thesis or that the timeframe may be off for years.”-Beanie

    You mean your thesis of always being long stocks no matter what?

  4. David


    “Paulson was bullish on the market in 2010. He could have basically bought anything and it would have gone higher, and he would be right.

    The fund assets were denominated in gold is what i remember reading. That gave it a further booze.”

    The above statements are false. There are plenty of assets that didn’t go higher in 2010. Paulson didn’t “basically buy anything”. He bought gold. He has 80% of his assets in gold, because he is a gold bull.

    Paulson OUTPERFORMED the S&P in 2010 because gold and gold miners outperformed the S&P by a wide margin.

    Once again: you are adopting a condescending tone towards a group of gold investors (who are all outperforming you by a huge margin, by the way) while simultaneously wrapping yourself in the mantle of a man who has 80% of his assets in gold.

    “John Paulson scared the pants off of a packed audience at New York’s University Club recently as he warned them of huge changes in the economic environment in the years to come.

    According to InfoWars, he told the audience that he thinks the price of gold will hit $2400-$4000. And a whopping 80% of his assets are in gold.

    Given his expectation for further money printing by the Fed – and that in 1980 the gold price rose by 100% more than the correlation implied – Paulson noted that the price of gold could hit $2,400 based only on monetary expansion, and as high as $4,000 per ounce based on a projected overshoot.

    Lastly, he noted that 80% of his assets are denominated in gold.

    We rarely get to hear Paulson’s opinion on the market unless it’s filtered through his stiffer research reports. As a result, he has never been so extreme in his predictions as he seems to be now.

    Here’s what Paulson sees coming:

    — Low double-digit inflation by 2012, killing the bond market, and restoring strength to equities and gold.
    — 2% GDP growth for 2011 and 2012
    — Gold hitting $2,400 to $4,000

    It’s worth noting that if gold goes to $4,000, Paulson will be a top contender for the richest man in the world.”

    “Billionaire John Paulson, who placed the bulk of his personal fortune in funds that bought securities linked to gold, made $5 billion in 2010 as gold climbed almost 30 percent last year.

    The gold investments are primarily conducted through one of the largest ETFs in the world, SPDR Gold Shares, which is believed to hold near 1,230 tonnes of gold bullion. SEC filings reveal Paulson’s hedge funds own 31.5 billion shares in the SPDR Gold Trust, worth an estimated $4 billion.
    Citing a “person familiar with the matter,” the Wall Street Journal said Paulson earned $1 billion in performance fees last year, normally a 20% cut of his funds’ profits. The New York Times quoted unidentified investors in the Paulson Advantage fund who noted the gold-class shares of the Advantage fund surged 30.8% last year.

    Paulson placed much of his own fortune in gold-denominated funds and a separate gold-focused fund. “Because gold rose sharply in value last year, the gold-denominated versions of his funds rose as much as 45%,” the WSJ reported.

    Last September Mineweb reported that Paulson told a crowd at New York’s University Club that 80% of his assets are in gold. His investment is spread out among ETFs, physical bullion, and shares of gold mining stocks. Among his equity holdings at the time were AngloGold Ashanti, Barrick, Gold Fields, IAMGOLD, Kinross, NovaGold, Randgold Resources and the SPDR Gold Trust.

    Forbes Columnist Robert Lenzer noted, “The Paulson Gold Fund was up over 35% on the year, as positions in Anglo Gold, Osisko and GLD, the giant gold ETF all paid off big-time.”

  5. Keys

    I have always been an old turkey for pm’s for these exact timing issues. I wouldn’t call Gary wrong at all btw; he has been bang on. Waiting is not the same thing as being wrong btw! I am even thinking about tweaking my position once the d-wave is called for…which is alot for me to say 🙂 Maybe even go down to 75%.Lol….but seriously I will probably sell some, and place a hedge on my physical(which I won’t sell until the day’s end). As per the hedging strategy, I guess I will see what is on sale when that date comes.

    Looking forward to another sprint in this bull!

  6. Rob

    Gary & Keys,

    I too have a lot of money tied into physical bullion. Why is it a bad thing to sell when this C wave finishes and a D wave is about to occur. And by Gary’s calculations, the D wave targeted bottom will be lower than today’s current price. We could always load back up with physical at that time.

  7. Tim and Jeanene

    Wingman –

    I will spend a minute to answer your statement because I like you and it deserves a response. Even though you disagree with me, you at least do it respectfully, so I would like to give you the respect of an answer.

    I am thankful that you are able to see first hand all the lives that are being hurt by the situation we are in. There is no doubt, it matters. The problem though when drawing conclusions like you have from those around you experience, is that it can lead to faulty conclusions. Psychologists call this observational bias, and many, including Gary are victim of this.

    An example of how observing something that seems obvious and drawing conclusions can be seen by someone observing the sun rise and set. They may conclude by observing this phenomena that the earth is the center of the universe and everything revolves around us. It seems pretty obvious if you just sit there and watch the sun move throughout the day.

    Actual facts prove though that this is in fact the exact opposite of the truth.

    Racism is another form of observational bias that creates wrong conclusions. One could watch the TV show COPS and conclude from observation that a certain color of skin seems to be more violent than own, and falsely conclude, because of their observation that people with a certain skin color are more dangerous. The truth of the matter is that skin color has NOTHING to do with the truth.

    Men approach any topic with a bias, and then observe things or read things that help them determine that their bias is correct. I presume that is what is going on with most on this blog who won’t even look at the facts, and instead stick to what they observe around them. Evolutionists for example have the bias that there is no God, and then observe the actions of monkeys and determine that men have evolved from that. Statistics is just math. Yes they can be manipulated, and also the same stas can produce different conclusions, but the true debate should revolve around the conclusions of statistics, not from our own observational biases. Thus the reason it is impossible to continue to debate here, as everyone wants to use these observational biases as the foundation for their arguments, rather than the truth, and thus they come to faulty conclusions.

    The sun does not rise or set. The sun stands still. We just rotate.

  8. DG

    Beanie: I’m afraid the question of observational bias is not so simple. It is not possible to tease a theory out of the “facts.” This is because fact selection is by definition biased. A scientist must decide what variables to control for and what experiments to set up. It is impossible the get away from insight and intuition in that pursuit. no set of “facts” can tell you what “facts” are more relevant than others, how to weight them, and which ones are just “noise.” Even Einstein said so. The school of thought that felt that objective facts could spawn theories was called Logical Positivism and was discredited fully and the idea dropped hundreds of years ago (Good Lord, I never thought I’d be using my college major and my study of the Philosophy of science on this blog!) My only point is that your conclusion that anyone who doesn’t agree with you must have a closed mind is simply unsupportable. People of good will, clear thinking, and an open mind, can look at exactly what you are looking at and disagree completely.

  9. David

    “Evolutionists for example have the bias that there is no God, and then observe the actions of monkeys and determine that men have evolved from that.”

    I wish you’d told everyone that you don’t believe in science or understand the scientific method from the outset.

    It might have saved everyone a lot of time.

  10. DG

    David: It really is more nuanced and frustrating than that. I found my study of Epistemology and the Philosophy of Science incredibly interesting in dealing with how facts are gathered, how a theory is formed, and what it takes to have that theory accepted.

    From Wikipedia on Kuhn’s work:
    Kuhn’s insistence that paradigm shift was a mélange of sociology, enthusiasm and scientific promise, but *not a logically determinate procedure*, caused an uproar in reaction to his work. For some commentators it introduced a realistic humanism into the core of science while for others the nobility of science was tarnished by Kuhn’s introduction of an irrational element into the heart of its greatest achievements.

  11. David

    “The school of thought that felt that objective facts could spawn theories was called Logical Positivism and was discredited fully and the idea dropped hundreds of years ago”

    Logical Positivism didn’t even exist hundreds of years ago. It was born in the 1920’s in Vienna. As recently as the 1950’s it was a major influence upon the philosophy of science and language.

  12. DG

    OOPS. It’s been 40 years since I studied that stuff. I thought it was much older (In fact there was a school that submitted data to the royal Academy of Science in Newton’s time that was later laughed at. Thought it was them. Must have confused two stories). Sorry for the wrong date, but the point stands regardless, no? Any substantive comment?

  13. DG

    Oh, and 1920 is 191 years ago. I said “hundreds” so I guess I was off by 9 years (though I did actually think it was in the 1800’s.)

  14. DG

    Hey, and now I can’t do math! You can see why I studied philosophy rather than physics. But seriously, I’d welcome a substantive comment rather than nitpicking dates.

  15. Rick

    Gary, you have some big stones to be bearish

    mostly everyone has accepted that this is a new bull market and new highs are all but assured

    I have been watching you for a while and you have been right but isn’t everyone in a bull?

    this will be interesting to see how your call plays out.

    the NASDAQ is near multi-year highs

    Good luck

  16. Gary

    I’m not calling for a top just yet. The dollar should still have 2-3 more months before it finds a final bottom. Once that happens then we can look for a top in all markets.

    Or at the very least the top of the intermediate cycle.

    The timing of the next 4 year cycle low in stocks is what suggests to me it will also be a final top. Plus if the Fed’s printing strategy was ever going to “break” something it would be at a final three year cycle low.

    The last three year cycle low is when oil spiked and destroyed the economy. I expect the same thing again.

    Heck we already know Bernanke is incapable of learning from his mistakes. So it’s not unreasonable to expect him to do it again…and again….and again.

  17. David

    Sorry for nitpicking dates. I also studied Logical Positivism with an emphasis on Wittgenstein, but I don’t want to try to pass myself off as an expert (on anything but dates, at least).

    My memory, however, is that Logical Positivism had a much larger agenda, which was to define “truth” in empirical terms. In other words, there was a hierarchy of truths, starting with pure logic and math, followed by lab science. Other fields, such as ethics and aesthetics, were determined to be unverifiable and therefore meaningless, and not worthy of discussion.

    Ultimately, as you say, the idea of “objective” truth sort of dissolved in the late 20th century as the emphasis shifted from what was true to what was meaningful. Wittgenstein himself was at the forefront of this shift. The demise of Logical Positivism really took place in the 1960’s and 1970’s.

  18. Jerred


    day trade what asset class??

    No reason to day trade gold and silver. They are momentum trades and you will miss large moves based on gaps.

    Why give up those points??

    If you want to talk futures then that is a different story

  19. Beanie


    “My only point is that your conclusion that anyone who doesn’t agree with you must have a closed mind is simply unsupportable. People of good will, clear thinking, and an open mind, can look at exactly what you are looking at and disagree completely.”

    DJ, I haven’t the slightest idea what you’re talking about, especially I’m the very people here who don’t agree with the majority here of the gold thesis– that gold must rise and that equities must go down.

    I haven’t done a great amount of research into gold to know where gold is headed. The only guess I can make is that gold is headed higher, along with all the commodities. The other guess I can make is that gold appears to be a fear-based trade. Nobody really knows how to value gold, other than it’s going up and that it has to take out historical highs since the fed is printing money. I also do not see the gold standard running our economic system in the future, especially considering our massive population. As such, I can only surmise that they’re (you guys included) gonna keep on running and pumping gold skyhigh until the early gold bugs (some of you included) sneak out the back door with the gold profits (which will be converted back to dollars in your brokerage accounts) and gold eventually collapses like the Tulipmania several centuries ago.

    It is true John Paulson made most of his money in gold in 2010. I don’t question that. I only say that he was right that the market was headed higher and that the economy would be improving in 2010, and that he was right. The general market (SPX) is all I really care about because I’m invested in it. The Dow Jones was up 12% last year, so Paulson was right, and most bulls (commodities bulls included) made money. As far as the market (SPX) is concerned, I simply do not agree with Gary’s take.

  20. DG

    Yes, David, that’s all fair. My only point is that we seem to have two camps here each of whom seems to feel that if the other side would just “look at the facts” they would se the light. And if they look at the facts and don’t change their minds they are “ignoring history” or that some other personal failing is at work. I am saying it’s just not that simple. Theories come and go as new paradigms come into existence based on new understanding. I expect the same thing will happen with MMT, the Austrians, etc. I guess the smugness, self-assuredness, and lack of humility was what I was reacting to.

  21. David

    Your invocation of logical positivism is apt because the positivists would probably agree with the description of economics as the “dismal science”. Austrians, MMT-ians, Keynesians, all feel they have a lock on the truth but the reality is probably more fluid — each is correct in some instances and wrong in others. Economics is ultimately as much about mass psychology and sociology as it is about math.

  22. jeff


    no, not meatals

    futures in general, what i am curious about is indicators and/or a basket of indicators and the likes

  23. ddn3f


    You said that you expect for this last leg in the C wave to move quickly. Do you expect that in the first daily cycle, gold will push to new highs?

  24. Jerred


    Personally, I dont know anybody that makes money with indicators on the futures market. Indicators lag real time trading so you are entering late (I would be scaling on your buy/sell signal).

    The market pays you to take risk that is why I trade purely on an auction style (volume profiles).

    The caveat is you dont get buy and sell signals just areas to do business.

  25. Movax2


    There is noting wrong with bias, or prejudice or even prejudice against a race (the actual word racism has such negative connotations).

    It’s instinctive and it may protect you, if certain situations or certain types of people have caused you harm over the years for example. As long as you can think clearly and decide if your initial reaction or feeling was justified.

    It is better to embrace and be aware of bias and prejudice than try to deny you have any.

  26. Jerred

    they do it by having an edge before they enter the market

    homework every night and a thorough understanding of the auction process.

    trade only positions that offer probabilities and r/r that is beneficial to them

    a trading plan that makes you take every setup. If you dont then the probabilities will be skewed.

    well capitalized

    most trade blank screens with no indicators. Just areas to do business

  27. Jerred

    and most important

    they focus on the process and not the outcome (p&l)

    A lot of people dont understand this part in trading. Everybody wants to focus on the outcome.

    just remember you have no control on which way the market will move. Just setups and risk management

  28. jeff

    yep.. I dont think gary agrees, but i just bought 4 options at 1330 and that is my core. best i can do for not haveing any money

  29. Tim and Jeanene

    DG –

    Why is asking if we are truly poorer or richer a theory when the stats say so?

    Question, Am I poorer or richer if it takes me 20 minutes of labor to purchase one gallon of gas at $3.00 a gallon today, compared to 10 years from now if it takes me 10 minutes of labor doing the same job to purchase a gallon of gas that costs $10?

    Gary ad others seem to want to say its a bigger burden. I just don’t see how that can be. That question has NOTHING to do with MMT, but the aswer to that question from Gary has been: I can’t accept any theories that say deficits don’t matter.”

    That doesn’t even address the question.

    As far as science. Never said I didn’t trust science, but evolution is foundational to the big bang theory. Please provide empirical evidence of the big bang.

    You can’t – it’s pure theory.

    Science starts with an observation, and then goes through tests and ouble blind studies and other methods to prove whether or not the observation is true.

    This blog obersves prices, and concludes we are poorer because of it, without goig through the scientific method of determining whether or not thoe observations are correct.

  30. David Kafrick

    Some awesome discussions going on right now 🙂

    DG talked about how facts cannot tell you which facts should be valued, which is kind of what Hume said: You can´t get an “ought” from an “is”. I used to agree with this argument, but no longer do after having read Sam Harris´ latest book, The Moral Landscape. Great, great book if you are interested in philosophy of science and morality.

  31. pimaCanyon


    We are indeed in a brave new world where the world’s monetary system is a collection of currencies that float in value against each other. And those currencies are all fiat.

    So I can buy your argument that the dollar won’t collapse because the other currencies it’s pegged against are also fiat.

    However, what about this: Maybe the whole monetary system goes belly up? Maybe we get hyperinflation across the board?

    If “all fiat currencies eventually collapse” (something I’m not sure will turn out to be the case this time, but I am open to the possibility of it happening), then the way it would have to happen would be for the whole mess to implode, that is, all currencies go into severe inflation, then hyperinflation, then poof!–no more world monetary system.

    What do you think? Possible, probable… ??

  32. pimaCanyon


    I consider myself an evolutionist AND I also believe in God.

    I never could understand the whole basis for that argument, like it has to be EITHER/OR?? How about BOTH/AND?

    Why can’t there be a god AND have the theory of evolution be correct also?

    I would also point out that you seem to have “observational bias” when it comes to that subject, like if someone believes in a theory of evolution, you conclude (wrongly so) that they do not believe in God.

  33. Movax2


    You talk about the way the world (monetary system) works in the context of MMT and inflation and sometimes in the context of how it should work and slip back and forth between them saying this or that is good or bad without saying where you are coming from.

    Like last thread you laughed at the idea of saving, that it was better to invest in growth producing enterprises, that savings just sit and do nothing. and when I said savings (in the bank) was a form of investing you agreed with me but only in the context of a stable money supply.

    It’s confusing when you jump back and forth from a context of a proper functioning money supply and this MMT+inflation stuff without being clear.

    And again, this deficit stuff does matter no matter how bad you want to believe it doesn’t, unless you somehow know the marketplace will agree with your views.

  34. David Kafrick


    I would say it is quite a stretch to believe in the theory of evolution by natural selection and at the same time believe in the God of Abraham or any other form of Theism.

  35. Beanie

    Most people don’t realize this but science isn’t necessarily a representative of the truth. Science represents “current truths” based on the current scientific methods (frequently dictated by notable or popular scientists). But the reality is, science is always changing; we see that in many scientific endeavors, whether it be in medicine or in physics. Scientists believe that “we’ll believe it only after we can see it ourselves.” Even though many great philosophers (who are great scientists in their own right) like Socrates and Plato asserted that that earth was round, it took many hundred years for “real scientists” to finally see it themselves that that the earth was round. It wasn’t until the 1600’s that the Chinese scientists finally agree that the Earth was indeed round!

    In medicine, the scientists told us for many many years that fever was a bad thing and that we need to suppress it with medication. Only a few years ago, they say, “Ok, fever, for the most part is a good thing and represents the body’s immune response against invading pathogens by elevating internal temperature. So we should not medicate our kids (and suppressing the fever) every time they come down with fever.” Suprisingly, that’s what the new age crowd and natural healers have suggested many decades ago and still do so today.

    I remember taking a college course back in college many years ago –Philosophy 101. We had to write and essay: Evolution or Creation? Creationists had a very strong argument: If you walk along the beach and see a wristwatch, would you say that it were there due to randomness or due to intelligent design. Obviously, living organisms are much more sophisticated than a wristwatch. Back then, I was an evolutionist. But now, being wiser, I realize both sides were correct, but the Creationists (removing the religious context) were much more correct.

  36. David Kafrick

    In my opinion, if there is one thing that could eventually make the U.S. collapse, it will be its religious obscurantism, not hyperinflation or Bernanke´s printing press 🙂

  37. Jerred


    If you have a small account then you need to trade via a simulation.

    Support/resistance = volume profiles

    No Fibs, No Pivots. keep asking yourself what is your edge? What is the market trying to do and how well is it doing it?

    I bet you that it will keep you from trading because you dont have the answers. This will save your account.


    Very similar but more advance based on the tick data that you import into volume profiles. They will differ slightly from Market delta.

    How you trade the locations differ as well.

  38. Razvan

    this is not the time to day trade. We have one of the greatest bull markets we will see in our life so we must take advantage now. A good entry and some leverage will bring you more profit then you can dream of without having to kill yourself all day day trading in front of the computer screen.

  39. Keys

    Alright half time…
    My reason for physical is my insurance that I will not lose on this bull. By refusing to sell, you don’t get caught in the trader’s though patterns. The worst thing one can do in this bull, in my opinion, is if one gets burnt by being in or out of the market at the wrong time.

    You either chase and start thinking about missed opportunities that make you use leverage, or you get burnt and leave the bull forever.

    There is also a scenario, where there may be a complete detach from physical and the futures. I don’t pretend to believe this will happen, but I like to cover as many bases as possible.

    There is also a scenario that the government does something incredibly stupid; having easy access to my pms would be preferable.

    So my basic reason for holding physical as a large percentage of my portfolio, is my fear that I will do something stupid during this bull, and miss out on something that could be truly amazing. Most on this blog, I believe, do not follow the physical route, however there are some.

    To each their own, and whatever works.

  40. Rob


    If you don’t mind me asking, what is in your portfolio? I ask because I agree with your strategy. I am not a sophisticated investor, but I hold a few ounces of silver bullion, slw, and some junior miners. I plan on buying and selling with the cycle analysis trends.

  41. jeff


    so if you dont have much money, how about just doing the opptions?
    i have 4 on the gold. each cost 2300. so i give up a 23 dollars on the move and i have the june contract. I dont have enough to have a core and ride something out. its the best i can figure out

  42. Jerred


    Why are you long gold?? How much homework have you done to determine gold has a higher probability to move higher?

    What strike price? Why did you pick that strike price?

    Where is your stop?

    If the trade doesnt work and you get stopped then what is your account size then?

    I.E. how much do you lose on the trade?

    If you didnt go through this process then you are trading blindly and anxiety will set in and you will not hold the trade or hang on too long.

    Just thoughts

  43. Razvan

    i just trade spot gold and spot silver. No stocks or ETFs. The ratio between the 2 is about 50/50 and each one with its own leverage.

    Dont ask me how much leverage because i dont want to open a can of worms.

  44. Rob


    LOL…yeah, let’s keep the can of worms closed. I don’t use leverage at all. Maybe I’m a fool in this bull market for not using leverage, but because I’m not that sophisticated an investor I would probably use it incorrectly. I don’t wanna open up my own can of worms. 🙂

  45. Razvan

    if you are going to use leverage now is the time to do it.

    If you are not too confident you can use something small like 3:1 which means if you have 100 you are buying 300 worth of gold. For you to loose all your money gold would need to loose 33% of its value or at the current spot price of $1345, it would need to go to $901.15 an ounce for you to loose all your money. (assuming no margin is required by your broker)

  46. pimaCanyon

    David K,

    IMHO it’s quite a stretch to see all the order that exists in this universe (including the order that is inherent in evolutionary theory) and NOT believe in God.

    So you and I have a different viewpoint on this, we’ll just have to agree that we see it differently.

    Others have asked to not turn this into a debate re evolution, so let’s leave it at that.

  47. Slumdog

    DG Posted: “
    From Wikipedia on Kuhn’s work:
    Kuhn’s insistence that paradigm shift was a mélange of sociology, enthusiasm and scientific promise, but *not a logically determinate procedure*, caused an uproar in reaction to his work. For some commentators it introduced a realistic humanism into the core of science while for others the nobility of science was tarnished by Kuhn’s introduction of an irrational element into the heart of its greatest achievements.”

    DG, the irrational element is measurable. That’s the point.

    Under more extreme circumstances we humans nearly always act the same. When the train is coming down the track with its lights on, the rational jump out of the way. If we see a light and it looks like a train’s headlight, we jump.

    That is measurable.

  48. Keys

    That is the problem with gold. In my opinion. Call options only serve to create a nasty taste; the gold bull steals the time value away with giving you little in return..Also with options you can’t ride the bull, you must act like a trader as your entries and exits are very important.

    Options are a great way of losing everything if you don’t have enough money by simply putting in 10K to get 100k exposure.

    Honestly, Gary’s approach has been the most effective that I have seen in this gold bull, and even he only goes 130% at times…

    The only effective approach I can see for this gold bull for someone that has low cash…is A)Buy in time increments or B)get a fixed rate loan with a payment that you can and will pay each month….
    And B) I say with great reservation.

    But this is only my opinion…I am sure there are others that are better with options than I.


  49. DG

    Slumdog: No one is suggesting that the irrational element is not measurable. It clearly is. The point is that scientific (and other) theories do not just fall out from data that’s been well collected. There is no fully objective way to even collect data. Every scientific experiment and theory is a function of subjective processes. There’s no way around it. But, yes, human irrationality is quantifiable and regular when taken as a whole. Different point though, as I was talking about theory-creation (MMT, quantum mechanics, etc.) not behavior.

  50. ContangoKid

    Tim said: “Evolutionists for example have the bias that there is no God, and then observe the actions of monkeys and determine that men have evolved from that.”

    “Never said I didn’t trust science, but evolution is foundational to the big bang theory.”

    “You can’t – it’s pure theory”

    David said: “I wish you’d told everyone that you don’t believe in science or understand the scientific method from the outset.

    It might have saved everyone a lot of time.”

    Agreed. Tim, you’ve made some excellent arguments regarding MMT here over the past few days, but you’re clearly out of your element wrt your understanding of the characteristics and rigour of scientific empiricism.

    Perhaps you should stick to your strengths, and leave your understanding of the scientific method, nomenclature and observational biases aside. Your understanding of these is not your strength.

  51. jeff


    im just trying to ride this wave. if 15 weeks is enough. and i dont have to have a stop. its a opption. a target? hmmm well mf global made the call at 1310 stop at 1300 and a target at 1375,, now they raised it to stop at 1320 and tartget at 1435

  52. Josh


    Thanks for your rec on Mind Over Markets. I’ve been digging in. Day types, POC and value area have already given me some new ideas. So far, ideas are relevant mostly to day timeframe trading. I hope later the framework is applied to longer timeframes too. I only want to be a day trader on the days I make entries and exits. Otherwise I want to play a longer timescale with lower intensity involvement.

    You talk about volume profiling, but so far the market profile is all about price and time (TPOs) and the distribution of same. Volume is not directly measured. Does direct volume analysis come into the analysis later?

    I’m just getting started with the book, on about page 50 or so. Fascinating stuff.

  53. Nick

    Great conference call Gary! Thank you!
    Will there be a download link? Would love to listen to it again and again to drill in the Big Picture outlook in my head!

  54. catbird


    Thanks for doing the conference call. I asked the first question, about why Greenspan’s loose monetary policy didn’t do anything for gold and silver.

    Eager to see what this week brings.

  55. Nick

    David K said:

    “In my opinion, if there is one thing that could eventually make the U.S. collapse, it will be its religious obscurantism, not hyperinflation or Bernanke´s printing press :)”


  56. Tim and Jeanene

    pima – “However, what about this: Maybe the whole monetary system goes belly up? Maybe we get hyperinflation across the board?”

    I have actually argues in old articles at SA that is hyperinflations were to happen, this would HAVE to be the case. Not sure what the probability is, but that is the only way I see it.

  57. Tim and Jeanene

    Contango – Just because you may be an atheist or may not believe in God or believe in evolution does not mean that I do not understand the observational bias going on with this blog.

  58. Tim and Jeanene

    Contango – here is a good description I found:

    An observation bias is a particular variety of bias introduced into scientific studies when the method of observation used causes the results to be skewed in some nonrandom manner, leading to inaccurate results. Although this can occur in any variety of study, correlational studies, in which there is no independent variable and all information is from observation, tend to be the most vulnerable.

    Observation bias can occur when the group being studied is not representational of the group as a whole. An example would be giving a school a rating based upon testing the children in the “special class”, making a judgement abut the effects of video games in general on children based entirely on Grand Theft Auto, extrapolating a national opinion on gay marriage from a poll taken entirely in Alabama, or estimating national literacy rates from a written survey. Non-representative samples can still grant useful information, but the information can only be generalized to those who are represented by the sample rather than the population as a whole. (A poll conducted from random households in Alabama could be used to generalize to all of Alabama, but not all of humanity.) “Non-representational group” is the most common form of observation bias.

    We could throw in there Gary saying the price of gas is $3.00 per gallon and it used to be a quarter, therefore it is now more of a burden.

    My response was to wingman, who is a pastor and used a sample of people coming to his church for help. He therefore concludes that sample is indicative of America as a whole and throughout history that inflation has made us all poorer. Someone can look at the value of the dollar and say it buys 96% less, and conclude we are all poorer.

    I assume you used the evolution one because it struck a chord. Fair enough – use my example of the guy who observes the sun going up and down and concludes that we are the center of the galaxy because everything revolves around us.

    Why is that not observational bias?

  59. Gary

    For what it’s worth I was talking about the price of gas now compared to 10 years ago. That was roughly the start of the commodity bull market and the beginning of Fed printing.

  60. Tim and Jeanene

    Gary forgive me if I am confused now with the comment

    “For what it’s worth I was talking about the price of gas now compared to 10 years ago. That was roughly the start of the commodity bull market and the beginning of Fed printing.”

    This whole debate started when you said on the blog a few days ago:

    “A gallon of gas is still a gallon of gas. That hasn’t changed in the last 100 years. So if the value of money hasn’t changed why does it take over three dollars to buy that same gallon of gas instead of a quarter?”

    Are you suggesting that a gallon of gas 10 years ago was a quarter?

  61. Natanarchist

    t & J

    you realize when you talk about purchasing a gallon of gas in the 60’s vs purchasing a gallon of gas today, its like comparing apples and oranges? Since you guys are all accountants I am sure you can figure this out.

  62. MLMT

    If I owned PMs, I would be very very very worried if gold closed anyway near $1361 at the 4pm ET close…

    The decline I was looking to start this Monday didn’t quite materialize.. The set up required gold to close near $1361 (to screw maximum bulls). It WILL come.. just a matter of WHEN and not IF IMO.

  63. David Kafrick


    Let me ask you a hypothetical question. Suppose that gold drops below the previous 8 cycle low this year or next year, would that make you think the gold bull is over regardless of your opinion about the fundamentals? In other words, violating the previous 8 cycle low would automatically declare the end of the gold bull?


  64. ContangoKid


    With respect, you don’t know me. Your assumptions about my faith or lack thereof are beside the point and inconsequential. The evolution example you brought up suggested all evolutionists are atheists. If this isn’t an example of observational bias, I don’t know what is.

    Suffice it to say that your observational bias in this case has you postulating an incorrect conclusion about evolutionists and atheists. To suggest observational bias on the part of others while bringing up an example that has you falling into the very same trap is not a good place to start from.

    You’ve brought up some excellent points on the topic of MMT which has sparked some excellent debate here over the past few days. Go with your strengths.

    As an aside, most people of faith aren’t aware that the big bang model was first postulated by a roman catholic priest.

  65. Gary

    It seems like you and others want a technical reason for when to consider the bull over while I look for a fundamental reason.

    That being said if gold dropped below the last 8 year cycle low then yes I would say the bull had expired.

  66. RA


    Could you give us your reasons for your prognosis?

    Otherwise, you are not much different than a struggling Math student who produced an answer to a Math problem without showing how he got it.

    A few months back we had people on this blog calling for 950 gold (or was it SPX?).

    If you could educate us, some of us might even subscribe to your blog 🙂

  67. Jerred


    If you dont use stops then you have no risk management.

    Risk management is the only thing in the market that you have control over.

    You are basically gambling on somebody’s recommendation.

  68. Jerred


    It sounds like you are moving in the right direction.

    I don’t use TPO’s because I don’t believe time periods have anything to do with an auction. They choose 1 hour or 30 minute time period, Why?

    Why cant it be 1 hour and 30 minutes or 2 hours.

    The volume analysis looks at the auction process with no time constraints.

    Direct volume analysis is not talked about in the book.

  69. David Kafrick


    I asked that question because I wanted to know what conditions are necessary according to cycle theory to mean the bull is over. Would there be any other condition prior to an 8 year low being violated that would tell the bull is over (considering only cycles, not fundamental analasys)?

  70. Gary

    Folks, at intermediate bottoms one will always be able to find some kind of technical reason for why the rally will fail. Occasionally they may even pan out.

    But the fact is that we are now 28 weeks into an intermediate cycle that rarely lasts longer than 25 weeks. We have a weekly swing low. The miners and silver are leading the rally, like they should be. The COT has hit a very rare 100 on the Blees rating. The dollar is forming the last short term bounce before it completely falls apart and starts heading down into the 3 year cycle low in earnest.

    As I’ve said many times in the past you aren’t going to do yourself any favors by trying to analysis gold in the rear view mirror with TA. At every intermediate bottom the technicals look bad. It’s why I don’t waste my time with technicals when trying to catch an intermediate bottom. You can’t do it with TA.

    This is where sentiment, cycles and the COT come into play.

    If you want to look at charts then look at the weeklies. They will tell you the big picture. The dailies will just distract you with meaningless wiggles.

  71. Gary

    Actually Cramer has been saying to buy gold for well over a year.

    In reality Cramer was one of the most successful hedge fund managers ever.

    People give him a bad name simply because his short term calls rarely play out. How can they? He makes them on TV and the market immediately trades against them to fleece the retail traders that are following his recommendations.

  72. Gary

    The only thing I could think of would be if a D-wave were to drop below a prior D-wave bottom. That of course has nothing to do with basic cycle theory.

    In the present setup that would be a move below the 8 year cycle low, as that was the last D-wave bottom.

  73. Haggerty

    Does anyone believe that we can get a dip in the stock market when the dollar starts to fall. Cause this bounce in the dollar is doing nothing to correct stocks.

  74. Onlooker

    Every time Cramer has said, “buy gold” over the last couple of years, I’ve heard this same thing; i.e. “uh-oh, it must be a top.”

    Of course that hasn’t been the case. This business of Cramer being a contrarian indicator for gold is kinda tired. And I’m no Cramer fan. I have no idea what he has been saying for a very long time.

  75. DG

    Hey Alex: Back short FCX. I’m amazed it got to 57.50 again and died. maybe it’ll break big this time. Stop is day’s high at 57.64. For anyone else who wants to short, I still recommend China. It is already in a bear market (and as Gary says, you don’t want to short bulls…) Buy FXP if inclined.

  76. RA


    You said China is in a bear market. Are you basing that observation on $SSEC or FXI? They do not have a good correlation.

    Why is China in a bear market? FXI still above 200DMA.

    Have you also considered shorting treasuries?

    Sorry if you had posted this before and I missed it. Would like to hear your thoughts 🙂

  77. Gary

    Just curious as to your reason for shorting FCX. It clearly seems to be in an uptrend that has experienced a pullback. The general market is clearly not correcting yet.

    It seems even if you manage to catch a daily wiggle it seems that timing a profitable exit is likely to be beyond the ability of most traders

  78. DG

    I use E*Trade and have been able to borrow it. Sometimes if I call them (rather than just try to place the order online) they’ll call and ask their stock loan dept. if the computer said “stock unavailable.”

  79. DG

    RA: A previous post said Chiuna was in a bear “something.” (Correction? bear market?) They are raising rates to fight inflation, so doing the opposite of what Bernanke is doing…with the opposite effect. Their market has not hit a high for three months, they’re economy is overheated, they are raising rates, and there’s an acronym to refer to how great they are (Chindia) I tried to short India but couldn’t borrow the stock. Too bad. By the time everyone knows a country is immortal, the game is near over, and they are already down in spite of how great they are. It’s a modest position with a good stop. And it’s impressive that they are down again with the Dow up. A reasonable stop is at the declining 50 DMA on FXI; at about 43.33 or so.

    Gary: Re FCX, I am happy to play corrections. If the stop is tight my risk/reward is quite good. I have already made enough shorting it the first time that even if I had lost this time I’d have been ahead. And it has already dropped enough that my stop has been reset at break even. I know this is not your cup of tea and i will not get rich doing this, but it keeps me from shorting the SPY’s 🙂

  80. Gary

    My question is how do you know where to take profits? The pullbacks have been mostly intraday. Are you just covering when the stocks gets oversold on an intraday basis?

  81. pimaCanyon


    I’ve done a little research regarding your contention that we are just as wealthy today (or was it more wealthy) than we were thirty years ago even though the value of the dollar has dropped substantially during that time. You point to how much in the way of goods and services one hour of work can buy today versus what it could buy thirty years ago.

    But my research tells a different story, especially for the bottom 80 percent of wage earners.

    Here are the numbers:

    1) From Wikipedia article re income inequality:

    “Between 1979 and 2005, the mean after-tax income for the top 1% increased by 176%, compared to an increase of 69% for the top quintile overall, 20% for the fourth quintile, 21% for the middle quintile, 17% for the second quintile and 6% for the bottom quintile.”

    Using a online CPI calculator, I find that the value of the dollar decreased by 269 percent during that same period!

    So even the top 1 percent that had their income increase by 176 percent did not keep up with inflation, much less the bottom 4 quintiles which had an increase of 20 percent, 21 percent, 17 percent, and 6 percent respectively.

    We KNOW that the value of the dollar dropped way more than 21 percent between 1979 and 2005, so those folks (80 percent of all Americans!) are getting further and further behind.

    These figures don’t come close to matching your analysis. So what I am doing wrong here?

  82. Gary

    DGP is what you are looking for if you want an ultra gold fund.
    NUGT is an ultra miner fund. It’s pretty thinly traded as it’s still new.

  83. Robert


    “Anyway I expect we will see continued weakness in the market until the dollar tops. That can’t happen until we at least get a swing high. I expect continued strength in the dollar to drive the stock market below the prior cycle low of 1173 if not tomorrow, sometime this week.”

    Superb call Mr. Savage.

  84. pimaCanyon


    I will answer my own question: Those numbers (of how much income has increased) likely already have an adjustment for inflation built in.

    If that’s the case, then yes, even the lowest 20 percent has had an increase in earning power since 1979.

  85. Razvan

    i say we forget about investing in gold/silver and move into cotton, corn and other agricultural commodities. Thats where the big money is being made right now!

  86. Gary

    Certainly missed that one by a mile didn’t I?

    But in my defense I’ve been begging people not to short the market for months and months.

  87. DG

    Gary: I will cover when I get a clue off the tape. Hard to explain. Last time, for example, I shorted it at 57.50 with a stop at 57.58. It never hit the stop. It reversed down that day. The next day it was lower then reversed up. I covered as soon as it reclaimed the 50 DMA. I netted a point with a risk of 8 cents, so 12-1 there. There are lots of triggers that get me to cover (yes, oversold is one), and I sometimes cover half and let the rest run. But if you can enter trades with a tight stop your risk reward is always good. This requires an ability to place stops that are not tight and simply random. You don’t want them hit all the time! That said, I am down for the year, but just very little, and this is shorting into a screaming bull market. If we ever go down I’ll make it all back in a day. If we never go down (a la Beanie!) I will lose a little and deserve to for having been wrong for months. Of course, I’ll make it back 10 times over in PM’s. 🙂

  88. Robert


    Right on again Mr. Savage:

    “don’t be surprised if we make it to new highs in the next week or two. If we do, and I think the odds are pretty good we will, that should be enough to drive sentiment over the top bullish. Traders will become convinced that QE2 is going to permanently keep the markets levitated. That, of course, will be when a more serious correction begins. “

  89. Gary

    You seriously would rather buy something (DBA) that is stretched 25% above the mean as opposed to precious metals which are bouncing off the 200 DMA and likely just now emerging from an intermediate cycle low?

    What are you thinking?

  90. Robert


    “I’m fairly confident once the dollar cycle bottoms we will see the stock market roll over into that half cycle low. And I expect that will also mark the top of this intermediate cycle.”

    -Gary Savage

  91. Gary

    Instead of shorting like I’ve clearly warned multiple times against, why not just follow my advise and invest in the gold bull.

    At least that way you will be making money.

  92. Razvan

    no, i still love my precious metals! it was just a thought!

    with such a change of course, i would have to change my avatar to a plate of corn bushels and that is just not sexy.

  93. DG

    Rav: When you say “that’s where the money is being made right NOW!” you are predicting the past. You mean “That’s where it has been made the past few months.” The question ought to be what will go up over the coming next few months. That’s where Gary’s point about buying something overextended comes in. People tend to chase what has done well in the recent past instead of what is about to start doing well, and thus are often buying the hot item that is just about finished.

  94. Strellsy


    Do you have a different exit strategy for your 15% leverage?

    You said you were going to sit old turkey style now, even if gold made a new low. But I wonder if you would be more aggressive in taking that leverage of the table.

    And if so what would you be looking for? (That might be a question to answer in the subscription reports)

  95. Gary

    How so? I told every one not to short and to concentrate on the gold bull. I’ve been exactly right and the people that followed my advise made a ton of money.

  96. Robert

    Oh and it’s so hard to make a ton of money getting into gold and silver? Wow, I didn’t know that was the case, what a genius you are.

    You have to be retarded not to know to be in gold and silver miners.

    So what extraordinary feats have you done with trading the gold and silver bull?

    Looks like since I’ve been here, nothing. If you were to have leveraged miners back anytime in 2009 and held onto now I bet you’d be ahead of your antics including the long-term vs. short-term capital gains taxes.

  97. Gary

    At only 15% I can easily ride out one more leg down without getting a margin call.

    So if this turns out to be another curveball I will just twiddle my thumbs until the intermediate cycle bottoms and the next leg up begins.

    I won’t add any more leverage until the pattern of lower lows and lower highs is broken.

  98. Robert

    You still didn’t answer the question I posed:

    “Why do you even prognosticate about the stock market if what you are truly only interested in is the gold bull?”

    I had question-dodgers. They are usually rotten to the core.

  99. Gary

    Because some subs have 401 K’s that don’t have a precious metal option. I would have them out of the stock market at this time. continuing to hold into these extended conditions is dangerous and not worth the risk of getting caught in another flash crash or bear market.

  100. DG

    Gee, Gary. You told me to buy AGQ so I shorted it and am now losing money. What kind of an analysts are you anyway! (nice move in silver today with gold down, BTW).

    Robert—my observation which you are welcome to blow off— I’ve been watching you trade and you have been arguing with the market without using good risk control, at least from what I have seen of your posts. “TZA is going to 30!” is not cold unemotional trading. If you want to fight the tape you need to trade as if you were tiptoeing through a mine filed—which you are. Overconfidence is a killer. I know, I’ve been there more than once (and God willing, never again).

  101. LowTax

    Geez Robert, take it easy dude. The bulk of us actually want to hear what Gary has to say about the general market – even if he turns out to be wrong. We actually learn something from that. I’m not sure how old you are but I get the feeling you are like I was when I was younger – I had to learn the hard way. Gary was the one who finally got me to stop fooling around with shorting bull markets, manipulated markets and just get on board the gold train. And he HAS advised the buy-and-hold approach for people who can’t control their emotions in trading. It might be the best option for you at this time, at least with a good chunk of your money. Keep a bit to play around with but get out of these rigged markets man.

  102. Tudor

    Bingo! Satisfied subscribe here, also!

    I’ve accumulated gains and avoided losses like I never have since I signed on with Gary. Just his drilling into my head to go “Old Turkey” alone has been worth many times the subscription fee. Because of him, I don’t even mess with the general stock market. My non-PM capable 401K is parked in cash and I’ve reduced my contributions so I can invest more in the PM bull.

  103. pimaCanyon

    Jeez, Robert, we can see you’re really pissed off, you must have lost some money there. But no one forced you to take the trades you took. They were your trades and yours alone, you decided to pull the trigger and when.

    Sorry you lost money, but swearing at Gary or anyone else is not going to get your money back.

  104. Shalom Bernanke


    Well, I’ve been reading the same nightly reports as you, and I’m up huge. And not only this past year, but about as much the year before too.

    I would retire now, if I wasn’t having so much fun.

  105. Shalom Bernanke

    Was it a loss just realized today after being short the last couple months, or did you make another move like exit equity funds in your 401k that has you upset and thus leave money on the table?

  106. Romeo Bravo

    Robert, who controls your account? Losing hurts, I have been there, but to blame Gary is not fair. If you have invested for any amount of time you know that following any one without your own risk control is a great way to blow things up.

    Gary provides analysis but often says he is usually only 50% right. He has also cautioned all along against shorting the market, even if he does provide commentary on it. I for one enjoy the commentary he provides even if his timing is off!

    Maybe it’s time to go to cash, or a light PM position and ride things out for a while?

  107. pimaCanyon

    forgot to mention:

    Very satisfied subscriber here.

    AND, I very much appreciate Gary’s analysis of stocks and other markets. There may a time when it’s right to short stocks, so I appreciate Gary keeping us up to date on that market.

  108. DG

    Robert, you are just succeeding in making yourself look on tilt after a big loss. Gary is the first to admit when he makes a bad call, but you apparently are not. You may have just learned that YOU are responsible for your own trades regardless of what others may advise. AND Gary told you not to short a bull market! Selecting just parts of what an analysts says is also not a great idea. I DID listen to what he said about an impending top, DID short, and lost almost nothing. I guess I was just lucky. By the way, I’m a washed up old dude as well (just a well seasoned trading one, I suppose).

    BTW, every analysts is going to be wrong sometimes. if you blow up every time one of them is wrong you won’t last long in this business.

  109. AGQ

    If you want to blame someone, you should blame yourself. Take responsibility.

    I made alot last year due to Gary. I started off bad this year as I jumped in early in PM, but I made up all my losses from early Jan. I read the same report as you. Why did I made money and you didn’t?

    Seems like you lost money shorting the market. Gary has mentioned many times not to trade S&P and stick to PM. I think you need to practice some risk control.

  110. aaronpalang

    Robert you remind of myself when I was 18 and just getting into the market, you need to learn to use the right mix of signals, and Gary’s sub is a tool, and a valuable one at that.
    I believe in manipulation, trade futures only, and have disagreed with Gary’s calls on numerous occasions (most recently his call for gold to drop below 1300). I am very satisfied with his service and that says a lot.

  111. LowTax

    Gary, are you still waiting to put the other 15% of margin to work? Doesn’t seem like the market wants to revisit the 10dma…

  112. DG

    Wow, Robert. I guess my successful business, 1st wife of 35 years, financial independence, tons of friends, good health, means I have a sucky old-persons life. And yes I will die at some point. Imagine that. Man, you really need to learn how to take a loss if you ever hope to learn to trade. If you ever do learn to trade it will probably be after going broke once. What you do with that experience (learn something or rail against how “unfair’ it was) will determine your future in trading, and probably in life. good luck, wet-behind-the-ears baby-faced one.

  113. DG

    SB: I’m not all that old (55) so you’re probably right. I just started trading actively at 21, as soon as i could get my Series 7 license.

  114. Tim and Jeanene

    Pima –

    I am not sure what study you are looking to, but maybe this will help. I have a guy on my blog who wrote this, and it seems to focus on inequality. He said:

    “Though I did state several questions for you, I would like to focus on your point that wealth has increased for the middle class. This chart represents population and wealth, if you draw a conclusion that aggregated wealth is a increased because more families have entered a high income level, I seemly need to see that data, for a certainly don’t see that! What I do see is that families that are in the 80% are losing wealth, the next 19% have seen a marginal gain 1% and a large gain for the top 1%

    Table 6: Distribution of income in the United States, 1982-2006
    Top 1 percent Next 19 percent Bottom 80 percent
    1982 12.8% 39.1% 48.1%
    1988 16.6% 38.9% 44.5%
    1991 15.7% 40.7% 43.7%
    1994 14.4% 40.8% 44.9%
    1997 16.6% 39.6% 43.8%
    2000 20.0% 38.7% 41.4%
    2003 17.0% 40.8% 42.2%
    2006 21.3% 40.1% 38.6%

    From Wolff (2010). “

    To which I responded:

    “Not sure if this study is getting to the point. I need to go study what he is saying, but at first glance it misses the point.

    Your conclusion the bottom 80% are “losing” wealth is faulty. This just shows they are not gaining as much as the top. For example.

    If , for this example, I have one hundred people to start, let’s pretend there is a million dollars of income between them all and the top earner makes $100,000, the next 19 make $40,000 each, and the next 80 make $1750 each. The bottom 80% make 14% of the total $1 million income.

    Now lets say 20 years later we look at the same 100 people and the amount of income they make total is $10 million. The top guy makes $1.1 million the next 19 make $410,000 each and the last 80% earn $13,875 each, or a total of 11.1% of the total income being distributed to them.

    This example shows that the 80 have less of a percentage of the income distribution, but in fact earn almost 800% more than they used to. It does nothing to show whether or not they are affording their lifestyle easier or if it is harder.”

    Maybe direct me to your study that you are using, and I can take a look when I get time to find out how relevant it is to the discussion based on the types of data they are mining.

  115. T.J. Rand

    No one knows what any market will do…so you play the odds…and Gary’s analyses have been terrific at prompting me to test my assumptions and biases. I am (and have been for some time) a gold bull based on fundamentals, but needed Gary’s work to give me a plan for putting significant (for me) $ to work. And for testing my biases about the way yet market should incorporate the stupid actions of our government.

    But at the end of any day, we are responsible for our own actions…and a real stage of growth is understanding and embracing that.

  116. Haggerty

    I too have a losing position in March spxu calls at 19. Down like 80 % on that trade. But I can’t be mad at Gary because he warned and I didn’t listen. BTW should I just hold that now and hope it gains some of it back or should I sacrifice the body and just save a limb?

  117. ALEX


    I know you’ve been playing FCX like a fiddle, but I am thinking it COULD really go higher hear. Just my 2 cents if you care to hear it?? It kind of consolidated in this area lately…daily.

    put it on a 3 day chart= cup/handle , and IF this handle explodes upward, It’ll be quick-

    also , its a copper miner, and coppers at all time high.

    just kind of a ‘be alert’ from me hear 🙂 I know you use stops, so You’ll be ok…
    just a note of caution.

    I bought CXZ this morning , great volume right off the bat. Care to jump in ?? —- j/k its way under your $10.00 limit ( But so was SLW 2 yrs ago 😉

  118. AGQ


    An updated version to 2009 or 2010 would be better reference. 2006 was the peak of the housing bubble when even the dirt poor felt richer. As you know, the poor and middle class experienced faux wealth through freebie housing and home equity withdrawal. I think the numbers today will be drastically different. The middle class getting squeezed out. The poor getting poorer.

  119. Avann

    Robert, I also tried to short the S&P … with 10% account risk and tight stops I lost less then 1%.
    The tight stops where in place BECAUSE Gary continuously warned us NOT to short.
    Have since made well over 5x the losses.

  120. Gary

    Yes I will exit all PM positions in front of a D-wave.

    I may place a small short position at that time but mostly I will just be out of the market and in cash waiting for the D-wave to run it’s course.

  121. Haggerty

    Anyone have an opinions on my trade? I would appreciate it

    Bookguy, I think Gary has said that when the D wave comes that we will exit PM’s completely and wait on the sidelines. I assume that will be cash.

  122. Gurvir


    I just took a $11K loss last week shorting the stock market. Gary I think where people get confused is when you say not to short the stock market but at the same time you show a chart with the S&P going down to test 200dma. To say S&P may drop almost 100pts and at the same time tell everyone not to short sends out a mixed message. I’m not blaming anyone for my loss as it was ultimately my decision but those S&P charts did give me some motivation to continue holding my shorts longer.

  123. DG

    I can follow the blog because I make short calls to client all day. It’s a perfect setup. I get paid about $500-$800/hour to give talks and so can trade and post between calls. I am 6′ and 178 pounds, so not too fat I guess. I am also an avid volleyball player. So let’s see, as well as not knowing how to trade you can’t judge people either. Well done! Would you like a second shovel so you can dig yourself in deeper now? And use foul language a few more times as that really gives substance to your ill-conceived points. Anyway, enough with you today and forever. That truly IS a waste of time because you have not yet learned how to learn from others. Maybe some day.

  124. Gary

    I don’t mind you pointing out when I’m wrong. I don’t have working crystal ball anymore than anyone else and I will be wrong from time to time. That’s just the nature of this business.

    But I’m not going to be cursed at because you did the exact opposite of what I told you to do and you some how think it’s my fault.

    Man up and take responsibility for your own decision. Until then you are just an idiot fouling my blog with your language and I’m not going to stand for it.

  125. Bob loves Hawaii

    Robert, you made me Laugh out loud. I hope you did not lose too much money.

    A year ago, before Gary, I would double down when I should have gotten out.

    He is all right in my book (Gary)

  126. DG

    Alex: Yes, they may well close that gap on FCX. The question is does it keep going down or is that it. Please tell me definitively which is the case. Thanks.

  127. Onlooker

    Looks like we’ve got a new troll! Time to ignore him folks. He’s done enough to make himself look tremendously immature and foolish.

  128. Gary

    Folks the odds were in favor of the market moving down. Cycles were in the timing band for it. Sentiment had reached extremes. COT was lining up with commercials selling. The SoS data suggested the market would go down. Breadth was and is poor.

    But all that still doesn’t account for the fact that the dollar is collapsing into a major three year cycle low. That is and was the potential fly in the ointment and it’s the reason I pleaded with everyone not to short.

    So if you want to do the exact opposite of what I say and take a trade that I don’t feel has good odds of panning out, and if you take it with no risk control in place in case you are wrong then you’re on your own.

    Next time either listen to me or use better risk control.

  129. Glen

    Gary said,

    “People give him (Cramer) a bad name simply because his short term calls rarely play out. How can they? He makes them on TV and the market immediately trades against them to fleece the retail traders that are following his recommendations.” (February 7, 2011 6:30 AM)

    I would be interested to know if you think the same thing could happen with your recommendation to be long PMs, especially with all the interest that will be generated with last night’s webinar. Could the popularity of your recommendations kill the gold bull the same way it does for Cramer?

  130. Gurvir


    Here is another example. When this C wave tops and the D wave begins you said you will not take a short position as you never short a bull market. Even if gold only drops $100 (which is unlikely, closer to $200 or more based on previous D waves) in this D wave why would you not want to make money and short?

  131. Rod

    JP Morgan is on the top of the SoS list at -97. Does this mean anything? Could the insiders be looking at a topping of the stock market and starting to bail here?

  132. Natanarchist

    Is the Robert posting the young lad from Minnesota? Perhaps he is just drunk again. Robert, if you can’t handle abusing downers, maybe you should lay off the sauce for a while. It seems it is clouding you decision making process.

  133. Shalom Bernanke


    I haven’t looked into NUGT, but generally don’t get too heavy into any etfs. First, one can look at the holdings of GDXJ and glean the best names (5-8 is plenty), so why own the other less desirable companies. Second, being I can own the best names for me (based on things like profitability, co. size, betas, etc) I don’t see any good reason to give a firm .75%+ to “manage” the fund. Of course, SLV and GLD are different, but stock etfs don’t get me too excited.

    DG, I was right on the age guess. I’m 42.

  134. ALEX

    Are there 2 Roberts on here??

    This doesnt sound quite like the Robert from December.Anyways…

    Robert…if I may say something. If you’ve followed this post, you know that I subscribed too, but I disagreed with Gary’s top call from Nov to Jan also. I just kept trading until I was proven wrong BY MY METHODS, using HIS knowledge of Cycles to my advantage too.He always says he doesnt call tops as well as bottoms.

    I know what you mean about how ‘strongly ‘ he spoke and sounded dogmatic and convincing that this mkt CANT keep going up, sentiment is never wrong=its too bullish,people long or trading here will pay a big price, and tech analysis doesnt work under these conditions, etc.

    He admits he was wrong in some opinions, but by stricktly following his plan…He would help you make money…or doing it any other way (your own & my own , Dg’s way, Onlookers way, Jayhawks way , etc etc etc , your outcome would vary.

    So here we are…we all got slightly different results.


    I think you’d take the credit, because Gary said DONT GO SHORT.You might eveb boast that you went against his advice and made a killing YOUR WAY…

    So STILL take the credit for the trade you made YOUR WAY and the loss is your college tuition. You have learned SOMETHING from it.

  135. DG

    Haggerty. You never need to exit a position all at once. If you have already entered a position that’s against you big because you didn’t use a stop (first mistake), and didn’t use proper position sizing due to over-confidence (second mistake), then you should cover at LEAST 1/2 right now and hope you will regret having covered that part. I see little indication that we are about to drop. We of course may at any time, but hope is not a good investment strategy. In the future: 11) start with smaller positions and 2) each successive trade should be smaller and smaller as you take losses. The market is telling you you are not in tune with it. Don’t fight that information. And NEVER do anything that risks serious damage to your account as there is no recovery from zero capital. If you are getting at all close to that now cover everything and start fresh.

  136. ALEX

    Blogger DG said…

    Alex: Yes, they may well close that gap on FCX. The question is does it keep going down or is that it. Please tell me definitively which is the case. Thanks.

    DG…You are a funny man !! 🙂 can I tell you definitely , say , a month from now?? haha

  137. Gary

    I wouldn’t short it because it’s so damn hard to pick a top in a bull market, espeically in a parabolic move which is what we should see with the final move in gold.

    It’s easy to say gold should drop $200 and you will short it. The reality is that the way it gets there will rob you of your cash on the way down.

    First off you will miss a whole bunch of times trying to pick the top. That alone will cost you a pretty penny. It will also cause you to become gun shy so you will then have to have some kind of confirmation before selling short again.

    Then once it becomes clear the correction has begun you sell short and what happens? That’s right a violent oversold rally occurs knocking you out for another sizable loss.

    Now you are really gun shy. If you try to short again and get caught one more time in a counter trend rally that should just about seal the deal on losing money on the short side during a D-wave decline.

    I’ve been doing this a long time and I know what happens in real time. If the odds are not good then I will not take a trade. It’s up to you whether you want to trust my experience or not.

  138. Tim and Jeanene

    Nat: “t & J

    you realize when you talk about purchasing a gallon of gas in the 60’s vs purchasing a gallon of gas today, its like comparing apples and oranges? Since you guys are all accountants I am sure you can figure this out.”

    I am not, Gary brought up .25 cent gas compared to $3.00 a gallon as proof it is more of a burden today.

    As i stated before, even looking as recent as the 80’s – In 1981, a gallon of gas took as much out of what the average consumer spent as $3.90 does in 2009. (So in fact, gas today, is even cheaper than it was in 1981 even AFTER trillions have been printed.)

    And as a share of GDP per capita, gas was even more expensive at over $4.60 in 1980. Both wage indexes show the prices then and now are similar.

    If you want to only look at the last ten years as proof, sure, we can data mine all day long to fit our thesis. But when we look to 1980, we can see money creation has actually not done anything terrible since then. If printing trillions the past ten years was really crushing our economy, the cost of gas would be MUCH higher now than in 1980 when we had many trillions less of dollars sloshing around.

    I would guess gas going up the past ten years would have more to do with the rest of the world getting wealthier and demanding it more, because printing trillions still hasn’t caused gas to be more of a burden than it was in 1980.

  139. DG

    Hey Alex: You PROMISED me FCX would go up. I heard you. You ALWAYS put your guarantees in CAPS. (And here it is soft again. Cup with handle be damned.) And my stop is now low enough that I will exit with a profit. If it can get all the way back to my shorting price today it may mean a reversal so getting out makes sense regardless.

  140. Tim and Jeanene

    ACG – “An updated version to 2009 or 2010 would be better reference.”

    I did not provide that data, someone on my blog did, and he got it from a guy names Wolff – so I can’t get you more info that what he provided to me.

  141. Gary

    If I ever became popular enough to have my own TV show with millions of people watching every day then yes the market would certainly trade against my calls.

    Right now with maybe 5000 people following the blog I really doubt anybody even is going to bother fading my calls because they think the market is following me 🙂

  142. TheBookGuy

    Thank you for the response.

    How long does a D-wave last?

    Why would you not short the stock market or the dollar at that point? I hope my questions don’t seem argumentative. I really want to learn.

  143. Gary

    A D-wave usually lasts 5-8 weeks. I might take a small short on the stock market. I wouldn’t want to short the dollar because the dollar should be rallying out of the three year cycle low at that time.

  144. Poly

    Although I played (at the time) fairly conservative puts, (April $135’s on SP) I still lost a BIG $5 figure number trying to pick a top, around 50% of the trade.

    I had no real plan on how/when to exit this trade, mainly due to my stubborn believe the market would top any moment and not wanting to miss it. I could have taken much off the risk away when the drop 10 days ago to 1,276 presented itself, but of course greed got the better of me and i only dumped some 10% of the trade.

    Easily my biggest loss to date and a real lesson. Nobody’s fault but my own (never is), it stings, but I’m fine with it.

  145. pimaCanyon


    A simple wave count from the low of 1/28 looks to me like SPX has just topped the 3rd wave of the 5th wave up from that low. (5th wave appears to be extending).

    –IF– I’m right about the count (low level count on hourly chart), then the market will likely wander around a bit in a 4th wave (4 of 5) before heading up to 5 of 5 and MAYBE topping around 1330 – 1335.

    Then –IF THIS COUNT IS CORRECT– we would expect a move down to around 1300, but maybe only 1307 – 1310.

    I have not looked at the bigger picture count in depth, but it looks like after that correction, we are likely to see more upside, into the high 1300’s, possibly 1400.

    Good luck.

  146. DG

    Haggerty: One other point. Once you cover your mind clears. You will adapt to the new account-size reality and be able to make fresh decisions. While the trade is still active that is much harder. Get out and you can always re-enter (don’t, BTW) Losses are the ONLY way we really learn how to trade. just keep them small enough that you don’t have to leave the table.

  147. ALEX


    you re kidding, right ? LOL

    I had to re-read my post , see if I really used caps and said that .Yes , a perfect cup/handle has a downward sloping handle to scare shake weak ones out, but some have a sideways handle (less sellers) and still goes up.

    now you go back, like a good little boy , and re -read my origional post.

    It was a friendly, cautionary…”hey DG, whats up? Like to show you something…” kind of post. Not an etched in stone ,kind of post. I never do that…you’ll Robert me , if I did. lol

  148. pimaCanyon


    I know the feeling. I hate missing a move that goes in my direction after I’ve bailed on the trade.

    But with time, I am hating that less and less, and I’m happier knowing that I cut my loss as I should have done.

    I believe that learning to cut losses short is the most important lesson on the way to becoming a successful trader. However, everything conspires against doing that when you should, especially emotions.

  149. DG

    Alex: Yes, of course I was kidding. New low for the day on FCX BTW. The best shorts get oversold and keep on going. I don’t use the standard oversold measures as they get you out of good shorts way, way to early.

  150. Josh

    Regarding learning from feedback:

    I used to think therapy was expensive, but I see now it’s a whole lot cheaper to pay a shrink $250/hr to shine a light on your weaknesses than to let the market do the same job. The market bills its time in percentage points, and those add up fast.

    Nothing I’ve ever been involved with cuts through the bullsh*t so cleanly.

    Best to all.

  151. ALEX


    “like a fiddle’ should have been in caps when I posted 🙂 It just dove another .50…so do you just follow it down with a loose stop…Master??


    Yeah, I felt like he was ‘Roberting ‘me haha. In reality, I feel bad for the Robert, because when you take that kind of loss, it can throw your balance off.

  152. DG

    Josh: Great post. I always think of the market as a heat seeking missile. If you have ego-crap that burns hot it will find it and blow up your account.

    And a thought for traders: Work mentally on liking small losses. “Oh goody! I get to take another small loss!” That will help offset the tendency to want to avoid taking losses, which is the very most damaging thing you can do to your account. Don’t worry, you’ll always hate it but not so much that you freeze. Besides if you take small losses you can’t take big fat ugly ones. If you re a trader, run scared.

  153. MLMT

    I use two things:

    1. Volume Profile (across various time-frames and price-intervals)

    2. “Think like a criminal”, the basis of which is “market will screw as many participants as it can and WILL”

    This applies to all charts across all asset classes and countries… I am not saying that this is fool proof method. This is no more/less vulnerable (or prone to failure) than the cycles theory or any other investment thesis that you folks use…

    The important thing is to HAVE a thesis and use it consistently and not jump from one to the other.

    A good friend of mine once said “if you cant make money in the stock market using the financial tools that you already know, then no other tool will make you money. He trades using EW and MAs… and catches every major move in the market…

    The 1361 level comes largely from “think like a criminal theory” and after what happened in the PM world last week is now backed up by Volume Profile theory as well…

    I dont have a blog that I sell subscriptions for.. and I never intend to do that.. I come here to learn and share what I know.. thats all. I have learnt a LOT about cycles from Gary… And quite a lot about money management from him and some amongst you.

  154. Jerred


    Take a look at this book:

    Talent is Overrated

    talks about learning and coaching. I just finished and really enjoyed it.

    Colvin is the author

  155. Redwine

    T & J

    This ongoing debate over the price/value/cost comparisons of gasoline are a diversion.

    So many factors enter into the equation, other than currency debasement, that it’s really a waste of time. As an example, vastly improved technologies that affect exploration, drilling, production, transportation, refining, etc..

    The real question is what would be the number of hours labor necessary to purchase the gasoline if currency debasement, and all its market disruptive inefficiencies, hadn’t occured.

    After all, if someone were to steal half your money would you say it doesn’t matter because new technologies have made everything so much less expensive?

    Just use some common sense and the answers become obvious.

  156. ALEX


    That was a good post!

    At times, the market doesnt just shine a light on your weaknesses, it can bring them out and amplify them in both directions,

    Thats why I seriously take the advice


    DG, these caps are so you know I mean it. It’s like me yelling it 🙂

  157. Gary

    FWIW If one is willing to hold their shorts this is still a secular bear market and at the bottom of the next 4 year cycle low those shorts should be up huge.

    I expect they will even be up huge at the next intermediate low. But you will probably have to hold through several more months of pain before receiving the reward.

    The problem is you could end up missing the entire final rally in gold while you are waiting for your short to work.

  158. DG

    Alex: At this point I don’t know where to cover FCX. My target is 11.16. Gary often asks “how do you know where to cover?” Let’s just say at this point this is a very happy problem. I have a macro belief that copper is way overdone to the upside so if I can I’d like to let it ride a bit. I’ll post the cover. (BTW the 11.16 idea was a joke.)

  159. Avann

    It’s one thing to lose money and attempt to elicit some moral support from wherever you can … it’s another to start blaming others for your actions.
    IMO … Robert knows full well who’s fault it is but instead chooses to blame Gary to make himself feel better … effectively I’m sure he feels far worse.
    Robert … please come back and apologize … it’s fun reading your posts when you’re not offside.
    I love reading your conspiracy theories.

  160. St. Deluise

    Hey team, I’m going to be away from a computer for the next month (!) but am holding a small chunk of GLD (40% of my account) while i’m away. Curious as to what stops/targets you guys would set if you were me or if you would play it differently.

    Right now my stop is at 121 and my target is 156 (wishful thinking! not really as important) as an OCO order. Knowing my luck i’ll get booted out of any sort of trailing stop so i’m really just looking for a doomsday price gold absolutely can’t fall below. Thanks in advance!

  161. Jerred


    Not picking on you but I learned a lot from the book.

    New ways to learn, coaching and asking the right questions.

    It should accelerate your learning curve with trading.

    Let me know when you read it.


  162. Gary

    St. L,
    It’s probably too late in the intermediate cycle to place a stop at this time. If triggered it would likely just result in a whipsaw before reversing.

  163. Mikey

    I must have missed the fireworks. Everyone is responding to some guy named “Robert” – but I don’t see any of his posts.

  164. Wes

    I have just sold the QLD position that I bought on 1/19. While I have no special insight into the stock market, I am playing it according to sentiment, which will be more favorable to the downside over the next few days.

    And, no Gary, I’m not shorting it.

  165. St. Deluise

    haha where is everyone getting the “L” from?

    I should probably just not be in the market at all but I hate to see my dollars just sitting there getting devalued. I guess I’ll just stick with my bet we see the 161.8% at around 156 before the 38.2% at 123 of this recent leg.

  166. ALEX

    Hey…you re right

    ST D

    I’m NOT blaming anyone…but I read Garys reply, and posted with that in my memory.

    again..I am NOT blaming anyone 🙂

  167. Poly

    Is the $HUI up against a long term resistance relative to gold? Can it get back into “bull market” valuations relative to gold?$GOLD:$HUI&p=W&yr=10&mn=0&dy=0&id=p45476586352&a=223825933

    It’s interesting to see the $HUI still at levels seen at the March 08 and Dec 09 peaks, when gold was trading at some 30% and 10% lower than today.

    But much more startling is the $200 run in gold during Spring 2006, peaking gold at $730. At this peak, the $HUI hit 407, a mere 1.72 the ratio of hold and just 120 points below where it stands today. Since then though, gold has essentially doubled!

    Looking at the long term $GOLD:$HUI, it suggests to me that we still have not shaken off the trauma associated with the PM’s collapse of 2008. At the bottom in 2008, the HUI traded at just 150.

    Is this the run where PM’s get back into favor and break back down below the 2:1 ratio?

  168. auger

    St.Deluise! The L’s for love, of course. I think you’d be pretty safe with those stops. Please check out my dumb blog, sometime. Good to see you, man!

  169. TZ(5288)

    2nd day of gold pausing (and pulling back a bit) after thursday’s spike higher. I think the congestion is pretty much over and the lows today will hold.

    I suspect we go higher now tonight and tomorrow.

    (It is actually good that gold didn’t continue running after thursday because it makes it much less likely we retrace back down to these levels once we resume higher.)

  170. M4570D0N

    Speaking of State budget slashing, I received an email from the University of Houston’s Senior VP yesterday. Here’s the first two paragraphs:

    “It is now clear that the University of Houston will suffer significant and very likely permanent cuts in state funding. The magnitude of the proposed cuts is in the range of $54-65 million for the next biennium. This is equivalent to a 16%-20% cut in our state funds. This range reflects the difference between the current House and Senate bills that will be resolved during the current legislative session.

    I want to stress that this is not just a transitory cut associated with the recent recession. Over the next decade we will likely see the proportion of state support decrease from about 25% to no more than 10%. We must find new business models that will support our goals using fewer resources.”

    UH was just awarded a ton of money last year to become the third Tier 1 public university in the state of Texas. I don’t know what’s going to happen with that now, but it’s rather unfortunate.

  171. Danno

    The USD is tap dancing on a 3 year up trend line that originated in March 2008. It might take until July for the dollar to explode. Who knows. Then again… it could blow its top any week now. I don’t see a lot more down side to the dollar here. Sure, it could stab below the trend line like it did in November 2010. But man, the USD is huffing and puffing like it wants to erupt. Certainly the last few weeks were painful for anyone long the dollar. But looking back now it is not surprising that the dollar would dip to its 3 year trend line at least one more time.

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