STRIKING SIMILARITIES

It appears that the approval of Greece’s austerity measures has finally halted the correction in the stock market. But has it really?

I would suggest that this correction has never been about Greece. The market has known for over a year that Greece would be back looking for more money. Let’s face it no one is under any delusions that Greece is going to be able to solve their problems. Greece is going to default, there’s no avoiding that. What the EU is trying to avoid is a domino effect of cascading sovereign debt crises.

Last summer the crisis was solely centered around Greece. Does anyone really believe that this is going to stop with Greece this year? I doubt it. I suspect in the next week or two were going to see bond yields spike in Spain or Italy or Portugal, or maybe in all of the PIIGS. 

What started as a financial crisis in `08 has now infected sovereign debt as countries around the world have acted to bail out the banking system. I really doubt that this is going to start, and stop, with Greece again this year. As we found out during the real estate bust, there is never only one cockroach.

Striking similarities to last years correction are now starting to pop up. In May of last year the market put in what looked like a final intermediate low. It was followed by a higher low and higher high. The only problem was that the daily cycle was too short for the May bottom to be a final cycle trough as the bottom had occurred on day 13 and a normal daily cycle runs 35 to 45 days.

I also noted on the chart that we saw a large selling on strength day (smart money distribution day) one week from the top. The market then proceeded to move down into a final intermediate low in the normal timing band. I can tell you that many technicians got caught during the May bounce.

Now take a look at the current chart.

This time the market appears to have bottomed on the 15th day of its daily cycle. Again we have a pattern of higher lows and higher highs, convincing technicians that the bottom is in. Also note that we have another large distribution day just like we saw last year.

We have been expecting some kind of counter trend rally all along because sentiment had become too bearish by the middle of June. In order for the market to continue lower we were going to have to see some kind of relief rally to work off the oversold technical and sentiment conditions. The question is, is the rally for real or is it a counter trend move to be followed by another leg down. In bear markets the counter trend moves are very convincing.

I tend to think that this is probably not over yet. If the daily cycle runs a normal duration then we should look for a final bottom somewhere around July 22. However Congress is going to vote on the debt ceiling August 2. It’s possible that this daily cycle could stretch just a bit long and bottom on that vote.

Traders should probably be careful about placing too much trust in charts right now. Last year trading the charts suckered investors into the counter trend rally only to drag them down into a final intermediate bottom.


One final note. The market is now nearing the 50% retracement level. This is the same level that turned back the market last year.


512 thoughts on “STRIKING SIMILARITIES

  1. T.J. Rand

    Gary-

    Nice summary.

    I’ve been wrestling for a few days with S&P daily cycle counts. As I look at the charts, it makes more sense to me (visually) that the April 18 half cycle low is actually a shortened (22 days) daily cycle low. That would leave the recent low (June 16) as the bottom of a 41 day left translated cycle, meaning we would be 9 days into the current cycle.

    Is rephasing the cycles like this in violation of any cycle count guidelines (I’m thinking in particular about the potential 22 day cycle from April 18)?

    The primary impact would be current cycle count.

    Thanks.

  2. David Kafrick

    Gary,

    You always seem to be predicting six sigma events. Gold should have melted up, the dollar should have collapsed, countries will implode, there will be hyperinflation, etc…

    This is the same marketing strategy that Bob Prechter uses. Sensationalism.

  3. Christian

    Gary,
    thanks for the post.
    It’s funny to see how fundamentals or big news tend to align with corresponding cycle lows or highs. One chapter in Elliot’s Nature’s Law states just this; that news are no more than buzz and that the cycles are always right. Bit extreme of course, but this was in the mid 40s, yet I do think it resonates quite true today as well!
    Maybe it is as always the mainstream who wishes to keep the public stupid and unaware of the great cyclic nature of our existence and therefore tags a news event to all highs and lows as an explanation! Hmm…

  4. Gary

    I’m not sure what is sensational about this post. I’m just showing where the cycle low should come in at.

    BTW gold and especially silver did melt up. Gold was about $50 shy of my target but close enough.

    The dollar has quite clearly collapsed since 2001 and when priced in gold the collapse has continued this past year even though the dollar index hasn’t as it is measured against other worthless currencies.

    Iceland & Latvia have already imploded. Greece is imploding. Ireland, Portugal, Italy and Spain are knocking at the door.

    Sovereign debt crises are what precipitate hyperinflation’s. The world is clearly headed down that path as we continue to bail out every crisis instead of letting the market cleanse. If we did that then hyperinflation could be avoided. Realistically what do you think the chances are of politicians doing the right, but very painful thing?

  5. Allenupl

    Re-posting from previous blog entry.

    Gary,
    I read from another source that QE2 is not ending until mid-July.
    “The Fed is scheduled to purchase around $4.5 billion worth of Treasury debt on June 30, and then there are a couple more $3 billion purchases on July 6 and 11.”

    So actually there are a few more weeks of the Fed’s injection of liquidity.

  6. Christian

    David Kafrick,
    do some study in economic history and see how many nations get away with debasement of their currency the way USA is doing now, and what the ECB will shortly start (who legally cannot do any printing by the way) with to continue these bailouts.

    If you find any please share it with us here. Until then, realize that the USD is doomed until the government cut some 1 trillion dollars per year in spendings and instead start to raise interest rates to more normal levels again.

    As for your other comments, well, just wait and see.
    Regards,
    Christian

  7. Silverhound

    TJ

    The current cycle on day 9 would really throw a spanner in the works.

    I understand what you are saying though. I’m trying to apply cycle counts to my local market and some of the counts are a bit of a struggle, even with the benefit of hind sight.

  8. Gary

    TJ,
    April 18 was a half cycle low not a full daily cycle low. The decline into the April 18 half cycle low defined the trend line for the current daily cycle.

    That trend line was broken in May signaling the move down into the daily cycle low had begun.

    The rally on May 31 broke the down trend line signaling the daily cycle bottom was in and a new cycle had begun.

  9. T.J. Rand

    Silverhound-

    I could be missing something, but I do not see a S&P Daily cycle rephasing as that big of a deal in terms of its impact. It might push the Intermediate cycle to the longer end of it’s timing band, but that’s about it.

  10. Silverhound

    TJ

    It could potentially change where you would be expecting a cycle low to occur?

    It was more of a tongue in cheek comment. I was mainly agreeing with your comment about coming to grips with interpereting cycle counts.

    Please accept my humble apology if it came across in another way.

  11. T.J. Rand

    Siverhound-

    Absolutely no apology needed…I thought your question/comment was on point, so I took it at face value. I’ve been trying to get my thoughts around impacts…but Gary’s comment may make the discussion moot. 🙂

  12. Silverhound

    TJ

    The trendline break helps a lot in identifying the cycle lows. Doc shows this a lot on his charts if you’re a sub there.

    I know the cycles aren’t meant to work on individual stocks but I have a daily and weekly cycle count worked out for one of the junior gold miners that I trade. As the stock aproaches the timing band for a low I just use other TA to pick the low and a cycle trendline break as confirmation. It’s helped me trade the counter trend rallies as the stock has trended down over the past few months.

  13. T.J. Rand

    Silverhound-

    I am a Doc sub, and I am familiar with his use of cycles, but I had not considered them as definitive a tool as it appears I may need to.

  14. Gary

    FSR,
    I will not be shorting the S&P until we are in a confirmed bear market. Bear market rallies are just too tough to time the top and too easy to get whipsawed into losses.

    We are getting a first-hand example of how hard it is to make money on the short side, even though some seem to think it’s easy. I daresay no one thinks this market is easy.

  15. PST

    Allenupl,

    The additional purchases of treasuries in July is just the continuation of the Fed rolling over the proceeds from maturing bonds and prepaid MBS.

    Just to clarify one additional point, POMOs (Permanent Open Market Operations) are not just something that occurs during QE. POMOs are a monetary policy tool that the Fed has always used to control the money supply and implement their Federal Funds Rate target. Contrary to popular belief, the fed doesn’t set an absolute Fed Funds Rate but instead buys and sells treasuries through open market operations to manipulate the rate. This is why it’s always quoted as a target range (currently between 0-0.25), because they can’t control it precisely. So even after QE ends, you will still hear about open market operations and the purchases of treasuries. The formal $600B expansion of the balance sheet is coming to an end.

  16. 86d4life

    This whole scene. I think we`re There. I think the $ did what it needed to do and now it`s just sweeping the floor and heading out of town. Of course I`m probably wrong. Which means I`m probably right. A double double cross; like a swastika……

  17. William The Insane

    86,

    I think I can say one thing with certainty (although nothing is certain here) Gold is still going to melt down, whether its going to be a normal correction or a D-wave is still to be seen when we near the 150sma

  18. 86d4life

    I think the $ needed to hit about 74.5 and it was reall close overnight. did you check bb on spy? Popping it`s cork like a bartender at a mob wedding!

  19. William The Insane

    Here is my post from last night. Lets see how things play out today.

    “Gold closed at the 60sma today, and tonight the futures are hitting resistance at this level. If we dont break the 60sma early morning or tomorrow gold will have begun a meltdown within 3 days of its bounce off the 75sma, which seems to be much quicker than previous intermediate declines, it looks like this only happens in D-waves. I said today that if the bounce off of the 75sma is short lived (1-2 days) I would begin to lean toward the D-wave side instead of a normal intermediate correction. Although gold is beating to its own drum right now I think the dollar would have to reverse tonight or tomorrow for gold not to break above the 60sma and continue its normal crawl along the 75sma for 4 or so days before heading to its next support at the 100sma. Lets see what happens.”

  20. traderlady

    GARY, I appreciate your opinion on shorting and glad I closed them last Friday. I started yesterday a small EUO
    position as pocket change. Have a great 4th week-end and same to all the rest of the GANG:)

    PS: Big speedboat races here in Sarasota as a highlight.

    SB: Glad you are making the $$$

  21. 86d4life

    I read that this morning and I agree. It`s like it just figured it`s time to roll and forget the pleasnantries. spy looks like it wants to take out 38.2% fibo.

  22. William The Insane

    We still have that upper trendline on the S&P , still got some room to rally before we test it. S&P is in a wedge pattern now, if its going to break above that upper trendline it probably won’t happen until we are 3/4 of the way down this channel, which is weeks from now.

  23. white2ronin

    Gary

    Interesting post. Isn’t a bit academic is you expect S&P to bottom at 1250? (your expected low at july 22nd or Aug 2nd). On the off chance that the scenario doesnt play out a longer term oriented investor should buy at 1317 with a risk of 1250 low or 1400 (or perhaps the old high of 1500) on the upside. I assume you think gold will bottom at around the same time so buy now at 1500, with a risk to 1400 if you are right (and 2000 if we your scenario doesnt play out and we plough higher). Thanks

  24. Gary

    For one to believe that the market is going higher they would also have to believe that the dollar has not put in its three-year cycle low.

    We will find out very soon as the dollar is due to put in a cycle low any day. If the rally out of that low crashes the market then there will be very little doubt that we are in a cyclical bear market again.

  25. Gary

    White,
    We should be able to time our entry into gold a little better than that. The daily cycle usually runs 20 to 25 days and it’s only on day 13 right now. Waiting at least another couple weeks would improve our chances of getting much closer to the bottom.

    I think it’s a big mistake to assume that what is happening at the end of June with window dressing and the last day of QE2 is going to continue into July.

  26. MrMiyagi

    It’s been mentioned many times before but if you look at Kitco’s gold chart, it seems to be following along the dips and peaks of the past 2 days.

  27. white2ronin

    Thanks Gary,

    I assume then your low is 1250 for S&P July 22nd – Aug 2nd as per your chart. DXY is falling again as would expected with market rallying, would you expect peak DXY strength at your July 22nd – aug 2nd low, if so what would your target be? 80?

    For the record am short EUR/USD but will change my mind if we break 1.485. S&P I am in your camo but will change my mind if we break 1320 ( then we go to 1400 plus)
    Gold looks good here at 1510 either way

  28. 86d4life

    WTI,
    yeah, put on some BBQ to warm. These exciting mornings burn fuel faster than normal. Did a couple briskets on the grill for about 25 hours. I bring the mesquite and pecan back from tx.

  29. William The Insane

    I dont know much about bonds, maybe someone here can help me out with this question.

    My mother-in-law just took her savings out of an income mutual fund and put it into bonds, if the dollar rallies bonds will rally also, correct?

  30. William The Insane

    86,

    Briskets with mesquite and pecan, I never tried any of that, I have no clue what mesquite even is! All I eat is chicken and vegetables, im going to grow feathers and a beak soon.

    I just told my wife I was hungry and need to eat, ya know what she tells me? “Again?” I told her dont worry I will wait till next week.

  31. Poly

    Well here we are at the top of the hill, if the cycle counts are correct, we should have a nice short SPY entry point (discussed couple of days ago) now on our plate, IMO.

    Much harder to do after a 4 day $5 SPY rally right? 🙂

    Popped above the 50dma, cleared extreme bearish sentiment, still in a failed daily cycle with quarter ending, QE ending, positive Euro news priced in and the dollar should find a low here.
    Entry here with a fairly tight stop has a great chance of working nicely with little risk. Small trades, just a thought.

  32. EricH

    S&P back above the 50 and also above the BB bands. This is not a market to be messing around with a short position.

  33. Gary

    Eric,
    Exactly, until a bear market is confirmed one is just guessing with shorts. If the bull isn’t finished then you’re going to get run over.

    As I said we will not be shorting again until we get complete confirmation that a bear market has begun.

    One needs to be sure that the cyclical trend is in their favor if you are going to be selling short. You need to be assured that the bear will correct your timing mistakes.

  34. EricH

    I’ve been watching Dr. Copper for the past month and it’s refusal to join the bear party the past few weeks was a sign that this bull certainly isn’t dead yet.

  35. PST

    William,
    The short answer is there isn’t necessarily a cause and effect relationship between the dollar and bonds (or stocks for that matter), and it all depends on why the dollar is rising. I don’t want to bore you with too much detail, but bond prices are typically a reflection of investor’s inflation expectations. If investors are anticipating inflation, the price of bonds will fall because it is expected that inflation will eat up the purchasing power of the bond’s future coupon payments (coupon payments are fixed over the life of the bond). The longer the duration of the bond the greater the impact inflation will have on the price of the security. Alternatively, if expectations are for deflation in the future, investors will in theory be willing to pay more for bonds. In this case, the purchasing power of the bond’s future coupon payments will increase relative to the declining price of goods in a deflationary environment.

    Now in the case of today’s market, you might expect that a rising dollar will be negative for stocks and therefore cause money to flow into bonds (flight to safety trade). However, this relationship doesn’t always hold up as stocks would do well in a rising dollar environment if it were due to a strengthening economy. To complicate matters, there are unfortunately more factors (Fed’s actions, manipulated yield curve, flight to quality trade, mechanics of QE or operation twist, etc) at work here affecting bond prices than just inflation expectations or the direction of the dollar. Therefore, as is often the case, the answer to your mother-in-law’s question becomes “it depends”.

  36. Silverhound

    Hey William

    Your Cup n Handle pattern on the SnP can’t happen at the bottom of a down trend, it needs to have an up trend leading into the cup. You are just looking at a “rounded bottom”.

    But you knew that didn’t you 😉

  37. DG

    Gary: You posted a day or two ago, something like “Where did I say such-and-such?” when someone alleged you made some claim. I will ask you now, then: You posted: “We are getting a first-hand example of how hard it is to make money on the short side, even though some seem to think it’s easy.” Can you show me where someone said it was easy? Trading is never easy or everyone would be rich! It is not “easy’ to be long during a bull market or you wouldn’t need to encourage people so much through drawdowns. Weightlifting is not “easy” but you have worked at it anyway and become world-class at it. Actually, nothing worthwhile is easy. I am not sure why you keep saying it’s not easy as if you are responding to someone when in fact you are responding to no one…? Please forgive me if this is a little strong, but you say it quite consistently and I am hoping an explanation will enable me to read it differently.

  38. Silverhound

    My money’s still on the red days returning early next week to form the left shoulder of the HnS pattern.

    If this green does push on into next week though there’s the possibility of a “Head test” before moving down to trigger the neckline.

  39. Nike Boy2008

    hi DG,

    please post when you get a sell/buy signal or anything…

    with the market up 4 straight day, hopefully you’ll get a sell signal soon

    thank you

  40. Gary

    DG,
    I find riding a bull market immensely easier than trying to short.

    For one thing bottoms are often an event, and cycle analysis is a decent tool for spotting bottoms.

    Tops on the other hand are often a long drawn out process with multiple whipsaw’s.

    All in all I think most people will find it much harder to make money selling short than buying long.

  41. Nike Boy2008

    the down trendline from 1370 also sits right around here…this might be a great place to short with a tight stop (risk/reward in our favor)

  42. 86d4life

    Eamonn,
    Right under the macd on your stock charts chart, it says annotate. Click on that and it will bring up a separate chart. That is where all the goodies are hidden.

  43. Hack

    Gary;

    We are at the upper range of the downward trend line which I show as 1320. If the market breaks convincingly above this then I believe that we will go higher.

    Comments?

  44. Ben

    DG, I don’t think Gary meant anybody in particular said it was easy — just that a lot of people actually do think it’s easy and ought to stay away from it.

    With the monetary inflation bias of perhaps 4% over the past lifetime, it’s no wonder it ain’t easy. Bears must go upstream against that bias, meaning any timing window is that much shorter.

  45. DG

    Gary. Easier to be long, for sure—I agree completely. Easy…hmmmm.

    Ben: I have never seen anyone in my entire trading life say “shorting is easy.” Not once in 38 years. Saying “people say” and then countering what “they” say is usually a way to attempt to distinguish yourself from the crowd, but it just doesn’t ring true for me…especially if no one ever says what it is alleged “they” say!

  46. Gary

    Hack,
    I think what happens today and tomorrow is basically meaningless. The real test is going to come next month as the dollar rallies out of its daily cycle low and QE2 comes to an end.

    Right now we are seeing window dressing and an attempt to create momentum before QE2 stops.

    Basically for the market to continue higher one has to believe that the dollar has not put in its three year cycle low yet. If that’s the case then we will be sitting pretty at the bottom of the intermediate gold cycle ready to ride a massive rally into fall.

    If the dollar has put in its three year cycle low then the gold rally should just be an A-wave and stocks are going to falter once the dollar begins to rally again.

  47. DG

    Nike: I usually post signals that I think are actionable. My all-market sells are not nearly as good as the buys, BTW. The individual ETF sells are quite good. I am just not seeing anything worthwhile at this point .

  48. Gary

    William,
    Presumably it would occur if the current intermediate cycle rolled over into a left translated orientation that would be due to bottom sometime between early September and early October.

    It doesn’t fit very well considering the last two three-year cycle lows occurred very early in the year. But it is a remote possibility.

    A final C-wave top very early in the fall also doesn’t line up well with gold’s historic tendency to top late in the fall, and often in early December.

  49. Coffee

    Gary,
    I have to admit that I’m Old School bullish right now but have decided to save that bullishness for the cycle lows

  50. DG

    Bought EUO at 16.71 since FXE is up against its trend-line. Allows for a nice tight stop. I have about a 30-50% position in it now waiting for the dollar bottom.

  51. DG

    Funmike: No more ZSL, but I have SLV Aug puts, so same idea. Small position, though. I need to see something at this point in order to add.

  52. Poly

    Although often not the final “price top”, most Gold IT cycles ‘technically top” much earlier in the IT cycle than you expect. Many of them “technically top” not far off the middle off the cycle, even in the ERT cycles. There are plenty of TA indicators that show this top and offer safe exit or scaling out points in the IT cycle.

  53. Michael

    DG said…
    “Guys:My last post on this as I think the issue has been made clear— It’s not that hard. Don’t “think” the bottom is in just because there’s a rally. Wait for the timing band. The bottom is not “in” because there’s a sharp up day…”

    “For those who feel it is hard to stay short: It is time to go Old Turkey…”

    “Just sitting is not that hard. Don’t look at the dollar profit and you won’t be tempted to take it…”

  54. Felix

    Gold looking very week in spite of an early long weekend vacation for the Greenback… All good signs supporting our working model

  55. ALEX

    I cant rememver if I posted this here, but in case I did-

    Bought XG 2 days ($11.70) ago as it bounced off of the 20sma ( it always seems to).

    Just Sold it since it is at a previous high on 1/2 the volume. Sold @ $12.75

  56. William The Insane

    Alex,

    Yeah you mentioned that, I think yesterday, said you were looking to sell at 13, nice trade my friend. How did you come across XG, have you been trading that for a while now?

  57. ALEX

    William The Warrior

    XG was just one of the miners that was acting very well & I have traded it before. Even now, with Gold pullbacks and market dropping, it just hits the 20sma and goes back up.( SO FAR)

    So even though I’m not bullish Gold and shouldnt trade against the trend…the trend on XG was consistently up off of the 20sma.( Buy and TIGHT STOP) And you’re right, I was targeting $13, but its volume is drying up, so take profits 🙂

  58. haveaniceday

    DG, these may be some tough questions but here goes.

    Currencies seem to be the trader’s choice? true, false, not that easy to say?

    I have EURO on buy since about 6/17. What do you think the status of the buy is? In the sweet spot and will continue to roll, should make it up to next resistance still not to late to get in, or no idea just go with it until it flops?

  59. William The Insane

    The market lately reminds me of my little brother when we were kids. He would get on his bike, pedal so fast like he was being chased by a car, his foot would slip off the pedal, the pedal would slam him in the back of his shin and he would flip head first over the handle bars and the bike would come crashing down on his head putting his teeth in the pavement. Then he would be so mad he would get up, cracked tooth and all (nobody had more chipped teeth than him)pick up the bike and smash it on the pavement (I guess he thought maybe a tooth for a tooth?) After that he would get back on the bike, bent rims and all, and pedal away like a maniac same as before, and then the same damn thing would happen all over again!!!!

  60. DG

    Ryan: On the EUO I just bought my stop is about 16.65, so super close. I’ll have to decide about holding overnight, but suspect I will.

    Have a: Not sure what “trader’s choice” means. I will hold what Euro I have now until the dollar cycle fails. If the dollar can show that the low was not the three year low I am out.

  61. haveaniceday

    wtif, you are taking insanity to never before reached levels. Time to sell? Parabolic?

    Insanity: doing the same thing over and over again and expecting different results.
    Albert Einstein, (attributed)
    US (German-born) physicist (1879 – 1955)

  62. Dan

    Ya were not very far from that low in the US Dollar around 73.7 and were currently sitting at 74.3 so we either reverse soon or we fail to make a higher low.

  63. PST

    86,
    It’s the start of a new month/quarter, QE2 is finished, traders don’t want to be long going into the weekend……I’m not predicting a selloff, but there are reasons why it could happen.

    William,
    It dawned on me that when I responded to your earlier post, I only addressed your question about the relationship between the dollar (and inflation) and bonds. I didn’t mention anything about the inverse relationship between interest rates and bonds prices because I just assumed that you were familiar with the old adage that bond prices rise when interest rates fall and vice versa. I won’t bore you with anymore bond crap here, but I just wanted to mention this in case that was an incorrect assumption.

    BTW, you may, in fact, be insane. God bless you.

  64. Gary

    Markets don’t usually just go from a big up day to collapsing the next.

    Look for one or more narrow range days or a key reversal before expecting the market to turn south again.

  65. flaunt

    This is the second or third day in a row where there was an initial dip going into the end of the day that turned out to be a trap when it was followed by a surge into the closing bell. If tomorrow’s ISM number is good SPX is going to surge well over the 50dma and the down trend line. The low volume does indicate lack of buying interest but that also means there’s a lot of money on the sidelines that could come pouring back in not to mention a short squeeze. Then there are earnings reports mid-July that could be another upside catalyst. It’s almost as if QE-2 is no longer ending next month and the economy is firing on all cylinders.

  66. Gary

    William,
    Yes that was a very unusual day to say the least. But we were already in a down trend at the time.

    I kind of doubt lightning is going to strike twice. But I do think once the dollar starts to rally July is going to turn out to be a tough month.

  67. Aaron

    Looks like gold will close this week down too, despite the weakness in the USD. The downturn in gold into the IT low seems certain.

  68. Gann360

    No.

    i am Predicting that , come the next Pivot Cycle, if we Rally into it. i will short it, If we Selloff into it ,i will Buy It Long .

    So ,it all depends what we do here, and the direction going into the Pivot Cycle.

  69. PST

    Personally, I’d go with Alex’s nickname of William the Warrior, but WTI also has a nice ring to it. How about William the Insane Warrior?

  70. PST

    How about William the Fantastic? That way, when you write one of your rambling posts, we can just write

    “WTF,WTF???”

  71. William The Insane

    PST,

    William The Fantastic is to flamboyant for me, thats like calling me William The Fabulous!!

    And dont get no ideas…William The Flamboyant is out of the question!

  72. PST

    WTI,
    Your call boss. I’ll call you by whatever name appears by your picture.

    Alright, gotta hop. My 3 yr old son has his “graduation” party from Bouncing Buttercups today. On Tuesday he officially becomes a Froggy Friend. Ah….the joys of parenthood.

  73. white2ronin

    Whilst this is an interesting post for the bear low to be confirmed in the July 22nd/Aug 3rd window that Gary is suggesting you would need DXY/bonds to rally. This hasnt been the case. Further euro 2 year swaps have dipped below 60 bpts, and European crossover is below 400 bpts (which hasn’t happened in a month). This also suggests to me that this is the real deal and we are headed higher, much higher. Gold for a $100 downside to $1400 or $2000? (upside) seems like a good trade here. SPX at now 1320 for 1250 downside (is this what the post is suggesting?) and 1450+ upside is a good trade here. DXY has not done anything since payrolls, so looks to me like rolling over (again). Again interesting work with cycles, I don’t buy the month end window dressing either – I will change my mind if crossover or swap spreads gap out but so far its risk on.

  74. Nike Boy2008

    silver holding much better than gold…weird..been such a long time since i’ve seen silver down 0.47% when gold is down 0.8%

    Also, miners have been and seem to be following the stock market more than gold – something to keep in mind at the intermediate bottom

  75. Gary

    This fish has no desire to swim until gold reaches its intermediate bottom. The reality is that stocks have rallied 5% if you managed to catch the exact bottom, and the odds of them making a significant move above the old highs are slim.

    If we can catch the miners close to the bottom of the intermediate cycle we could make 5% in a day and 50% plus before the rally ends. That’s the kind of percentage gain that gets me excited.

  76. wmp

    This just posted in TOS news “Fed’s Bullard “QE stimulus to stay while fed collects data”…details to follow

    Anybody else see this?

  77. Cool_Loser

    Gary,
    Assuming we get in on the minors at or near Gold’s intermediate cycle low, at what point would you be interested in selling them?
    Just curious.

  78. Éamonn

    BEEP BEEP Gary Savage & his blog & graphics is mentioned by Marc Faber in this month’s Gloom, Boom, and Doom report BEEP BEEP

  79. Éamonn

    This is it:
    “Writing for http://www.goldscents.blogspot.com, Toby Connor notes, “last year the market was able to push higher for almost a month on momentum after QE1 ended. This market has already rolled over even though QE2 isn’t scheduled to stop until the end of June. The conclusion is that the market is much weaker now than it was when QE1 ended. We all know what happened last year when the money pumps were shut off. It led to the flash crash and a severe stock market correction. It would have led to a new bear market except Bernanke quickly started QE2” (see Figure 15).”

  80. white2ronin

    Eamonn

    I just read Marc Faber’s report, the first part dicusses the role of friendships, the middle part on the the markets, gold and dollar. There is no mention of Gary Savage in the report.

  81. flaunt

    wmp,

    Did you find any info on that Bullard statement? I wonder if it has something to do with reinvesting proceeds.

    It seems ridiculous to me that he would say something like this:

    “Bullard said on Thursday that while the bond buying program impacted financial markets immediately, its effect on the broad economy will lag by as much as a year.”

    I don’t know how the central planners can say things like this with a straight face. They admit that they can’t possibly know the full effects of their policies at any given time yet they huddle together around their crystal ball routinely to determine The Plan for the economy. It’s insanity. How many parasites can a system feed before it just implodes under the stress? Madness.

  82. Felix

    Were we talking about 100-300% rather than 50% on the A-wave miners not long ago? Just wondered if the estimate changes for a reason that can be easily understood, such as, the intermediate decline won’t be very severe, etc.

    Sometimes I transition to the Mirror Universe without being aware so I just wanted to check. Over there I subscribe to a newsletter by a Toby Connor.

  83. Marty

    Could raising the debt ceiling be also considered some type of a modified QE3. If so wouldn’t investors have a false sense of security in the market until the vote came out as they would be expecting the debt ceiling to be raised. The surprise would then be not raising the ceiling and thus the markets get hammered with the surprise. Not sure just typing outloud 🙂

  84. Dan

    Felix,

    The lower it goes, the bigger the bounce. Although I find it very difficult to see HUI going up more than 100% in one cycle, let alone 300%.

  85. Gary

    Felix,
    It took the miners 2 1/2 years to rally 300%. We aren’t going to get 300% again in a couple of months.

    A move from the recent low at 490 back to the recent highs at 610 would be a 23% gain. If the miners could tack on another 10 to 15% on top of that during the next rally that would be a tremendous gain.

    Juniors might do a little bit better maybe 40 to 50%.

  86. flaunt

    Marty,

    They may let it go down to the wire but in the end they will raise the debt ceiling. They all caved in on TARP which was as much of a travesty as what just went down in Greece. The effects of not passing TARP were much more nebulous than an outright default where everyone knows the outcome. There’s no way the republicans will go into an election cycle allowing the democrats to blame them as the ones who “caused a default.”

  87. Gary

    No I had no idea he would use anything in the blog. I’m amazed someone of his caliber would even bother to read the blog much less quote me in his newsletter.

  88. Éamonn

    Gary, he must have you on his browser bookmarks! I have studied him and he appears to be very clever. He never appears to be wrong. Watch for his grasp of the details. His accent winds me up a bit alright but I search every day on YouTube for any fresh interviews he has given

  89. Éamonn

    Interesting what Faber is saying about China. Felix Zulauf has also alluded to this coming recession in China within a year and a concurrent collapse in commodity prices

  90. Ben

    Here’s my favorite quote from Marc Faber, which I wrote down after I heard him say this in an interview:

    “If gold will stay above $1,000, it’s never going under $1,000 again.”

    If I didn’t see him say it, I’d have thought it was from Yogi Berra!

  91. Poly

    Gary,

    Nice report.

    As so much hinges on the dollar right here, if you use the futures on the dollar, it certainly shows this current daily cycle in a very favorable light.

    It extends the daily cycle two days to Day 19, meaning we could have a cycle low already in place. The recent high confirmed a RT cycle. Today we bounced right off the IT trend line.

    I know Tim Wood uses this for the dollar, any reason why this wouldn’t work? Thanks.

    Dollar

  92. Bullion Trader

    When you say the “Juniors might do a little bit better maybe 40 to 50%.” Are you saying this is what they can do in the A wave or are you saying they could do perhaps 50% better than what you earlier said about the A wave advances?

  93. Felix

    Gary – I think I understand now – Are you thinking that the miners might be the best vehicle, not only for the A wave, but for the whole next C wave (no promises, realtime calls) and, if so, they could make that sort of massive gain?

    If I haven’t understood just say so, I’ll go away and tweak the dilithium intermix formula for a few hours.

    In the other universe Toby C. Is an avid champion zero-G hoops player with a xenopet named Gary, BTW.

  94. Gary

    The miners are getting beat up irrationally right now. That often leads to big gains as the market finally comes to it’s senses.

  95. Bruce

    Toby, I mean Gary … 😉

    what do you have to say regarding the positive divergence between the miners and gld/slv over the last week or so?

    It seems opposite of the action in April, where GLD/SLV went on to new highs as the miners topped out about 3 weeks prior.

  96. Gary

    Possibly it’s a good sign. Although if gold continues down below $1462 I suspect it is going to drag the miners down with it at least to some extent. Don’t forget they have already breached their previous intermediate low.

    If the miners can continue to show relative strength through the remainder of the correction then we will know that’s where we want to be invested once gold bottoms.

  97. jeff

    poly

    i just bought more sept dollar contract
    poly, i asked my broker how could a futures chart be the same as spot. well he said they are similar and always will be similar,but if you get support in the futures that is where we mark it and that is where it holds or fails.

  98. Poly

    Good to know, Jeff. I really would be interested to hear Gary’s thoughts too, as in this case the slight difference makes considerable difference to the translation of the cycle and it’s timing band.

  99. NJ

    Gary:

    While QE3 has not been announced yet, everyone has known the end of QE2. So could the end of QE2 be already priced in the market?

    Thanks!

  100. Gary

    I remember last August someone said that QE2 was already priced into the market. I said it was impossible to be priced in the market because it was fresh money that was coming in every day. We saw what happened.

    I think the end of QE2 is the same, it can’t be priced in. Without the Fed’s continuous liquidity pump the forces of deflation are going to slam back down on the economy. I don’t know how you can price in that deflation until it happens.

  101. Gary

    Jake,
    I don’t think you understood exactly what I was trying to say. My original expectation was for a quick bounce followed by a waterfall decline.

    However if the market breaks the downtrend line it seems unlikely that we would get a waterfall decline from here. In that scenario it would be more likely that we get a 1-2-3 reversal, only instead of the number two test of the lows holding it would marginally break below the March pivot. That would be followed by another intermediate cycle that fails to make new highs and would eventually roll over into the next bear market.

    That is the complex topping scenario that I mentioned in tonight’s report. I drew the chart as if the 1-2-3 reversal was successful but my expectation is the #2 test will break the March lows, mostly because it’s too early for the daily cycle to have bottomed.

    Another thing you should know is that my charts are almost never drawn to indicate targets, they are just to illustrate trajectories.

    Next, and this is very important. As the market evolves I will abandon previous expectations and adapt to what the market gives me if it becomes apparent that my original thesis was wrong. I’m not going to stubbornly maintaine a position that the market has clearly negated as that would just be stupid.

    I do realize that people prefer continuity. People hate to change their mind. The odd fact is that most people will gladly lose money before they change their opinion. Needless to say that is a surefire way to go broke.

    So if the market does something that suggests to me that the bear market has not started yet I will abandon that opinion in the blink of an eye. And if traders who have committed 100% to the bear market find that aggravating, so be it. I refuse to lose money because I’m stubborn.

    That being said I haven’t seen anything yet that would suggest that this is not the beginning stages of a new bear market. But even if it is I have no desire to trade it. The beginnings of a bear market will whipsaw Bulls and bears alike to death.

  102. ALEX

    Words of wisdom

    Gary said “…Next, and this is very important. As the market evolves I will abandon previous expectations and adapt to what the market gives me if it becomes apparent that my original thesis was wrong. I’m not going to stubbornly maintaine a position that the market has clearly negated as that would just be stupid. “

    Thats the way I look at the markets to ( you have to)

    Its a flexible plan , and you let the market tell you what it wants to do…AND YOU LISTEN.

    Trouble is, every once in a while it speaks a foreign language 🙂

    Good reporting Gary…Summer always seems to be a bit tricky.

  103. flaunt

    Soft numbers out of China and Japan tonight. I think if tomorrow’s ISM number is good this move will continue. If not it could turn down temporarily, until people realize that it’s not about true economic growth, it’s about Hopium!

  104. JaketheFake

    Gary,
    Thanks for your reply. The last statement in my comment was that the S&P 500 will have to go down pretty far to spook the Fed into going back to printing money. So if the downtrend is (or has been) broken, that will push that event farther into the future, no? At some point, it is logical for there to be that declining waterfall, no? If not in July, then sometime later.
    Another question. You have said that when gold hits its intermediate cycle low, that will be the best buying opportunity in the remainder of the secular gold bull market. Since you only envision a months-long rally that might hit 50% for the junior miners, that is not the buying opportunity of a lifetime. Would your strategy be to hold on long-term as the buying strategy thru all the subsequent peaks and valleys and therein lies the big gains?

  105. Gary

    If it takes longer for the market to decline then I suspect the Fed will remain on hold past August.

    If I’m correct about the dollar having made the three year cycle low then this will be a D wave decline, although probably a mild one.

    The bottom of a D wave will be the lowest point that we will see between now and the top of bull market. So it stands to reason that will be the single best buying opportunity we will get for the remainder of the bull market.

    I will continue to try and buy at intermediate bottoms and sell at intermediate tops.

  106. William The Insane

    Gary,

    If we retrace to the 62% level on the fibo, thats right around the 200sma. I think you might have mentioned that the other D-waves retraced to the 62% level, correct?

  107. aklaunch

    Is it me or does the SPY chart look like it is from outer-space? I might look into some August 130 puts tomorrow if it goes up again. Then again i might just cower in fear?

  108. Christian

    Hey all… Morning here in my corner of the globe 🙂
    Gary,
    your 7:41 PM comment was the major reason why I decided to subscribe and follow this blog incl. comments all day long as much as I can. The adaptability is key to earning money on a stock market, and to be able to do that one needs discipline and experience.
    Big thanks.
    As always funny to start my day reading all twisted comments amidst golden observations!

    Stay cool,
    /C

  109. Christian

    SF Giants Fan,
    thanks for the link.
    Liked the picture in the blog so I had to borrow it for my profile as a friendly reminder to myself what happens when you stop being disciplined…

  110. Christian

    Gary and William,
    looks for now as the gold is following your orders. If it does close this week as a red candle that would surely set it up quite nice for a continued trek downwards, especially if it is facing a dollar rally.

  111. Christian

    I was thinking about silver and its hybrid status as both industrial metal and monetary metal… If gold continues down as projected it will surely drag down silver with it (probably with a magnifier too), but how will silver then react on a nasty slowdown in the global economy (read China 🙂 )?

    Will it be double trouble for the shiny metal, or will one of its two sides be dominating and thus ignoring the other side (eg. as a monetary metal together with gold)?

    /C

  112. Christian

    Michael,
    yeah, or it’s an replay of the 27th, where we dropped 10$ like a bad habit at this time but then started to rise to eventually end at 1500$.

    Red would be the better candle though! 🙂

  113. SF Giants Fan

    Wav_R

    Thx for the link on Slv. Been holding Zsl since 17.40 (thx Alex. He got it at 17.25) Shhh. Don’t tell Gary I’m shorting a bull market.

  114. Christian

    SFGF,
    link didn’t show any picture, just some ads. Though I followed your other link and I’m kinda guessing you went for The Mask picture! (Which in fact WILL be my choice when we go riding on the gravy train)
    Hehe.

  115. Christian

    Silverhound,
    you know, you’re probably right, that would be the logical choice! 🙂
    However, I’ll be a happy camper if all pans out as we plan, so the Mask picture will sum up my mood quite well by then methinks!

  116. white2ronin

    Eamonn

    Ok thanks – although if you are already writing a blog, then you would use the same name throughout?

    This cycle stuff is interesting, but it seems to me more of a coincident indicator than anything else

  117. SF Giants Fan

    Looks like gold and silver got Garys memo to start their decline. Perfect timing. New quarter. Window dressing over.

    I wonder if we will see the low of the day between 10:00 to 10:30 am EST again like we have the last 3 days in a row.

  118. DG

    I posted my buy on EUO yesterday. Now is the time to sit and not take a small profit as the dollar dip has probably run its course, IMO

  119. Christian

    Silverhound,
    nice graph. For sure there are several technical tools that can point to if it is a low or not, MACD being one of them. IT/daily cycles are there to help us start looking for the technical data in a certain timing band, which is really helpful in the longer run.

  120. ALEX

    SF GIANTS FAN

    I’ve been tuned into that site for maybe 6 months now and am amazed that he does his cycle analysis for free like that. ( and actually…anonymous?? I dont even know who writes that page.

    He also has some of the best pics around 🙂

  121. Silverhound

    Christian

    Yep, there are many tools as you say. I mainly posting charts for the benefit of those still learning the art of charting. No doubt the seasoned traders amongst us have their own favourite tools.

  122. Christian

    Silverhound,
    I gotta say, I truly appreciate all you guys who post charts and solid arguments in these comment sections! I don’t have as much time to devote to my investments as I would like and definetly not to be working the charts. Most of the time I just have the time to read posts and tries to follow the comments (lately whilst rocking my youngest to sleep at roughly 20.00 my time. God bless smartphones, it makes me super-optimize my time 🙂 ) so keep it up!
    /C

  123. SF Giants Fan

    Alex

    Might not be free for long with all the traffic from SMT. I like to use a combo of him, Gary and Doc for a consenus. Oh can’t forget you, DG, poly, and a few others.

  124. William Wallace

    Gold broke below the 75sma quicker than any previous intermediate cycle decline during this C-wave, and looks samiliar to how it reacted during the D-waves. We are now head toward the 100sma where we will see another small bounce. I think again though, like I said with the 75sma, it will be short lived. Because of how quick we broke below the 75sma, and the 100sma will be sort of like confirmation for me, I think this is a D-wave and not a normal intermediate correction. Also, every D-wave (same with C-waves) was bigger than the previous (and im not inluding the last monster), this C-wave is much bigger than the previous ones which leaves me to believe this one will be huge.

  125. Christian

    William,
    interesting musings! Personally I bet on the correction being smaller than previous due to the C-wave top not being a parabola and all but also due to circumstances with the QE3-to-be-launched circus which might interrupt gold’s natural movements. In other words, more aggressive buying this time around might dampen the landing vs. a time when gold was not safe haven du jôur.

  126. William Wallace

    Christian,

    That safe-haven thing dont fly with me, I have watched many apply that “safe-haven buying” label to gold on every bounce, the same people basically said gold would never correct. I do know one thing for sure, someone got it wrong.

  127. Jayhawk

    We talked about the likesmoney blog early in the year. At the time, he was copying Gary almost word for word. Several here caught it and called him out. Mysteriously, the blog went down for a few weeks…then, came back with some of the content edited out. (Even down to Gary’s style of saying things like “folks” etc)

    Nice to see they have changed out the style at least to make the theft less obvious.

  128. Christian

    I’ll re-post a question I put earlier now when the bar is a bit more crowded…

    I was thinking about silver and its hybrid status as both industrial metal and monetary metal… If gold continues down as projected it will surely drag down silver with it (probably with a magnifier too), but how will silver then react on a nasty slowdown in the global economy (read China 🙂 )?

    Will it be double trouble for the shiny metal, or will one of its two sides be dominating and thus ignoring the other side (eg. as a monetary metal together with gold)?

  129. Christian

    Hi William,
    I agree with your opinions about people saying gold won’t correct anymore and that impending doom is upon us tomorrow (no wait, day after tomorrow. No, wait, next day after that. What is this, manipulation!) I was more referring to the increased demands on a broad basis from China/India (where now A LOT more people have the right to purchase bullion)and not to mention the central banks (or the ones actually having some dinero that is). Then again, we all know how quickly sentiment can change.
    Suffice to say it will be terribly exciting to follow this!

    BTW, now gold is inches away from 100DMA on my screen 🙂

  130. I've Eaten Silver

    Gary,

    How can you seem to predict so well the future movements of gold, like record-setting well as you’ve done, BUT, fail tremendously when it comes to movements of the markets?

    Obviously it shouldn’t matter to us because you tell us not to play the market, but I’m definitely interested.

    Ever thought of giving up predicting the market just to concentrate your energies on PMs?

  131. gold silver troll

    Thank you Gary…for showing us not to short…wow…mind-boggling rally the past 5 days in this bad economy

    i would have sure lost my ass shorting

    sometimes the best position is to stay in cash and boy, aren’t I glad that I’m in cash

    I’ve realized that it is best to go in and out of intermediate cycles in gold until the bull is over…the stock market aint for me

    thanks again Gary

  132. Poly

    “How can you seem to predict so well the future movements of gold,”

    Easy, cycles work wonderfully well in secular bull markets. Although Gary’s work on equities is not the same as the gold calls, hard to argue, he has been impressive there too. Cycles is a tool, not a crystal ball, to borrow from him.

  133. Ryan

    DG,
    Thanks for the EUO buy yesterday, I hesitated and didn’t buy so I bought in on the dip this morning. Please post when you think it’s time to let it go.

  134. Christian

    Looking back at an earlier post Gary wrote that D-waves tend to retrace back to the 61,8% Fib of the C-wave but in this case he predicted that it goes to 50% instead (I know, I know, don’t quote earlier material…). This would still be a drop down to 1250, and in the 61,8% case we’re looking at 1150$.
    Now that’s a cute little drop…

  135. Robert

    “I would not urge anyone to just go out and short this market right now, the daily trend is now up again. It will be very interesting to see if this trend can carry on like it has been without another round of QE, I have no idea if it can or not. The one thing I am sure about is that if it cannot another one will be announced in fairly short order and also that the Regime will still be injecting money in other ways and just not calling it QE.”-found this quote today and i agree 100%

  136. Beanie

    The market isn’t something simple where one item determines its direction. It isn’t just about a singular event (i.e., the dollar, or the national deficit, or money printing, or political events). It’s multifactorial, although we never really know which are the most important drivers at any given timeframe. To say that the equities market must go down since the dollar is rising is beyond hogwash…it’s a travesty.

    Often times people just overanalyze, creating unnecessary mental paralysis.

  137. Dan

    Considering some market shorts if we rally into the close. 5 big up days were way overbought short term, very stretched relative to 10dmva

  138. Adam

    Beanie,

    The market is rallying because of the weakness in commodities particularly energy. Investors were concerned about margins being compressed. That’s why the gov’t is releasing the oil reserves into the market to continue that weakness by increasing supply and helping the economy. Monetary policy cannot get more stimulative at this point in time so they are resorting to more creative measures. But, to your point, that could very well help equities in something more than the short-run. if OPEC decides they’re going to cut, equities will tank.

  139. Beanie

    Being completely out of equities market is an illogical play and has a very low probability of success. To bet on multiple more black swans after which we’ve been thru in 2008 is even a lesser probability.

    Since the market is multifaceted and there is rarely a singular item that determines its direction, the logical approach is to be invested, with probably money (and some active) management. Sure, gold and silver will always have a proper place in any portfolio. But let’s not delude ourselves on what constitutes a proper portfolio by letting our own fears (much are inborn) run amuck.

    Even noted bears like David Einhorn and Doug Kass and George Soros are mostly invested in equities, with proper protection when warranted. Can you be sure that you’re righter than they are? You cannot.

  140. Chris

    Beanie,

    You are right about 1 thing. The market isn’t driven by a single event or data point. But I could enumerate a few dozen solid fundamental reasons why this economy is a house of cards and in worse shape than its ever been, but I feel it would fall on deaf ears. The dollar is FALLING. Once the USD starts to rally (probably soon), the stock market will sell off hard.

    Keep drinking the coolaid.

  141. Beanie

    Adam,

    I wish I can agree with you with the why’s and how’s but I cannot. Back in 2008, oil was cheap and there was lots of supply…and the market continued tanking. Again, the reasons for market movements are always multifactorial and intricate. For if there was just one reason, all Ivy League economists would be multibillionaires if the stock market movement is all about a singular event trigger.

  142. Adam

    Beanie,

    I agree with you to a certain extent. Money markets are offering negative real yield. Treasuries, unless you’re trading them, offer little value for an investor. The general investing public probably has some exposure to commodities via mutual funds at this point, but it’s unlikely there’s a great deal in 401(k)s which is where we would see the biggest inflows. That makes equities the only game in town. Liquidity will drive equities higher. Let us not forget that markets get old too. I remember all of our strategists being the most bullish they ever were at the October ’07 top. It was pedal to the metal! The economy is showing some weakness, but it’s going to have to stay weaker longer to enter a bear market. Not seeing that right now – especially with oil falling. Again, if OPEC cuts production that will be a big blow.

  143. William Wallace

    Beanie,

    You are 100% correct about markets being multifactorial, which means there is absolutely no reason markets can’t crash when an economy is. Practice what you preach my friend.

  144. Adam

    Beanie,

    You’re correct. Oil was very cheap, but the reflexive relationship between liquidity and stocks drove them lower than anyone expected. Higher oil will remove that liquidity from the economy as it is now. The nature of the relationships change which is why it’s so easy to discredit TA. You can pick and choose when you want to blow holes in certain relationships when that factor is playing a much less important role in the overall picture.

  145. William Wallace

    Gary couldnt have said it better, that bulls and bears will be whipsawed to death. I am watching daytraders I know who are permabulls getting killed even though we just rallied for 5 days. They couldnt believe the market was selling off, changed there stance, began shorting and got crushed.

  146. Adam

    Just a week ago it felt like the SPX would never go up again. Now here we are. It feels like it will never go down again. Funny how your luck can change that quickly, isn’t it?

  147. tmwhittier

    Beanie you are as much as joke as Tim Knight. You only post on up days and he only posts on down days. Maybe you guys should start a blog together.

  148. JReality

    Beanie,

    I got on the equities train in the 1250s, but I’ve been scaling out of the train on the way up. Absolutely nothing wrong with taking profit! I’ll let you hold the bag. 🙂

  149. DG

    William: Yep EUO has been a big waste of time. What does one do with that information? Does that mean it will continue to be a waste of time? That’s something I’d love to know ahead of time!

  150. Moneyman

    I agree with Polly.

    Oil and PM:s might feel the smell of the dollar daily cycle low and starts to go down..

    Think we soon get a dollar rally..

  151. DG

    oa92: I have a number of etf’s on my sell screen, but these momentum moves are dangerous to short. We need a quiet day first. Ones that could be sold/shorted: IJR, FXI, EEM. I haven;t posted because they are more risky than usual right now, but since you asked…

  152. TheBookGuy

    Gary,

    I have really enjoyed the last few weeks of reports. Thank you for such thoughtful analysis.

    IMO you deserve to have someone like Faber following you.

  153. flaunt

    For anyone trying to digest current events (Greece, ISM numbers, these reads may be of help):

    http://www.economist.com/node/18897415?fsrc=scn/tw/te/ar/theabusesofausterity

    http://www.zerohedge.com/article/goldman-ism-composition-report-was-weaker-sidean-increase-inventories-negative-future-activi

    “The ISM beats expectations and rises in June. The details of the report, however, were weaker than the headline as more than half of the headline increase was due to an increase in inventories”

  154. William Wallace

    Gary,

    I agree with thebookguy, I would say you definitely deserve to be followed by investors like Faber, your going down in history my friend. Porter Stansberry follows your work also.

  155. William Wallace

    Gary,

    I think you should setup some blog alerts, I’m at the home depot buying wire to wire up all the lights in my kitchen, but I would like to be alerted if gold hits the 100sma today. I will take me getting electrocuted today as signal to cover my shorts!!

  156. flaunt

    I wish Gary weren’t always right about sitting out of these markets. My experience over the past few months has been 100% spot on with what he said. Getting “whipsawed” is way too easy and generally results in a lot of aggravation. It’s very hard to be patient when the markets are acting like little children throwing temper tantrums.

  157. MrMiyagi

    OK Gann,
    Because I’m finishing the basement, I’m not doing much. I do have a small SPY put position, thankfully a September option.
    Aside from that, not much.
    How’s the weather?

  158. Poly

    Gann360, I will be there Feb for a week, maybe we could catch up then.

    Was there in April this year, lovely place.

  159. EricH

    Today looks like a good day to cover short on Gold and get short on S&P for a short term trade.

    I covered my gold short from 1542 at 1482 for +60. Took a very small short position on September ES 1332.

    Very good risk and reward here for 10-20 points on S&P based on BB and overbought indicators.

  160. Gann360

    Hey Poly..

    Not sure if i’m going to be there in February…Maybe..

    My Oldest Daughter is turning 6 in September, We my be in Florida,She may start grade1 there,!. But it’s not 100%..
    In any case, let me know. we may be in Turks.i live on Grace Bay Beach, If we could meet up. it would be fun !

  161. MrMiyagi

    Hey Gann,
    I live in the Yukon, last time we had temperatures in the 30’s (celsius) it had a minus in front of it.

    Thanks for rubbing it in bud….

  162. Hack

    Gary;
    I re-read the June 21st oil / gold ratio report and this came true “the only way for the gold/oil ratio to decline is if gold starts to accelerate to the downside, dropping significantly faster than oil”.

    In your opinion does this mean that gold is going to the low range of your prediction?

  163. Dan

    Where you can you get the totals for Buying on Weakness/Selling on Weakness intraday? I know the WSJ lists them but where are the totals?

  164. Peter

    Well, now one can certainly see the right shoulder on the S&P. It seems quite doubtful it will stop at the shoulder level, but it did in fact reach it in record time. In the meantime, the Russell exploded past its shoulder level.

  165. Dan

    Adding some EUO, very low risk trade here with euro sitting right on the trend-line within its triangle. UUP will probably provide a similar outcome.

  166. Poly

    WOW, that is one impressive weekly candlestick printed here.
    I’m not bullish equities at all, but bring up a chart with any time period, say 3 years, using a weekly chart. Take a close look at what happened the following 1-3 months after similar huge white candles.

  167. Felix

    Poly – July 2009 looks like that, wasn’t that the commencement of QE1? Massive leg up till the next summer. Strange that this would accompany tge *end* of QE2. Do you think it’s a fake-out?

  168. Bruce

    Gary,

    I have a question about Dow Theory confirmation; Isn’t it more important for the transports to confirm a high in the Dow with a high of its own, rather than vice-verse?

  169. Keys

    For the market to rally for no good reason, except to say…I think I can I think I can I think I can…doesn’t make sense.

    This all smells like a set-up…Who is shorting into this…nobody, so the shorts won’t take it down…who will though? It will be the longs when they get tired of running at full speed…Profit taking will turn into an opportunity for shorts to come back in, which will turn into a panic run by longs.

    Learned one thing in these markets: speed in an direction will result in an equally sharp move to the other side…

    Who in their right mind is chasing this on the long side. Too many confuse price action with the health of the market…price usually has little to do with the market, and hence why we take advantage.

    I am sure the greedy ones frothing at the mouth have started to enter with options, counting the billions in their heads. No way am I shorting into this mess, but no way am I going to get suckered into this trap.

    Go long at your own peril…this is not a healthy rally!

    Just my opinion in thought, and I couldn’t care less about being right, by the best course of action right now, unless one has an advantage is to sit out and enjoy the show.

    Happy 4th!

  170. Poly

    Aug and Nov 2010 have similar candles, not as large.

    I don’t know, Felix.
    One observation is that the market did top 8 weeks ago, a 8 week slide is already significant. I know Gary talks a lot about the end of QE2 and it’s impact on market liquidity, but hey we’ve been down for 3 straight months and still at Feb high’s, set 5 months ago.
    So in terms of a base to build on, it’s a good 4-5 month consolidation there.

  171. MrMiyagi

    If after watching this weeks’ run you are at the point of thinking (or already past it) “I’m going to buy some because it keeps going up” then it may be at the turning point.

  172. Poly

    Key’s, you’re probably right, I think I will stand aside either way on this one. Plus gold is around the corner, those odds just stack up better. I would caution that people have been calling the market sick and ready for a plunge for two years now. BTW I’m curious,what do you see when you say “this is not a healthy rally!”?

    Bruce,

    For what it’s worth, Richard Russell is saying that there was a DOW theory confirmation and he expects new bull market high’s. (He has been known to be bearish 🙂 )

  173. Keys

    As per…”This is not a healthy rally!”

    In my view, we have rallied too fast and too hard, without confirmation of the move. It seems like everyone is on a sugar high, hitting the buy button. When things rally this hard, it tends to first knock out the short side completely, and second it gets the long side too excited…the longer something goes on like this without a corrective move to test the rally, the more likely that corrective move will be deep.

    The longer this goes, without being tested, the more unhealthy it is in my view. Going through any sort of resistance like butter, is not healthy for any move that I want to be a part of.

    Maybe the market knows something I don’t, sure why not, but to chase into this is not my style…. Either we get a corrective move to test the rally, or we keep going and eventually get a real nasty corrective move…either way the market is due to fall…by how much, I don’t know, don’t care either…down is down. 🙂

  174. Poly

    OFF TOPIC.

    A very good friend of mine is heading up his own start-up out of London.

    I promised him some traffic 🙂 and hopefully if people liked it, they would forward it onto their business and social acquaintances too.

    Here is his site.
    http://leadersin.com/
    LeaderIN

    Do me a favor and click around and PLEASE vote for a business leader. Appreciate it.

  175. whitebear

    We’re all very proud of you Hack.

    Good luck with all that.
    Ignorance may give you bliss but it’ll prolly break your bank.

  176. wmp

    “Convinced that the “gauntlet” of bad data is over and the Greek debt crisis is “largely behind” us, JPMorgan Chase is looking for a “summer of cyclicals” that will push the U.S. stock market higher by 6 percent in just the next two months or so”

    Yahoo Business Headline

  177. Gary

    Poly,
    For a Dow Theory confirmation both the transports and industrials have to close above their May high.

    The transports did that today. Unless the industrials can match it we now have a DOW Theory non-confirmation.

    I haven’t really studied volume on the S&P futures but for the last several days we’ve seen huge spikes in volume first thing in the morning. It looks like somebody is trying to create trend days.

    The Bulls are desperate to get some momentum going into the end of QE2.

    Like I said the real test will come by the middle of the month after the dollar has rallied out of it’s cycle low.

    Either way though we obviously have an intermediate cycle low. Which will change the daily and intermediate cycle count. At this point I have no idea whether to count the cycle as very short or very long, it’s been warped beyond recognition.

    Oh well we’ll just start over with the current bottom marking the beginning of a new daily and intermediate cycle.

  178. ...at ease

    Thanks Gary and WTI for confirming the next drop down range on GLD. I was able to get out for the day and still collect profits on my GLD/SLV shorts. Made enough and now just holding for the bottom for the A wave ride back up. 🙂

  179. white2ronin

    Guys

    Been reading the comments here, as much as you think Hack is nuts the last week the bears on this blog have gotten creamed this week. The tape doesnt lie

    – EUR/USD rallying above 1.45
    – Credit through european crossover now below 400
    – Euroswaps 2yr under 60 bpts
    – SPX 1339
    – bonds, TLT selling off
    You can speak all you like about window dressing, cycles etc…but the market does what it wants. Its risk on – or make your case for which indicators say otherwise.

  180. Gary

    I’ve been trying to warn everyone not to short the market. There shouldn’t be any bears here unless somebody just has a death wish.

  181. MBS

    Gary,
    I’m sure you will cover in the weekend report, but what confirms that we have seen the intermediate and daily cycle low? My perspective is that SPX could still be on day 26 and in the midst of a bounce out of the mid-cycle low. OR does the fact that the $TRAN made highs negate that?

    Thanks

  182. Gary

    Breaking the intermediate trendline is a pretty strong indication.

    The bulls have managed to create enough momentum into the light volume holiday sessions that this isn’t going to turn easily. The top may have come during the last intermediate cycle or it may come during this one.

    If the dollar cycle fails then we could again be looking at a monster C-wave finale this fall.

    I find it hard to believe the dollar will roll over again with QE2 pushing it down, but anything is possible.

  183. Ben

    According to a member of SI, only 6 times in the past 2893 trading days (that is, since Jan 1, 2000) have all these indicies gone up every day of a streak of 5 consecutive trading sessions. Only 1 time so far did the streak hit 7, the maximum:

    http://finance.yahoo.com/quotes/%5EMID%20%5ERUT%20%5EDJI%20%5EGSPC%20%5EIXIC%20%5ENDX

    5 trading day streaks: 0.20%

    6 trading day streaks: 0.003%

    with all those indicators positive every single day.

    Interesting. Maybe QE-Secret-and-Illegal-but-Nobody-Cares(yet) is going full tilt now. It isn’t just that they are all up, but they are all up BIG.

  184. white2ronin

    Well. Anything is possible. Where is the convinction? Where are the levels?

    Funny Faber said the same thing about eur/usd and markets in his monthly letter. His work is excellent.

    I guess this boils down to separating opinion from actionable advice, and of course a published track record.

    My advice – watch the trend in euro crossover, 400 is a key risk on/risk off level and 2 year euro swap spreads 65 bpts risk on/risk off – they usually foretell change in trend in the equity market.

    Gary as for the left handed cycle – the same thing happened in the first half of 2004 and the market powered on. Thoughts? You make a convincing case what would make you change your mind?

  185. white2ronin

    One final point to earlier post – DXY has maintained some composure this week but if it breaks 73.50 that would confirm the risk on trade is sustained.

  186. Gary

    It’s all about the dollar. For the markets to sustain the rally it would have to mean that the dollar has not put in its three year cycle low yet.

    If the dollar has put in its three year cycle low and it bounces out of the coming short-term bottom and breaks out higher than this rally won’t last long.

  187. Poly

    Gary, I believe today’s action raised the odds on a 3yr low still to come.

    I just don’t buy window dressing and sucker rally to support the ending of QE2, at least not after Thursday and Friday action. After the 3rd day I was in that camp, but today’s action had no short covering, that was way gone and it was by far the most powerful day of the 5 day rally. The volume today, for a summer Friday before a major holiday was massive!
    It was also a 93% up day, panic buying, from what I can tell, that can only mean massive institutional buying, IMO.

    Obviously this run has to be consolidated, maybe that will coincide with the first half of the next dollar daily cycle. But from then on, we need to watch the dollar like a hawk because if that baby turns down through the cycle, equities and gold (with new IT cycles in hand) could go berserk.

    Just a scenario to watch for.

    Gary and Company, have a great weekend.

  188. RJ

    Gary,

    What do you make of gold COT?

    Commercials went quite long, covered a lot of shorts and OI decreasing.

    I looked back to the Feb IT low and we had a similar draw down in OI. The weekly gold chart to me looks like we may be a couple weeks from the IT low putting it in this cycles timing.

    Do you think they’ll push gold down right into July op ex wiping all the calls out?

    Thanks

  189. Gary

    If the dollar index breaks the May lows it will signal that the three year cycle low hasn’t been achieved yet.

    In that case the currency crisis I was expecting this year is still in play. That would drive stocks to new highs (probably marginal) and it would drive gold into what should be a final parabolic C-wave top.

    It seems unlikely though with QE ending.

  190. Gary

    RJ,
    I haven’t looked at this COT report yet but it is to be expected that commercials will cover shorts as gold drops. The Blees rating tagged 100 at the last intermediate, low it could do it again at this one.

  191. Ben

    Panic buying as QE ends…!

    I’m strongly reminded of three years ago when my PF rocketed right up to the 4th of July holiday and then the wheels started to come off the bus.

  192. Ben

    Sorry, that was portfolio. I was fairly heavily weighted in miners in July of ’08. My personal PF peaked on July 3rd.

    On the 3rd, I was singing, ‘I’m in the Money’

    On the 5th, somebody changed the tune rather abruptly to ‘Ring of Fire’…

  193. Poly

    Wmp, yes all out. Been nibbling at tops and getting stopped out. The bigger positions that were planned for an Aug IT low were closed today when it became clear were breaking the IT cycle. They were timed well last month so they didnt cost much. Still overall humbled by the power of the 5 day rally.

    Least we have our Silver/oil trades working for us.

  194. Cory

    I did see a Goldman Sachs technical report on the markets, and they were talking about how the markets have been tending to retrace to their 78.6% Fibonaccis a lot in recent years. Even though Stockcharts doesn’t do it, that number is 134.19 on the SPY. Doesn’t mean anything, but just wanted to throw it out there for those trading the indices, especially after that big SPY SoS day two days ago, a $VIX BB crash, and the SentimenTrader short term bullishness about to explode.

  195. David Kafrick

    Sold half of my longs at the close today. Will buy them back on the first 10 points correction we get, as long as the correction itself has a pullback of 2 points or so.

  196. Gary

    At the current rate the market is going to reach extreme bullish sentiment very quickly. The intermediate score has gone from multi-month bearish extremes to within striking distance of bullish extremes in less than two weeks.

  197. Éamonn

    Is it possible that with the ending of QEII that people are moving capital from bonds to stocks? Or am I talking garbage?

  198. Gary

    I think it’s safe to say that the bulls have used the low-volume holiday week to trigger a massive momentum move ahead of the ending of QE2.

    Bernanke doesn’t want a replay of last year. however, if the economy is rolling over into recession, nothing will keep the stock market propped up for very long.

    The more intervention they throw at the markets the worse the endgame becomes. We saw that in 2008 and 2009.

  199. aviat72

    Poly:

    The relentless buying we saw today after ES took out 1324, do you see as a sign of institutional buying or short covering?

    Bespoke did sent out a report saying that stocks with heavy institutional ownership did the best in the last days of the quarter (window dressing?). Today the largest rotation down after 1324 was 7 ticks till we hit the 6/1 high. That is typically a sign of desperate buyers. Typically desperate buyers are shorts; longs typically will wait for a pull back. The volume profile is very notchy and the move was not well-auctioned. With equity MFs seen outflows till recently why would they suddenly panic and rush in to buy?

    Zero Hedge reported that short interest had a new yearly high in Mid June.

    Will appreciate your thoughts on why you saw long side buying and not short covering in this rally?
    V

  200. Cory

    I think everybody in the world knew QE2 was ending, and after what happened last time + the low volume/positive bias holiday weekend it was probably easy to ramp the futures and take the retail shorts to the cleaners. If the market was trying to juke everyone before a drop it just got an A+. Every person in America has 3 days to read about how great a week it was.

  201. oa92000

    ” David Kafrick said…
    Sold half of my longs at the close today. Will buy them back on the first 10 points correction we get, as long as the correction itself has a pullback of 2 points or so.”

    what is the thinking behind the sell and then buy back @10 points correction?? Is it better just hold through the cycle?

  202. Return to Resistance

    Today’s candle on the SPY chart shot out of the bollinger band like some penny stock.

    I was looking at the copper chart and noticed that during the June market sell off it wouldn’t break down which might have been a tell of the rally to come. Dr.C is never wrong…

  203. Gary

    Actually copper is very unreliable as a predictor of market direction.In 06 copper price was collapsing even as the market was rallying hard. In 08 copper responded to the weak dollar even though the stock market had already entered a bear market.

    Since 09 copper has just followed the market, presumably under the assumption that a strong stock market means a strong economy. However copper diverged from the stock market and was unable to make new highs in April.

    The doctor copper myth is one of those things that everyone takes as gospel but if you actually look at the historical stats doesn’t really hold water.

  204. Gary

    How much of a beating must you take before giving up on the short side?

    We made a little money on the short last month. Be happy and move on to something else. We’ve got the buy of the year coming.

  205. Gary

    Trying to pick the top in very powerful stocks is a fools game and one destined to turn one into a pauper. Just ask all the traders who tried to short GOOG or AAPL during the last bull market.

  206. TheBookGuy

    Gary,
    I’m not short anything, just thinking of when the time comes. I probably won’t do a thing honestly. I like to throw ideas out there.

    I usually just do exactly what you say.

  207. Keys

    Alright had a couple beers, so excuse the spelling..

    Simple without my usual wordy comment.

    1) Dollar is key
    2) Market has not tested its move
    3) My bet is in October for a real crash or Sept.
    4) My view, AND more importantly, who cares about stocks, BUT if the stock market crashes really late, then I am worried about gold corrececting in the normal fear run to USD BS. Ie buy gold old turkey too early! Boys and Gals there is only one bull market left right!
    5) Enjoy the week-end…life is not just about BS…Family is there, life is there…work is a part of life, but right now enjoy what you have and be thankful!

    Cheers!
    Alright Jen where’s my next beer!

  208. Rosabarba

    The coffee companies have been among the best performers of the year (SBUX, GMCR, PEET, etc.) … not the sort of thing one looks to short, imo.

  209. Vonda

    Shorting SBUX is what ultimately lead me to Gary. I thought, “It’s a recession: Who’s gonna pay $5 for coffee they can make at home?” HA!!

    Embarrassed to say I lost 1/2 my portfolio, and at least as much of my sanity, on that short. Still remember staring at the ceiling in dejected disbelief the night I finally closed the position. Gave myself three years to make it back: It took six months with Gary.

  210. Dan

    Yes definitely dont ever short the best performing sectors in the market. You mentioned sbux specifically and I remember reading how they would go bankrupt back in 2008 however they started expanding aggressively in developing nations, asia specifically, and have had stellar results. Lots of wealthy people in poor countries apparently willing to pay $5 for the “experience” of buying a fancy american coffee.

  211. Vonda

    Yep. Clearly I was an idiot.

    Good lesson though, as others have said, feeling that awesome pit in the stomach. Worse than a caffeine overdose.

  212. Return to Resistance

    Gary,

    You have a point. The correlation of copper to the market hasn’t always held up. When a correlation diverges you have to determine its validity. A good example is the dollar/gold relationship. We’ve all seen dollar rise – gold rise and ignored the dollar strength knowing it was euro weakness more than dollar strength. I would just point out that since the lows of ’09 copper has been a pretty good forward indicator of market direction.

  213. JEFFtheFLEA

    new name since we have another jeff now
    hi trader lady

    i put a just a little in the profile, it summes up me being on this blog and following smt

  214. JEFFtheFLEA

    kinda looks like a gold bull, but im not the rider, i am the flea on the hind quarter. In this picture when the bull landed i chomped down hard and sent him spinning the other direction. threw the ridder of in 5 seconds, poor guy.

  215. Hack

    I look at copper futures every morning to see what the direction is in the market before it opens. This was taught to me by an experienced trader and I find it to be reliable more often than not.

  216. Marty

    Interesting… Golds pattern for the last 9 months or so, the “3 Peaks and a Domed House” Pattern. I have to admit I thought I have heard a majority of the patterns yet this made me chuckle at the name. Very intriguing though.

    http://fx5186.wordpress.com/

  217. wmp

    Marty,

    It will be interesting to see what he comes up with after this past week…this report, from a week ago yesterday, projected four bullish weeks in the equity markets. If this is a subscription can you send the next one?

    Thanks

  218. Silverhound

    Wow, if I was a novice I would say this guy makes the cycle tool look about as predictive as Elliot Wave Theory. Changing the cycle count / wave count with the benefit of hind sight……..

  219. Gary

    It’s foolish not to alter your cycle counts when the market clearly tells you something has changed.

    This trader is exactly right on with his analysis.

  220. Patrick

    Gary I’m a little confused when you said in your report “I’m starting to wonder if QE2 really is ending”…is that just based on what the market has done this past week or is there any real evidence that QE2 has in fact not just ended?

  221. Gary

    Patrick,
    It’s based on what the market did this week. Compare the rally this week with the rally out of the March low. The power and breath of the rally this week was freaky, to put it bluntly.

    The market sold off for three days after Bernanke confirmed that QE2 would end and then all of a sudden it’s like the word got out to the big trading banks that it was all just a show and QE2 was not ending. Then out of the blue the market started this incredible rally.

    I could see a normal rally, something similar to what happened in March or even last summer when the market climbed a wall of worry to new highs. But this rally looks like all fear was suddenly removed from the market, which is exactly what I would expect if QE3 had been announced.

  222. wmp

    Poly,

    Thanks. You said “Least we have our Silver/oil trades working for us.” Are you still short silver and oil then?

    Also: the weekly SPX move and past comparison you spoke to yesterday was very telling. The only question I would have is, is there a way to compare SOS days against those same periods? If the earilier periods didn’t have the same multiple SOS days as part of the weekly rally would it change your thoughts?

  223. Gary

    Yes the intermediate downtrend was breached in 2010 and the market did continue down into the normal timing band for the daily and intermediate cycle low.

    The power and breadth of this rally though suggests that this is not going to reverse easily. I think it will come down to the dollar just like I said in the weekend report.

  224. Éamonn

    Gary, thank you for your comment. I agree that the power and breadth of this rally though suggests that this is not going to reverse easily. However, all may still be well. The dollar may behave as expected in the next week or two. Time will reveal all :o)

  225. T

    Gary, are you revising your early thoughts on silver dropping into the mid-twenties? I know we are out of silver, but I was just curious. Haven’t heard you talk about it in a while.

  226. wmp

    Gary,

    Let’s just say that that’s the case, insiders know about an unannounced impending QE3 and it’s removed downside fear: doesn’t that obviate the big effort to supress oil/gasoline prices by releasing from the Strategic supply? Oil prices will go back up won’t they?

    Right hand doesn’t know what the left’s doing?

  227. Éamonn

    FWIW, Marc Faber, in his most recent letter, feels that there may be continued modest relative strength in equities up until the end of July, but never breaching the May high. Followed by renewed weakness in August to Fall taking the S&P down to test the 1100 area. He recommends investors with heavy exposure to equities to use current strength to reduce positions.

  228. white2ronin

    Gary

    Reading these your recent comments it sounds like you’ve reversed your position/posts on left handed cycles are bad news (I look at early 2004 which was similar and didnt see anything sinister in fact the market plowed ahead to 2007) and “striking similarities”. At least it sounds like you are not betting any money on these posts panning out and your posts are just an observation? Thanks for making the effort anyway. The dollar is the final piece for full risk. Hack is having a good laugh way to go Hack (you’re the man – this week)

  229. Gary

    I exited all sorts on the tag of the 200 day moving average and have no plans of shorting again until they confirmed bear market has begun.

    It’s very tough to make money on the short side. Most people shouldn’t bother. The main focus of the articles was to get people out of stocks in their 401(k)s not to get them short the market.

    That remains the case. If we didn’t see the top in May then we should see it during this intermediate cycle which should also form as a left translated cycle.

  230. Patrick

    Thanks for answering my question Gary. It was a vicious rally indeed and it’s wise to respect it. Next week should certainly be interesting.

  231. Silverhound

    Ok, it looks like I won’t be gatting any response.

    For the record. I don’t disagree with his change of tack. It pays to be nimble and all traders should be as the market is the one who is always right. The point of my original post was to bring this to the attention of the multitude of EW knockers who frequent this forum.

  232. don

    gary

    you are not betting on markets…but still your analysis got fried one more time… since dec your sky is falling posts and getting teared off my mr. market :-)..your are very poor market analyst..i must say…better you stick to gold bull only as any timing mistake will be corrected

  233. don

    silverhound

    what you is right..but ew is much more difficult and more subjective than cycle theory and hence lots of after the fact changes occur in ew

  234. don

    gary

    next time when you put a sky is falling post, i might get a small position in spx call :-)…and what nonsense is that…continuation of QE2..cm’on how about obama sitting infront of computer and buying stocks using govt money…

  235. Bob loves Hawaii

    Hey Gary, good report. The miner charts are showing nice divergences in terms of momentum to prices. My view is there is one more reset of price, before we take off. So timing seems to be coming together.

    My question though is if your scenario plays out, when is the C wave peak. October/November?

    Thanks. Bob

  236. David

    That SPY chart is almost creepy in its perfection. Five white candles laid perfectly end to end, indicating steady nonstop buying. No ebb and flow, no backing and filling… if I were conspiracy-minded, I would think that someone just turned on the spigot.

    The only question is — why should gold be plunging if the dollar rally is over? If you believe that gold is sniffing something out, then this would indicate that the meat of the dollar rally is still on its way.

  237. wmp

    Gary,

    Are you saying that gold will continue into it’s low with the same targets you suggested regardless of which way the dollar reacts (of the two scenarios you outlined)?

    I may need to read it again but, where is oil in all of this?

  238. Silverhound

    don, I agree with you on the complexity and that is probably why it has it’s detractors. I don’t pretend to fully understand it myself but agree with the general premise of it and have seen others use it to good effect so I’m not one of it’s detractors.

  239. don

    folks

    the simple fact is sentiment reached too bearish and market failed to move down as smart money found an edge in moving it up…real test will come if market can make higher high…and dollar verdict is still not out..but given the extreme bearish sentiment on silver, gold, oil it makes sense for the dollar to move down..also given the seasonality for gold, it makes sense for dollar to move down for next 3 months

  240. Elaine

    Good reading over at Trader Dan’s. He thinks the government is trying to force commodity prices down through the release of oil and a bogus corn report.

    Anyone buying corn?

  241. Gary

    David,
    Gold is plunging, so to speak, because it’s due to move into an intermediate cycle low. Those occur no matter what the dollar is doing.

  242. Gary

    Don,
    Let’s review shall we. Back in May I told everyone to get out of stock market funds in their 401(k)s. Seems like a pretty good call in loo of the correction we just had.

    I clearly said in all of my articles that I was expecting some kind of rally because sentiment had gotten too extreme. We’re getting that rally now. Again seems like a pretty good call.

    I told all subscribers to cover when the market tagged the 200 day moving average. Since I picked almost the exact bottom of the move I would say that was also pretty good call.

    I then told subscribers that I would not be shorting the market anymore, because I was worried about what kind of tricks the Fed would pull out of its hat to try and levitate the market ahead of QE2 ending. Again seems like a pretty good call.

    I still do not recommend investors go back into stock funds in their 401(k)s. This bull market is very mature and if it didn’t top in May it is very likely to top during this next intermediate cycle. There just isn’t enough upside potential to risk getting caught when the next bear market begins. This call you could debate, but for the average investor not trying to trade the market I would say this is also very good advice. It will prevent him from getting caught in the next leg down of the secular bear market.

    I told all subscribers to just be patient that gold would move down into its intermediate cycle low sooner or later and we would buy that dip. Gold is now moving down into its intermediate cycle low. Looks like I nailed that one too.

    So do you still want to complain about my analysis?

  243. Gary

    Bob,
    If the dollars intermediate cycle lasts a normal duration the C wave should top in September or October at the latest.

    That’s the only fly in the ointment as Gold tends to rise into November on holiday demand.

  244. T

    Gary,

    Are you still feeling that silver will drop into the mid-twenties as you stated in earlier posts? It seems to have traded more or less sideways for a long time now, I was just curious.

  245. Gary

    As gold moves down into its intermediate cycle low I expect silver will break through the lower end of the consolidation. The market will realize this was not a consolidation before a move up but a consolidation to work off the oversold levels before another leg down. Once the May pivot is broken it’s anybody’s guess how far down silver will go.

    I never want to invest in broken parabolas.

  246. Hack

    Gary;
    I re-read the June 21st oil / gold ratio report and this came true “the only way for the gold/oil ratio to decline is if gold starts to accelerate to the downside, dropping significantly faster than oil”.

    Now that oil is accelerating upward in your opinion does this mean that gold is going to the low range of your prediction?

  247. gough

    Could this turn out be a blow off top or if it rallies on up for a double top over the next few weeks? Or did the market sniff out the decision on raising the debt ceiling limit?

    Have a great 4th of July everyone

    jeff g

  248. zboy2854

    Given the fact that the last several days of rallying was on low volume, and during the last days of QE2, I’d be more inclined to believe that what we saw was not strong “insider” buying with foreknowledge of continued QE, but rather the Fed’s last shots of QE2 as part of a last hurrah to get the markets up before they exit the picture for now.

    That said, let’s assume for a moment that it was foreknowledge by select insiders of continued QE. Gary, were you suggesting that it’s possible for the Fed to continue monetizing new Treasury debt in secret without it becoming common knowledge to the general public? Or simply that this was insiders getting in in advance of an impending announcement of continued QE?

  249. SF Giants Fan

    Bob LH

    Yep I just read it. Looks like the exec took care of themselves and lots of insider selling. Best part was ” over its dozen years in existence (they) spent 95 million to produce 26 million in revenue…”

  250. traderlady

    Hi Jeff, I saw where you are the flea on the bull,lol.

    I agree, any strength in the dollar, I let my small EUO position go and preserve capital.

    Hope you are enjoying the long week-end. Washout so far with Golf this week-end.:(

  251. I've Eaten Silver

    Great report Gary.

    I still think the original theory of the dollar’s 3ycl being put in in May, and that equities are entering a bear market, as well as Gold a D-wave, holds true. So far 2 of these 3 are still working out and 1 is deeply in question.

    Because of the insane imbalance in puts vs calls the past few weeks you can see why the market needed to balance that out with a massive rally.

    I also, before Bob mentioned it in the quotes below, was wondering why all these financial firms are announcing massive layoffs recently (something smells fishy)?…

    “We believe the market is being deliberately taken down by them in order to impress upon politicians that if they do not extend the short-term cash debt limit that the market will fall even further and that in turn will reduce their ability to get reelected. If you do not think that is possible then you have no idea what is going on. At the present time with about a month to the August 2nd deadline the two political parties are nowhere near an agreement. As we draw closer to the deadline investors will become more and more concerned and the market will trend lower.

    These problems that we predicted for the second half of the year are all coming together like a bad dream. This could very well be a reply of 2008, but for a different set of reasons. Obviously Wall Street knows something others do not know as they resort to large layoffs.”

  252. I've Eaten Silver

    I think the best explanation for Gold under performing its previous C-waves is that silver took its place for that C-wave.

    Also the dollar had extreme bearishness at the 3 yr cycle low.

    Markets aren’t easy by any means and I think we’re all getting a good taste of that right now with all the confusion that is showing.

  253. SF Giants Fan

    I E Silver

    I agree. I think the other difference is a lot of ETF’s that werent around during the last c-wave was draining money away from gold

  254. Hack

    Bottom line is the Fed and Treasury will not let the market crash. This is not a conspiracy, it is a fact. Look for gains into the end of the year…

  255. SF Giants Fan

    Interesting quote from safehaven.com

    “Every major index was up every day last week. From a technical perspective that gives us little to work with.

    It was either a liftoff or a blowoff.”

    I hope it was the later.

  256. Gary

    Hack,
    If that’s the case then explain to me how in the hell we just went through the second-worst bear market in history.

  257. 86d4life

    W2,
    Did you and the family go to the beach and eat hot dogs or clams or what? Did you have any shootouts or anything? Isn`t that New Yorker City type stuff? I went up to Leech Lake again this afternoon and took the kayak out for a whirl And thought how lucky we are to live in this country and felt kind of sad having an idea what`s coming.

    Happy indepence day to all.

  258. William Wallace

    86,

    My shoot out days are long gone now brother, I moved out of the city further east into Long Island NY, its like the country out here, I see Kayaks on tops of trucks everywhere! Im actually going to the end of Long Island, Thats Montauk, for the 4th. Go to the beach with the kids during the day and then watch the fireworks pop off at night, feel like the old days again being in those NYC shootouts!!

    That lake looks real nice in your pic bro, I love going by the water, I search all over Long Island for new lakes.

    I hope you have real good Independence Day bro, talk to you next week, its going to be a crazy week.

  259. 86d4life

    W2,
    I got a few ideas I`m spinning around in my head, but I need to sit here for a while and do the research. I don`t know man, what a mess. Here`s the thing; look at the nymo going back 2 years, I think there is one time it was higher. With a rise like we had the last 2 days, the $ by all rights should tumble, but instead is just kind of sitting there. Look at the 2 big sos days tue. and wed. just to buy it back higher on thur. and fri? Ah, COME ON!!! WTF!!! That stinks to high hell. Or I got it all wrong….:)

    Montauk, that`s like the lobsters, right? We`ll chat again; this issue isn`t settled!! LOL!

  260. Keys

    Like many of you I am puzzled by the market action lately.

    1) This is strange…which implies something

    2) Because Ben read Faber’s report with Gary’s mention, he decided to screw Gary’s cycles up..sneak attack! lol

    3) I don’t think the move is based upon QE3…If Ben wanted QE3 he would have said it, and not come out openly and say no a week ago or so, just to put it in now…for what purpose? It only makes him lose credibility for no good reason. Lie about it for a period to prop the dollar up sure…it buys time and then unleash the beast, but not now. This is unlikely in my regard.

    4) Possible loss of reserve status…despite cycles, the US is finally losing its reserve status in practice…Central banks are selling $s to what they say is to diversify out..the double edge sword could be that they are selling $’s to get Euro’s…but this should be limited, since once the dollar starts tanking, they would turn off the sell button and wait for the market to recover. In this sense, they wouldn’t drive the dollar too much lower than recent lows.

    5) All the talk above still doesn’t explain the organized attack on the upside for stocks. It just went up, without being tested. Who has the power to do that? Was this organized? Hedge funds won’t care, and will go for the ride…the retail guy will go for the ride too. So in order for the above to happen, either the collective is really convinced in the reason to rally and not take profits, or a couple big players are moving the market. My logic is this, you are joe hedge fund, you just went up say 5%-10% in a week, would you keep it on the table or take profits. Of course once this happens, everyone does it, causing prices to fall, and we test the rally. The only reason the rally wouldn’t be tested is if something major caused the market to believe things couldn’t go down…and not raw emotion….QE3, A discovery of a new energy instead of oil, Ben quitting, the market tanking too hard…nothing like this happened…so at this point if joe hedge fund is taking profits to some degree, and the collective is weak, it would suggest a couple big players moving things.

    6) If it is a couple big players moving things…it could be due to inside information, but on what? Unless QE3 is coming from another central bank, but it doesn’t make sense with a falling dollar…the dollar would strengthen if others weakened their currencies quicker.

  261. Keys

    7) Now if there is no good reason for the market to rally, eventually the private hedge funds will take advantage of the rally and start shorting. Say Ben orders the big banks to support the market for a time….this would cause a severe problem…I asked myself this, what if QE3 were the big banks borrowing from the FED at 0% in order to prop the market up. Problem with this, is two fold…1) Private Hedge funds at a certain point will go short and slow the movement forward. In order to keep going, the banks would have to borrow more and buy more stock..2) The more pressure the banks would be under to keep things up, the more nervous they would get, since at a certain point they would be the only real buyers…3) as the banks sell, the shorts run in, the market crashes worse than anything we have seen before.

    8) TA analysis and perhaps even cycles may be thrown off, if the big players are making a move. TA is nothing more than a generally expected rule base; what better way to confuse bears and get bulls extra excited except to violate on these self-observed rules. In such as case SOS might be masked too. This may be a giant exit for the doors by some big players with big positions. We have had two major crashes in the last decade…big players with lots on money know the signs, and may need a sucker’s rally to sell out of.

    9) With gold dumping, and silver falling after consolidating for so long…I don’t think it is the buck. If QE3 were back on, silver should be soaring since it didn’t fully fall from its parabolic position. Instead of gold finding support at 1500 it broker through it. That really doesn’t make sense if the market got a wiff of QE3…My best and truest opinion on that one, is that nobody cares about gold anymore, so no reason to manage it…let it plunge….If gold surged 100$ instead, I would question things. But gold is giving us a story. 1500 should have been a pretty big support level, it didn’t hold.

    10) the market can do anything it wants! But the more I think about it, the more I really don’t like the move objectively. Shorting is tempting, but suicide. Going long is greedy, and the risk is too great. Cash seems like the best place…I may not be right, but this game is about not being wrong, and holding cash won’t be a wrong move.

    That’s all I can think of for now…Best thing I can say is that my gut would shoot me if I went long now. MMA action is still on..Godzilla vs. King Kong…who will will? I also am taking back my belief in the crash in october…if this market continues like this, it may be sooner…either way…agg

  262. Veronica

    IMO, if SPX down Tuesday then a low risk short trade presents itself with a stop at Friday’s high.The rally we just had may very well have been a violent bear market rally. With an up day Tuesday I think that I would forget about shorting for the time being.

  263. Gary

    Keys,
    Gold violated 1500 support because it’s due for an intermediate cycle decline. That would happen whether the dollar is rising or falling.

  264. Gary

    NJ,
    This is only the first week of the cycle it’s impossible to tell whether it will be right or left translated yet.

  265. ...at ease

    Gary,
    Do you anticipate the emerging markets (BRIC) to have a major correction also? I know I took a severe beating in Eastern European funds a few years back. Years of substantial gains, that dropped like a brick day after day.

  266. wmp

    CNBC article released this morning: “Fed Chief Bernanke has yet to offer any hints of further monetary easing, or QE3. Even though the Fed is not expected to tighten money policy any time soon, gold is likely to rally if the U.S. central bank reintroduces additional market stimulus, called for this week by U.S. President Barack Obama to spur job growth.”

    I missed this statement from the President..anyone know when it was said? Is this what precipitated the rally last week..the stealth QE3 Gary talks about?

  267. Gary

    at ease,
    if the world goes into another recession and the US enters another bear market emerging markets will get hit harder.

  268. Moneyman

    WMP

    So Obama called for stimulus to spur job growth and the market took that like QE3 is next or what?

    Feels like the market knows something about this?

    If its true then the Weekend report is valid and we have a new scenario here..

  269. Keys

    Gary said
    “Keys,
    Gold violated 1500 support because it’s due for an intermediate cycle decline. That would happen whether the dollar is rising or falling.”

    Gary, sure…I writing about possible outcomes…But if whatever moved the market were enough to throw a wrench into its cycle count for stocks, why not gold as well? Doesn’t mean that gold wouldn’t fall when the buying frenzy ended.

    But if an announcement for QE3 or some other biggie was known by the market, and the reaction was a madden buying spree, gold should have been included. Rather my belief, or more of a thought process, that gold as you mentioned is setting the proper path, and rather the phony move is the stock market….ie I don’t think there is a fundie story for why the market rallied.

    That being said I am not committed to my story, simply foolish, nor do I think your arguments in the week-end letter don’t hold water…simply tired of this right is right and wrong is wrong…There is obviously a puzzle before us, and I think collectively we are trying to figure it out.

  270. Keys

    Moneyman…
    Great point!

    My concern is there are really only two sources of stimulus…tax spending…which would be suicide with the battle to reduce deficits(at least the perception to fight deficits) and debt ceiling issues.
    The second source is money printing.

    Perhaps, if the gov decided to guarantee small business loans or something at 1% interest. Banks borrow at 0% and make 1% off of the guaranteed loan. Has the effect of QE, and as people go bankrupt the fed simply prints the money for the guarantee….perhaps something like this would work to by-pass the notion of QE3 and tax spending.

  271. William Wallace

    Gary,

    Im sorry, forgive me, its the 78.6%level I was looking at the 1425, your correct the 61.8% level is 1305. I was not near my computer I was going off the top of my head. Sorry 🙂

  272. Gary

    We should be long gold way before that. But if the May low is penetrated it will signal that the C wave is still in progress and we can expect another large leg up.

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