GOLD T-1 PATTERN?

There is quite a bit of speculation lately as to where the impending intermediate cycle decline will take gold down to. Today I’m going to throw my guess into the fire.

Some people expect gold to drop to  $1400. Some $1300. Some even doubt that gold will ever go down again. However after watching gold for years and studying its history I think I can safely say that gold never misses an intermediate decline. Next week will be the 18th week of the current intermediate cycle. That means gold is now in the timing band for a bottom. If gold is in the timing band for a bottom a top can’t be far off.

In the weekend report I discussed the impending stock market yearly cycle low and three year cycle low in the CRB that are both coming due together this summer. A yearly cycle low in stocks is the second most severe selling event ever seen in the stock market, only exceeded by a four year cycle low, which by the way is due in 2012. The three year cycle low in the CRB is the single most severe selling event for commodities.

By a twist of fate these two major selling events should happen simultaneously this summer. The combination of of these two major cycles bottoming together will almost certainly intensify selling pressure into the stratosphere. In an environment like that fundamentals will go right out the window.

In theory gold put in it’s yearly cycle low last January at $1308. Barring something extraordinary I would not expect that low to be violated. However we could very well see something extraordinary. 

While the pattern isn’t “clean” there is an ongoing T-1 pattern in play on the gold chart that suggests that $1575 probably was the top of the current C-wave and if that is so and the T-1 pattern plays out as expected we should see a test of the the mid-point consolidation during the summer sell off.

That consolidation zone for gold’s T-1 pattern comes in at roughly $1225- $1250.


Of course I have no idea if this will play out as we move into the summer but if in July gold touches the $1250 level I think it will be the last great bargain we will get in the secular gold bull market.

458 thoughts on “GOLD T-1 PATTERN?

  1. David

    Gilbert,

    You can make money on the short side with RWM, PSQ, shorting the Euro with EUO, going long the dollar with UUP, and shorting oil with DUG.

    Or you can sit in cash. Either way, the real money is going to be made a month from now.

  2. Hot Rod

    Hkc,

    Grand supercycle has been calling a top in the market with his rising wedge for over a year and a half. It’s gotten old for me and I rarely follow him anymore. He posts his trades but I have not really followed. I’m sure at some point he’ll be right an he’ll surely pat himself on the back (again).

  3. hkc

    Pima and Hot Rod:

    Thanks. That’s good to know. Both the caution and the disregard…

    I am sure Gary will get us out early with his much more conservative play now.

  4. David

    Gilbert,

    Since you’re new to this, don’t go too crazy shorting. It’s very hard (and scary) to short, even if you’re right. Your timing has to be spot on. If you feel you want to do it, risk only a portion of your portfolio — maybe 10 to 20%.

    Avoid the ultrashorts, because you pay a high price for timing errors. Something like UUP should be a pretty easy trade.

    There will be much more money made by going long at the end of this decline.

  5. Romeo Bravo

    The other option, so to speak, is buying puts on the ultra long funds. This way time decay works to your advantage. So even if the index it is based on doesnt go up much, it should still decline over time.

  6. Keys

    I will add to the what if stuff. Since we are talking belief in probability, and not actual events. Most experienced guys I talk to understand the difference between being right and wrong and probabilities. BTW the guys that follow right and wrong usually lose most everything.
    In any long winded event…I think the USD is done as a reserve currency. I expect an IMF currency of some sort to replace the USD as a world store of value. This event I will expect to be the bottom for the US economy, as Ben the F’ing moron, can no longer print without recourse..of course he can print now, but it steals from worldwide investors in USD first..so it softens the blow….I expect only one more C-wave type event….I also expect this D-wave, or decline to be a good spot to go old turkey and lock in. I expect a US reset, and look forward to buying dividend paying stocks again…I hate gold, but to invest in stocks as an investment is crazy….I may be nuts, but crazy is something else. I differ from Gary on silver, as a polite difference, I think an opportunity will develop to buy silver shortly time wise…however the opportunity cost to owning miners, if this plays out, may outweigh that opportunity. The money made 3-5 years from now will be made by investments made this summer/fall. Get ready

  7. Gary

    200-200-200 is still a possibility, although it’s fading. We would need to see gold rally almost $100 in probably less than a week. The odds of that are pretty small as short term traders almost always take profits into any large one day moves.

  8. Gary

    It’s pretty tough to drive any asset class too far above the 10 day moving average. Regression to the mean always drags it back down before it can stretch very far. For gold to reach $1625 in the next week it would have to stretch massively far above the 10 DMA. Much farther than it ever has before.

  9. Gary

    The original target zone for this C-wave. Three legs up of $200 each. The first leg broke out above $1025 and rallied to $1225. The second leg rallied to $1425 and the third target was $1625.

    I think it’s going to be almost impossible to get there now that the current daily cycle is running out of time. We needed gold to continue to grind higher day after day to reach that goal.

    Gold threw away two of those days on Wednesday & Thursday. That made my decision that I didn’t want to stay in the sector any longer.

  10. Hot Rod

    Gary,

    Thanks.

    ———————

    Ok, here is the link again I put in from the last post. Still, I am amazed at the quality of this guy’s chart book. I’m like a kid in a candy store here.

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show%5Bs219564530%5D&disp=P

    The above link is his chart on the gold forecast.

    One interesting thing I noticed….

    Gold has consistently over the past 2 years touched the 34 week moving average about every 6 months. Jan 2011, Jul 2010, Feb 2010, Aug 2009.

    Guess what?…. The next one is “due” in July 2011. Projected target at the 34 week MA is around 140 on the GLD a 10% move from the top, which looks to be the “minimum” correction.

    Another observation is that from the prior peak to when it hits the 34 week MA, it is “approximately” 3 months, give or take. This coincides with the 1575 peak so far in early May.

    “IF” this thesis plays out, we will not make a new high here and will get at least to 140 on the GLD by the end of July.

    Also, look at the Accum/Dist stat. It looks pretty close to a double top. The Full STO looks like it is bouncing solidly off the 50 range, but it still could be a bearish bounce. For a bullish one, I would rather see a solid bounce from a deep oversold level under 20, something like this:

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show%5Bs219561896%5D&disp=P

    Which just happened in equities (SPX).

    Hmmmm. Maybe our Oracle from the SIn City (Gary) is on to something.

    😉

  11. Hot Rod

    Bob Loves Hawaii,

    Thanks for your great put strategy info exchange with Blake on the last post. Would you be able to help me out with something similar for GLD?

    Let’s say I want to buy the GLD Sept. 140 PUT (trading at $2 right now). What strike would I want to sell? Something like the Sept. 143 (trading at $2.87).

    This would net me 87 cents a contract.

    Your info was very valuable in terms of “exit points” (35.80 and 38.40 for SLV). What exit points would we have for this trade? How do you determine the exit points? Is it based on TA or based on the option’s pricing?

    Certainly, I would want to wait a bit until gold get’s higher, right?

    Thanks in advance for your help.

  12. Greenspansconscience

    Really disappointed in the HUI’s performance especially if this turns out to be the D wave.

    I mean it is basically where it was 3 years ago, and solidly broke above the 2008 highs fairly recently.

    Looking back on the HUI’s performance over the last 11 years, I’ve noticed that with the exception of the 2008 crash, it has always held above the yearly spikes on the weekly chart. If it manages to close below the 490-500 level it will basically invalidate this prior behavior.

    I’ve been long the metals mostly through the miners over the last 10 years and am about to throw in the towel and just play the futures. Maybe this is a sign they will finally outperform the metals. On a risk adjusted basis the miners have been tremendous losers relative to the metals over the last few years.

  13. Brian

    Gary, In the last post you said it is time to step on the gas in stocks. Previously you said get out of everything equity related, and for sure you would never get tangled up in the stock market. Reality is that the mantra since I have been here has always been to not get tangled up in the market.

    Has the market become undervalued? Are you becoming a market scalper? We really seem to have a sea change in thinking here.

    Sign Me Concerned

  14. Bill

    Often times we read about the HUI not breaking out due to rising energy & labor costs, which often times rise when gold rises.

    I’m starting to wonder though if the real reason might be that we’re running out of high grade deposits. I heard this on King World news this weekend.

  15. Greenspansconscience

    Bill,

    Another thoeory I have had is that the miners are discounting hyperinflation–total loss of faith in the currency. In that situation, dollar denominated paper is going to suffer no matter what relative to the metal itself. Add in all the event and politcal risks miners are subject to and the metal vs mining stock question is easy to answer.

  16. Bill

    Greenspan, wow good point.

    I’m now really hoping for Gary’s D wave scenario, so that I can buy bullion in hand this summer. As insurance. At least 25% of our wealth.

  17. sophia

    Gary, SB, DG, Bill from Japan,

    You seem to follow in the back of your eyes the US treasuries for a view on the economy. Personally, I think that inflation is here and I really don’t understand why people are buying Treasuries unless we believe in QE3.
    But it is difficult to short them as if Gary is right and the summer brings us a stovk market selloff, the Treasuries are going to cruise higher…
    What is your view?? Thanks

  18. Bill

    Hi Sophia,

    I agree w/you on inflation, but I don’t trade treasuries – I think that Gary recently said they move too slowly and that’s right. I do however watch rates a bit just to make sure gold doesn’t get blindsided.

    Am sure the others have better comments though. I think Gary gets up soon, so shouldn’t be long.

    – Bill (from Colorado but now stuck) in Japan

  19. Bill

    Chartists, w/Gary’s T1 Gold Pattern article in mind, I was looking at (2 months) long 60 min charts of ABX, GG, NEM and SLW – and I’m not sure but the last 2 weeks of each chart looks like a bear flag.

    How does it look to you?

  20. Gary

    Brian,
    I said a month ago when silver crashed that the market had changed and trades would be much shorter now. We will have to make money where we can and not just by holding long term to the PM market.

    With that view I weighed the risk reward and decided it was probably safer to buy into the beginning of a daily cycle in stocks (for a trade only) as opposed to continuing to hold on to PM positions that are not only late in their daily cycle but also very late in their intermediate cycle.

    There is too much risk of getting caught in a severe intermediate decline in the metals at this point. Plus they have shown a tendency to gap down in the morning trapping longs into losses or seriously cutting into profits.

    I just have no desire to risk getting caught in that at this time. I would rather wait for an intermediate bottom that I can buy and hold onto for a while.

  21. basil

    Gary,
    would that imply a low in silver at the bottom of this d wave, then perhaps an upward drift back to $50 or so over the next 1.5 years or so and then the final C wave that might give us perhaps a 7 x $50 rally to get us to $350? Or what’s your view there?

  22. Gary

    BTW I corrected the final chart in the weekend report and drew in the major cycle lows correctly with expected lows in the correct timing bands for anyone interested.

  23. Éamonn

    Gary, would you have any thoughts on buying ATM Puts expiring in August on ProShares UltraPro Russell 2000 (URTY) near the upcoming stock market peak? Last summer, they lost ~50% in the correction

  24. eric

    There’s no volume in those. If your going to do puts on the Russell go with IWM, much more volume and thus liquidity when you need to get out.

  25. Gary

    E,
    You better give yourself more time than August. Where would you be if the cycle runs really long or if in August you get a violent counter trend bounce before another leg down.

    Folks in theory it sounds easy to make money on the downside but in practice, in real time it’s actually pretty damn tough to make money on the short side.

    To be honest the only time I’m ever confident on the down side is when I’m playing a broken parabola. Those are the only instances where it’s relatively easy to hold shorts or puts.

  26. Ollie

    Hi Gary, regarding basil’s notes on silver and its potential run up to the bull market high, has your views changed on not touching silver for the 3-4 years?

    Do you recommend buying AGQ at the bottom of the D-wave and go Old Turkey until the bull finishes (based on your shortened scenario in the weekend report) ?

    Thanks

  27. Gary

    Let’s take last years yearly cycle low for instance.

    The vast majority of the move occurred in just a few minutes during the flash crash. The market was moving so fast that you had no possibility of exiting even remotely close to the bottom.

    Immediately after the market experienced a violent counter trend reaction that rallied almost 10%.

    In order to make any money you would have had to time the top of the counter trend bounce correctly and then exit during the marginal break to new lows.

    Then we were treated to two violent counter trend rallies. The second of which made a higher high, in theory signaling the correction was over.

    One would have had to some how guess that the bounce was a fakeout and sell the top and then again exit into the marginal break to new lows to make any money.

    I’ve been at this quite a long time and I can tell you that I had no chance of timing that mess correctly.

    Do you really think you are going to successfully navigate something like that? I can assure you the move down into the yearly cycle low this year will probably be every bit as complicated.

    99% of you will fare much better in the long run if you just sit on your cash during this process and then use it to buy gold or miners when they are being given away for pennies on the dollar.

  28. Gary

    Ollie,
    You can’t buy AGQ unless silver is in a strong trending move up. We won’t see anything like that in silver again for a couple of years.

    If you want to buy silver at the bottom of the D-wave then do so by buying physical silver and putting it in a vault.

  29. jlinks

    Valuable report Gary, It’s greatly appreciated.

    IMO, I think 2014 is a bit early to expect the dollar to lose its reserve currency status. Especially with with my expectation that the Euro will go belly up first. I think that’ll probably boost the dollar for some time.

    Austrian economists foretold most of what is currently transpiring, except their timing was always off, so I learned to never underestimate the power of the FED to kick the can a bit longer.

    As long as oil is priced in dollars, I believe the dollar will remain the reserve currency, but with the middle east constituents getting restless with their US propped up leaders, a case can be made that it’s about to end.

    Some even say that DSK made to much noise about the dollar’s reserve status and he was setup. I don’t know the facts, but the US is the biggest bully after all.

  30. Bob loves Hawaii

    The three ETF’s with high volume, that are stretched the most; AGQ, ERX, TNA.

    ERX puts is my choice, as I want to be on the same side of Obama/Bernanke as they force down the price of oil in this D wave.

    This latest rise needs to roll over first though.

    ERX is making lower highs, and is under the 65 EMA, a failure there is very bearish.

  31. Gary

    Elaine,
    I’m guessing you meant SLV & GLD.

    I don’t think so. I will need to see what happens during the move down. For one thing the leader of the last move almost never leads during the next run. Silver was clearly the big winner during this last run so we probably don’t want anything to do with silver.

    Miners were the big disappointment during this C-wave. More than likely they will be the big winners of the next one. Especially if they get taken out to the woodshed and beaten to a pulp during the D-wave.

    So until I see how this unfolds I can’t say for sure where we will invest at the D-wave bottom.

    It’s possible that metals may not even be a big part of our portfolio during the next rally. Biotech has been performing exceptionally well. We may end up taking a large stake in biotech at the bottom of the yearly cycle low.

  32. E

    Just tyring to understand timeline, are we saying that D-wave should be done by July or August, and then A-wave starts? can someone correct me, if I am off?

  33. Gary

    Probably because it will be the driver of the next secular bull market. Discoveries are being made now that will ultimately change our world. The market is starting to sniff that out.

  34. Romeo Bravo

    Gary, in the weekend report the very topmost SPX chart and bottomost chart show very different expectations for the coming Late summer cycle low. The top vpchart back to last summers lows. The bottom chart only a margin break of this past March lows before a heafty bounce. Was this intentional to show the possible complex nature?

  35. Gary

    I put a disclaimer under the first chart so this is clear. I will try to remember to do this from now on.

  36. ...at ease

    Gary,
    If reading correctly, and all goes as planned, then it would seem buying GLD move at the bottom this summer, we would be holding long until 2014 or possibly longer?
    And trades would be on 2x metals and or miners?

  37. Gary

    At ease,
    Again this depends on what happens during the D-wave. We want to be in what ever sector will give us the best percentage gains. I kind of doubt that will be gold.

    More likely it will be miners or even something like biotech. I don’t care where I make money I just want to be profitable and have a reasonable chance of outperforming. There’s nothing that says we have to only make money in gold or that gold will outperform other assets.

  38. Elaine

    Gary,

    Thank you. If you expect that Silver might reach $300 in 2014 wouldn’t it be easiest to buy it at $30 and just hold? Since I do not trade options, or “trade” much, do you think something else might happen in between now and then?

    Elaine

  39. Chrys

    Gary – in your weekend report you say that miners could take a 40% haircut. Is that from the current price or the high, say in GDX?

  40. David

    Elaine,

    Why would you want to sit on dead money for years when you can earn a better return elsewhere in the interim?

  41. Ollie

    Gary, thanks for your response re AGQ

    Previously you’ve mentioned: “To be honest the only time I’m ever confident on the down side is when I’m playing a broken parabola. Those are the only instances where it’s relatively easy to hold shorts or puts.”

    Does that mean mean in your view that buying ZSL (ultrashort silver ETF) for the D-Wave has a good risk/reward ratio as silver is in a collapsiong parabola so there’s still downside pressure left for the D-wave?

    Thanks

  42. Gary

    Ollie,
    I think there is probably better ways to play the broken parabola in silver but I guess a small position in ZSL might work if you time the entry correctly.

  43. Gary

    You’re probably better off with just a straight short on SLV except shorts have unlimited risk, small profit potential, and it is a bull market after all.

    Folks there are times when the safest & best strategy is just to sit in cash. For most of you that will be the correct way to play the D-wave decline and move down into the stock market yearly cycle low.

  44. Ollie

    Gary, I agree, I don’t think I have ever successfully shorted anything…it’s just that the charts in the weekend report make it look so easy! 🙂

    If say the SnP500 will be appx 20% lower in 2 months time, and this is the probably the last daily cycle it sounds very easy to say I’ll buy QID somewhere near the top and hold for 2 months and buy GDX at at the bottom of the D-wave!

    The key word is it SOUNDS easy! 🙂

  45. ...at ease

    Thanks Gary, My thought was that if GLD was the cheapest it will ever be going forward, for those who want the longer term investment, GLD would be it for the long profits.

  46. Moondoggie

    David,
    I’m inclined to agree with Elaine’s thinking and that a 700% gain over 3 years wouldn’t exactly be sitting on dead money.

  47. Moondoggie

    Gary,

    There are a lot of Miners that have already shown a 40% ‘haircut’.

    Would that indicate that we had the D wave or should we consider that the Miners could actually take a much larger ‘haircut’ if the D is still in front of us ?

  48. Gary

    Gold hasn’t even corrected yet. Gold needs to suffer a 10-15% correction before this will be over.

    By 40% haircut I was referring to the HUI dropping 40% from its highs.

  49. basil

    Elaine,

    I tend to agree.

    David,

    easier said than done. Trading in and out of various markets to increase % gains sounds like a good idea in theory, but it usually never is. If PMs were to top in 2014 and you buy at a D wave low in 2011, that’s hardly a bad investment. If say there is a 700% gain in the price of silver, as Gary is expecting, it doesn’t matter much whether that gain is stretched out over three years, two years, or just one year. If you’re in the boat you’re in the boat and don’t risk jumping on board too late or missing it all together. Once silver takes off from the D wave low, it will be hard for you to guess how many times the price will still return to that low, if at all. You would be risking buying not the low because you might be uncertain whether silver is already taking off or not. So buying at a D wave low, I think, is about the best idea anybody can have.

  50. aklaunch

    I think 350$ dollar an ounce Silver is preposterous… But who knows…. If the worlds currencies fall apart i would think the best thing to own would be a garden and a small orchard. Also maybe a few cases of whiskey and some bullets for your rifle.

  51. MrMiyagi

    Gann360, Hot Rod, others too…
    You guys are putting a lot of work into your research and charts. I appreciate it.

    You too Gary…

  52. MrMiyagi

    aklaunch,

    When silver was 8$/oz, a lot of people thought 40$/oz would be insane.

    In other news, I got to start reading about fibonacci, it looks quite interesting.

  53. Troy House

    Gary, one more question, with the decline in PMs, are you also thinking that equities will go down too? I might have to move my 401k into money market if its true.

  54. Elaine

    Basil,

    Yes, that was my thinking. I am no longer able to actively monitor the market. I don’t think going from $30-$50 in 18 months and then going to $300 in another 24 months is dead money.

  55. basil

    aklaunch,

    there was a time when 14K in the Dow seemed preposterous. The price of anything at a final bull market top, regardless the market, seem not preposterous only in hindsight.

  56. David

    Gary has always spoken about 2016-17 as a target for the bull market top. 2014 I presume is the top of this next cycle. He may have changed his thinking, for all I know.

    I don’t see any reason to argue. You should own whatever you want. I will avoid silver while it’s consolidating and wait to buy the breakout.

  57. basil

    Elaine,

    and even if silver will ‘only’ go to $100, which I feel should be a given after the printing spree, that would then still be north of 300% in three years. To top that with any other investment we would need an awful lot of good luck. I’d be very happy with 300% in three years let alone 700%.

  58. basil

    David,

    yes, he seems to have changed his view on timing regarding the final top, so what we’re discussing here is relevant only if he is right about 2014.

  59. Gary

    Troy,
    Thew answer is in the weekend report.

    2014 is just a guess. I said if the Fed continues to print then this could run til the next 3 year cycle low in 2017.

    It all depends on how long the Fed continues to try and make a failed strategy work. It’s been 11 years so far and they haven’t been able to figure out that they are the cause of all our problems.

  60. basil

    David,

    and having contemplated the chart you posted the other day, I understand that you may have a very different view of the time frame for the spike in silver.

    Gary,

    David posted a chart of silver in the 70s the other day. After the spike of 1974 it took silver five, six years to launch another spike. What made you change your view from 2017 to 2014? I just read something about a 120 year super cycle low in 2014, is it that?
    Haven’t wrapped my head around all this cycle stuff; to me it still sounds a little like mumbo-jumbo. No offense intended at all, I simply haven’t looked much into the whole relevance of cycles yet and haven’t found the right literature to do so. I read some of Tim Wood’s work and used to listen to him on financial sense news hour. I also heard a few interviews with Nenner. Then Prechter talks about cycles too, and some other people out there in cyber sphere. Looking back I didn’t find any of their predictions, which were based on their cycle work, particularly relevant. Also there seems to be such a vast amount of cycles of all kind that I find my eyes glaze over some times.

    Again, anyone with a recommendation for literature on cycles, I’d highly appreciate any thoughts.

  61. Elaine

    Basil,

    I agree. I had many, many years of virtually no success and sideways trading until I found Gary. I would rather be patient, if it will be profitable.

  62. Gary

    I really have no idea when the gold bull will end. It could be 2014, 2017 or 2020.

    I do know what to look for. A Dow:gold ratio of 1 or less and everyone and their cousin buying gold.

    When we see those things happening it will be time to sell our gold.

  63. basil

    Gary,

    shouldn’t all of the cycle analysts come to somewhat similar conclusions? If they don’t, why not? How does your cycle work differ from say Nenner’s, Wood’s, or anybody else’s? What sources have you been using to get to your understanding of cycles and how proven you think is your approach to cycle theory? Thanks.
    Btw, I do realize that your analysis of the PM cycles seems to work so far when it comes to mid to long term moves, and that is where I find it most helpful.

  64. pimaCanyon

    Basil,

    There are cycles and then there are cycles. Too many analysts are using the same term to describe their own version of cycles.

    Gary’s cycles are very different from Nenner’s and Prechter’s. Those two looks for a time interval (calendar time) that is repeated in the markets. Gary’s cycles are not tied to time in the same way (note that he uses trading days or weeks, not calendar, and that the cycle length has a normal range that is quite wide). IMO Gary’s version (and Doc’s) are the only version of cycle analysis that actually gives a trader an edge in the markets. I’ve looked at Nenner’s work and it’s very hit or miss. Prechter’s is mostly miss (because of his fixation on ONE high level EW count out of many that could be possible).

  65. basil

    “I do know what to look for. A Dow:gold ratio of 1 or less and everyone and their cousin buying gold.

    When we see those things happening it will be time to sell our gold.”

    Gary,

    I think that’s already so standardized in people’s view that it will for sure not coincide with a top. I read that in so many variations already that I am sure ‘this time it will be different’.

  66. Gary

    Basil,
    That is kind of the definition of a bubble. They all pretty much end the same way no matter how many bubbles humanity creates.

    So unless human nature has changed I don’t see any reason to expect the gold bubble to top any different than any other bubble in history, other than it might be more extreme than most because of the thin nature of the precious metals markets.

  67. Alex in Montana

    Gold Miners – Possible Trigger

    The Chinese have made it very plain they want more gold and fewer dollars. The Chinese are buying all their mines output(300 tons/year) or so it is rumored. They are the world leader in gold production. Physical gold is hard buy especially when you want
    1,000s’ of tons.

    The Chinese have reported gold holdings three times in ten years.

    2001 – 394 to 500 tons
    2003 – 500 to 600 tons
    2009 – 600 to 1,054 tons

    Follow this logic. Newmont has 90 million oz in reserves. That’s 2,800 tons. Market Value is $28 billion.

    What would you do if you were China and wanted to get rid of some dollars and increase your gold position? I know what I would do as China’s central bank president.

    There’s your trigger.

  68. Jin

    Basil and Elaine,

    Gary’s four year cycle low due next year may be the reason that you may not want to hold cold turkey.

  69. Elaine

    The jobs report on Friday is expected to again to be heavily influenced by hiring at McDonalds. Wonder if you can get gold dust on your fries.

  70. Elaine

    Jin,

    Currently I am all in cash, as per Gary’s recommendation a few weeks ago. I will purchase at the start of the A wave when Gary gives the signal.

  71. Jin

    Elaine,
    Same here. I work full time too, so try not to play wiggles, but holding out for better odds bet. I am thinking of going after Agriculture, and tech too after the yearly cycle low. I will play etf on energy bets.

  72. ALEX

    Good report Gary, quite thorough.

    I can see everything that you are looking at, but I was Bullish Metals the whole way…thinking maybe into mid June, but just taking it 1 step at a time.

    I had conflict the way I look at GDX and GDXJ also…I thought they looked so similar NOW and at the Jan i.t. low, EXCEPT for the MACD got weak on the re test of the previous highs.

    http://www.screencast.com/t/zyh0C0oOebX

    so cautious is prudent.

  73. David

    The one thing you can count on in manias is that they run much longer than anyone expects.

    In 2001 the Wall Street Journal was talking about a housing bubble. In 1996 Alan Greenspan was worrying about “Irrational Exuberance”. You could have sold at any point along the way and watched the markets explode for years without you.

  74. Bill

    Éamonn, re: the Fukushima plant in Japan, I really don’t know. I pretty much distrust companies and governments, because it’s human nature to lie when under stress, so that’s my assumption, is that it’s much worse than they are saying. When the reactor is cool, that will be the green light. Fortunately for us, we’re 150 miles upwind, so it’s the distance and the weather reports that I trust, not the plant itself.

  75. Gary

    It’s irrelevant. Gold is going to find a way to move down into an intermediate cycle low no matter what happens.

    If it was at the beginning of an intermediate cycle then gold would use an EU default as an excuse to rally. Now that it is very late in the cycle gold will use it as an excuse to sell off.

  76. Éamonn

    Gary, thanks for your reply. However, I was speaking in general terms, and not just around now. Maybe they get one more year out of the EU before a default, but it seems inevitable. It seems likely there will be a double dip recession this summer in Europe. Just wondering how it would affect gold spot. I know equities tumble when there is EU debt tumble in the news.

  77. ALEX

    EAMONN

    I was bullish metals and have been long P.M. stocks as of a week ago ( re-entered AG @ $17, and EXK @ $8.50 area and a few others .

    I sold EXK and AG Friday..volume was lower each day up the last 4 days up.I sell stocks that “float up on less interest”.

    I WAS expecting $1600 gold and I have seen gold go up $40/day, so not impossible in the “time’ Area, but now I am seeing weakness. I was 100% in for the last week. I am now 30%.

    Long story short, my last post chart was showing similarities that I thought appeared between the Jan I.T. LOW and this May’s low. I was as bullish as Garys WED report.

    Now on a wkly chart of GLD…Macd didnt confirm the last high (weakness) and I will look at this “bounce/” for clues. I expect a pullback…looking at the 20sma/gap fill/ and light volume.

    Time does seem to be running out , I have a flexible plan.I still can see a minor IT LOW and the Dollar 3 yr low in the fall, and P.M.’s run hard in the fall ( but 1 day at a time 🙂

  78. Éamonn

    ALEX, thanks for clarifying. My plan is to buy silver Puts when gold hits $1560, so I was concerned that you saw more strength ahead in gold. As far as I am aware, $1560 should be bettered, but maybe not by much.

  79. ALEX

    EAMONN

    GLD COULD pull back to the 20sma on light volume and bounce into June 1st week- Or it could plunge through the 20sma and drop. ( I am still SLIGHTLY bullish for a small pullback and another bounce)

    But I am only in NAK, HMY, XTXI (energy), and 1 ag stock. I am ready to sell or add at anytime 🙂

  80. ALEX

    ROB L

    I am kind of looking into that now.
    It would likely be the ones that have run up a lot, and just drop.

    I was going to look at all the ETF’s and see which have run up .

    http://www.etftips.com

    DG shared that with me a few days ago.

    Goodnight (eastcoast time)

    P.S. GBG was catching my eye Friday. And I am still 50% bullish 🙂

  81. Rick

    “That means gold is now in the timing band for a bottom. If gold is in the timing band for a bottom a top can’t be far off.”

    Am I the only one confused by this? WTF. Gary drank a bit too much kool-aid this weekend.

  82. NJ

    Gary: Thanks for the heads up on Biotech. If you decide to play it, are you going to base timing decisions off of SPX cycles or develop new cycles for Biotech?

    I know you have mentioned that coming up with cycles for Agriculture is difficult due to weather – so wanted to know timing tools for Biotech.

    Also, are you thinking of ETF’s like the gold sector or individual stocks within Biotech?

    Thanks for all your work! Looking forward to old Turkey again at the end the big D!

  83. Gary

    Rick,
    Think about it. If gold still hasn’t corrected but it’s in the timing band for a bottom it means we are very very close to a top.

    The timing band for a bottom is from 18 to 25 weeks. Next week will be week 18. An intermediate decline almost always lasts at least 5-8 weeks.

    Since we have to allow enough time for the correction to run it’s course it means the upside from here is very limited.

    Actually I’m pretty sure the intermediate correction began on week 14. I doubt gold will be able to make a new high and will probably start back down in earnest again next week or the week after.

  84. Bill

    One bit of chart supporting evidence for what Gary is saying is that, in addition to the apparent bear flags formed over the last 2 weeks, the 60 min charts for both GLD and SLV also show clear and strong negative divergence in both the RSI(14) and in the PPO (MACD).

    We all know divergence doesn’t always pan out, but that said it often times does, and when it does it marks the end of the move.

    I’m now expecting GLD & SLV to fall next week, but how far I have no idea. But if GLD breaks below the pivot of 2 weeks back at 143.42, then I’d bet we are doing an ABC correction w/C going down to the 150d or 200d EMA, or further.

  85. trond56

    Sang, thx for the comparison charts between the dollar-index 1970’s and today. Very amazing resemblance! Maybe we are about to do the same retest of the broken support-line now as then.

  86. Moneyman

    Gary

    I also think that the move up in gold is limited. But I think that we can se prices close to 1575-1600.

    You wrote that the timing band for a bottom is from 18 to 25 weeks. Next week will be week 18. An intermediate decline almost always lasts at least 5-8 weeks

    So we could se 2-3 weeks of higher prices in gold and still be in the right timing band?

  87. Bruce

    fwiw, Gold is consolidating just above the 38.2% retrace of its recent corrective move. Fib theory gives a 70% chance of touching the 23.6% retrace line at 1553, which equates to about 151.30 GLD.

  88. ALEX

    SANG

    I meanst to thank you for that chart too…It was thought provoking, but cycle wise -its hard to know where in cycle timing the dollar was then compared to where it is now ( But , in my opinion, it could follow that other one exactly if we were still going to get that 3 yr low.).

    Gary

    Just an F.W.I.W….I honestly traded Bio tech off and on in the past-maybe 4 or 5 yrs ago . I lost money on companies that would lose an approval ,or the company was doing great, then had a major set back and gap down 20%-40% or more(maybe the bio-etfs would be safer).

    It was frustrating. That sector alone has me gun-shy, I was NEVER successful for long.

  89. pepper2009

    What are the new drugs & developments which should trigger such a rise in valuation? Some reseachers are saying that it might take 100 more years to cure cancer. Additionally all discoveries which are made now will take at least 10 years to lauch a drug.

    I would be more interested in an index tracking green energy. Any idea? The Germans might quit nuclear power in the next years. Recently I talked to some physicist working on solar & wind energy. In conclusion they believe a complete change in the power grid is practicable and will come.

  90. Gary

    Moneyman,
    The problem is the daily cycle. It will be 17 days old today. The average duration on the daily cycle is 20-28 days. Don’t forget you have to allow 5-8 days for the cycle to move down into the cycle low. That means gold has just about run out of time here.

    This is one of those times where the cycles are giving us a very loud warning that it’s time to tap on the brakes or park the car.

    The recent tendency to gap down is making it even more dangerous.

  91. Gary

    Alex,
    As long as one sticks with the ETF’s biotech is perfectly safe.

    You may have to break your habit of trying to pick individual stocks to play this sector though.

  92. Gary

    No way would I buy silver in front of what will almost certainly be a hard intermediate correction.

    Look folks at the top the media was full of stories about house wives dumping their silverware onto the silver market.

    Now supposedly there is a run on silver except when I look at the dealers I don’t see any shortages. If there was a run on the COMEX wouldn’t you think that silver would be flying out of every available outlet?

    YES the COT is bullish on silver. It’s semi bullish on gold. But the fact is if gold corrects 10-15% sellers are going to continue to sell the broken parabola in silver and they are going to sell it hard. I have no doubt we will see panic selling in silver if gold corrects 15%.

    Like I said yesterday there is only one time where I feel comfortable on the bear side when it isn’t actually a bear market. And that is when a parabola has broken.

  93. ALEX

    I know …I will NOT be buying individual stocks in that sector –
    I wasnt as good at it as they were at pulling the rug out from under me 🙂

    As for Rich Russell- He still said he expects the summer doldrums and a run in the fall, so he may just not care about timing ( he’s in his 80’s right?) He just wants to buy now and hold through winter.

  94. Gary

    Unfortunately Richard knows nothing about cycles. I think we can probably time a little bit better entry than to buy in front of an intermediate correction. But I’m pretty sure we will be holding the sector as we move into the fall.

  95. thedocument

    There are a couple of problems here. First, unless gold is ready to decline into an 8-year cycle low, we should not see a previous intermediate low violated. So, a drop below $1310 for gold seems unlikely, and the the fact that sentiment never really became exuberant supports the notion of a less severe decline.

    Second, the commodity and equity cycle are NOT due to bottom together. They will most likely begin declining together, but the intermediate equity cycle is due for a low sometime between mid-July through the end of August. The 2.5-year commodity cycle is due to bottom in September at the earliest. However, considering that the last commodity cycle ran short at only 2 years, we are likely to see the current cycle run long and probably find a low in early 2012.

    That said, I do expect the next intermediate equity cycle to fail, so it is possible that stocks and commodities continue falling together into simultaneous lows next spring, but we can leave that conjecture for another time.

  96. Gary

    Actually the S&P and CRB bottomed almost perfectly together at the last 3 year cycle low in March of 09.

    The oil cycle is due to bottom around the second week of August and the CRB is mostly driven by oil. Stocks are due to bottom in the second week of August also.

    They probably won’t occur exactly on the same day but I expect it will be within a week or two of each other.

    Gold will probably bottom first and bottom several weeks ahead of the CRB and stocks. However the kind of selling pressure that is going to be generated at a yearly and three year cycle low will probably keep gains in the sector muted until it passes.

  97. Bob loves Hawaii

    Pepper, I am in the Green Energy industry, and I can tell you that margins are being compressed and the industry is totally dependent on government subsidies.

    Europe is trying to figure out how to get out of the subsidy commitments they have made, and China is driving margins at the wholesale level to the floor.

    End user customers are broke or reluctant to commit to a ten year payback project.

    Almost every manufacturer uses the same technology, no differentiation.

    Otherwise a great business. 🙂

  98. v

    Hi Gary,

    In weekly report you mentioned dollar should bottom early next week around the employment report and expecting SnP to test 1400 in coming weeks? I’m a little confused, will the stocks rally with rallying dollar?

    V

  99. Gary

    I think any move below $1380 would be in the “buy zone”. $1340-$1320 would be in the strong buy zone.

  100. Moneyman

    Hi Gary

    Thanks for the answer.

    You said that the average daily cycle last about 20-28 days. We are now on day 17. It seems that the time is running out. We have maybe a few days left for gold to go higher..

    But if the cycle last longer..Like 30-35 days then we still have time. Like 2 weeks.

    I dont remember if the last cycle in gold was long or short?

    Im invested in gold. Not the stockmarket.

    The feeling is that its such a mess everywhere in the world.
    I cant understand that the market is rising in this mess..

  101. Gary

    Money,
    The last gold cycle ran exceptionally long, which would argue against another long cycle.

    The reason that stocks are rising is obvious…liquidity.

    In 07 stocks continued to rise and double top even after it was obvious the financial system was in trouble.

    QE2 doesn’t stop till the end of June. In theory we could continue to see stocks rise even past June as momentum could push it higher for a while.

    That’s what happened last year when QE1 ended. But ultimately the economy is headed back into recession. I don’t think the stock market has ever been able to resist that no matter how much money is printed. Recessions are deflationary. Capital is destroyed at a massive rate.

  102. Gary

    E,
    Because the world is in a secular bear market. In order for the global economy to recover into a sustainable uptrend we have to do two things. First we have to cleanse the massive debt that has built up over the last 40 years from the system.

    It’s impossible to build a sustainable recovery on debt. We tried from 2002 to 2007 and look what it got us.

    Second we need a new industry to come online. Something to drive a massive surge in productivity and create millions of jobs.

    In the 1920’s it was the automobile and mass production. In the 50’s & 60’s it was plastics and electronics. In the 80’s and 90’s it was the personal computer and internet.

    Every one of these forced a paradigm shift in the way the world operated. They created huge surges in productivity and job creation. Until that happens again we will be stuck in this on again off again recession. And unfortunately we are making it worse by trying to stop it with money printing.

    All money printing does is create massive mis-allocations of capital … as we saw during the housing bubble.

    It also causes inflation, especially commodity inflation and that opens a whole new can of worms. Commodity inflation causes severe hardship in economically stressed countries. When people can’t afford to eat they go to war.

    This is why all the great wars happen during periods of economic stagnation while the world waits for the next “big thing” to come along.

    Idiot politicians exacerbate this process by trying short term fixes which almost always just spike inflation further.

  103. Éamonn

    Gary, thank you for your answer. I cant say I know much about economics, so I find it hard to see the “big picture” with any sort of authoritative sense. I think people have become used to easy credit over the last decade. Socially, I think the world is in a dangerous position. I believe that there will have to be a crisis before the political will becomes sufficient to solve the problem.

  104. Éamonn

    Also, I find it ominous that the US Government seems to be saying that current inflation is at 2%, but from other sources, inflation is in reality for the ordinary person at a rate of 10% (www.shadowstats.com, and Marc Faber)

  105. Ivan

    Today people from Greece withdrawall 1.5 bilion Euro from the banks,scared that Greece is on the verge of colapse any moment.In my country Bulgaria we have 7 Greek banks and people start doing the same thing from Greek branches.Situation here may soon get out of control and that would colapse the Euro I think.

  106. Gary

    Doc,
    I did a quick look back and the only stretched CRB cycle I see is the early 93 to late 96 cycle. For the CRB cycle to stretch into next spring would require a full three years.

    Base on the data of that only occurring once in the last 30 years I’m willing to be a burrito on the next bottom also marking the 2.5 year cycle low in commodities.

    What say you? 🙂

  107. Vodni

    Ivan – wow, another Bulgarian! Didn’t think I would ever see one here!

    I am too trying to correlate the deep trouble the EU and Euro are in with a potential plunge of the price of gold – hardly imaginable (especially when thinking about the Euro crisis in May 2010), but as we know, everything is possible on the markets, including the opposite of what everyone expects. Let us see how things will turn out in the following weeks.

  108. Ivan

    Vodni,
    I think is going to get really bad in Europe.I use to work with Greek people.Most of them are very dificult and very rarely they are happy with anything.Now with those restriction they got really angry.
    I’ve been this summer in Greece.It’s really a diferent story and everyone can tell the diference.
    The main indicator is that they use to go out and eat and drink every night.Now I saw only empty restorants,just few tables with people.

  109. Vodni

    We all know the situation in southern Europe is getting worse every day. Greece is small compared to Spain (and yes, they already have revolts too) – if the latter or another country would also need to be bailed out, we could see some very dramatic developments over a short period of time. I personally think there could be still a couple of months before it gets that far.

  110. Ivan

    Gary is actualy right .The next big bad news will come from Europe.
    Even my country is in European union I dont believe in such unions.Its 28 diferent cultures,languages and people.It will never work out.

  111. MrMiyagi

    Last time I was in Greece was 1979. I was a kid back then but I still remember how the plakas smelled of grilled souvlaki.. oh man I’m drooling…

  112. Éamonn

    I was wondering too if crisis in Europe would force the price of gold up, or would it drive it down?*scratching head*

  113. Bruce

    Pepper2009/Bob loves Hawaii,

    regarding sustainable ‘green’ energy:

    I understand that our energy problems can be solved by tapping the heat trapped deep in the interior of the planet. Gigantic thermal power plants would need to be constructed and operated, by means of which all energy requirements on our planet could be met.

    No dangerous waste products of any kind would arise and there would be no worst-possible-case-scenarios or super worst-possible-case-scenarios, as there will always be with atomic/nuclear power plants.

  114. David

    A fall in the Euro would lead to a spike in the dollar, which should theoretically cause gold to fall.

    But that fall would presumably be offset by Europeans buying gold, so the drop would be short-lived.

  115. Alex in Montana

    Eamonn,

    You are correct on the CPI. It is understated. The U.S. is not th eonly country palying games. So is China.

    It also means that the Fed’s and China’s reported “real” interest rates are also understated.

  116. Hot Rod

    Isn’t there a big difference between where the people of Europe will put their money for safe haven and where the institutions/Wealthy will put it?

    The people likely wouldn’t be buying physical, USD or US treasuries. Their money would go under mattress, real estate.

    The wealthy would invest in other countries or markets or commodities (China, US, gold).

    What is different today than it was back in 2009? The stock market is a lot higher. A high stock market provides people with paper profits and an appearance of wealth.

    Maybe I, as middle class, don’t have the best perspective but nothing really changed for me and my wife from 2007 to 2009 other than our 401K going way down and then back up (we were not invested in the markets outside of 401k). The key was we both kept our jobs (essentially our long term insurance policy).

    It appears as though it may happen again, wash, rinse and repeat. However, there is a huge difference this time around. Lot’s of people are expecting a top or a crash is imminent. It seems to me the popular opinion isn’t the one that happens.

  117. brazil

    Gary wrote: “QE2 doesn’t stop till the end of June. In theory we could continue to see stocks rise even past June as momentum could push it higher for a while.

    That’s what happened last year when QE1 ended.”

    Didn’t the market start to roll over in April last year – one month before QE1 ended and fall thru July – a total of 17%.

    QE2 was announced by Bernank in Aug, but big money probably had knowledge of it sooner (july?).

    Enjoy your blog – both the technical and fundamental comments.

  118. mamaloshen

    Gary,

    That was a great summary of the Austrian economists position in your reply to Eamonn. Saves me reading a few volumes of Van Hayek.

    Governments will always tend to misallocate resources (I think Milton Friendman once said that if the government was put in charge of the Sahara Desert, the sand would run out in 25 years).

    But if we get a hyperinflation, stocks and gold could be the best investments; cash and bonds the worst.

  119. TommyD

    My Thoughts On Europe – The domino affect should carry this around the globe to China, Russia, USA and a reshuffling of nations will be needed.

    Consider world war 2.36 as an option to rebuild the peoples trust in banks?

    Watch for UN troops to take control of Greece, Spain, EURO-zone and maybe the USA before it’s over.

    NWO imposition is not out of the question. Who do you side with is my real dilemma .. China, Iran Brazil and Russia — they do not like UN inter-planetary control, imho, nor do I.

    RFID money and chipping people do not sound like the CHRISTian way of life. Does it to anyone here?

    Tom

  120. Éamonn

    The problem I think is that its political suicide for a US President to preside over call for the required recession/depression to cleanse the system. Reagan with Volcker somehow did it in the early 1980s to get rid of inflation and yet Reagan got re-elected. I’m not sure how that was pulled off.

  121. hamvestor

    “Watch for UN troops to take control of Greece, Spain, EURO-zone and maybe the USA before it’s over.”

    The lunatic fringe apparently is alive and well.

  122. Peter

    Gary, when you have a moment, it would be interesting to see how the last ABCD wave played out. Would you be able to either share the dates of the various cycles starts/stops, or perhaps include a chart in your next report.

    Thanks in advance.

  123. Hot Rod

    Gary,

    Does today’s lower low in the USD and positive close count towards a possible swing low or is this “off hours” action ignored?

    Thanks

  124. Cory

    Just Zero Hedge as usual, in Shanghai this time. Might be nothing, but they always seem to come when nobody can trade it.

  125. Gary

    DP,
    Zermatt is definitely in the cards. Most of us all ready have our flights and hotel booked. I think most are staying at the Christiana hotel although I hear it’s sold out now so you will have to stay at a different hotel.

  126. Gary

    Basil,
    QE1 ended in March of last year. The market managed to drift higher for another money before the wheels came off the car.

  127. Gary

    Peter,
    Last D-wave bottomed in Nov. 08 at $680.

    The A-wave topped in Feb. 09 at $1000.

    The B-wave bottomed in April 09 at $860.

    This current C-wave has so far topped last month at $1575.

  128. Gary

    Hot Rod,
    I count it if I see it on the chart.

    Keep in mind a swing doesn’t guarantee a cycle low though.

  129. $$$

    Euro Rises to Three-Week High on Optimism Over Extra Greece Aid

    May 31 (Bloomberg) — The euro rose to a three-week high against the dollar on optimism European officials will sanction additional assistance for Greece, increasing demand for the region’s assets.

  130. Gary

    I don’t know when gold will decide to go down. At the moment its down even though the dollar is down hard.

    The bottom line is that gold is very deep in it’s daily cycle. When it decides to let go it will probably do it pre-market and trap the longs again.

    I just have no desire to get squashed twice. Let’s just say that was an expensive mistake last month and I really don’t feel like making it twice.

    So for the next month or two I have no desire to be long precious metals anymore. We managed to skim a decent profit off the last trade and that was good enough for me.

    It’s not important that I catch the exact top. It’s only important that I’m prepared to take advantage of a great opportunity when it comes next month or in July.

    So that’s what I’m going to do. I’m going to wait for that opportunity.

  131. Edwin

    i’m holding gold. i think it’s still in play.

    it’s late in the cycle agreed i’m not adding.

    my stop is at 1515

    lets see what happens this and next week if it can carry momentum.

    i’ll have a storage of cash like most of you guys to deploy if a correction begins. my est downside projection is 1324. but i’m a buying in chunks if gold breaks below 1480.

  132. Gary

    Edwin,
    There’s no need at all to buy anything above $1462. In order for an intermediate decline to begin a prior daily cycle low has to be broken. The last daily cycle low came at $1462.

    So we won’t even have confirmation of an intermediate degree decline until $1462 is broken.

    My suggestion is wait for the break of the daily cycle low to confirm the intermediate correction has begun and then count the days into the next daily cycle. Once gold gets 18 or more days into the cycle then it’s time to start buying.

    I’m going to go over this in tomorrow’s report.

  133. Beksachi

    Gary,

    Just to clarify: you said never short a bull market. You also “except broken parabolas”.

    Does this we will short silver sometime later on?

    Thanks

  134. Gary

    Aries,
    I’m afraid James is going to be sorely disappointed. Gold still has to drop down into an intermediate degree correction as does the stock market.

  135. Gary

    Besacki,
    I wouldn’t short silver. The profit potential is too small and the risk unlimited. I will from time to time buy puts on an asset that I think is going lower.

  136. ALEX

    Gary,

    I just reviewed the report again. Without revealing too much…

    When I looked at the wkend reports long term thoughts on what may be to come, this time around it doesn’t appear to be as difficult to make money in the ‘b’-wave due to your thoughts on the crb?

    Are you imagining that the ‘b’wave
    will be of relatively short duration and then on to another ‘c’ wave .

    I was also quite surprised to hear you mention QE3 and QE4 and QE5, since you were earlier saying that it was foolish to think that even QE3 would be implemented (Unless you just meant immediately after QE2).thx

  137. Turning Japanese

    Regarding Turk’s forecast above, does anyone know if there is any single source that has tracked the accuracy of all these so-called gold “experts”, such as Sprott, Turk, Faber, Rogers, Schiff, etc.

    I know they don’t all give day-to-day or even month-to-month forecasts regularly, but surely someone has been tracking their relative accuracy during the gold bull.

    I doubt anyone has been anywhere near Gary in terms of timing and medium-term targets. Fred Hickey has been fairly well-timed in his newsletter as well.

  138. Bill

    Turk is great for fundamentals, including history. So for Old Turkey buy/hold investing, he’s great. Although in his speech he sometimes sounds like a trader, he’s not – he’s a monthly buyer of gold – an investor.

    Bob Moriarty of 321gold.com is closer to a gold bug trader. He told folks to sell silver about 2 weeks before it topped. And he just wrote to go to cash, due to his belief that derivatives are about to blow up.

  139. lodmund

    i’m not interested in whether Turk or anyone else is a trader or an investor. What interests me is when they make an unambiguous prediction such as look for gold to trade at $1800 by 31 March 2011 whether this proves to be accurate or not. using this measure Turk’s record in my opinion is not great ( although there are worse)

  140. Bill

    Iodmund, then I’d say I’ve never seen him right regarding on *price* on a *date*, and I’ve been following him for 6+ yrs.

    I still greatly respect him though for his clear understanding of the big picture – but yes I wish he’d stop predicting prices at dates, as I think it detracts from his main message.

  141. Turning Japanese

    Thanks for the responses.

    Bill, the name is just a bit of humor regarding the US entering into what will be equivalent, or worse than, Japan’s lost decade (well, lost two decades, now).

  142. Bill

    Actually though, even BIGGER picture-wise, Gary nailed it when he stated that gold is a rock.

    Money is a concept in our human minds.

    But, humans DO think it’s money, so it is, for us.

  143. T.J. Rand

    Gary-

    Terrific weekend report – both thoughtful and comprehensive. I really appreciate both the integration of all available data into a ‘story’ which outlines a likely path ahead, and also your willingness to change the story as the data supporting it changes.

    You mention that equity sentiment needs to be reset. In measuring sentiment, I have defaulted to the Smart/dumb money index, AAII Bulls/Bears and COT Commercial trader net position, all from SentimentTrader…are there others that I should consider?

  144. Bill

    Turning Japanese, makes sense.

    A suggestion if I may. You might want to consider using the current flag then, as that imperial flag carries with it the symbolism of that period, and many suffered under it – which is not even remotely related to your point – but anyone out here in Asia, upon seeing it, is immediately polarized.

    By the way, Japan lost 2 decades. And, the US has already lost 1. 😉

  145. Gary

    Alex,
    Let be try again. QE3 following right on the heels of QE2 is an impossibility. Politically there’s no way to swing it. We will have to have another crisis before the Fed can justify QE3. That crisis should come this summer as QE2 ends and the markets and economy start to tank.

    I never said there wouldn’t be a QE3 just that it couldn’t follow immediately after QE2.

    Here’s the problem with gold. The A-wave is easy to make money. The problem is we don’t know when it will end so we could get caught again. The A-wave could rally back to $1550 or it could only rally back to $1450. The B-wave is self evident. If you don’t know where the A-wave stops it’s almost impossible to play the B-wave.

    The real problem is that usually about the first year or more of the C-wave is just a choppy mess that goes almost no where while it consolidates the massive gains from the prior C-wave.

    I think we all know how hard it is to make money in choppy markets. I have a plan that should allow us to at least make some money but we aren’t going to be making 50-100% until the next C-wave breaks out and that is probably going to be a year or more away.

  146. Gary

    TJ,
    I like to see the intermediate score also become bullish. The COT for equities has mostly become worthless although it could start working again.

  147. 86d4life

    Gary,
    Good explanation. As long as your poking and prodding the crystal ball this morning, care to venture a guess at where the dollar bottoms here? A double bottom maybe? If a guy had that one answer…..

    Good Morning everyone.

  148. ALEX

    Thx Gary,

    you wrote “I never said there wouldn’t be a QE3 just that it couldn’t follow immediately after QE2.”

    Actually TJ contacted me and told me that he felt you said that exact thing as you wrote above too, that it wouldnt come right after QE2.

    my bad. I had asked last winter about possibly QE3 stretching the dollar low into the fall and gold parabola into winter.I implied it following right after QE2…

    Your answer must have been as stated above. thx.

  149. 86d4life

    Thanks Gary. I remember this commercial way back, I can`t remember what it was for, but this guy had his head tipped back with a pencil on his forehead, and a plate on top of the pencil and another pencil on top of the plate and so on. He had the whole stack swinging around in circles. It was really impressive. That`s how this whole market is starting to feel. Better take a picture now `cause any second……..

  150. Éamonn

    Market futures are up 0.8%. Looks like the S&P will break that down trend line. After that, the magic number is 1311 down into the abyss :o)
    Gold dropping despite the weak dollar…is this as portent?

  151. Éamonn

    Gary, yes of course, and I agree with you. I was thinking aloud, so to speak :o)
    The next big move is in equities heading south. Might buy some silver Puts, but not many. A fortune could be made with them

  152. SF Giants Fan

    Gary

    Off topic question.
    Any guesses on when the real estate market will bottom / stabilize, specifically California? My guess is the majority of the pain in price drops have occurred and we flounder around until the employment picture improves.
    Thank you

  153. Gary

    Equities could go higher for a whole month before rolling over so I wouldn’t bank on a quick market decline just yet. It’s going to take either a bit of time to push sentiment back to bullish extremes or a very sharp rally.

    Which ever way it happens I think it has to happen before a bull market top forms.

  154. Gary

    RE will make another leg down during the next recession.

    This is how bear markets work. They drop to the point where everyone thinks it can’t go any lower based on the higher prices that they start from. So buyers start to step in. The market bounces convincing everyone that the bottom is in then the market fundamentals drag it back down again. And everyone who fell for the bounce gets taken to the cleaners.

    Repeat, repeat, repeat.

    Housing in general probably still has another 5 to 10 years to grind lower.

  155. 77

    just another manic monday traders!!

    oops i mean turn around tuesday!

    The major market averages (Dow +105, S&P +11, Nasdaq +22) are pointing to strong gains versus fair value on word of a German-led bailout of Greece.

    now with the eur/usd longs will be tried on a drop to 50-day MA around 143.50 with a stop under 20-day MA

    gold showing it was a greece safe haven so losing it’s bid right now

    Day After Memorial Day, Dow Up 14 of Last 21

  156. Gary

    I expect the market would be up no matter what the news out of Greece is. If nothing had happened then the news would have been market up on hopes that a solution to the Greek mess will soon be found.

    The market is up because it’s time for the daily cycle to rally.

  157. Gary

    The oil and gold cycles don’t always match up. Actually quite often they run opposite. Oil is seen as an economic play now. if stocks are up the market assumes the economy is working and that means demand for oil is strong. Oil will probably continue to rise to some extent along with the stock markets daily cycle.

    Gold however will be more controlled by the dollar which has put in an intermediate cycle low.

    Being as gold is very late in it’s intermediate cycle and wants to go down anyway any strength in the dollar should force gold to roll over and head down into the intermediate bottom.

  158. 77

    Gary, very nice that you aren’t a perma bull on gold, so many people get hurt ‘buying high’

    like all the blogs that were screaming ‘silver to 75’ when it went to 49 on the 2nd thinnest holiday weekend sunday of the year(Christmas would be the thinnest)

    silver likes to follow crude oil ‘inflation’ … overlaying charts can see how they have been doing things recently…. since crude oil is the biggest weight in commodity indexes, a case can be made that crude oil rules the roost

    here’s one link where silver always goes down 70%, scroll down to SILVER MARKET TOPS
    silver-tops

  159. Gary

    Actually silver quite often diverges from oil. What silver does is follow and magnifies the moves in gold.

    The gold and oil cycles don’t always run together. I think the coming intermediate correction will probably be a good example. Gold should bottom several weeks before the stock market and oil.

  160. 77

    a poster who i commented upon last week when it said ‘USD surely going over 77 now’ now i saw it said richard russell was an imbecile…

    richard has had subscribers at least 20 years, maybe 30, and the deal was in the 1990’s when gold was grinding ever lower to it’s 20 year low, richard kepy saying ‘have 10% of your net worth in gold’

    would guess that as gold rose from 2001 that richard’s subscribers position in gold kept going up with it

    can see many gold bug sites here:
    http://www.voy.com/65437/

    since gold was up 10 straight years, and is up this year thus far, and silver was up 87% last year and had a blow off this year, it’s hard to say all the gold bug sites and commentators are making wild posts…

    yikes, they haven’t been wrong for a very very very long time!!

  161. 77

    nice chart Gary…. from your chart looking to the farthest right side…silver and crude oil are not diverging now

  162. TommyD

    77,
    So silver may be a bad holding for a few years.

    I have the physical just in case the dollar becomes worthless. At least I have something people may accept in place of currency around the world.

    I am not holding 120 pieces of silver eagles. Not much but in a crunch it could be considered a fortune.

  163. basil

    77,

    sorry to be so blunt, but you’re charts make no sense to me; particularly, I don’t see the purpose of turning a thirty year chart of silver backwards. Is your point that what goes up must come down? You can do that to any chart in the world with zero prognostic value.

  164. Harry

    I know we try to stay way from options chatter here, but boy oh boy, those Aug $1500 GC puts below 20 are looking mighty tempting. I will probably hold out a little longer, but…

  165. Baba Ghanooosh

    Gary,

    Another secular trend to keep our eyes on is the wireless infrastructure business.

    People will be consuming huge amounts of data on wireless devices. I think this trend will continue despite the economic cycles so I am accumulating shares in these companies on dips.

    However, like the miners many of these were up 4-5x this year and are now correcting hard so I am being patient but for a multi year horizon, I think this is a good entry point.

    I don’t want to list any particular stocks because I don’t want anyone losing money because of me.

  166. Éamonn

    Gary, if I could ask you another question……
    Which sector of the market, other than energy, would you expect to be hit the most in an intermediate correction?
    Thank you for letting me pick your huge brain :o)

  167. oa92000

    Greece pushed international markets higher with the MSCI Asia Pacific Index gaining 1.4% and the Stoxx Europe 600 up as much as 1%.

    thx Greece!!

  168. DG

    I have been expecting an SPX drop to happen this summer for some time. I am starting to change that opinion. There is too much bearishness in my view. I have posted a number of items (the 25 year high in newsletters looking for a correction, the incredibly low number of AAII bulls, the five year low in investment manager confidence, the lack of call buying, etc.) To be fair, these sentiment things have only a 2-3 month life so maybe shorting in August will work for an October smash, but I expect higher prices until then, which argues against the dollar low being in.

  169. Alex in Montana

    Eamonn,

    Small stocks are very overpriced. Some very smart, fundamental based long term investors have done work indicating how expensive small stocks are. Their breadth is breaking down worse than large caps stocks right now.

    You might be better off shorting a class of stocks like that (Russell 200) vs. shorting retailers or hospital stocks.

    Picking sectors might be harder than indices. Having said that somes sectors will fall more than small cap stocks.

    Me, I will short the Russell 2000 at the proper time.

  170. NJ

    Gary:

    Since the $$$ daily cycle is around 20-28 days and you have mentioned that the employment report turn may not work in the future, do you think the cycle stretch going forward? Just like the stock cycle has been stretching since QE2?

    Thanks!

  171. coolkevs

    Demark signal update from Kevin Depew at Minyanville:
    German DAX on a Daily BUY setup => 1-4 days of Greek euphoria
    SPX – also on a Daily BUY setup, but not as strong – SPX still on the MONTHLY SELL, good through August to keep it down
    Silver – Today is Bar 8 up of a countertrend rally – perfected Sell setup will print tomorrow, so the back half of the week could be rough
    SLV ETF – slightly behind in the counts – bar 6 only, but still should follow the underlying
    Gold – one day ahead of Silver in its DAILY SELL setup – recording today, so Tuesday-Friday downside expected

  172. 77

    the major indexes have been messing around with their 20-day SMA’s today…interestingly RUT is the furthest index above that MA now and historically outperforms in june
    20DMA’s

  173. 86d4life

    Dude,
    No I just get the freebie. Nothing earth shattering, but fairly accurate. It`s one of the few that I read anymore. I guess I look at it as good confirmation for the price. 🙂

  174. 77

    it’s not me saying silver will go down, it’s the opinion of the market timer whose site it was…what markets have done in the past they tend to do again, call it cycles perhaps, just never say ‘it’s different this time’

    i appreciate Gary that he is not just constantly bullish precious metals

    since minyanville was mentioned, here’s a link there saying silver to 07.00$
    $7-SI

  175. aklaunch

    Kind of funny….

    Over in the options section of my brokerage account i am seeing high volumes of SLV calls in the 30-35$ range for January of 2012 and 2013.

  176. 77

    all of you should plop $2K USD into a tdameritrade account, can be an ira, then you get minyanville buzz and banter plus other minyan articles…plus you get to download the think or swim platform that does work with your ameriturd login, there are 4000 people logged into the think or swim chat rooms during market hours and a ton of trading webinars are always happening

    buzz and banter also has the best guy there is on gann, jeff cooper, who did say buy SLV at 32 last low, he shows the gann wheel of time, gann angles, and all that jazz

  177. deliberate

    Minyanville? Arn’t they the one’s who spam out all that video incessantly blabbing that price can go up or down, and it can up or down some more, etc., etc. adnosium

  178. Gann360

    Alot of my Charts were on MinyanVille and Ameritrade.com,,,But when it got to the Point where Jeff would stop giving me Credit , and Pass my charts for His, i stopped, i just sent Jeff my Recent Charts, lets see how long it Takes him to Post them on Buzz and Banter and not give me Any -Credit for them Again…lol

  179. Benjamin

    gann360, what are your favorite gann books? I have a few but never got to reading them in depth.. Any tools that you use for gann specific analysis? These people from sacredscience.com who claim to be gann experts I don’t really like…

  180. Gann360

    Read all the WD Gann books you can , and take your time with them,,, Gann always said , to understand anything Properly you should read it 3-4 Times,

    You will learn about Vibrations in Time and Price, along with Patterns , A little Astro as well,,, which will help your Trading.

    As far as Gann Fann .Gann Wheel/// that’s all the Easy stuff,Once you get started , it’s very Addictive.

    Goodluck

  181. DP

    Gary,

    Just booked another hotel.

    Will we have any info in Christiania about where and when we meet first time etc?

  182. Edwin

    platinum and paladium been working..

    but yeah gold looked stagnent today. people were cashing in. cha-ching!

  183. aklaunch

    Rhodium is pegged today at a 2500$ ask price per ounce… It looks like Silver is trying to lead the way for gold? Once it figures out it is leading it in the wrong direction maybe it takes a good stumble? I am betting on it!

  184. Less is more...

    Looks like we have BB crash and VTO setup for UUP. Now that we are in the timing band cycle low on the Dollar… might be a low risk taking this trade.

  185. wmp

    Alex,

    I took some qqq and spy this morning as well. Do you have a target?

    Thanks, enjoy your comments and direction.

  186. wmp

    Anyone have thoughts: I heard on the radio this afternoon that the budget deficit vote was scheduled for after hours so it would put the market into a “downward spiral”. Hopefully just media drama??

  187. ALEX

    WMP

    I just take it a step at a time. I was watching for a retest of the highs , and who knows, maybe it breaks out from there and makes a new high.

    The SPY chart that I posted, the DOW and NASDAQ have basically the same type of set up (except the DOW is sitting right at the 20sma.

    I am gone for the night, good day all.

  188. Gary

    DP,
    send me an email.

    Sophia,
    Shoulder is doing great. I’m already climbing and doing some light lifting.

  189. Gary

    First off everyone knows the debt ceiling will be lifted. So that’s a non event. But the market is being driven higher by QE2 the same as it’s been for the last year.

    At some point the market will start discounting the end of QE2 but probably not until sentiment reaches bullish extremes, which at this rate won’t take long.

  190. Bill

    Gary, I know you’re watching sentiment numbers closely, but stepping back I always heard/thought that the market discounts future news by 6 mos – it’s odd to me that the S&P has not discounted an event that is less than 30 days away. I never would have guessed that the market would go up until these last days of QE2. Think of all the money that has to pull out, and that not all at once.

  191. Bill

    Feels like a crash could happen, if we don’t start going lower soon.

    The entire rise out of the Mar ’09 666 low has been QE funds. It’s all fake – loans, rather – that have to be repaid.

  192. Gary

    Bill,
    The market as a discounting mechanism is pure baloney. The market can’t see the future any better than you or I can.

    Over many years people have watched as the market rallies early before a recession ends and they erroneously assume the market discounts the future. All that really happens is that once a recession starts the Fed prints a ton of money and dumps it into the market. It’s the liquidity that forces the markets higher not some ability to discount the future.

    The first recession of this decade ended in 2001 yet the market didn’t bottom till 2002.

    By the summer of 07 it was easily apparent that the financial sector was imploding, yet the market rallied all the way into Oct. even making marginal new highs.

    The market didn’t discount either one of these events.

    Right now the Fed is still pumping billions into the markets. That is what is driving them higher even though by now anyone with a lick of commonsense can see what’s coming down the pike by next summer.

  193. Bill

    Huh. Well, that’s the 1st time I’ve heard that perspective, but you may be right.

    Looking at the charts, SPY peaked in Oct ’07, but XLF peaked in May, a full 5 months ahead of SPY. It’s things like that that reinforce the idea (or myth) that the market discounts the future.

  194. Bill

    Follow me on this one: if most people believe the notion (or myth) that the market discounts the future, maybe it means that they believe that there will be a QE3 soon, esp. as this is the 3rd presidential year. I’m not saying they’re right in an absolute objective truth sense, I’m just wondering if they believe the myth, that could explain the continued rise in the $SPX.

    Or, it’s just as simple as you say: the Fed is still printing, so the market is still rising.

    Simpler is better!

  195. Romeo Bravo

    Lots of major name industrials recorded quite a bit of selling on strength today. I don’t proclaim to be any kind of SoS or BoW expert other than large SPY sales/buys. However, this could be end of month action. Anyone else have more insight?

  196. Gary

    Bill,
    The dilemma you are going through trying to find meaning in the market moves is exactly why I use cycles and mostly ignore charts.

    A week ago the chartist knew that the market was going lower. Why? Because the indexes were moving down. I’ve been saying for a couple of weeks now that we would get a bottom soon. Why? Because the cycles were telling us that a bottom was due.

    Now the same thing is happening with gold. The charts are saying gold is going up. But cycles are telling us that a serious correction is coming soon.

    This is why I use cycles and sentiment to trade and most ignore charts. Because cycles and sentiment give one an actual edge in the market and charts mostly just convince you to keep pedaling off the cliff.

  197. Gary

    RB,
    At some point we will see one of those coupled with the SPY and that will most likely signal the end of the cyclical bull.

  198. DG

    It’s pure baloney that the market does NOT discount the future. It does and I have been trading using that fact for decades. For example, sector stocks lead individual commodities. Oil stocks start down before oil does. Gold stocks start down before gold does, etc (as we just saw to our pain!). “Smart money” starts getting out late in a move. What would be the point of tracking “smart money” if they just followed the heard? And if they get out early, their footprints show up as “smart” is also “large” (which is their reward for being “smart”). You have to know how to read the footprints. Not knowing how to read it does not mean it cannot be done, of course. It’s specious to say “If I can’t or don’t know how to do it, it must be impossible.”

  199. Gary

    BTW the XLF headed down early because the financial sector was already broken. The market knew that but continued to delude itself that this wouldn’t affect the rest of the market.

    It called sector rotation and it usually happens at tops as sector after sector starts to break down.

  200. Gary

    DG,
    Certainly insiders who know their sector will exit ahead of the general market. I’m not talking about that, and that isn’t really discounting the future anyway. That’s just insiders that see the fundamentals rolling over exiting. Then the crowd starts to follow their lead. That causes the sector to weaken.

    What I’m talking about is the notion that the general stock market can somehow see the future. That is absolute nonsense. It never has and it never will.

    It will respond to massive inflows of liquidity and to cycle timing bands but to think that the stock market knows what is going to happen in 6 months is ludicrous. If that was the case then there’s no way we get today’s rally. The market would know we have a recession coming continued down.

    I’ve already pointed out two recent cases where the market completely mis read the future.

  201. MrMiyagi

    Gary,
    Since, seemingly, Doc uses cycles as well, why isit that you guys are diverging on the SPX & gold issue at this time? Unless I missed something…

  202. Bill

    Gary, good point on sector rotation. That explains it.

    But. Do you play chess? I used to suck at it until I developed the mindset to ATTACK and KILL my enemy, limb by limb – with no fairness nor pity – then I started winning. I swear I had turned into a nasty little Darth Vador, helmet and all.

    Maybe it’s the same thing on the S&P. You’re right to say that “the market” can’t predict the future. But is that what’s happening? Maybe what’s really happening is, very very smart and very very rich HF’s are LEADING the market up or down, at will. They play god and CREATE the market.

    What I’m saying is, maybe the Fed is printing so the market goes up via liquidity. Or maybe this is a big rat trap, and HF’s are suckering in the retail investor, creating the illusion that the market can go up w/out QE. This despite MASSIVE debt, massive derivatives, paper money printed w/out regard to value, and massive WW unemployment. Feels like a trap.

    The only market I think I understand is gold and oil and ag. The rest will carry on w/out me, as I don’t trust them.

  203. Gary

    Well I don’t read Doc’s letter, mostly because I don’t want any outside influence and I want to make my own decision but I think we are both on the same page generally speaking.

    We both expect gold to move down into an intermediate cycle low in the next month or two and for stocks to top in the next month and move down into a yearly cycle low.

    I believe Doc thinks the CRB 3 year cycle may push out to spring whereas I think it will probably come this summer. That’s just a timing call and not terribly important. If it does manage to stretch long then it will be because the stock market has rolled over and is dragging oil down.

    That may end up being the case but I’m just going to go with the standard 2 1/2 year cycle based on only the 93 to 96 cycle stretching long in the last 20 years. If only one cycle has stretched in 20 years then the odds aren’t good for this one to stretch.

    It might form a left translated cycle though. That is something I haven’t considered.

  204. Gary

    I wouldn’t fall into the trap of thinking someone controls the market. The market is too big for anyone to control and that includes the Fed.

    Sure they can print money and stretch the cycles but they can’t stop the inevitable. Ultimately they will accomplish the same thing by printing as they will spike commodity inflation. Then that will bring down the markets. either with or without the printing presses the market will come down because it’s in a secular bear market. And will be until valuations reach stupid cheap levels.

  205. Bill

    Gary, a q re: cycles.

    So as I understand it, cycles happen because crowd behavior is predictable and moves in waves, or cycles. So far so good?

    And is golds cycle caused by the massive number of Indians buying gold over their weddings and holidays? Most gold bugs would say yes. Until now.

    Now the Chinese are getting richer, saving upwards of 30% of their incomes (I’ve read), and are heavily investing in gold.

    If so, could this somehow reset your cycles for gold moving forward.

    There are 1 billion people in India. But there are 1 billion people in China as well. Seems like their constant, monthly buying could put a floor under gold.

    My question is, do cycle periods change when there is a huge paradigm shift, such as China being a major buyer of gold?

    Thanks.

  206. Bill

    Sorry to be lengthy, but what I mean is, the Indians have had their weddings and ceremonies for 1000’s of years, so I can see how that would create a predictable cycle.

    But China has become a major buyer only now. Could their size change the cycles?

    Thanks.

  207. Adam

    Bill,

    Fundis decide the direction (dependent variable). Any number of independent variables such as Indian buying, Chinese buying for the year of the rabbit, debt destruction, fear, currency trading, tips from college room mates, etc. are all responsible for the variance around the regression line which is trending higher. Cycle analysis is a way to help sift thru the regression’s variance around the mean in a measured way to help mitigate risk. Regardless of why it works, it helps us decide when to “tap on the brakes”, accelerate or run away screaming.

    The parabolic phase is when all of these independent variables begin to feed off one another (multicollinearity) and drive the regression equation to ridiculous levels that can’t be backed by the underlying fundamentals.

  208. Bill

    Yup, nicely put.

    But, when I look at a 30 yr chart of gold, I see a few cycles but not nearly enough to help me trade. Buy/hold invest, yes, but not trade.

  209. Gary

    Bill,
    There has already been a huge paradigm shift in gold since 2001. Gold entered a secular bull market. It didn’t alter the normal cyclical behavior. The only thing that has changed is the long term trend is now up instead of down like it was from 1980 to 2001.

  210. Bill

    I have to keep it real w/trading, or else it becomes an Emperor-w/no-clothes trap.

    So for instance, I didn’t see how cycles helped in predicting the sudden change in $SILVER. Saying it clearly, it didn’t. So for me, cycles are still a “sometimes it works, and sometimes it doesn’t” tool, so just like EW, it’s in the avoid-at-all-times category. It’s either that or loose money. It still hasn’t proven itself to me. I see it does for others, so not to detract from that.

  211. Gary

    Bill,
    If you don’t want to trade then don’t. You will still do just fine you will just have to hold through some severe draw downs is all.

    I suspect a great many of us would rather have not got caught in the silver draw down 🙂

  212. Adam

    Bill,

    My suggestion is to just keep watching how Gary interprets these cycles in real time. I started off with an open mind but remained skeptical; now I’m convinced there’s something to it. Even if there’s not and it’s all in my head, I don’t buy high (buy breakouts) & sell low (sell breakdowns) anymore. Can you put a price-tag on not making the same stupid, costly mistake day in and day out? I haven’t found much literature out there that’s even a little bit useful on cycle analysis – and I’ll be taking Level 3 of the CMT Exam in the fall. Keep watching. Before you know it you’ll see starting the patterns and maybe even respectfully disagreeing with Gary.

  213. Adam

    Bill,

    Cycles will tell you WHEN to use certain TA tools. In a move like silver had, we were all expecting a move into a daily cycle low, it was just more extreme than we had anticipated. We all had different stops. If you are more risk averse and decided it was a parabola – put your parabolic SAR tool on your chart. When it hits, you’re out. I’m not going to try to convince you though. If you prefer blindly going navigating the markets without a roadmap have at it.

  214. Bill

    You guys.

    Well, 1st off, I am a trader, trying to be a better one. I use a combo of fundamentals to choose the sectors, then charts for buy/sell signals. I was out of silver the 1st big down day, as it made a lower low, and also broke below the 20d EMA. But that logic doesn’t always work, as Gary pointed out.

    I agree w/you that there probably is something to cycles. But it can’t be just magic – there has to be facts and data to suppport it. Plus they have to be pretty obvious to see for a 1st grader. At least, that’s my going in expectation.

    The moons have cycles, the seasons have cycles, so I thought stock cycles would be something like that. But so far I just don’t see zip.

    Not trying to be an a-hole here – I subscribed and read everything – I just don’t see it yet. Yes I’ll keep trying. It feels to me (as a beginner) more and more like EW – i.e. a guideline, which is overwhelmed by the exceptions (in EW, its the renumbering of turns, and in cycles for me its right translated, left translated, etc.).

    I’m giving it a good go though. And I do see that Gary and most of you are really good traders.

    But when a simple question that is direct and clear can’t be answered, then either it’s hard, or it has no answer. I don’t know which yet. Thanks for your help though.

  215. Gary

    Bill,
    EW only works in hindsight so is of no use as an edge in the market. Cycles have clear timings bands.

    For instance if gold where to break out to new highs in the next day or two a chartist would buy on the premises that gold had experienced a break out.

    Someone using cycles though would know to sell the breakout because it is too late in the cycle to have any chance of follow through not to mention the length of the intermediate cycle means it’s now due for a deep intermediate degree correction. Another warning that one would not want to buy the breakout but rather sell into it.

  216. Adam

    Yeah, there are some technicians who swear by EWT. Personally, I don’t get it. I’ve reread Prechter’s book a few times and occasionally I’ll see a pattern that screams ABC or Ziz-Zag, but usually it doesn’t help me all that much because I keep seeing 5th wave tops which continue to make new highs. Not helpful (to me). I am interested in reading some of Gann’s work and seeing if there is anything useful there. When I read about things like the Gann fan though I get a chill up my spine. If changing your chart settings from default to logarithmic completely screw up your investment thesis then I fail to see how you have any thesis at all. Obviously, the same goes with LT trendlines, I’m not just picking on Gann for no apparent reason.

  217. Adam

    For me, Elliott Wave pointed out the importance of how trends consolidate. Lots of hours went in and that’s pretty much the extent of what I got out of it. Not the best use of my time, but then again – I also love zombie movies.

  218. Bill

    Yup, I hear you gary. I don’t see evidence of cycles yet on charts, but I understand your thinking.

    The reason why chartists like me buy on breakouts is because, we don’t know the cause, but we see tht price is moving higher. As long as there is a fundamental reason for higher prices, and as long as we mitigate risk by putting in hard floors, it’s worth the trade. Still is in my book.

    Flipping this a little bit, a week or 2 back, you said that if gold broke above 1526.20, that you’d buy a small position. Did you? Price went higher from that breakout point. It might not have, but it did, and still today gold is on that buy signal.

    I hear you on cycles, and believe me if I saw them I’d be right there w/you. But until I believe in them, I have to rely on other things, like price, like 1,000,000,000 Chinese each buying gold, like Nevada legalizing silver as money, and Mexico not far off, and so on.

    This rise in gold might fall – I am agnostic – if it does, I break even – if it doesn’t I make money.

    What can I read or where can I go to learn about cycles? I saw your charts, and there was just too much variation for me to use for trading. I am trying.

    – Grubbhopper Bill

  219. Bill

    Gary/Adam, actually EW is like cycles: it’s predictive (I mean, assuming they work). If one is in an EW wave 2, then one knows that wave 3 is next, and once wave 2 turns, one can buy w/the idea its low risk. Same as for cycles – at cycle bottoms you buy because you believe cycles will carry you higher.

    EW is based on mass crowd psychology. Cycles doesn’t say that, but it relies on the same thing. Masses of people buying/selling all day long move price up or down in a regular rhythm.

    EW worked when people traded. Now 80% of all trades are done by comp machines. And its been shown that these computers are programmed similarly. The only strategy I see in this new world is to FOLLOW PRICE.

  220. Gary

    Bill,
    Study the terminology document and then just follow along with the nightly reports. Eventually you will “get it”.

    Yes I did buy miners for a trade and even bought them under $1526. But gold has taken too long to rally so I booked some decent profits on the miners and I’m now just waiting for the intermediate cycle to bottom before I want to play in that sandbox again.

  221. Gary

    The problem with EW is you can’t know if you are in wave 1,2, 3 or 4 until after the fact. So EW is mostly useless.

  222. Adam

    If Elliott Wave helps someone else manage their risk and make better trades I congratulate them on its proper use. For me, it’s too subjective and has too many rules. I read a book by Connie Brown who said she likes to use EWT on intraday charts and then expand it out. I’ve had more success interpreting the ending of corrections that way than starting with the big picture and working smaller. Having said that, it’s not my preferred tool – just a trick I will consider pulling out of my hat if I’m trying to wow n00bs.

  223. Bill

    Gary, agree w/you on EW.

    And I read the term doc and have followed you for like 6 mos.

    The fact that you DID buy miners when cycles told you not to proves my point: a) that cycles don’t work, and b) that you’re a great trader.

    I’ll keep thinking on cycles.

  224. Bill

    What really sealed cycles for me was when you wrote at the Oregon airport that the $USD might go up, or it might go down. It was then that I saw that cycles don’t exist.

  225. Bill

    To keep balance, I will again restate that I think you’re a fantastic trader, Gary, and that it’s sentiment and experience that gives you the edge. At least, that’s my net-net perspective.

  226. Adam

    What’s next? You gonna tell Gary he’s weak & his muscles don’t work, but he’s still a great power-lifter? :o)

  227. Gary

    Bill,
    The problem is you want cycles to do something they can’t do. They can’t tell you the sustainability of a move. Any cycle can be right or left translated. The odds are of course higher that a right translate cycle will form once you get deep into the intermediate cycle.

    Gold is a good example. The next daily cycle will almost surely be right translated as gold needs to make a move down into an intermediate low.

    Cycles can only tell you when to step on the gas and when to hit the brakes.

    Perfect case in point. I’ve been saying for a week now that it’s time to step on the gas in stocks (at least for a little while). The charts certainly didn’t tell me that as the charts were clearly telling us the market was going down.

    However today makes it pretty clear that cycles do in fact work, they just aren’t a perfect timing tool (nothing is). But in this business close is usually good enough.

  228. Bill

    Adam, Gary’s an Olympic Weightlifter, not a Powerlifter. Big difference. 😉 At least he’s not a Bodybuilder though! 😉

    Gary, good point on S&P and cycles. Believe me I’m watching like a hawk for your call on gold. I’ll re-read your stuff and keep looking at the charts.

    Thanks to the both of you for your comments.

  229. Gary

    I guess that means they will have to send it back and add some more pork before everyone signs on. That seems to be the standard operating policy for US politicians nowadays.

  230. Bill

    Adam, you goof-ball – Gary has a massive squat – 190 kg – for his body weight. He can pull weights off the ground in perfect balance, and lift them over head.

    A powerlifter his size though can squat 300 kg though, but has no chance in hell to press overhead.

    Its like comparing a Dragster to Formula 1.

    When the bar is on your back, or over head, believe me it’s not just a little difference.

  231. deliberate

    Definition of SPECIOUS
    1obsolete : showy
    2: having deceptive attraction or allure
    3: having a false look of truth or genuineness : sophistic

  232. Gary

    Just my doctors prescribed 1/2 cc of testosterone every other week.

    It sucks getting old, nothing works right anymore 🙂

  233. Bill

    Adam, you goofball. Actually w/Gary I wonder how with all his muscles how he’s able to climb 5.12C. It must be his 3rd leg.

    Gary, I figured out your secret. You raise your own chickens, and massively inject them w/EPO, and then eat chicken burrito’s 3X/day. No one’s the wiser. Smart.

  234. Gary

    LOL unfortunately since I started lifting and gained 20 lbs I no longer climb 12c. I’m lucky to get 11d now.

  235. ALEX

    GARY SAID-

    “Perfect case in point. I’ve been saying for a week now that it’s time to step on the gas in stocks (at least for a little while). The charts certainly didn’t tell me that as the charts were clearly telling us the market was going down. “

    GARY, no offense please, but you have been posting “Imminent crash, get you parents out of their 401K!! Sell this market all through Nov to May.
    I wrote in January , when you told me I was foolish & sentiment was too high, crash was imminent…that this chart points to 1367. That could be the top…See the date on the chart.
    we hit 1370 top in May, and thats the top so far..

    CHARTS arent the enemy,if read properly , one can be very profitable. “Use them correctly” is key.

    http://www.screencast.com/t/9IkeUpghPY1

  236. ALEX

    But I really appreciate you Gary, for your patience with all my questions , since I didnt know cycles AT ALL last August.

    Since your cycle work at bottoms has given me confidence to go ALL IN on trades at THE I.T.bottom…rather than thinking that it may just be “questionable bottom” until proven otherwise with signs of strength…and for this blog…where many minds and opinions debate/ learn , and benefit. 🙂

  237. Haggerty

    Gary
    I have two questions for you if your around.
    1-In general, if we get a failed daily cycle, does that automatically put us in a new intermediate decline most of the time?

    2- Can a daily cycle low only be created when a recent trendline is broken?

    Enjoy the trip everyone wish I was coming with you!

  238. ...at ease

    Gary, Glad to hear you are recouping well. Have a great time in Switzerland. Beautiful time of year to go. Thanks for all your hard work and keeping us on track.
    Have a safe trip over and back and a great time with fellow SMTP members and a great climb.
    Yep, getting older can suck, but only if you let it get to you. I don’t think you do, as you still get out and about, make personal bests and records as well as rock climb, travel and keep up a great trading site. So don’t think you are that old yet. Your activity level puts youngters to shame. You are a perfect example of how to use your God given talents to the max! Trading hours shouldn’t be too bad, as you should be finishing up before bed time 😉

  239. Gary

    Alex,
    Let’s be clear. I said people in 401K’s should exit this market and they should. It’s too late to continue pushing this with retirement funds. For those people who aren’t traders the safe course now is to just sit tight until the next 4 year cycle low.

    For us that can trade ETF’s, sure we can take a short term trade on the SPY or QQQ based on a daily cycle low. That trade probably won’t last more than 2-3 weeks.

    And I never said the next bear market was going to crash like the last one. This bear should unfold as a volatile grind lower, more like the 2000-02 bear because it will be driven by the economy rolling over again, not by a financial implosion.

    Now sometimes a runaway move will end in a semi crash scenario but not something that is going to drop the market 40% in a matter of days. More like 5-10% in a week.

    But we don’t have a runaway type scenario at this time so I don’t see why the market would crash. More likely it will roll over very sneakily and then before anyone knows it they’re caught in an intermediate decline or the start of a bear market. That’s what holders of 401k funds need to avoid, getting caught.

  240. Gary

    Haggerty,
    #1 yes almost always.

    #2.I haven’t actually tested the trendline idea. I trust that Doc has so I’m going to say probably 90% of the time it does apply.

  241. ALEX

    Gary

    Thats true…you have said that the last crash was a once in a great while fluke, this one would be a ride down. ( no quote).But you were discussing ‘timing’ with Bill.

    I did specifically draw that chart when you were calling ‘excessive bullish sentiment” and an imminent crash last winter.I wasnt referring to ‘how hard’, just ‘timing’ . The chart said “timing wise” to me, stay in until 1367.

    The only reason I re posted now is …

    Earlier you were telling Bill that charts arent very value added as to ‘timing’& that cycles were the way.
    I use both, and value both a lot.

    Last winter…you were scaring me too,but I used charts to stay the course in these tricky markets.Same with OIL/ENERGY warnings . I traded them all along using charts, despite warnings here. Charts are valuable if you can read them properly.

    Now as a side note, I was looking at IBB and I cant believe it , but Biotech is “all that” right now.

    These are 3 bio tech charts. They are beautiful.

    ONTY, VICL, AXK. as i said, biotech burned me in the past, so I wont equity pick, but these are great charts.

  242. ALEX

    And this is your blog , and I value your cycle subscription…so I am not one who wants to disagree with you…I actually just wish I could show you that the value in both is respectable.

    I know that using cycles -you have done very well. I have followed your system since Aug of last year, and as I said, I have gained confidence at the I.T.lows from you.

    At times like this (rare times) when old turkey no longer works, I would go straight to cash and wait for the “a wave” if I didnt have charts. I wouldnt know how to have confidence at a cycles possible topping area. I’d have no confidence in the short term,The cycles seem to just quit or wiggle on and on at tops.

    I guess I just wanted you to see value in tech analysis and cycles together? The symbiosis 🙂 But in a bull market, seriously, its not that important if you have time and patients…catch some D-wave, and then the A-Wave will arrive and 100% + is 90% more than the fund managers will give any one …so its all WAY BETTER than the rest of the funds are making 🙂

    I do have respect for your work and help I’ve rec’d. DO have a great trip!

  243. Veronica

    Out of long gold futures as the swing was made tonight.I’m sure that I will be proven wrong but I have about 25 points on this trade and don’t want to lose it:)My system still on a buy but with the previous 2 trades as big winners the odds are that this will end up being a loser.

  244. pimaCanyon

    Thanks, Veronica. I was wondering about your system and whether you were still long. Being so late in the cycle, closing the longs with a nice profit makes a lot of sense even though your system is still on a buy.

    What would have to happen in order for that buy to switch to a sell?

  245. Moneyman

    Veronica

    Will also sell..The dollar is weak but gold cant rally..We saw the same yesterday..Nah think its time to leave this trade now.

  246. Gary

    Alex,
    I’m not saying charts are completely worthless. I do become a chartist to some extent once the cycles and sentiment line up.

    But a pure chartist is probably doomed to mostly lose money in the markets because he will almost always miss the major turning points.

    Let’s face it every chart is just a record of history. The future isn’t linear and just because the past projects a certain future doesn’t mean that the market can’t turn on a dime tomorrow. For all intents and purposes that’s what happens at cycle turning points.

    I think you need all three to really have an edge in the markets. Cycles, sentiment and technicals. And I would also throw in an understanding of the big picture fundamentals.

  247. Veronica

    Pima, my charting service is down currently so I don’t know where the exact sell is currently but am guessing at about 1475.GN all, I’m tired:)

  248. ALEX

    Gary

    “I think you need all three to really have an edge in the markets. Cycles, sentiment and technicals. And I would also throw in an understanding of the big picture fundamentals.”

    AGREE 🙂

  249. basil

    If the dollar breaks down like Chris Puplava suggests here…

    http://financialsense.com/contributors/chris-puplava/biggest-inflection-point-of-the-year

    …then commodities and stocks should obviously jump. In that case I don’t see how gold and silver would not jump along and even past their previous highs. They are real money and should therefore react contrary to the dollar.

    With Gary having a strong stance against gold and particularly silver at this inflection point I must say that I am a bit torn here. Still though, I can’t help but recognize that the silver uptrend from last summer is not broken yet, so I am not yet considering this to be a broken parabola. I think we might find ourselves possibly waiting for a D wave bottom while watching a powerful C wave peak in both the metals in September/October or even later.

  250. basil

    If the dollar is still ahead of its final breakdown into a 3-year-cycle low, how on earth could silver not rally?

    AGQ would have been another incredible buy at $150 – now north of $200 already (that’s close to a 40% gain from the low). Having missed that run feels uncomfortable. Admittedly, jumping into silver after almost 40% off the bottom would feel no less uncomfortable.

    Having said that, for that reason I switched from cash to what I believe to be at least the second best option, into agriculture last week (AGRO, DAG, CORN). Unlike silver, there is no technical damage in these charts and similar to last year I expect Ags outperform PMs or at least perform equal to PMs over the course of the summer.

  251. $$$

    Basil,

    If I may…

    I think that since the dollar printed its recent IT low and yearly and maybe its 3 year low, the dollar is poised to rally.

    The current daily cycle for the dollar is right translated therefore we can expect a the dollar to print a higher low in this upcoming daily cycle low.

    That will give the dollar a higher high and a higher low — sounds like an up trend.

    Its this dollar strength that will push commodities into a correction.

  252. Gary

    Gold would correct into an intermediate low even if the dollar falls. It happens every time. The cycle is a stronger force pushing down than the dollar is pushing up.

  253. basil

    but it would surely have to react to the upside if the dollar were to finish its cycle low with a steep 15% drop.

  254. NJ

    Gary:
    I could be wrong, but if memory serves me correct, late last year and early 2011, you were looking @ the Feb 2010 low as marking the low for 2010, with the July 2010 low due to the BP Oil Spill. Now, if we take Feb 2010 as the yearly low last year, then maybe March 2011 marked the yearly low this year and equities won’t take out the March low unless there is an extraneous event like the BP Oil spill?

    Enjoy your Europe trip! Everyone joining Gary in Europe have fun. Looking forward to some amazing pictures…And of course the bottom of the D wave / intermediate correction!

  255. Aaron

    The dollar may be the reserve currency, but its not the only currency that gold should be looked it. Gold, in Euro terms is very relevant in my opinion, and since the USD index is so heavily weighed against the Euro, it becomes even more relevant.

  256. Greggy_M

    Gary,

    I’m becoming a huge cycles fan. I tried EW, chart patterns, ect. but
    cycles are a tool that can
    really help a trader. I want to learn as much as I can, might you have any suggestions regarding cycles education?

    Thanks, glad your shoulder is doing so well….

  257. Gary

    92000,
    It’s one thing to be bullish but to put blinders on is another. Now if you don’t mind riding out a D-wave or at the very least an intermediate correction then sure buy every little dip.

    But look at what’s happening. The dollar has been down big lately and gold can’t get any traction. It’s now chewed up 18 days and still is quite a long way from making new highs.

    When the dollar rallies out of it’s cycle low gold is going to get hit…probably pretty hard. Maybe even for 150-200 points.

    This is why we use cycles, so we can sidestep some of these big declines and buy at bottoms instead of tops.

  258. Gann360

    Yeah , your right, Bulls needed that candle to close back up at the top 1/3 Portion of that Candle on Big Volume.( which would of been smart money buying )But, we closed on the Lower half on Big Volume,,,So if anything it’s a little Bearish for now, which should mean we retest todays lows and maybe lower, now lets see what happens with this candle.. look for a reversal candle on big volume ,leaving a nice bottoming tail, for a hint the may rally it back up … careful here ,

  259. Keys

    Gary as per your comment to 92000…wow does what you have to say make real sense! The picture is bleak for the PM’s…even if you are buying on the dips, it seems obvious that a better price is coming.

    Alright back to sleep…Troll out!

  260. basil

    Manufacturing figures in the US don’t mean much, because there’s almost no manufacturing anyway; so there’s practically no relevance at this point.

  261. Gann360

    SP-500 TOOK OUT YESTERDAYS lOW.for now it a pierce , watch n see where it closes as well. it could reverse and fool everyone , take out the stops and rally back up ,,, same deal , watch for a reversal candle on big volume, leaving a tail. for a heads up , to a Bounce back up ,

  262. Wes

    basil,

    US manufacturing is #1 in the world by dollar volume.

    Other than that, it may not mean anything.

  263. DG

    Gann: Tuesday low on SPX was 1331.10

    Today’s low is 1332.78 (as of 10:26)

    We took out yesterday’s low…?

  264. deliberate

    If UUP is destine for a BB crash, then 73 and retest of $USD is in the bag. Last time, gold did not wait and started to correct ahead of the $USD rally off the low. The BB crash trade could take $USD back up to 75 taking alot of traders out of PMs. What do I know though? Getting ahead of myself.

  265. Redwine

    People tend to confuse manufacturing employment with manufacturing output. The U.S. is still a manufacturing and agricultural giant in terms of output. Higher productivity has led to a decrease in farm employment of over 50% of the population and the same is happening with manufacturing.

  266. deliberate

    Yes, productivity is the best economic driver. Ag has probably been less than 50% of pop for 100 years. No big tech advances working through system now. Organic revolution probably counter productive in short term.

  267. DG

    Gann: Interetsing. Stockcharts data disagrees with yours:

    Tue 31-May-2011
    open 1331.1000
    high 1345.2000
    low 1331.1000
    close 1345.2000
    volume 2846230528

    Difference may be you said “SPX” and your chart was “SPY” SPX had held when i posted (broken now, though)

  268. Gary

    The market so far is just testing the 10 DMA. It usually does this at the start of any rally.

    Right now one has less than 20 points of risk on a long side trade in the SPX.

    AAPL and GOOG are still green. As long as they hold there’s a good chance this will reverse into the close.

  269. Haggerty

    Bob
    Miners should be up more though right? I think we might see a test of the highs but I doubt we are going beyond that.

  270. Harry

    This looks like a test of the downtrend line to me. I took profits on the breakout at 1339 expecting a retreat today or tomorrow, and I agree with Gary that this looks like the start of another rally. just now went back long at 1329.5.

  271. Bob loves Hawaii

    Haggerty, I do not know why for the market. But if it does, it is very bullish.

    No idea on the miners.

    Regarding gold, i think Gary’s initial thesis is correct. Gold to 1650 on a slow I don’t believe it grind higher.

  272. aklaunch

    Wow! Gold is making quite a show today. It seemed the 1540 mark was the minimum to hold the rally. That just got smashed.

  273. Gary

    E,
    Why would I be concerned with gold moving up?

    Do you think that golds intermediate cycle will just all of a sudden quit working and we will never have another correction?

    That hasn’t been the case for the last 40 years.

    I expect some point soon the gold cycle will top and gold will start the move down into an intermediate bottom. I have no desire to chase a move like this higher as it could top at any time.

    I would rather just be patient and wait till the intermediate correction. This is how bulls drag everybody in at tops. They go up further than you think they should. Then just about the time you can’t stand the pain of missing the move and get in that’s when the top comes.

    At 18 days for q daily cycle & 18 weeks for an intermediate cycle it’s way too late to continue pushing on the long side.

  274. Aaron

    aklaunch, there was nothing wrong with being in gold, everyone was simply being impatient on the blog, saying that its not reacting to the dip in the dollar, (ironically the snp is failing to react to the dollar today), the move was never broken. Patience is key, as I hope it remains so with those who bought the SnP.
    have a price or a date to hold your position into, and ignore the wiggles…for me, thats the key.

  275. Alex in Montana

    Anyone see if “SLUMDOG” has posted recently. He said he would by end of last month. Stocks did close above Japan lows. He was expecting a drop to 10,800 to 11,000 on the Dow if that happened.

    see his post of 05/16/2011 @ 10:03 pm

  276. Gary

    Folks I think you need to come to grips with the fact that the dollar has at the very least put in an intermediate low and probably a three year low. The move down over the last 5 days was a counter trend move.

    If we are on the cusp of another deflationary event then the dollar is going to soar.

    Deflation is going to crush stocks. It’s going to crush silver and it’s going to force gold down into a fairly severe intermediate degree correction.

    Take a step back and look at what’s going on. Gold is 18 weeks into an intermediate cycle. Why would anyone want to continue to press the long side of that. Your upside is minimal and your downside risk is huge.

    Just make the smart move and wait patiently for the next intermediate low where the downside risk is minimal and the upside potential is huge.

    All one needs right now is patience and a little commonsense.

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