DEFLATION IN OUR FUTURE

Make no mistake, the four-day rally we just saw was nothing more than short covering in front of the Fed meeting just in case Bernanke surprised us with QE3. As expected he confirmed that QE2 would end on schedule. The dollar rallied and the market sold off on the news.

Folks, I don’t think this is over yet. In the chart below you can see that every intermediate cycle low exhibits some kind of capitulation volume as market participants panic.

We clearly have not seen any kind of a panic selloff yet. As a matter of fact volume has been running slightly lower than average. This is not what happens at a true intermediate bottom.

The average duration of an intermediate cycle is between 20 and 25 weeks. Two of the last three intermediate cycles bottomed perfectly in that timing band. The March cycle was slightly shortened by the Japanese tsunami which generated tremendous bearish sentiment in a very short time.

However there is no serious calamity that should shorten the current cycle. One could claim that the Greek situation is driving the decline, and once it gets resolved the correction will end. I think that’s highly unlikely. The market has known for over a year that Greece is going to default. There’s no surprise there. I suspect the next Black Swan will come in July as Spain, or Portugal, or Irish bond yields spike, or something completely out of the blue occurs, like an implosion of the Australian housing market. It’s in times of stress that flaws in the system break.

Since we don’t have any capitulation volume yet, and it’s still too early for the intermediate cycle to have bottomed, the assumption is that this correction isn’t finished. 

So far the market is still following the template I laid out in “The Bear is Back” post. I expected some kind of counter trend rally to relieve the extreme bearish sentiment levels and oversold conditions. We are getting that rally now (it may have already ended).

Once the counter trend rally runs its course the market should have another leg down bottoming in late July to mid August. At that point I expect Bernanke to freak out and initiate QE3. That will be the signal for a more durable, and probably explosive rally.

But remember, the most violent rallies occur in bear markets!

468 thoughts on “DEFLATION IN OUR FUTURE

  1. wallofworry

    Gary,
    Just wanted to ask again, what do you think will happen with the big banks?
    I’ve got some January puts on WFC, BAC and C as well as some November puts on LNKD (I think that stock will go to 15 by December if not sooner).
    Building up cash position and holding tight for the buy opportunity coming in the metals (BTW, I started preparing for this event BEFORE I subscribed to your premium site 🙂

  2. tinchro

    General investors in stock market have no idea what is in front of them. Personal accounts and 401Ks get demolished and people think buying on the way down is “dollar-cost-averaging”.

  3. Gary

    The government has made it painfully clear that the banks will be protected at all costs. Personally I won’t touch the banks long or short.

  4. jeff

    Wall
    you need to pick a bank that the gov is mad at and wants to make a example out of. short that bank and you will do good. =)

  5. William

    Gary,

    Im confused, the dollar chart is from 6/16 and it says day 11 in the cycle. If the new dollar cycle began on 6/8 that would put us at day 7 of the cycle, wouldn’t it?

  6. Gary

    Day one occurred on June 8. Today is June 22. There are 11 trading days between June 8 and June 22.

    Hence the dollar cycle is on day 11.

  7. Gary

    Yes it’s too much work to redo the charts every day. I redo them every week or two or if I think a cycle has bottomed.

  8. William

    Gary,

    Sorry to trouble you about this again, stocks first cycle day?

    If I count 19 days (as shown) that puts us at 5/27 being the first day, is that correct?

  9. Beksachi

    Amazing- opposing views are offering a rare chance to evaluate tools and information sources:

    James Turk now predicting 40$ silver before July 4th!

    I used to be a huge Turk fan thinking that he must have unique perspectives based on customer demands and knowledge of “backwardation” etc.

    If this intermediate low does end up crushing silver, I will have to wonder what else is “BS” from Turk/KWN gang and reconsider my goldmoney.com account….

    http://www.fgmr.com/trading-current-positions.html

  10. Christian

    Beksachi,
    I’m in a similar situation as you… Don’t however disregard the possibility of a further delayed IT cycle low and a short rally for silver up in the lower 40’s. Then the hammer falls, thus proving both sides correct!
    I’m getting more and more thick-skinned when it comes to the Silver crew’s projections as it is most likely correct in the long term, but it can still hurt you in the short term. They can always cry manipulation and thus exonerate themselves from their projection failures. That is why I find it useful to regard their data with a fair bit of scepticism. Again, all this talk about end of the world, we’re probably not there yet so no major implosion in the fiat currencies yet. In the longer term though I think that we can all agree that PM’s will outlive the paper currencies, it’s just a matter of squeezing out the most of it!
    /D

  11. NJ

    Hi Gary:

    Since we are looking at an A-wave for Gold and a more substantial rally for stocks in late July / early August, does it mean we will have only 1 intermediate $$$ rally cycle? I would think that after a major 3 year cycle low, the $$$ would have 2-3 RT intermediate cycles…

    Thanks!

  12. Silverhound

    That was a good post Gary. I particularly liked the SPX chart showing capitulation selling at intermediate lows although I prefer to call it buying as that’s really what it is, smart money buying everything they can get their hands on at fire sale prices.

    Shows how simple it can be.

  13. Gary

    NJ,
    That’s a tough one to call. I expect Bernanke to begin QE3 at the bottom of this intermediate cycle. That could start an extremely left translated three-year cycle that would potentially destroy the dollar.

  14. Russell

    Anyone new to this blog and cycle theory should read TSI trader’s latest post. He gives another explanation and summary of where we are in the gold cycle. It’s nice to see conformation of the prevailing theory expressed in other sites who are analyzing the same data.

  15. hamvestor

    Gary, nice call on silver. You kept me on the right side of the trade lately when I might otherwise have gone in the other direction based on my (incorrect) reading of the charts.

  16. sophia

    Eamon, because for me we haven’t moved much..Yes, yesterday was short covering as Gary said it, but 1530 seemed always to hold well…So I was just asking…

  17. sophia

    I think that I am puzzled…The end of QE2 was given 6 months ago, so now, people are feeling uneasy, but they still buy US Treasuries despite the fact that by June 30th, Ben will not buy them anymore and nobody else will take their spot…The rest is noise

  18. DG

    Wow. If this is part of not being able to make money in a bear market, looks like I am going to make a lot non-money today. For those who shorted silver on my silver-sell-signal post yesterday, now is a time to just sit and not look at your profit as it is probably going to tank hard for a lot more than a few days. “No one has ever gone broke taking a profit”, but lots of people have gone broke taking small profits which do not offset the inevitable losers.

  19. sophia

    The US is the new emerging market! 2 days sharp rally, followed by big selloff…P&L getting trashed for the big boys as they cannot cover on time, not good, not good…

  20. Poly

    The safe short play IMO are SPY and USO (oil) as deflation and the economy is tanking.

    Although Im short SLV and EUO too, these pose some risk, Silver being tied to the gold, fed and safe haven play and EUO tied to further US gov/fed weakness and ECB plans.

    They’re a quad dollar backed trade, so be careful thinking you’re diversified when they’re highly correlated.

    For now, enjoy the short ride and if you want on, get it now before it gets expensive! Don’t forget, Gold IT cycle low coming, save the big guns for that.

  21. Alex in Montana

    Sophia,

    Best bond manager, Jeff Gundlach, buying treasuries as Bill Gross sells them. Gross was dead, dead wrong. I’d worry when Gundlach sells them.

    Money Market funds of Vanguard and Fidelity, 40 to 50% in Euro paper. Smart people are switching to Treasury MMF’s.

    There are buyers of Treasuries.

  22. Haggerty

    Nice call Gary, DG

    Well said Poly, Save the big money for that move. I really hope this goes on for the next few days. we’ll see

  23. Gary

    DG,
    No one ever said you can’t make money in a bear market. I said it’s very hard to make money in a bear market.

    The last month has been a classic example.

    How many people were unable to short on the violation of the daily cycle low? I think it’s safe to say that quite a few held off hoping for a bounce and then ended up chasing.

    Then if they didn’t cover on the tag of the 200 day moving average they got caught in that violent counter trend rally. How many get knocked off out of their short positions during that rally.

    Now the shorts are in the same position. If they missed the exact top do they chase into today’s gap or do they hope for a rebound, and if the rebound comes will they actually be able to sell it?

    Markets go down differently than they go up. Because of that it’s hard to make money on the short side. I’ve been doing this for a long time and I can honestly say it’s very difficult for me to make money shorting.

  24. Keys

    DG….Nice call on silver! I took a small play on it, since I was getting soooo bored.

    Real interesting from an education view point. Last Thursday “the sky is falling”…Friday until mid-day yesterday this bull is going up forever…mid-day until today, aggg Armageddon. And nothing has happened. Greece was as anticipated, and was very likely….FED no news except what was given before….maybe the big news was Ben saying “NO QE3”…might be his take to crash commodities on purpose before QE3… maybe that is Ben’s plan, monetize debt, stop to crash commodities, monetize debt….repeat rinse wash.

    Not looking forward to the inflation deflation debate again. I guess my view of deflation and inflation is slightly different, but I don’t consider deflation a period of falling prices. When prices surge 100% to 300% and drop from stupid levels, I don’t call that deflation…a period of falling prices or what have you, but deflation I would view as a permanent fall in prices due to economic conditions not a fall in prices due to prices surging beforehand.

    In other words the multi-decade trend line needs to trend down…Oil was in the 30s what in early 2000s. (so using oil as an example)…oil would need to fall to at least 30’s and stay there for me to consider deflation a REAL reality. But as many know this isn’t possible since the marginal cost is say $80….In otherwords, I don’t see sustained deflation unless the entire system truly turns on itself, and we get something like the great depression, banks need to go under, and wages need to start falling as unemployment goes up…which all means the dollar has to reverse path and increase substantially in value. Anyways a point of view beyond equating deflation with falling prices…in fact if oil were to fall to 50, the upwards trend would still be intact and inflationary, which implies a 5%-7% inflation in oil since early 2000s.

    WOW what a great blog!

  25. Poly

    Thanks Haggerty,

    That gold cycle plan to spike above $1,550 and drop ended up being spot on, did you get yourself some?

    This type of gold drop after a spike is a classic gold cycle top move.

  26. Gary

    Haggarty,
    If this is the start of gold’s intermediate decline, and it probably is, it should last at least a month.

  27. Edwin

    so much emotion

    prepare for some wild swings.

    remember gold went as low as 1511 last week. i hope we don’t trade below that for longs.

    1525 is the key support. gold still healthy if it maintains this end of the week.

  28. Haggerty

    Gary
    Another huge Gap down before the open, trapping all the longs again. The market had the opportunity to react like this yesterday during trading hours. Maybe this is a new trend?

  29. Haggerty

    All
    I have to argue that it is hard to hold on the short side, I got in to this trade way too early and it has pounded me a little. I bought a few more puts yesterday on GLD but I wish I had bought more. If I see a decent price at the open I will buy a few more

  30. Gary

    Edwin,
    Even a move down to 1320 is still a healthy bull market in gold. This is just a normal profit-taking event that happens like clockwork every 20 to 25 weeks.

    This is essential to clear sentiment, clear out the weak holders, and build the base for another move up.

  31. Keys

    Gary, great work recently btw! Seems that your reports and blog posts are cyrstal ball’ish lately. Look forward to your call to get back into PM’s…patiently, somewhat lol.

  32. TommyD

    Alex in Montana,
    Thank you for your post getting me straight on treasuries. It makes total sense that Ben can stop purchases knowing full well that the flight to safety from EUO and other places( as dollar strengthens ) will roll into treasuries for a ‘said amount of time.’ There will be a time when people leave treasuries.
    When do you think, INHO, this will take place?

  33. Edwin

    Gary,

    yeah definitely. Gold bull still intact. It doesn’t go to zero.

    Steepness of the drop though.. we can’t put a number on that one. Just hopefully not lower than 1309 the low for the year.

  34. Edwin

    each one of these commodities follows a cycle and each one has a bunch of different players, (this is a game of cat and mouse)

    a little different but they all share one thing in common these commodities are priced in USD.

  35. DG

    Gary: Fortunately no one needs to get “the exact top” in a bear mkt anymore than one needs to get “the exact bottom” in a bull market. You just need to get the area right so you don’t get too far in the hole and put pressure on yourself. I did not get the exact top on a single position of my 8-10 positions, yet every one is profitable. “Exact top” means nothing. If you shoot for perfection of course you will fail at that, but that is n the goal. The goal is to get the heart of the move.

  36. Alex in Montana

    Tommy D,

    I’ll take a stab at answering your question as to getting out of Treasuries:

    1) Risk Off trade in full swing since April 30. Treasuries anticipated that by double bottom early April.

    2)Gary and others believe if stocks and economy tank Bernanke prints again. So do I.

    3) If stocks down 15% to 20% AND economic numbers miserable market will anticipate Bernanke printing again.

    4)That anticipation period will probably be low in Trasury yields.

    5) In any case if Gary says buy gold, silver, mining shares etc., then do that as the rise in those will far exceed anything you could make in Treasuries.

  37. Michael

    Very high first half hour volumes suggest range extension of first hour 1259-1267 range today – roughly 2x the size of the range or more. That means stats say we are looking at about 1250 ES as a target to the downside or 1275 or so if we go the upside.

  38. Gary

    if this is the start of the intermediate decline and this is a left translated daily cycle then it should decline for about 12 to 15 more days so your July puts should be fine

  39. DG

    I could use some help: I will be on business in Italy in September. In the States I use a data stick that connects my laptop to my cell phone carrier for internet access so I can stay on top of things and trade. Does anyone know of such thing in Europe? Any company someone here can recommend? How can I connect to cell phone waves there on my own current laptop?

  40. EricH

    Monster August Gold futures volume this morning. I’m still holding my August Gold shorts from 1542 from 2-3 weeks back. I think this leg down is the real thing. 1511 should fall later on today or early tomorrow.

  41. Éamonn

    DG, I have one such internet stick for my laptop in Ireland. I imagine any mobile phone shop in Italy will be able to sell you also

  42. 86d4life

    Gann,
    Thanks for sending along the updated SLV chart. Now I follow why you dumped ZSL. And to me it cofirms again why Garys cycle work is so priceless. You do a wonderful job with charts by pointing out things I never came close to seeing, but I think it also illustrates how TA only tells part of the story. Mostly here I think I`m kind of having the AHA! moment and thinking out loud with my fingertips. 🙂

    Something else that has ocurred to me is your charting often shows the other side of the story and I think continually reminds me of how precarious this whole affair is. Excellent as fair as `Stay on your toes!` and take nothing for granted! Thanks again.

  43. Gann360

    THX

    This could be a start of another decline into next week for SLV.but i am happy with my Scalp on ZSL.

    I had 15k long ZSL @ 17.28 sold this morning for a great profit.now waiting to position my self Long, Should Silver and SPX Selloff Hard in the next few days .

    Goodluck

  44. sophia

    Nice trade Gann360…well done!

    Guys, do you think that we could have a period of Gold down, stocks up as we had in January 2011?
    I cannot remember what was happening in January for the DX…

  45. MBS

    Gary-
    We had a failed intermediate cycle last year in July 2010 when SPX broke the Feb 2010 intermediate low, correct? But, we were able to regain the highs and keep rallying into May 2011. Was this due to the Transports not confirming that intermediate low break? Looking at the TRANS, we are actually quite a ways from the approx 4900 intermediate cycle low.

    Thx

  46. Ben

    Éamonn “bad economic news everywhere”

    This reminds me of a study about 20 years ago that demonstrated how companies clump their bad news in order to hammer their own stock price so that their options (the officers) get repriced, or set low. And, with that out of the way, smooth sailing ahead. I think if the floodgates open on bad news (the kind which impacts the markets) it’s because the smart money is OUT and wants to get the decline in. The added bonus this time will be setting the stage (or making the case) for QE3. Fools…

  47. Cool_Loser

    Gary,
    I read you talking about failed daily cycles. Could you explain to me what exactly it is and how it impacts everything? Thanks…

  48. Gann360

    It could continue to Correct.but i will wait and see if it does.

    But, as Gary has pointed out, You dont wanna get Caught on the wrong side of this Monster.
    should it continue to correct, Great , get ready to go long , when the Time is Right.

    Remember Patients is the name of this Game.

  49. Michael

    Gann and or Alex,

    would it not be better to short AGQ rather than go long ZSL for short play on silver? That way the cantango works in your favor.

    Rgds,

  50. hooloo1957

    gary, really an excellent job. you have helped my trading so much. is there any book or something for learning this cycle analysis that you do? take care greg

  51. Gann360

    you dont have to Short Silver ,Via an Ultra.(2x) You can also Short Via a Single (1x )

    Sure the Gains .are not the Same, But ,Nor are the Loses .

    as i stated .i am now in Cash

  52. Gary

    MBS,
    I think last year was a combination of a couple of things. First we needed to consolidate the gigantic move out of the 09 bottom. It’s not unusual to have a failed intermediate cycle in the first year of a cyclical bull market as that consolidation runs its course.

    Second; the unforeseen catastrophe with the BP oil spill probably triggered a more severe move down than would have happened naturally.

  53. Gary

    Yes the gap down was too large on the QQQ. I’m sure the hedgies are going to try and fill that gap.

    For those brave souls, that would be the spot to sell short,ias the hedge funds will exit longs once the gap is filled.

  54. seemster

    Cool_Looser, shoot pimaCanyon an email if you want any good explanations of cycle analysis. If you subscribe, see Swing Low and Swing Low on Terminology page under Charts and Documents.

    It sort of amounts to basic candlestick logic. Kind of anyways.

    Failed daily cycle means momentum is to the downside. The Swing High occurred before the middle of the daily cycle which runs about 1 month on average. Sooner than average means weaker than average on average.
    Your question is more intermediate in nature; ie, there’s a lot more too it.

    Hope this helps. Not sure everyone would agree with me.

  55. Gary

    I don’t know about precious metals. They are at the top of their trading range just now beginning an intermediate decline. Stocks are already halfway into their decline.

  56. Gary

    Gann,
    Honestly, do you really make, and more importantly keep, any long-term money with these short-term scalps?

  57. William

    In every other intermediate cycle of this C-wave a daily close below the lower trendline never recovers. If this is the case with this intermediate cycle, if we close below 1525 today we should continue lower from here.

  58. Gann360

    Gary ,We all have different Styles.

    I do make Money.I do this for a Living,I have been doing this for 20 Years .My 10Min Scalping Size is Not the Same as My Swing Trading Size.

    But they are Big enough that a .15 cent Move is 2k Gain, in Possible Minutes..

  59. Gary

    Just curious.
    A lot of people try to day trade but very few actually making money at it.

    Just wondering if you had actually checked your results over the last couple years to see if you were really making money.

  60. Billy

    Interesting how the S&P tagged teh 200 day again and bounced up. Kind of feels like once that 200 day level gives way all hell will break loose

  61. MrMiyagi

    Gary,
    On my daytrades, I have made money on all but 3 transactions since January.
    The amounts aren’t huge but it all adds up.
    Besides, I only found your site in March… Since then I’ve reduced my daytrading but still jump on when all my indicators line up for “living expenses” income.

  62. blackkettle

    It is all part of a big cylce. Sometimes that cycles are very long. Sometimes the cycles are very short. If you keep your patience you can exploit the benefits of trading the dynamics of both or all ends of the trading range timeframes.

  63. donald

    to: DG

    Recently went to Zermatt with Gary. Via Zurich, Florence. I have a DROID
    Global 2{ phone has sim card] which has its own WI-FI site
    which can be used internationally. You pay for both data, separte charge voice. Must make arrangements by phone in advance. I have Verizon in US, their relationships with Vodaphone were great as I stayed connected on the train
    from Zurich to Florence etc. rates are pro rated. Zermatt coverage was intermittent, however, I knew I would be dinning with Gary.

  64. fubsy_cooter

    I took a position in TWM a few minutes ago. Looking at the Russell 2000, which has been relatively weak, it is close to filling its gap this morning. Simply placing a bet here that the weakness is a trend and not a one day event.

    There is a close stop on TWM below 43.65, and with the Russell having a ton of overhead supply in the form of a well defined H&S, my reason for taking this trade is the high reward to risk ratio. If stopped out, TWM drops 4%, but if the neckline breaks and we play out a deflationary event, there is potential of 25-30% gain if the H&S pattern plays out, which is a logical target in such an event.

    I’m risking 1% of portfolio on this trade.

    Also holding
    EUO (2% risk on portfolio)
    SLV OCT 32 Puts (1.5% risk on portfolio).

    For comparison sake, at signs of a d-wave bottom in gold, I will position myself 50-65% invested with opening positions, and will layer in toward 100% invested. Currently I’m appx 23% invested.

    fc

  65. oa92000

    Greece’s GDP is about $330 billion .One little tech company AAPL in one little town called Cupertino, California, will generate close to $150 billion in 2012.

  66. Gann360

    on a good close above the 20SMA & Big red Candle,,,i would Cut my Losses.as i stated previously.

    Scalping is an art, which was Taught to me by a Master Scalper,He Taught me Gann and the Art of Quick Scalping.

    if and only if , the setup is there, i would of taken a Bigger Position, if we were ,lets say .at the top of a channel and Hiting the 20 SMA on the Ten minute for the first time and another Moving average say the 200 sma on the 60min or 5 min chart ,all at the same time..along with a 7 count or multiples of .

  67. MrMiyagi

    Gary,
    I would love to be in a cash position where I could just garner the information from your analysis, make periodic trades and do very little daytrading. A couple of years will hopefully get me there so you can’t retire until 2014 mmmkay?

  68. Gann360

    Losses are always going to be a part of Trading, As long as you Cut them Early,You should be Fine,

    as you pointed out, Rockie Trader holds on to losses ,and sells winners to quickly.

    that is a recipy for bisaster. it took me years to Control my emotions and Patients…to be able to make money..

  69. William

    Mr M,

    I would like to pull a chair next to Gary and pick his brain so I can learn quicker, just in case he retires soon.

  70. Gary

    Gann,
    I guess what I’m asking is do you think you will make more money trying to scoop up $.15 winners instead of just holding through a daily cycle, which in Silver’s case could be a $5-$10 move?

  71. MrMiyagi

    William,
    I’d love to sit with Gary as well to understand the cycles analysis better but I’m afraid he’ll make me lift weights..

  72. Bullion Trader

    Gann,

    Thanks for the chart. What is the the number as of right now that needs to hold? I can’t tell from your numbers on the side of the chart which one is which. Thanks much!

  73. ddn3f

    Gary,

    Do you expect Gold to have 2 short daily cycles left or 1 extended daily cycle to reach the intermediate low? I know you say that gold’s intermediate cycle keeps stretching, and usually comes in at 25 weeks. What was the longest intermediate gold cycle that you have seen?

  74. fubsy_cooter

    IWM came within .05 of filling its morning gap, and has backed off appx .5%. Let’s see whether it has the muster to make a move higher from here. It would take some serious short covering/committment of longs to push it through. i just don’t think that many traders were short going into this move, but its possible that new shorts could be jittery and cover into any strength here.

    Fun game! i out the odds of breaking past yesterdays high on the IWM at appx 30%.

    fc

  75. 86d4life

    William,
    I was laughing til I had tears! I needed that!

    Mr M,
    the weights would be preferable to making you climb the rocks! Or using you for a punching bag.

  76. Robert

    The primary pressure behind the last 24 hour reversal in the gold market is the announcement of a release of 90 million barrels of oil from the strategic oil reserves and the poor work report released this morning in USA.”But, as a good friend pointed out to me today, why did Obama wait until the price of oil had already fallen 22% from its recent high around $115 per barrel? How can there be a “shortage” if the price has already dropped like that without the SPR supply? It tells me that the Government wants commodities prices even lower in order to promote the appearance of no price inflation for the purpose of justifying the next round money printing “

  77. MrMiyagi

    William,
    Yesterday I took out one half of a beam in the basement and as I single handedly brought it down, I felt like Gary in a competition.
    I think it weighs 100lbs….

  78. William

    86,

    Glad I could make ya get a good laugh…now im rolling thinking about it…lol

    Mr, M

    lol…Gary could lift that 100lb. basement joist with one arm, even his bad side!

  79. William

    Mr M,

    Im doing my whole house over single handedly (actually single leggedly, im an amputee from motorcycle accident), well actually my wife is clean up crew. I do framing, electric, plumbing, sheetrock, paint, everything.

  80. 86d4life

    William,
    had an order in @ 54.80 on the way up and chickened out a few cents early. Got to thinking I`m extended enough and really just trying to pick up a few gains along the way to IT low. Yeah, maybe play it a little safer. Like Gary said, if half the move is gone in stocks……. I guess makes more sense to me to try to play a more full move. I read something by Doug Casey once that has always stuck with me but the execution is a lot tougher than it sounds. His point was; most people try to make 10% on 100% of their money, where as he tries to make 100% on 10% of his money. That`s an Exact ringer for waiting for the IT low.

  81. William

    Gann,

    You see, if you had better control over those damn “Patients” they would have let you hold onto ZSL alittle longer! LOL 😉

  82. Gann360

    William

    Yeah , you Can’t dance at every wedding right.lol ?

    Just got back from lunch,Wow nice fall on Silver …..I will now wait for the next setup…

  83. William

    Gann,

    Lunch?? Dont you know that we dont eat here at Smart Money, we all starve until gold reaches its intermediate cycle bottom!!

  84. William

    Gold MACD crossover, True Strength Index back below 0, stochastics rollover, most likely going to close below the lower trendline and 50DMA….why not short here and forget about waiting until it breaks 1511.

  85. William

    Veronica,

    I really wish you would tell us all what your system is!! Dont you want to help your fellow traders make money too, I thought we were all like one big family!!

  86. Ben

    I think the oil being released from the strategic reserve occuring NOW is to give the commodities correction a *nudge* in the right (down) direction. Commodities absolutely must correct before The Bernank can start the next phase of dollar destruction.

  87. Robert

    Ben,
    Agree–its all manipulated and planed out .as I said earlier
    why did Obama wait until the price of oil had already fallen 22% from its recent high around $115 per barrel? How can there be a “shortage” if the price has already dropped like that without the SPR supply? It tells me that the Government wants commodities prices even lower in order to promote the appearance of no price inflation for the purpose of justifying the next round money printi

  88. Gary

    There is no buying on weakness today, and there wasn’t any last week either.

    Intermediate bottoms almost never come until we see at least one of these large buying on weakness days.

  89. catbird

    Interesting disparity in the volume of GLD and SLV today:

    GLD’s sell off has come on tremendous volume. SLV, not so much.

  90. Harry

    Well, glad I was patient with my gold puts…

    Also, TF looks mighty tempting to short up here at 797. Whaddya say, guys?

  91. Gary

    Yes I believe it won’t be long before the market starts focusing on the real problem again.

    That being said, I won’t reestablish shorts in the model portfolio until the recent pivot is breached.

  92. Haggerty

    Hey you guys want to laugh, I am break even on my puts. I really hope this continues with Gold and Oil. I hope this is a repeat of the first five day’s of May!

  93. Driver

    I asked this question weeks ago and got no response:

    Why sometimes does iSharSP500 show on the money flow lists but not SPY? Are there different investor groups involved in each?

  94. Hack

    Very impressive come back in the market which means we continue the bull trend – for now. Miners look strong. Looks like last week was the buying opportunity we had been waiting for.

  95. Gary

    Now do you believe me when I say that shorting is tough?

    The government and the Fed are going to throw everything they can at this. It means we are going to get surprise rallies like these. It means your stops will get triggered and your positions will get whipsawed unless you are willing to weather draw downs.

  96. Ben

    As if Greece pretending that it will accept austerity will save the world.

    They told me I was gullible. And I believed them!!!

  97. 86d4life

    I was in on a big remodel of a greek restaurant a bunch of years ago. Two greek brothers. Damn they were hard to work for but the food was great.

  98. DG

    Well, I covered a lot. We should not have rallied as much as we just did. Having not broken 1250 yet I can’t prove a bear has started. Nice gains, though. Also a good demonstration of why it is best to short into strength rather than chase declines down with shorts. I hope the dust settles and I can figure out what’s going on as I have a lot of dry powder now.

  99. bullethead

    I am a relatively new member and just wanted to say – Excellent call Gary!

    Not sure I understand your aversion to trading it or maybe you do via your high roller commentary- regardless, it was beneficial confirmation for me.

    Have a great day

  100. haveaniceday

    $SPX looks flash crashish. What is with the glowing green tail? Looks radio active or like kryptonite. Japan recovery?

    The $VIX spike has a green tail too.

  101. Vonda

    4Life,

    Charles Mitchell — one of the charlatans underwriting the 20’s boom. He came in on the afternoon of Black Thursday, 24th of Oct, and propped up prices following the morning crash which, as we know, was only a taste of things to come.

    I know: It’s a stretch of the metaphor to compare a country with a person, and in those days the Fed was actually in the opposite camp to Mr. Sunshine, an ameliorating force. Imagine that.

  102. 86d4life

    Vonda,
    Thanks. No, I follow, good analogy. Ironically I was just thinking a little bit ago maybe how nice it would be if we could get the gubmont on our side for a change rather than working against us. But hey, as long as we got Gary, I can more than pay the bills on this.

  103. Ben

    86, if you want the gov’t on your side, simply increase your wealth to put you in the top 0.4%, and you’ll discover that they always work for you.

  104. sophia

    William,

    I am not so sure of that. Both Dax and Nsq are higher than they should be relative to S&P, and they could show a change in sentiment for couple of weeks…

  105. Sleeper

    Haggerty said…
    “Anyone holding puts on oil, if so are you holding here?”

    Haggerty,

    I’ve got USO Aug 37 Puts that I’ll hold. I’m looking at a target of $70-80/barrel when the dust finally settles.

  106. DG

    Bullion: I sold all my ZSL and 1/2 my puts. When the market does something I don’ expect I get out and wait for clarity. I don’t like SLW rallying so much. Could wind up shorting lower than where covered…I just don’t ever care about price, just direction. If it’s going lower I want to short it. Where I covered it yesterday is irrelevant. The rally put me back on my heels for now, though.

    Trading is a HARD game; old turkey on the long side is easier. But after having spent my whole life doing this, I love it and make enough to warrant the “effort” (fun)

  107. Shalom Bernanke

    I’m still long my miners with 1% capital at risk and didn’t do any buying or selling today. I can barely stay interested in the market this time of year. I’m mostly trying to remain patient. 🙂

  108. Vonda

    It caught my interest that you covered, DG, since I was also watching/appreciating your thoughts on riding the bear as well as the bull.

    SLW? Argh!! The stock that seemingly couldn’t go up when it had the wind at its back now decides it’s ready to sail.

  109. Vonda

    Could one make a coherent argument that miners are up on oil price? I’m woefully ignorant regarding actual mining practices.

  110. whitebear

    Silver daily looks bearish to me, despite whatever the SPX looks like. They trapped a grip of PM bulls on that gap down and won’t let them out very easily.

    Still holdin ZSL, among other shorts including the DRV.

  111. fubsy_cooter

    Curious day, but not unfamiliar. Reminds me of 2008 when we got tons of little wrenches thrown into the market by those who could throw them, but nothing was able to stop the overall trend.

    I’m holding my positions until my positions are beyond there stop prices at the close. My guess is we get a little strength tomorrow, but it reverses as everyone realizes that what just happened in the EU is meaningless to the credit health of the EU, the value of the Euro, and the economic decline. Plus, no QE means the rug is pulled out from under the market.

    With that said, I’m no fool. I will honor my stops to keep losses small if they occur.

    fc

  112. Bruce

    Gary, what do you have to say about the incredible resilience in the silver miners today, in the face of silver down over 3%?

    and frankly you’d think the gold miners would be down a lot harder with a nearly $30 decline in Gold.

    Interesting action. It bears attention, no?

  113. Wes

    I think this blog puts too much faith in the miners.

    When is the last time they told the truth about a short term move ?

  114. jeff

    Wes

    no indicator works for our purpose until its cycle time. when we are looking for any cycle low, then is when miners, TA , or COT blees rateings ect., is when movements count

  115. Poly

    This action just reminds me how difficult, frustrating and tiring trying to trade the wiggles within a daily cycle are.

    The point should be clear for 95% of investors, track and trade the Intermediate Cycle and learn to control your emotions within that IT cycle. No different on the long or short side.

    The play was to go short with decent size the second SPX broke 1,311 and confirmed a failed daily cycle. For those that did, we’re deeply in the black and can easily handle sharp counter trend rallies. The doubling up would occur on a break of the IT cycle at 1,250.

  116. haveaniceday

    A lot of consolidation is expected at some point in the mining industry due to the drop of share prices. In other words, the big mines are going to start buying up the small mines on the cheap.

  117. KAL

    Thanks Poly. I’m up nicely in my first short play, down slightly after the rally today in my later plays. But, still in the black and not nervous, as I trust Gary’s cycles. Thanks for sharing a reasonable concept!

  118. Wes

    jeff,

    A couple of things make that wrong.

    First, it’s way too early to be looking for the IT cycle low.

    Second, SLW (though not a miner technically) relates to silver. You are unlikely to find a gold low that way.

  119. Gary

    Bruce,
    I’m not going to be ready to buy miners until gold closes some or all of that large gap between it and the 200 day moving average.

    I put a lot more stock in 2 1/2 months of severe underperformance than I do in one day where the miners followed the stock market instead of the metal.

    Bottom line, gold has to complete an intermediate cycle decline before I’m ready to buy anything.

  120. haveaniceday

    Polly, are you using weekly to determine IT bottom/failed cycle?

    Do you have a failed IT cycle on $WTIC since the beginnig of May?

    “The point should be clear for 95% of investors, track and trade the Intermediate Cycle …

    The play was to go short with decent size the second SPX broke 1,311 and confirmed a failed daily cycle.”

    So, due to weekly IT failure; or, are you shorting every failed daily cycle?

  121. Wes

    Gary,

    I just thought I would point out that gold broke the weekly IT cycle trend line, even though it hasn’t traded below the pivot.

  122. Slumdog

    For the guys who were around and active short in silver during 1981, do you remember this similar emotional framework to the sideways trading in the mid 30’s?

    Then do you remember the stunning experience of silver slipping to 32? And then to $30, and when it quickly reached $25, the change in attitude?

    This time, the backside of the parabola, feels like I’m in a car with the windows rolled up, and I floating on a tsunami water surge, waiting to crash into something that will sink the car. And when it sinks, I’ll still be wondering what the heck is happening, saying, “This shouldn’t be happening.”

    The silver stackers are going to now get their clocks cleaned. That’s what I smell, blood from the weak who can’t hold during this building up to the crash stage.

  123. Ben

    This guy is a thoughtful analyst I’ve read for a few years, now and then. He’s the second person I’ve noticed today mention that the release of oil is actually bullish for oil, although not necessarily right way. It’s rather obvious why, but I think it has greater implications for later this summer and beyond:

    http://gregor.us/

  124. Veronica

    William, I have a lot of time and $ spent on coding for my system, so I don’t want to let everyone have the parameters, but I have been posting buys and sells and I hope it has given some members here extra confidence when my buys line up with Gary’s.The number of tests we ran numbers in the millions so I hope you understand.

  125. haveaniceday

    Wes, weekly $GOLD candle did not exceed the June 13 low if that is accurate at all. Oil is what is really getting killed here. Upside is that some life gets pumped into the economy, and you can drive to WalMart for less.

  126. haveaniceday

    BlH, I think that is what he is saying now. What the heck is a IHS? The $USD comes back under pressure when the economy starts picking up which becomes ever more likely as oil’s price falls. The deflation thing is just qe2 ending. Some call it deflation, but there has never really been any. Ok, once maybe twice.

  127. Peter

    Gary-

    What’s convinced you that shorting is no longer worth the risk?

    Previously I got the impression that your belief in cycles would outweigh a possible Fed intervention.

    I would presume from your other posts that you remain convinced this cycle has much further to fall.

    On the flip side, what would need to happen for you to believe this cycle was miscalculated?

    Thanks

  128. Gary

    Bob,
    I’m assuming you’re talking about the dollar. But I don’t really see an inverse head and shoulders pattern.

    I just see a basic pattern with a higher low.

  129. Gary

    Peter,
    I’m just concerned that the beginning stages of the bear is going to be so volatile that trying to hold short positions will just give traders ulcers, myself included.

    The only way the cycle has been miscounted is if it has warped way beyond any standard deviation. I never assume something like that because it’s such a rare occurrence.

  130. Wav_ridah

    GLD tagged the 50 ema today. Closed at the 34 ema but more importantly below the bottom rail of the channel for the first time since the end of January.

  131. 86d4life

    Gary,
    All things included, you still figure that the general market has to at least have a severe enough retreat to initiate QE3? I mean I guess to my thinking, we can`t have one without the other.

    Veronica,
    Thank you for your generosity. Myself and I`m sure others here are very apreciative.

  132. Wes

    haveaniceday,

    I connected the 1/24 low and the 5/16 low and extended the trend line.

    Today’s action clearly breaks it. I use log charts, so I checked it with linear and got the same result.

    I have a spot metal data feed which I can scale from tic to monthly, and on gold weekly it clearly broke the line.

    If $gold is not in agreement, maybe their data is incorrect. After all, they said it was.

  133. Gary

    Wes,
    Thanks for pointing out the intermediate trend line break. I missed that one. I’ll include it in the weekend report.

  134. Gary

    86,
    Bernanke has been very clear, no QE3.

    It’s also clear that the economy and stock market can’t stand on its own. So once QE2 ends deflation is going to come roaring back.

    All Bernanke knows is to print money. Right now it’s politically impossible to run another round of quantitative easing. But once deflation starts to take hold everyone who was screaming about QE2 will change their tune and start squawking for the government to do something.

    Voilà, QE3 begins.

  135. NJ

    Hi Gary:

    Thanks for your response yesterday regarding the intermediate $$$ cycles after the $$$’s 3 year cycle low.

    Another question regarding the $$$ current intermedaite cycle:

    A couple of days back you mentioned that we could get 3 daily cycles in the current $$$ intermedaite. Now, this would corelate awesomely with 2 LT daily cycles in Gold.

    Now if we were to expect only 1 down daily cycle in Gold, do you think we will get both Gold and $$$ rallying during the $$$’s 3rd daily RT cycle?

    Thanks!

  136. PST

    While I’ve long been in the camp that QE3 is only a matter of time, I am beginning to believe that the rollout of this program may happen later than most are expecting. In the meantime, I think that there will be a legitimate attempt to pass the stimulus baton from monetary policy (Fed) to fiscal policy (administration/treasury). While we all can agree that a there is not the political appetite for a traditional fiscal stimulus program, I think that we learned yesterday (Strategic Petroleum Reserve release) that the administration will now start to focus on non-tradition stimulus measures to try to get the economy rolling again. In the third year of a presidential cycle, Bernanke has to realize that the administration is now under considerable pressure to do its part and provide fiscal stimulus to try to turn this thing around.

    Bernanke and the rest of the Fed are coming to the realization that quantitative easing is proving ineffective in achieving their two stated mandates, stable prices and low unemployment. They also realize that until we are able to address the chronic employment problem that additional monetary stimulus will only be a stop gap measure until the job market turns around. While monetary policy has been effective in the fed’s unofficial third mandate, raising asset prices (stocks) to create a wealth effect, this has not translated into increased hiring and a self-sustaining recovery as the Fed had anticipated. Instead corporate profits have increased, but companies remain reluctant to hire and take on new capital expenditures until there is a legitimate increase in end-market demand. In addition, commodity prices have become anything but stable as we’ve seen oil and agricultural commodity prices soar as a result of the liquidity provided by additional easing.

    The fed is now boxed in where additional monetary stimulus will send the dollar tumbling and commodity prices soaring, whereas doing nothing will cause the economy and the stock market to tumble. The shorter term solution therefore will likely be for the Fed to encourage the administration to consider non-traditional fiscal policy actions like a tax holiday on repatriated earnings and a payroll tax break for corporations. These measures will be aimed at stimulating hiring as well as providing an artificial boost to stock prices (repatriated earnings traditionally used to increase dividends and share buybacks). In the end, however, the Fed will be forced to pursue some form of additional monetary easing however I am now starting to think that it will not be until later 2011.

  137. T.J. Rand

    PST- great post. I agree with it with one modest exception – I do not believe that Bernanke has come to understand the ineffectiveness of current Fed policy. The man has built his worldview (and career) on an economic model that an independent observer can see is flawed, and it will take much more than what we’ve seen so far to make him question his precepts.

    And this is why, I believe, when things get worse, he will revert to the comfortable playbook that is the underpinning of his professional life.

  138. PST

    TJ Rand,
    That is an excellent point and to be honest, it’s the one area that I am still unsure about. Prior to his recent Q&A, I would have said that I wholeheartedly agree with your comment about understanding the effectiveness of his policy. However, Bernanke did appear a bit humbled and actually had a few unscripted comments that led me to believe that he might just be questioning his policies for the first time.
    1. When asked about his prior comments about Japan’s policy moves, he laughed and commented that he was more sympathetic now to central bankers than he was 10 years ago. He may be starting to realize that all the economic theory that he learned at Princeton doesn’t translate as well in a world where there are unintended consequences and counter responses from other central banks, speculators, bond vigilantes, etc.
    2. He actually admitted that he had no idea why sustained growth hadn’t taken hold following the Fed’s actions. I was floored to hear him concede this for the first time rather than quoting some manipulated BLS and GDP statistics or offer some BS explanation like there were transitory factors involved.

    With that said, you make a great point and it is well taken. I do agree with your second comment though that when the SHTF, he will go right back to his comfort zone and employ the only effective tool that they have remaining. If all you have is a hammer, every problem starts to look like a nail.

  139. Wes

    Great comments PST and PJ.

    My understanding of the way the US money system works leads me to believe that the party of dumb and the party of evil both have it wrong.

    Taxes are too high and government spending is too low. Decrease taxes and increase government spending and you get out of this mess. Both of these things are out of reach of the Fed.

  140. Dan

    Wes,

    Are your joking with your comments? How can government possibly increase spending and cut taxes… Have you seen our deficit???

  141. PST

    Wes,
    Government actions aside, there really is only one way out of this situation and that is debt destruction/restructure/default. We simply can’t keep transferring or accumulating more debt in either the public or private sectors. We simply need to take the pain and accept the consequences of decreased consumption, slower growth, higher unemployment and a reduced standard of living.

  142. DG

    From my perspective there’s an overarching factor that is rarely taken into account: The Powers That Be are simply not tying to solve the problem. They are trying to get re-elected and maintain power. If they can do so by helping the country, great. If not, so be it, as far as they are concerned. The bank execs don’t care about their companies. They get paid bonuses to write default swaps so they write them. If the company goes broke later, so be it. They keep the bonus money. No politico will do something to solve the problem if the solution would upsets his voting bloc—or lobbyists/money flow. Look at Soc Sec. It obviously needs to be fixed. Hell, people live longer than when the rules were set, if nothing else! It should state that you get payments starting at 10 years less than current life expectancy. but no one will do it. As long as people are greedy and self-interested the problems are secondary and will not be solved. And the most greedy and self-interested rise to the top in part because they are the ones that want to. Very sad. Our problems will not be solved IMO.

  143. TommyD

    PST and TJ Rand,
    I believe that since 2006 or even as far back as the dot-com bubble, this GRAND SUPER CYCLE hit. Many powerful people knew this and acted on it, whether legally or illegally. This mess was designed and destined to happen. Now for the fun part.

    Re-engineering the worlds monetary, fiscal, employment, housing, food, manufacturing and so-on ecosystems for the next cycle. Out with the old and in with the new takes time to achieve.

    The people that looted, pillaged and damn near raped will just blend in to the woodwork unless there is a complete meltdown and revolution that occurs. This should not be counted out according to some people that profess to know cycles.

    Gary, you have stated that the CDSes and CDOs will take a while to work off the books before recovery can begin and maybe even stabbed at 2014-2016+ before things get better.

    In my thoughts I see resource wars and nation building/destroying with a lot of unknowns ahead for people, places and things. Elections won’t fix this stuff, wars, famine and pestilence will!, imho…

    Those that can see the pitfalls and with skill and luck, avoid them will be the new movers and shakers of our world, I believe.

    TommyD goin deep…

  144. DG

    PST: Agreed, but it will never happen for the reasons I stated above. It will only happen when it is forced to by nature and will be maximally disastrous by then.

  145. Wes

    I know that most think that raising government spending and cutting taxes will cause inflation. And, in an ordinary world it does.

    But assets, primarily housing values, but also commercial real estate, are declining so fast as to make inflation unlikely at present.

    Ultimately, people spending money hand over fist leads to inflation. When they don’t have the money to do this there can be no inflation.

    So far, government spending hasn’t replaced lost assets.

  146. Peter

    What is the most common Bollinger Band setup for TA?

    I realize it involves standard devs. but I’ve seen (10,1) (20,2) etc. Would someone explain?

    Thanks.

  147. EricH

    “Anyone adding their shorts or covering after the Gold 1511 pivot is broken.”

    Cover? Why? Gold just have confirmed a failed daily cycle.

  148. William

    I dont think we are going to see any significant bounce until we touch the 30DMA on the weekly, every intermediate cycle decline during this c-wave bounced off the 30DMA

  149. T.J. Rand

    Added to Gold puts when Gold pushed though 1511.

    I believe PST, you are right about needing the market to force our hand. Unfortunately, before the politicians take draconian action that will impact their constituents, they will reach into and grasp EVERY large pool of money that might forestall the problems a bit longer.

  150. T.J. Rand

    William, Gary has also pointed out the 150 SMA on the daily chary as providing the same backstop as the 30 SMA on the weekly chart. Check it out.

  151. Haggerty

    Wavridah, anyone,

    Anybody selling there July’s today to push out or still holding over the weekend. With the break of 1511 I feel kind of good about holding a little longer

  152. hamvestor

    TJ, SLV is getting pretty close to its 150 dma, while GLD has a long way to go to get down there. I’m holding some ZSL, so I’m not quite sure how to play this one. Any input on ZSL strategy going forward is welcome.

  153. Dan

    All past post-parabola silver corrections have not ended until they hit the 200dmva, at a minimum, so there’s no need to rush out of SLv puts / shorts. We still have quite a bit to go until then.

  154. MrMiyagi

    ..at ease,
    I’m pretty sure Gary mentioned a few times that he’s waiting for this decline to be over and then tap into an A wave.
    Or I completely misunderstood…

  155. ...at ease

    Mr Myagi,

    Or perhaps I misunderstood. Hmmm.

    Can you tell me what is the dollar symbol on Gary’s chart is that we are monitoring for the 200 DMA?
    My computer is so small I can’t see see what it is on his chart.

    …Or if you have another chart dollar symbol I can watch.

    Thanks 🙂

  156. ...at ease

    Thanks William, those don’t work in stock charts, do you have a symbol that works in stock charts for the US $ to monitor for the 200 DMA?

  157. Rick 4779

    Peter, Bollinger liked to use the 20DMA with a Standard Deviation of 2.0 (20,2). But the charts Gary produces use a 10DMA with Standard Deviation of 1.90 (10,1.9).

  158. Wav_ridah

    Fact of the matter is gold broke out to the downside of it’s channel. A close lower than yesterday’s close is about as bearish as it gets. Add that to a intermediate cycle low that is due around the end of July plus seasonality and you have a nice put on GLD.

  159. Éamonn

    MrMiyagi, thanks. I’ve always been paranoid about shorting oil because of a fear the middle east could explode at any time. But in less than 2 weeks my USO Puts are up 60%, which is rather nice

  160. Sleeper

    MrMiyagi said…
    “On the other hand, there’s a huge gap down…”

    Mr. M.,

    Let that gap fill on the A-wave down the road! 😉

  161. MrMiyagi

    William,
    At a point, SPX is either going to break it and fall through or jump back up.
    At this time I think the downside has more upside…

  162. sophia

    as I said earlier, back in January, precious metals went down while stocks stayed flat/up, so we could do it again…

  163. sophia

    I know that Gary doesn’t believe in conspiracy, but Ben could try to kill the speculators by pushing commodities down while he is keeping stocks up ( wealth effect)

  164. RJ

    Wav,

    What is your exit strategy for the July SLV puts?

    We essentially need continued weakness. Any bounce will murder premium at this point?

    I expected silver lower today given golds weakness.

  165. Poly

    Whenever you’re focused on the minute by minute movement of the market, you will find your self over trading, missing pivots and major moves/trends.

    Just stick with the Daily and IT trends, both which are bearish and focus on your allocations, risk exposure and emotions.

    The BIG money is made riding a trend, not just for a day or two, but from as close to the start to the end as possible. Trends run many weeks and months.

    I know it’s much easier said than done, but if you find yourself spending time trying to understand the day to day market fluctuation, you are wasting your time. Instead, pickup a book on trading and learn to cope and deal with your own emotional tendencies and how they influence your trading, you will find the exercise rewarding.

    Back to riding the short IT trend. Gold is clearly moving to an IT low, right on expectations. Don’t see how Silver escapes that freight train.

  166. MrMiyagi

    Poly,
    You are right in saying that.
    The real work is finding the trend, entering and exiting don’t have to be perfect.
    Daytrading is picking the mini-trend.

  167. DG

    Catbird: Just saw your post. I am still short silver, just not as much. Have been shorting gold today. Just sit tight or add a LITTLE. Don’t go nuts here, but gold just proved the IT decline is upon us. It may rally for a day or three which would be an excellent time to add some

  168. Harry235

    That was a big portion of the daily volume on GLD between 12:45 and 1:45 which sent GLD down to the $146 area. Some big sellers did not want to hold gold going into the weekend.

  169. Ben

    Bob loves Hawaii,

    I just looked at your inverted H&S chart of the dollar. Did you notice the obvious exact same formation from the first week of April to about the third week of May (the last handle of the first formation is the first handle of the second formation). In the first case, the dollar plunged after the IHS.

  170. Billy

    I’m selling half of my July SLV puts today. Not willing to take a big draw down on Monday if gold decides to bounce up and retest. Will re-establish that money on any bounce though.

  171. fubsy_cooter

    I’m tempted to close positions for the weekend with a sense of bewilderment at what the powers that be may pull to fight the downtrend in the short term. But…

    I’m not. 2008 was a great learning environment. one of the primary lessons I took away was that each time the government attempted to sway the tide, it was a great oppty to fade the move, and go with the overarching trend.

    I’ll sit tight and and stay in the game.
    17% EUO
    5% TWM
    1.5% SLV OCT 32 Puts.

    76.5% Almighty US Dollars..which are getting more valuable by the day. Can’t wait to spend them on some metal.

    ohhh, what’s that feeling? ah yes, caffeine. Having a nice Friday morning. Hope you all are in good health and spirits. Have a lovely weekend. I recommend doing something to reward yourself for being alive.

    fc

  172. Dan

    Nice drop into the close taking place with silver. Was curious why it was holding up so well relative to gold when gold was breaking down earlier.

  173. Ben

    fusby, I have the same thought. I think this will be a very interesting week coming up and I’m going to wait to close out my bear positions.

  174. ALEX

    Blogger wmp said…

    Alex,

    Nice ZSL trade. Why sell now with the broken daily cycle on gold?

    Thanks

    WMP,

    Honestly I feel like ZSL could run up and retest that $24 level from May 5th.

    I just took it as a trade because I have family in town and spent all yesterday with them, and am planning on doing more of that next week.

    I dont want to keep checking my phone/ internet when I’m with them just because I’m heavily invested…so I took the trade ( still have SDS and DRV) and am comfortable with that for now. 🙂

    thx

  175. DG

    (This is not written to anyone in particular—just thoughts) I am selling nothing. This is a time to sit, IMO. We may bounce a little, sure, but the final low is far away in both price and time. If we drop Monday you will just watch from the sidelines. If we rally you save a few cents.

  176. pvm999

    SLV is oversold on RSI 5

    It has bounced from those levels

    combine that with the uncertainty of the weekend …

    I closed my puts

  177. William

    Alex,

    Im boggled as to why you think ZSL will test the may $24 level, being that gold(which moves the sector)is almost 100% certainly entering its intermediate correction, possible d-wave?

  178. Cory

    GLD just broke it’s daily cycle low, now is not the time to give up on SLV shorts. Gary’s cycles are on track, I’ve been short DITM puts since May 25th and have been able to hold only because of his cycle counts. Go Old Turkey through this cycle and watch for capitulation volume. Even then, momentum might take it lower one more time. that is when I am buying junior miners for the A wave.

  179. Harry

    Cory, couldn’t have said it better myself. I took a pretty severe drawdown on my gold puts before things came through but I kept adding the whole way and put my trust in the cycle counts. Needless to say, I’m having lobster for dinner tonight!

  180. Hack

    Heavy selling volume in SPX, TWM, ZSL and EUO toward the close…15M shares traded at close in ANV – someone made a big mistake ?…

  181. ALEX

    William,

    OH, I thought you meant you didnt think it would!

    When silver crashed in May -ZSL went from $12.83 to $24.49 IN 5 DAYS!

    Unless you mean that I ‘ONLY’ think its going to $24? If so, no- I know it could do better…I was just saying that I needed to lighten up for my own trading comfort next week.

    I’ll be with away w/family-
    anyone who runs a business and goes on vacation with the company unattended & the doors unlocked is crazy 🙂

    There’s always another trade for me. – I made great $$ already this week and last , I just dont want to be 100% invested short and walk away next week…

  182. Gary

    I left early this morning to go climbing and just returned, if anybody had a question for me, please post it again as I’m not going to try and go through 200 posts.

  183. Ben

    Alex, I’ll be away for the first two weeks of August, and I’d like at least a 50% position of old turkey in gold and miners by the end of July. Looks promising to me at this point.

  184. Poly

    William,

    “You have to realize though..daytrading is exactly that, riding the trends, just on a micro-managed scale.”

    Of course, but VERY FEW, make any money day trading, at least consistently.

  185. ALEX

    BEN

    Yes, that could be perfect timing!

    Actually if i was going on vacation and the IT low was in…I might be fully invested in miners and walk away comfortably .

    That kind of un does my previous statement, but at THAT point, I would feel like someone was there minding the store during the busy season 🙂

  186. Poly

    See a lot of people closing their SLV puts today on a little profit, but is finally giving us confirmation that big money will soon be made.
    If anything that is the last position of my SPY, USO, EUO and SLV I’m willing to close. The dam just burst on Silver and big money will be made. Gold is heading into an IT cycle low which will drag it under. Just my thought at least.

    Good weekend all.

  187. Wes

    It looks like gold will close on a BB crash trade. In any event, GLD, which has already closed, also did, as did SLV.

    I sold about one quarter of my SLV July 42 puts into the close in anticipation of a few mild up days for gold and silver.

    The 5 day RSI on gold is currently below 22, another harbinger of a short term up move.

    My best current guess for a rebuy of the SLV puts is late Wednesday.

  188. Gary

    Wes,
    Just an idea. Instead of closing your puts and risking missing a large move down why not just play the BB trade by itself with a small call position.

    If stocks continue down the dollar is going to continue up and gold and silver are going to continue to get hit. Remember A Bollinger Band crash trade can take up to 15 days to work.

    15 days could mean a very large move down. Plus neither gold nor silver are stretched below their 10 day moving average yet.

  189. Cory

    One of the most important things I’ve ever learned in the market is that consolidation and narrowing of Bollinger Bands precedes big moves. It’s like some squeezing a spring, it’s going to pop at some point. There’s also less risk because you can set your stops close to the consolidation range and let the market work for you. The big silver move out of the consolidation last year is a perfect example.

  190. Billy

    I closed half of my July SLV puts when it was at about an 85% gain so took most of my cost off the table. I still have Aug SLV and GLD puts. I would have sold this half at 100% anyway and had I waited till end of day I would have come close. Just thinking that Gold may have one last little jump in it and if it does I will put what I sold back in, if not oh well, Just didn’t want to risk all the July puts on some weekend shenanigans. I still have half of my July puts and all of my Aug puts. Not worried about missing out on anything.

  191. Cool_Loser

    Gary,
    Do you still believe this current decline in gold to be the D wave or is it possible that this is just an intermediate correction within the continuing C wave? What will you be looking for as the deciding factor? Thanks man…

  192. Poly

    Wes,

    Another point to consider is how Gold/Silver behave during moves down into IT cycle lows, they don’t seem to offer many entry points and get busy getting lower. The move down is often relentless and investors get spat out the other end.

    IMO, not worth messing with it, we’ve caught the wave.

  193. Gary

    cool,
    I think this is a D wave because I believe the dollar has put in its three year cycle low. However, I believe it will be a fairly mild D-wave because we never got the parabolic stretch at the C-wave top.

  194. Wes

    Poly,

    Actually, how gold behaves when it breaks an important low was part of my consideration. Usually, when that happens, a 3 day reversal follows.

  195. Dan

    Real nice to end this week in big gains after sitting through this entire “bear flag” in silver and painfully adding more and more shorts everyday.

    Enjoy your weekend everyone!!

  196. wmp

    Alex,

    Thanks for your response..you had a better entry that I and hoped you hadn’t seen something I hadn’t..

    Have a great weekend!

  197. CMT

    First, thanks to all those willing to share their thoughts. This board is a great resource. Second, I agree with DG; I sold nothing today. Still sitting on a lot of EUO, SLV puts (July 32, Aug 35, and Oct 51) as well as some UUP calls. It’s not going to get better over the next few weeks, so I don’t plan to trade out of any of those. I’m still about 60% cash, ftr.

  198. CMT

    Oh, and DG, you’d be proud. While I was late to the EUO trade, I did get my average cost down to 16.95.

  199. Gary

    RB,
    My guess is the market expects the powers that be will throw something bullish at it on Monday.

    This is why I have no desire to short anymore.

  200. jeff

    Gary
    If one was long the dollar and wanted to take half off the table, we need to do it within the next 2 or3 trading days. Would that about do it?

  201. Éamonn

    According to the recently released HSBC Flash Purchasing Manager’s Index, China is only 0.1 pts from outright contraction. With another interest rate hike around the corner, the engine of the global recovery may shut down quickly.

  202. Gary

    Jeff,
    What’s the point of taking some off in the middle of nowhere. I would suggest that one needs a reason to exit a winning trade. Being nervous isn’t really a valid reason.

    Now if the dollar were to tag the 200 day moving average, that’s a valid reason. If the dollar were to get stretched far above the 10 day moving average, that’s also a valid reason.

    Right now I don’t see any valid reason to exit a winning trade.

    I see people doing the same thing with a winning trade on gold and silver.

    Gold has just now confirmed and intermediate decline. The daily cycle is only on day 9. Neither gold nor silver are stretched very far below the 10 day moving average.

    Traders make this mistake all the time. In the attempt to avoid a very minor draw down they lose sight of the big picture and end up with a very small profit while missing a very big move.

  203. TommyD

    Gary,
    Do you still think the long-term recession will take another 5+ years to work bad debt off the books? At 1 point I remember you saying 2016 or so. Just revisiting how bad this super cycle is…

  204. Gary

    Tommy,
    This debt will never be worked off.

    We are moving into the end game of the debt super cycle. This magnitude of debt can only be defaulted, either through outright default or monetary inflation.

    So far it looks like we are going to choose inflation. The question is will politicians come to their senses and halt the debt buildup before we reach critical mass that can only be serviced with a hyperinflation.

    Hyperinflation is and always will be a political choice. So far it appears that our politicians are unable to see what waits over the horizon if they don’t change their ways.

  205. jeff

    Gary
    I thought the dollar would have to peek at least by day 15 and make a higher high and then make it’s way into the next cycle low

  206. ...at ease

    Gary,
    Hope you had a great climb and your shoulder if feeling better.
    I realize you are not shorting this market, however many of us are.
    Can you give us an estimate (or a Gary guess) of where you see the intermediate cycle drop ending up with gold in the weekend report. Thanks

  207. Gary

    Jeff,
    The dollar cycle can last up to 30 days, and if recent history is any indication we could look for a turn sometime around the next employment report.

    But even then the dip into a cycle low is likely to be very brief and very mild.

    At ease,
    I have no earthly idea where gold is going to bottom at. I know what the timing band for a cycle low is, and I know that intermediate declines typically end with a big percentage down day. So I will look for a large down day in the timing band in real-time.

    But to guess at this point, on day nine, of the daily cycle as to where gold is going to bottom pricewise, I must confess complete ignorance.

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