IS THE FED ABOUT TO MAKE THE MISTAKE OF THE DECADE?

Just as I expected, when the market failed to rally on the debt ceiling resolution, panic set in. As I have been telling people the stock market is not dropping because politicians are debating whether or not to spend more money. They have a long record of raising the debt ceiling whenever it threatened to interfere with their spending spree. So the resolution to the debt ceiling was never in question. We knew from day one that Washington would add another trillion or so to the deficit without any real attempt to cut spending. The market has been in trouble since May because it is starting to price in the next recession.

The S&P has now breached the March intermediate cycle low. In a mature bull market that is almost always a signal that a new cyclical bear market has begun.

I’ve been warning investors since late April that this was coming. Many were fooled by the phony manufactured rally at the end of June. I knew at the time that the Fed’s pitiful attempt to manufacture a momentum move as QE2 came to an end would fail.

All that being said, the market is now moving into the timing band for a major intermediate cycle bottom. My best guess is that the reversal today will probably trigger a weak bounce up to the 200 day moving average, followed by one more leg down. That should mark a more lasting bottom and trigger a 6 to 8 week bear market rally. That rally is going to look very convincing and I’ll tell you why in just a second. But just like the rally in June it is going to fail.


Folks, a recession is unavoidable at this point. The piper is going to have to be paid for printing trillions of dollars and bailing out the financial system. Unfortunately there’s no way around that. The question is will Bernanke make the ultimate blunder and initiate QE3? I’ll explain in a second.

Next we need to take a look at the dollar chart. It’s not a pretty picture. With the market in free fall the dollar should be rallying violently. If May marked the three year cycle low like I originally thought then the dollar should be rising rapidly by now.The fact that it’s not is a very ominous sign.

I’m starting to worry that Bernanke is going to initiate QE3 and he’s going to add a currency crisis on top of the economy sliding back into recession.The combination of both of these at the same time will trigger a collapse much worse than what we went through in 2008.

If the market decides that QE3 is in the cards that would be the trigger for our bear market rally. Unfortunately it would also be the trigger for another spike in commodity prices at the very time that the consumer is least able to withstand them.

What Washington and the Fed don’t seem to realize is that the problem isn’t the size of the dose, it’s that we are using the wrong medicine. We’ve already spent trillions to save the economy and it failed. Let’s pray that the powers that be have enough sense to recognize that more trillions are not going to cure the problem, they are going to exacerbate it.

Unfortunately what no one wants to admit is that there is no cure for our problem. We can’t stop it. It can’t be “fixed”. All we can do is make it worse. We desperately need to face reality and initiate the painful policies that are required to halt the car before it drives off the cliff. Failure to do that will mean that the market will force reality upon us as a major global economic collapse.

Before this is all over and done I fully expect the Keynesian economic model will get tossed into the trash heap where it belongs. If it wasn’t for politicians desire to spend more than they can afford Keynesian policies would have been discarded decades ago.

489 thoughts on “IS THE FED ABOUT TO MAKE THE MISTAKE OF THE DECADE?

  1. Samson

    Gary–Great new post. Am curious, however, what impact, if any, a Fed QE 3 hintsay in early August after the FOMC meeting would do to your cycle analysis. As your charts show,last year in August started the USD decline and GC and SI were off to the races. Would that not occur this time as well?

    Thanks for your work.

  2. High 5

    This slow motion European train wreck might be giving Helicopter Ben just the opportunity he needs. Maybe he can flood money into the US economy without dropping the dollar index too precipitously, since the index mainly compares USD to Euro. A controlled descent rather than a crash.

  3. Robert

    If you are wondering why the dollar just went up vertically here is the reason–more intervention–some free markets we have

    Dollar Yen Surges BOJ Intervention – Ministry Of Finances Sells Just Under Y500 Billionfrom zero hedge – on a long enough timeline, the survival rate for everyone drops to zero by Tyler Durden

  4. Silverhound

    I can understand the comments about being distracted by other traders analysis. I’ve stepped away from other groups for the same reason and it’s why I was hesitant to post charts when I originally signed up.

    I get more understanding from charts as I believe the fundamentals come out in the charts first so they are my way of interacting with the group. Having said that, I’m happy to step away if it’s a problem.

  5. Silverhound

    Tekoa

    Thumbs up for organising the interviews. You can only get so much info from the written word. With the spoken word you can “hear” what people are thinking.

  6. 50K

    Gary,

    While conceptually it makes sense to consider dollar movement in analyzing gold trends, I don’t believe in using an index value that is so heavily-weighted towards the euro or more generally any fiat currencies. While these may not be current percentages, the dollar index is a basket of these currencies:

    Euro (EUR), 58.6% weight
    Japanese Yen (JPY) 12.6% weight
    Pound sterling (GBP), 11.9% weight
    Canadian dollar (CAD), 9.1% weight
    Swedish krona (SEK), 4.2% weight and
    Swiss franc (CHF) 3.6% weight

    Even the Economist’s annual international Big Mac survey would give a more accurate value for the USD because it reflects dollar purchasing power for similar goods.

    The point is, to measure the value of one fiat currency against another (or others) may not be as relevant an indicator as measuring the value of the USD against something more tangible like a commodities basket.

    In my view, this could explain why both gold and the dollar (index) could rise together — the market starts rejecting all fiat currencies.

    Do you agree with this logic and if so, is there any way to incorporate other dollar value metrics into your analysis?

  7. Jason

    Great post Gary, you echo my thoughts on the economy and QE exactly.

    My only concern is that QE3 is a certainty, and people will anticipate it as the economy tanks by buying gold. My fear is that on weak employment numbers, money will leave stocks and into gold.

    Gold’s recent surge may indeed be purely emotional/psychological, but if Ben starts QE3 it will all become validated.

  8. riley

    Gary new member about month. Love your post. I agree and know that QE huge driver in gold price, but wondering if dollar has to fall? As bad as fiat currencies are could hold against others even with QE3. Just a thought

  9. marksomething

    I’m not bullish for anything, except this blog. sorry to see it go because it will eventually.

    I appreciate slumdog’s posts re: basil. can you not just delete his/her comments when he/she posts them? eventually he/she will go away.

    there should be a blog blocker much like a call block. you know, block the ip address not just the blog account

  10. NJ

    GLD huge on BoW. Twice yesterday’s SoS number…IS this all the correction we get in Gold before another push higher?

  11. Slumdog

    The question is will Bernanke make the ultimate blunder and initiate QE3? I’ll explain in a second.

    Until Ben Bernanke changes his thesis written I recollect in ’82, no view save his will be operative.

    His view is correct. In ’08, the financial system was exposed as ruined. Clinton’s release of the hounds and Bush the Lesser’s small government gnomes, like Chris Cox, allowed the rape of the American sabines, as in we got the HPV courtesy of those governmental leaders who insisted it was not their business to oversee business practices.

    The game was over. I used to call it “bankrupt”, but was then educated to the term “insolvent”.

    To save the primary dealers who sell off and who buy federal paper, QE1 was launched. It was a clear attempt to save the federal govt from collapse, illiquidity. And it worked.

    In 2008, the economy was all but the playing out of the hand effectively destroyed. The value of US and EU fiat was then at great discount to what it was then carried.

    The QE efforts were manifestations of the self-serving. Paulson exemplified them; he advocated for them; he was them. The primary dealers were rescued. Thus, the federal governnment was rescued and the people, which means the economy and its trading partners’ economies were rescued.

    This too is about to fail.

  12. pimaCanyon

    Gary (or anyone else who would know what to do here),

    The SMT Premium site no longer has the links on the right side of the page for the daily report, portfolio, cycles, etc.

    Are you aware of this problem?

    Is this something I can fix by doing something different when I log in?

  13. Gary

    They are still there at the bottom of the page. Gurvir just fixed the problem and put them back at the top. Clear your browser history if it’s still showing at the bottom of the page instead of the top like it should.

  14. Gary

    The blog is the place to discuss trading strategies and such. info from the nightly report needs to stay in the premium website.

  15. ...at ease

    Right thing to do. Too much giving away the farm going on this public blog. If you want to know what Gary and the rest of us are doing… Subscribe!

  16. TZ(8155)

    I believe gold will be at 1700 by no later than monday. There will likely be a correction at that point and then resumption higher for a few more weeks after that.

    I’m still long 5x gold futures and 1x silver.

  17. TZ(8155)

    Thursday maybe flat or down somewhat, but I don’t see a significant pullback this week (at least below 1640 or so in gold at the worst), and Fri should be strong and close near the highs.

  18. SkepticSquirrel

    Plus the jobs we are getting rehired @ pay way lower than they did in the 90’s. There is no way we can compete with China unless we become like them. $20+/hr manufacturing jobs now pay $10-14 in this area.

  19. fubsy_cooter

    Well, I got my sell signal today on Gold. Usually my mind begs me to sell to protect profits in an uptrend. It often takes everything I have to ignore this impulse. But at rare times I get the feeling that I can’t possibly let go of my shares b/c the good times may never end. When that thought arises, its a pretty good time for me to sell b/c I sense that my thoughts mirror those of Joe public pretty well, meaning the retail investor is likely at a point where they will be jumping in, and will get handed a gift of shares from the big money traders. So, I have an order to sell my remaining DGP at the open.

    I had opened positions yesterday in TBT and SSO as the reversal candlesticks and volume seemd convincing to me, but I have mental stops 1/2% below the lows of yesterday in case we are about to get a waterfall decline in equities and a continued rally in bonds. Whether I get stopped out or not, TBT is bright on my radar as the US Treasury has gone straight up over the past couple weeks, and is bound to come back to Earth. I suspect this will become a long term hold for me in the next several months.

  20. DG

    I will not be able to post my buy signals on SMT anymore due to a new venture I am starting. If you would like to get them please drop me a note at [email protected] (the address is in my profile as well)

    These are the back-tested “all-market” ones around which the new hedge fund has been based

  21. Gary

    Sophie
    Log into the website and then scroll to the bottom of each nightly report and you will find a comments section.

  22. MikeStiller

    Gary-
    The longer the SPX daily cycle stretches towards 40 days, the odds turn in favor of the bounce coming out this cycle low to be very convincing. Seems like everyone’s inclination is to sell the first bounce, which will probably be wrong. Thoughts?

  23. pimaCanyon

    Premium site very slow today. Sometimes it just sits there when I try to do something, have to close the window and log back in.

    Right now it’s been sitting on the login window for a 3 or 4 minutes (after I’ve entered name and pw and clicked on Login), so I basically cannot login.

    I wonder whether users posting comments there is causing it to slow down to the point to where it’s almost not usable?

  24. Gary

    Rav,
    Money continues to panic out of stocks and into gold. But it’s getting very late in both cycles. We are going to see that trend reversed soon.

  25. Felix

    wow look at that electronic painted ceiling on gold at 1678, not saying it will hold but *really?* (say it like a teenager)

  26. Shalom Bernanke

    pima,

    That remains to be seen. I don’t feel pressured to make a decision at the moment as I’m still up nicely on it.

    I do know I’ll either keep it, or sell into strength…not here for sure. 🙂

  27. pimaCanyon

    there is nothing wrong with my internet connection. Any other website I go to comes up within a second or two.

    I am still waiting for the SMT premium to come up.

  28. pimaCanyon

    I get “waiting for smartmoneytrackerpremium.com” at the bottom of the screen, but nothing happens. I have tried closing the window and logging in again–done that three times now.

  29. Gary

    no it’s working fine. Make sure you don’t have caps lock on. If you made repeated attempts to login with an incorrect username or password the system will lock you out. Send me an e-mail with your username and password and I will check.

  30. pimaCanyon

    okay, it just came up (after taking literally 3 minutes to go from login screen to the next screen). Now I am waiting for the main screen to come up, about a minute so far since I’ve clicked on smart money tracker premium at the top of the page…

  31. Keys

    This really does remind me of oil…oil stocks going down, while oil going up…

    People only talking about oil. The problems as I remember is that both sides got smashed…shorts for getting in too soon…and longs for getting out too late…a couple nice fakeouts, and double fakeouts along the way..

    I have little doubt this will be any different.

    If gold were going to 2000 now, I doubt that miners would be doing what they are doing…heck..oil is dropping and the metal is going up…margins are increasing on both ends.

    Anyways call me Mr.Negative, but I think this is it…and if by some market move I am wrong great, I look forward to that C-Wave top this fall…but for now sitting tight.

    I don’t think gold is discounting QE3 either….gold and silver are the only items going up…all commodities are getting smacked. The only reason, that gold is going up is because it is going up, until it decides to go down…right now people are trying to rationalize all their great gains and justify gold to 2000..still waiting on the mathematical models to come out.

    In truth anything can take gold down right now, USD surge, Margin calls, Increase in margin requirements, CPI negative, doesn’t matter something will take it down as the excuse for it to fall…

    Joe public is all over this now, so until Joe public gets burned the market will continue to seek people to buy and then bury them, in a choppy pig slaughter…I will most likely get back in after Joe public starts calling gold risky again. I figure we break the 150 day this time around…perfect timing…especially if Joe public starts talking about the 150.

    Further on QE3…nothing has changed in the economy…its not as if the phony new bad numbers coming out are any reason to start QE3 in earnst…things were crap before and remain crap..the numbers do provide the FED with a reason though…but their goal is to wait until the dollar surges, buy back some debt then, at that point, and then drop it back down…rince repeat…Ben is probably smart that way…bankrupt other countries first as they buy our debt.

  32. thedocument

    QE3 is simply not politically feasible at this point. And why would Obama burn such a major economic card so early?. He is up for re-election next year. I think the most likely point to see QE3 unleashed will be at the FOMC meeting at the end of January. The administration will be attempting to juice the economy ahead of the election, and by coincidence, late January roughly coincides with where I expect to the the 2.5-year cycle low for commodities.

  33. Hack

    Sold EXK $10.65 and SLW $38.40 due to the action in silver. As far as the market I see support at SPX 1180, any comments?

  34. PST

    If you want to know why gold has surged over the last few days all you need to do is follow the money flows this week. Money has flowed into long-dated treasuries, the Swiss franc, precious metals, German bunds and to a lesser extent the dollar. In other words, it has been a rotation to quality/safety as a result of the recent global uncertainties and deterioration in the data.

    In terms of stimulus, I think it is possible that we could see a tax holiday on repatriated earnings on the fiscal policy side and/or some form of operation twist (without an expansion of the Fed’s balance sheet) on the monetary policy side. In the short term, an expansion of the Fed’s balance sheet may be unpalatable due to high commodity prices. Besides, right now the market is doing the work for the Fed with the flight into treasuries driving long-term yields down and the stock market holding up “reasonably” well.

  35. Billy

    Can someone comment on the BOW today in QQQ and SPY. I just started following this and have no frame of reference. Is this large buying today or relatively neutral?

    Thanks

  36. Gary

    Miners were forming a bear flag. I was afraid of that. The trends are very close to reversing. It’s time to go long stocks and get out of gold. For a while anyway

  37. Éamonn

    Sold all my gold and XLI puts and am now resting in cash. Although the employment report wont be pretty tomorrow, I think we have seen enough damage for a week.

  38. Billy

    Sophia,

    I was looking at the BOW but I just don’t have anything to relate what I am seeing to as I haven’t really followed this in the past. Just wondering if anyone that does follow it can comment how the QQQ and SPY numbers compare.

  39. Mr. T

    It seems like everything it getting thrown out, including the baby, its mom & dad, and siblings…

    BONY is charging 16 bps to hold cash in accts above 110% avg balance, and TBill rates are at 0.0000% today.

    It’s like looting a store with all the clerks frozen in time…

  40. Gary

    CCY,
    Just login and then scroll down to the bottom of the report and you will find the comment section. If you wish to change the name that appears associated with your comments you can open your profile and change your nickname.

  41. OptionsOnly

    Got in a little early, but my SLV and EXK puts are starting to look pretty good. I think this is it for the C wave. Price target on SLV: ?? crystal ball is broken…

  42. High 5

    A sign of things to come? Bank Of NY Charging Large Depositors To Hold Cash.

    Will they eventually make it illegal to not ‘invest’ cash?

  43. jeff

    Ok is it just me …because I think someone needs to bash on gary for missing the DCL top in gold by a 1/2 day 🙂

  44. Mike

    Wheeeee! Added swing dollar long, a small QLD purchase (for a bounce) and a small ZSL purchase today (for a daily correction).

  45. TZ(8155)

    Stopped out of silver futures for a small profit (under pressure silver is always weaker).

    Holding the gold futures with stop near 1645 to get me out with small profit (if we hit).

    This is getting a crash vibe (stocks). I don’t think gold will necessarily drop as you guys are suspecting if the world financial system goes off a cliff here. But we will see.

    I’m perfectly fine taking the stop here and will come out well ahead the last month.

  46. ccy

    Gary, the “Profile” section on the premimum site shows Username (which cannot be changed), E-mail, and New paswords. There is no nickname to add/change. What did I miss?

  47. Avann

    CCY … go to the bottom of the page as if you’re agoing to comment.
    Click on your name where it says … LOGGED IN AS: … you can add a nickname and a display name there

  48. Gary

    Ccy,
    Look again there is a space for nickname which will automatically default to your username. But you can change that to whatever you wish to be associated with your comments. Most people are changing it to the nickname they used to post here in the blog.

  49. Michael

    Thanks for playing, the House just got lucky tonight, hope you enjoyed the free drinks, don’t forget to tip the dealer, please come again.

  50. Farm Girl

    Into SPY @ 122.71. Was going to stay in cash after selling NUGT and wait for Gary’s call. On a close over S&P 1230, I think we go straight to 1290. On a close over 1295, we go to 1325-1345. Too tempting.

  51. ccy

    Gary, what I previously did was clicking on the “Profile” link on the top-right corner of the home page, and was then led to a profile page which was different from the one you referred to. Anyway, Avann showed me how to get to the right page. Thanks both of you.

  52. fubsy_cooter

    Feeling purty darned good about my internal signals right about now. Got me out of remainder of DGP at 57.91. Now, if only I can learn to wait for that signal and hold all positions until it comes. Working on it.

  53. Hack

    IMHO I think wishing for QE3 is foolish. It isn’t going to happen in this political climate. If anything we will cut the govt by 10% across the board. As we enter into a period of stagflation the market will go nowhere but gold should do well. Just look at the chart when Carter was President.

  54. fubsy_cooter

    Of course, what remains to be seen is whether this drop in gold holds. There remains the possibility that gold is in a runaway move and could reverse now that it has given up 40 or so points. Really hoping not, obviously as it would be great to see dcl develop so we have a decent entry point, and a clear point of reference for the next daily cycle.

  55. LowTax

    Hack, remember that QE3 comes from the Fed and government cuts are on the other side of government (Federal Government). So while cuts are likely in the Federal Government, the Fed is likely to counteract those cuts but making QE3 even bigger, to offset the additional hit to GDP. It’s in their mandate. The ONLY things standing in the way of QE3 are 1) commodity inflation and 2) the market’s trust in the Federal Reserve ability to control the long term effects of its actions. The market trusts the Fed far more than the Federal Government so if stimulus moves from FG to the Fed, it’s probably a postive to some extent. The Fed just has to manage commodity inflation. But that means it has to allow the market to crash right here – commodities have be slaughtered in order for the Fed to have the elbow room for QE3.

  56. oa92000

    ” Hack said…
    IMHO I think wishing for QE3 is foolish.”

    Fed is purchasing treasury this morning, they just do n’t talk about…

  57. High 5

    I think the fed will print heavy and soon. They don’t want a panic situation and the European meltdown, coming asian recession, and US slowdown pretty much guarantees lower commodities. They need to print until they can get inflation to self sustain.

  58. CMT

    Interesting that gold has moved a lot in the last 30 minutes while the dollar and the euro just sat. Just profit taking?

  59. Silverhound

    Gotta love PM’s, when a correction comes it just comes. Beautiful to watch.

    Bot ZSL yesterday with a stop at 1195. This morning it fell to 1192 and took me out before the big move.

  60. Mr. T

    Golds drop (IMHO) is due to margin calls/forced selling, exacerbated by price stops. This bodes very bad for money managers that held gold for protection, but got so SMACKED today that they had to raise funds. If we see more of this, prepare to see funds closing/putting up gates against investor redemptions…

  61. William Wallace

    Wow..I was starting to get real nervous long gold yesterday…went short today near top, and started getting nervous there…held tight

    Gary, although I know you dont recommend it I want to give you thanks again for keeping me in my shorts.

  62. Romeo Bravo

    Beanie’s just got off the third shift at a 24 hour drive through place. He then called his broker from a pay-phone and checked the market. He immediately went to the corner liquor store, bought 5 Colt 45 Malt Liquor 40 oz. and is currently at home passed out after drinking them and eating a a bowl of Lucky Charms.

  63. Gary

    I warned everyone about silver. But no one wanted to believe me. If gold is starting into a full fledged daily cycle correction silver is going to get annihilated just like I said it would.

  64. DG

    Nice work, Gary. People just don’t appreciate how tough this game is. Your call for breaking the March SPX lows and starting the next deflationary event is right on. Maybe next time you can tell me the date of the high about—oh, I don’t know—three weeks before it happens.

  65. Felix

    I went modestly long ZSL two days ago having about the collapsing parabola so often – finally a chance to recoup a tiny portion of what the parabola stole from me in the spring

  66. MrMiyagi

    Sold my SLV puts for a decent 1 day profit.
    Probably should have hung on longer but there’s the jobs report tomorrow and heck.. I sold, done deal.

  67. Avann

    Gary … I think most believed you … just the odd dipshit that didn’t.
    I have one regret today … I bought HZD at 4.47 and sold at 4.67 … it’s now at 5.20!
    It was a small play anyway … no big deal.

  68. Hack

    How is QE3 going to work? We now have a debt larger than our GDP. This means that unemployment should reach about 11-12%. Printing money and inflating the market will not help because no one will have enough money to buy into the market. This happened in the 70’s and it is happening now.

  69. Russell

    WMP,
    SSO the etf as a stock, not buying this in options as I’m not sure what Friday will bring. I have a bail strategy in place.

  70. Éamonn

    Harry, thanks. If the dollar breaks out to the upside I think I will play it by buying puts on copper. I’m wary of JJC cos its an ETN, not an ETF. With this uncertain environment, you might get unlucky and the Bank underwriting JJC, which I think is Deutsche Bank, it could go bust.

  71. Gary

    Let me make a quick comment here. If you have questions about content in the premium website post it in the comments section over at the premium site.

    From now on the blog is going to be reserved for people that wish to discuss specific trading strategies and the content of my posts. Proprietary information in the nightly reports needs to stay in the premium website.

    If I see information pertaining to the nightly reports here on the blog I will probably delete it.

    I would like to keep the majority of comments here on the blog so the website doesn’t get too cluttered. Just keep the conversations here reserved for things other than the premium newsletter content.

  72. LowTax

    Hack, nobody here said QE3 was going to work 🙂

    It’s just the Fed’s only real tool, that’s all. My guess is they act very soon, but not with QE3. They will play with the maturity curve instead. As their existing bond portfolio matures, they will reinvest the funds on the long end of the curve to keep those rates down. It won’t take any more money than has already been put in but they might get some bang for the buck in rates until the real QE3 is politically feasible.

  73. Shalom Bernanke

    Well, most of my profits from this round have been vaporized. And the day trade (one of my favorite setups with high-probability) blew out to my stop almost immediately which is typically a sign of more to come (downside).

    I’m not doing any buying today, but will keep my positions through any further pullback, unless stopped out but that is still a decent distance from here. I am tempted to exit, especially since silver is acting like more margin hikes are on the way, but I still have too many doll-hairs I’d like to put into metals so will sit tight.

    Unfortunately, I am quite sure there is more pain ahead before I see any respite. It’s the way it goes, and I’ll try to turn this into an opportunity sometime in the next few weeks.

    Good luck!

  74. Felix

    Sold ZSL for a good chunk, reestablished partial position awaiting further indications.

    Would anyone more experienced call gold’s intraday chart a bear flag?

  75. Shalom Bernanke

    What I especially don’t like is my strong hand status (cushion) that allowed me to ride through pullbacks is now just a sliver of what it was.

    Anyway, I’m getting out of here since I’m not selling, or putting any $ to work today.

    🙂

  76. Gary

    I’ve learned from experience that when anything gets as stretched as far above the 200 day moving average as gold was you no longer have strong hand status you are at risk of suffering a violent correction.

    When anything gets that stretched I will gladly give up my strong hand status.

  77. Keys

    The vortex of doom has begun…perhaps! Like a blackhole sucking out everything until a bottom is made.

    Next move we have strong gap up’s tomorrow to lure the wounded bull back in, and then the market unleashes another savage sword to its stomach…

    You know everything is red today…and bulls are so attracted to red, but the matador is there behind the red ready to strike.

    Ie don’t buy silver or gold here…even buying the market may be tough…

    This is the point where the bulls and the bears get slaughtered. I hope everyone brought their puke bucket for the rollercoaster ride!

  78. DG

    We will bounce from this carnage, but the game has changed. In a bull market you buy dips; from now on you sell (or short) rallies. We will probably put in a good bottom by Tuesday and rally for weeks, but don’t get excited and forget that the game has changed. I do believe the bull has expired.

  79. Shalom Bernanke

    oa9200,

    Yes, I have each of the names I’ve mentioned before, albeit with no profits this round. I have proper size for my risk tolerance and could even ride down another day as bad as today.

    Current positions are not my concern. My worry is that the next opportunity is still a ways off, and worse, it might not yield much gains if the damage gets bad enough before it presents.

    Take care fellas (and ladies). 🙂

  80. pimaCanyon

    Eamonn,

    You wrote “a blood bath. no other word for it. just saw a kitchen sink flying out the window”.

    Made me laugh out loud. thanks.

  81. pimaCanyon

    sophia,

    I would give more importance to the block trades number because that would be large traders and hedge funds executing those trades, I believe. What Gary calls “smart money”. But that’s just my opinion, I don’t have any research to back that up.

    FWIW, the BoW numbers in the Total column were much larger earlier today than they are are. The Block Trades number is pretty much the same as it was a couple hours ago.

  82. MrMiyagi

    pimaCanyon,
    Not only is SPY on the BOW, it also BB crashed (unless it closes above 123.50$ today).
    Seriously contemplating a purchase here but weary of tomorrow’s job(less) report.

  83. sophia

    Wouldnt it be fun if Job Numbers comes at 225K tomorrow? I cannot imagine the power of the turnaround!
    Then on the 9th, The Fed…..

  84. pimaCanyon

    Eamonn,

    Most of my cash is in my trading accounts! However, in those accounts I am mostly cash right now.

    (Small long position in UUP, very small position in VXX puts (spreads actually) that I plan to add to once we get confirmation of a short term bottom. I closed out my GLD positions this morning. They were small positions I had established a few days ago after closing my much larger positions a few days before that.)

  85. darkstarsky

    Gary,

    Great calls…saved me from the carnage by selling most holdings yesterday…sitting on the sidelines until Gary says otherwise. Keep up the great work!!

  86. MrMiyagi

    WildShot,
    If you’re thinking silver will go back to 50$ then it’s ok but if you’re looking purely speculative bounce along with gold then look at the November 45 or 46 calls.
    This is purely a longshot (WildShot?) of course and you could end up losing most or all of it.

  87. William Wallace

    Gary,

    Correct me if im wrong, but you got it wrong in your comment below…take a look at the dollar daily 7/22/08, looks alot like today and marked the first day of the rally…by 7/22/08 the market was already out of its topping process and in a down trend.

    “With the market in free fall the dollar should be rallying violently. If May marked the three year cycle low like I originally thought then the dollar should be rising rapidly by now.”

  88. Adam

    The market isn’t discounting anything right now. It’s panicked selling, technical traders getting stopped out and margin calls. The dollar FINALLY rallied so you could have exit your PM positions. By the time they settle you can put that money to work in stocks. Some good values to be had so long as you don’t mind weathering volatility.

  89. Adam

    I guess. PMs and miners are getting sold off hard ‘cuz everything else has already taken such a considerable hit. Traders won’t continue to sell something with extremely negative momentum if there’s something else that can get liquidated instead – and if it’s stretched far above its moving averages? Makes perfect sense. The dollar rally this morning was the tell.

  90. Hack

    This isn’t panic selling. Algo’s do 70% of the trading in the market now. Nothing these bots do is based on fear, just formulas.

  91. abc

    Gary,
    First of all, big thx!
    I sold rest of my portfolio on your call yesterday.
    It was great call with surgical precision:). Congratulations.

  92. Adam

    WW, for a week and a half the market was heading lower. That’s discounting a recession. Being down over 450 points TODAY… that’s just panicking.

  93. Duuuuuude

    We have had disappointing jobs reports all year and the market shrugged it off. I seriously doubt that the market will sell off tomorrow after another disappointing report. I expect it to be a buy the rumor, sell the fact event.

  94. Hack

    Out of the remaining 30% of the trades that are made by humans what percentage is at their computer right now selling their portfolio? Not many. Most folks have a 401k which can only be rebalanced AFTER the bell….

  95. Felix

    I don’t know about y’all, but the market charts look identical to Gary’s prognostications from the past several months.

  96. Cory

    Yesterday went 40% EUO, 40% DUST, 40% ZSL when people were yelling at Gary, to go along with my 10% gamble on IWM. My IWM got spanked today, and my DUST was down and miserable going into today, but it ended up being the best trading day of my life, and I never saw it coming. God Bless the random trolls with “B” names that show up here at tops. Sold my EUO at the close because it just doesn’t move even though I think it’s still going up, and put it into UWM.

  97. pimaCanyon

    Adam,

    Sorry my post put you on the defensive. It was intended to do that. I’m more in awe of what’s happening than anything–my question was more rhetorical than anything else, no sarcasm was intended.

    I have no idea what will happen tomorrow, but it seems like we’ve had a sea change here, that the bear is back and that the jobs report tomorrow just may result in more selling rather than marking a turn as it has in the past.

    1180, then 1130 SPX? Or do we get a bounce first?

  98. LowTax

    Gary, you nailed it, again. That crystal ball of yours isn’t THAT broken! Thanks for the hard work and please keep it up.

  99. Poly

    Wow what a riveting day, junkies paradise.

    Shades of the 2008 panic, Europe imploding/freezing up. ECB/FED going to need to come in with some heavy artillery, should be good for a 4 week rally.

    But the blood has been spilled, a recession and savage 1-2 year bear market is slowing coming out of hibernation.

    Gold was a rock star relatively today. That type of worldwide sell-off, with gold so stretched and in the timing band, should have induced a much bigger selloff/collapse. Now we could hope for a 2-5 day flag type setup and a new daily cycle.

  100. Adam

    pima,

    No problem, buddy. Thanks for clarifying. I hear ya – it’s been pretty brutal. I think we get sideways volatility followed by a pretty vicious move up over the next few weeks. The McClellan Oscillator and momentum readings won’t stay like that forever. We’ll get a rally. We don’t even have a confirmed bear yet. We’re still in a topping process. I think there will be more headfakes and I think that we now have an opportunity to take advantage of those moves.

    Right now, I pretty much can’t imagine the market moving higher. It feels like it’s just going to crater until economists agree we’re in a recession. It’s tough to find charts of indices that go straight down & never recover.

  101. LowTax

    WW, I agree. Poly, gold will be liquidated, because it’s the only thing investors have that hasn’t crashed yet. Margin debt is at all time highs and mutual fund cash levels are at all time lows – a perfect recipie for liquidation (Zerohedge). We haven’t even closed below the 10 day yet!

  102. Sleeper

    Adam,

    …oh, I think we’re definitely in a bear market now. We have a Dow Theory sell signal. We’ll see some snapback rally for sure, but the game has definitely changed. Now looking for lower highs and lower lows.

    I’m just miffed that I couldn’t profit more from this huge move down. I’ve been waiting to do a Big Short in stocks for awhile now, but with all the headfakes, fabricated rallies, juking-n-jiving, I struggled to pull the trigger in time. oh, well…

    And tomorrow for example—tough to trade when the market could go up 500 OR down 500 points with equal probability.

    Sitting in cash. Will play my small put/call games with the pivots.

  103. William Wallace

    Sophia,

    Looking back at all the other cycles of this C-wave both daily and intermediate, gold is acting perfectly normal, the only difference is that we seen an early intermediate bottom this cycle, bouncing off the 100sma instead of the 150sma. This daily cycle bottom may be early also…but all others usually bottomed on the 50sma. We may bounce off the 20 who knows, thats if this is not the top of the C-wave and we are going into a D-wave because of the dollar rallying from here.

  104. Adam

    We might be. The 200DMA are still moving higher and we’re currently stretched way below it. That’s a great time to buy a bull market – July of last year is a perfect example. We probably won’t hit the exactly bottom, but we’ll get close enough to turn a nice profit when we get the inevitable bounce back.

  105. gold silver troll

    my family and friends who have never invested their whole lives cam up to me yesterday and today and asked me for a gold stock to invest…when i asked them why now, they said that because gold is doing good…I told them all that this is sign of a top and not to buy now.

    Guys,
    it looks like the public has started piling into gold…the top must the close
    I

  106. Eriksven

    I’m curious about VXX, too. My Jan 2012 $25 calls are well in the money today. I’ve noticed that VXX tends to go down pretty quickly on up days. I’m now up 45% on this trade, and am tempted to take it… Can I count on the market crashing a little lower, or is it gonna bounce?

  107. TZ(8155)

    There is quite a good chance gold has already bottomed here. Stuff is falling apart left and right and smart/rich people have started to figure out gold is the answer.

    It isn’t like 2008. Trying to play “what the market did LAST time” is almost ALWAYS a losing strategy. In fact, playing the opposite can be very profitable.

    My stop was just 2-3 dollars too high to bypass the bounce here in gold and subsequent triangle it is now putting in. (On VERY high volume I might add. A good sign.)

    If I hadn’t gotten stopped out I’d be holding with the stop moved up to the low of the day. IF we go lower I would want out.

  108. basil

    Gary,
    haha, didn’t you write that stocks are about to turn up?
    Keep on writing bollocks, Gary, and you guys keep on discussing it all day. That’s just lovely. Good luck to you ‘folks’…

  109. gold silver troll

    Basil,

    You come here and incessantly say Gary’s call on the stock market is wrong…

    Gary has warned us about staying out of the stock market 8 million times…for this exact reason of uncertainly.

    so if you lost money in stocks, it it you fault.

    Gary’s trades have been making everyone atleast 20-30% this year, if you entered with him and sold with him.

    That beats out more than 90% of people out there.

    I still can’t figure out why you’re complaining…

    is it because Gary is not making you that 5000% return every year?

  110. Clarkatroid

    Basil, I follow garys calls pretty closely, I’m 28% up this year, 100% in cash now and dodging bullets left right and centre, sidestepping world carnage everywhere

    Your problem is what exactly?

  111. DG

    Basil: When did you turn into the kind of poster you have become? I remember posts of yours not so long ago that were sensible and about the markets rather than personal and of no use to anyone. Seriously, what happened? I must have missed something. Whatever it was, it’s not worth holding a grudge and you just make yourself look silly and petty. What happened?

  112. Razvan

    TZ the correction is not even one day old and you think it is over already. We need a deeper correction before we can have another sustained move higher. I touch of the bottom bollinger band would be nice.

  113. DG

    I agree. It would be odd for the gold correction to bee over already. With sentiment stretched and a huge high-volume reversal today, it seems much more likely the fear trade has been played out for now and that stocks will rally (Turnaround Tuesday?) and gold drop. We’ll see.

  114. youks

    Great calls Gary, wow…. so glad I stayed almost entirely in cash when it was tempting to get in these last few days.

    I’m Canadian and seriously considering buying the yearly subscription. Are there any Canadian subscribers here?

  115. TZ(8155)

    RAZ,

    I think today was not as much a natural exhaustion of gold as it was a takedown cause by OTHER stuff going over the cliff.

    That said, a purchase of gold futures here at 1647 with a $4 or stop or so near the low earlier is an excellent risk/reward trade. That you don’t think so reflexively should cause you to pause. The market is VERY good at causing people to hide and look down when they should be buying.

    I’m not sure I will buy this trade, but I’m simply saying it isn’t nearly as bad as you think and nothing says that gold can NOT stop here. I’m aware of gary and cycles and stuff, but nothing is perfect.

  116. Rob L

    youks,

    I’m a Canuck and a happy subscriber here. What does being Canadian have to do with anything? Buy a subscription and make some cash.

  117. rapper

    Duuude, got it. Also need to look at the half way back from 2010 lows 1166 on Spx.

    also, if we don’t break out of the 1668s on Gold then we are going down.

  118. TZ(8155)

    The ECB may need an Italy bailout “tarp” type thing TONIGHT to prevent a collapse and the fed may need to begin another printing program by next week if things don’t turn around as many of you expect.

    You know what? Sometimes they dont!

    So I’m simply saying that a long sharp drawdown in gold which is now being recognized as the go-to assets for world financial meltdown may NOT be in the cards.

    I’m not in futures at this time after stopping out, but I did increase my ‘core’ holdings to 1/3 my net worth today.

    At SOME point in the future I think the financial system will go over a cliff, shut down, and ‘reset’. I simply now judge the next few days as having a higher probability of such an event and want more protection than normal.

  119. Avann

    Another Canuck here … Been a sub since 2009. My accounts have doubled since then. I even manage my daughters not quite so aggressively and she is up over 60%. Get a subscription.

  120. Avann

    Basil …. Please go away.
    You are starting to make a fool of yourself.
    Or at least change your name, stop drinking and be civil.

  121. High 5

    Dear Basil

    …it is a blessed provision of nature that at times like these, as soon as a man’s mercury has got down to a certain point there comes a revulsion, and he rallies. Hope springs up, and cheerfulness along with it, and then he is in good shape to do something for himself, if anything can be done.
    – A Connecticut Yankee in King Arthur’s Court

  122. TZ(8155)

    Went long gold futures with stop towards the lows (not as low as I would like cause I hesitated on the buy and got higher prices)

  123. NJ

    Gary:

    In the audio interview you mentioned you were expecting $50-$70 pullack for DCL. We got $40 so far intraday. Another day like today and we should be good to buy?

    Or are you looking @ sentiment to cool and other indicators as well than merely the $$$ drop?

    Thanks!

  124. Gary

    A particular number doesn’t force a cycle bottom. We have to decline far enough to ease sentiment and then see a swing low.

    I can virtually guarantee it didn’t happen in one day. It usually takes a minimum of 4 to 9 days for a daily cycle declined to run its course.

  125. Robert

    for those that believe in manipulation ( almost every one except Gary ) of the PM’s-here is part of an article from a blog from G. M.Jenkins today
    Bill Murphy of GATA recently said that one of the things whistleblower Andrew Maguire learned is that the banking cartel often raids the shares first as a “dog whistle” to their friends that a raid in silver is coming. So, when I checked the markets this morning and saw the DOW was down only 1.5% (like all week, pretty much), silver was flat, and that the mining stocks were down almost 5%, I said wtf and bought a lot of ZSL on margin. I was rewarded handsomely. Thank you, f#cking criminals!

  126. Gary

    Don’t you find it amazing that these “raids” always seem to correspond with a powerful rally in the dollar?

    Not only is the evil cartel manipulating the silver market, they are manipulating the most massive currency markets in the world.

    Just use a little common sense folks. Murphy is running one of the oldest scams in the book. Find someone to blame for your missed calls.

  127. Silverhound

    TZ

    You are staunch I’ll give you that much!

    Not trying to influence your trade here but whenever I see that much volume and a large topping tail at the top of a strong rally I usually ask myself two questions.

    1) Was that buying volume or selling volume?

    2) If it was buying volume, why didn’t price close at the top of the bar and make new high’s?

    I much prefer to see that kind of volume near the bottom of a correction. Similar to early May.

  128. TZ(8155)

    The volume today WAS at the bottom of a correction. I don’t understand.

    That low has held and my buys are looking pretty good now.

    I suspect we can close back up towards the highs by tomorrow. And if the ECP prints something or rushes to help Italy then we’ll really have some juice.

    I know I can be wrong and I bought in with a small $4 stop which (thankfully) has held and looks ok. If we continue lower I’ll lose about 1.5% (more than normal, but like I said I hesitated on this one.)

    The fact that almost everybody is shellshocked and looking down…scared to buy…is a sign to consider.

  129. Silverhound

    Don’t get me wrong, I’m not criticising your trade. I hope your efforts are rewarded.

    I’m talking about volume on a daily chart, not intraday.

  130. Strat81

    Volume after an extended move up is the last thing you want to see if you are long. I always chuckle when people always use high volume on up days as positive confirmation. It completely depends on what has happened prior to the high volume day. The smart money uses those high volume “up days” to leave the dumb money holding the bag.

  131. Silverhound

    TZ

    Hopefully this explains it a bit better. My charting software doesn’t show the volume on gold charts well so I had to fiddle with the free stochchart version.

    The blue circles indicate volume which will potentially stop the trend.

    Gold volume

  132. gold silver troll

    RJ,

    Not sure about the company…

    From a chart view, JAG’s chart looks straight out ugly…it has been in a down trend for over 18 months. And the trend is your friend.

    Until the trend changes, best to stay away from this..

  133. Edwin

    good bye stock market
    bye bye technical traders.

    spx will be back in mid october

    gold axe coming.. will be back in end of aug

    i haven’t deviated from this call.

    talk about taken to the woodshed today! whew! that was massive. but nothing beats May 7, 2010 when I was watching the Dow drop 1000 pts drop right before my eyes!

  134. Keys

    Basil is just another person killed by the market pain…this market has been pure shit since 2001….don’t expect people to be happy when things are bad…

    and things are bad…Gary is always a great coach…in case I didn’t mention that one or two times..

    For the price we pay here, are you kidding me!!! AGGG…alright, thanks for being their Gary, as you may have guessed I am a little on the paranoid side, but money is money! Helps to have a view that confirms my own….

    Alright going forward….
    Welcome to the onslaugt! Bulls and bears alike…this is the next stage! Too tired to post more, but ZZZZZZZZZZZZZZZZZZZ

  135. TZ(8155)

    SILVERHOUND,

    Unless you are playing with token money do you really think it is prudent (and competitive) to invest using end-of-day free stockcharts that don’t even update until about 6pm….and…some “charting software doesn’t show the volume on gold charts well”??

  136. Silverhound

    TZ

    The free stochart was for your benefit and not something I normally use. If you aren’t interested let me know and I won’t bother in the future. I only chart daily bar charts and my normal software serves me well. Anyone who thinks they need more to make money is kidding themselves. For intraday I use a trading platform like anybody else.

    Were you criticising me, my software or my analysis?

  137. Julio

    I think this is some of the best information available, just catching up on my reading and came across Basil’s post critical of Gary’s call. Amazing, if you don’t agree, just leave, don’t waste your time or everyone’s time by post offensive comments

  138. TZ(8155)

    SH,

    You simply portrayed your data sources as unreliable or incapable of working well. I only went by what you seemed to say. If it was misread it wasn’t intended, but that is what it appeared to say.

  139. TZ(8155)

    Regarding the stockcharts image you posted, notice that by time the volume drops off to indicate a ‘bottom’ you are already more than a day later and halfway back up the previous decline.

    I can’t get much leverage in a situation like that. Often, like today, I will try to guess the bottom with a small stop.

    Like much of trading, by time the trade is ‘easy’ or ‘clear’ it is also much more dangerous or unprofitable.

  140. Silverhound

    TZ

    I understand what you are saying and I wouldn’t use volume alone as an entry signal on that correction. I was only trying to point out that the high volume bar at the bottom of a correction is “buying volume” and that high volume bar at the top of an uptrend is potential “selling volume” and should be treated with caution, especially when it closes well off it’s highs.

    I know you trade with tight stops so there is no problem if the trade goes against you. I hope it works out for you.

  141. Slumdog

    36 hours ago, I posted something to the effect, “within 12 to 72 hours, the PMs, due to the NYPit gaps, will drop to the low of those gaps to fill them.”

    That trade is now complete. I’ve no opinion at this moment but to stand back as this will be very choppy waters, directionless, but vicious.

    I’m in the league, and okay with that. I bring my own bat and ball and rule book. That’s good enough to be posting here.

  142. TZ(8155)

    Slumdog,

    It isn’t a challenge or anything like that, but since you mention your call, as a investor myself I wonder:

    1) did you actually make that trade?

    2) how much did you increase your net worth when it was over?

    Kudos on the call, clearly. But did you take it yourself and in sufficient amount that it moved the needle. No need to respond if you consider the info private. I simply see your confidence in the trade and wonder how it actually worked.

  143. TZ(8155)

    Side note: if gold is back to the highs by friday’s close (a serious possibility in my mind) you guys are gonna FREAK out

    🙂

  144. RJ

    thanks for the negative feedback on JAG. I find longer term shareholders have the best sentiment on a miner, much better than charts.

  145. Duuuuuude

    Where in the hell does CNBC find all the bulltards to roll out in front of the camera to announce we are still in a bull market, that the recovery is still underway, to buy defensive names, bla bla bla. They must be Beanie subscribers. I don’t see how you can be a money manager and not recognize a bear market.

  146. Brian

    Newmont:
    $26.9 billion market cap at $55/share, plus $3.3 billion net debt equals $30.2 billion enterprise value;
    Newmont has 94 million oz of gold in the ground;
    The market is currently valuing Newmont’s gold in the ground at $320/oz.
    Cash costs/oz to yank it out equal $575/oz;
    So, if you buy Newmont, you get the gold for $895/oz.
    For the market to value Newmont’s gold reserves at $1,500/oz, NEM shares would have to trade at $160/share, +194% from here.

    Yamana:
    $9.8 billion market cap at $13.10/share, plus $25 million net debt equals $9.83 billion enterprise value;
    Yamana has 22 million oz of gold in the ground;
    The market is currently valuing Yamana’s gold in the ground at $445/oz.
    Cash costs/oz to yank Yamana’s gold out of the ground equal $250/oz;
    So, if you buy Yamana, you get the gold for $695/oz.
    For the market to value Yamana’s gold reserves at $1,500/oz, AUY shares would have to trade at $36/share, +175% from here.

  147. Veronica

    I sure hope gold starts to correct ASAP because I don’t want to get THE final blowoff top here. It would be very nice to have this bull continue at least a couple more years.

  148. Michael

    Brian, ssshhh – we don’t talk about fundamentals and company valuations here, we pretend it does not exist. Watch out beating the grass with a stick, a snake might jump out! 😉

    TZ, I find that when I get a touch hostile and tad aggressive toward others it’s after a very good run in the market and it’s invariably time to pull in my horns and my positions.

  149. Blindweb

    I don’t understand this obsession with charts and trading. I use very basic charts myself. Confidence is more important than charting. With confidence in my fundamental analysis of the global economic situation I was able to maximize my leverage back in July with far OTM fall-expiring calls and go 95% old turkey through all the wishy-washiness. This frees up most of my time to spend working on an unrelated business I’m starting. Much more efficient use of my time. There’s diminishing returns on time spent studying stock charts.

  150. Sleeper

    The miners seem to be following the equities markets rather than the metals themselves, obviously. I guess they are being treated like stocks, which they are.

    That would tell me the PMs are rising simply as the fear and haven trade right now, not with regard to any other bull market attributes in gold itself.

    How long will that sentiment last?

    Need that big equities bounce to the 200 ma!

  151. Shalom Bernanke

    Still long the same things but if today turns out like yesterday, I’ll be stopped out except PHYS.

    Haven’t down any buying either, even though I like the prices/valuations here, as this is how miners were acting just before the margin hikes earlier in the year. Smells like some news is on the horizon, and just because I like prices doesn’t mean they’re going up immediately. Beatings like this usually take some time to turn around.

    Sitting tight and stops might force me to realize 2.5% loss of total accounts.

  152. 86d4life

    Kind of interesting how the dollar is starting to take a bath and the market isn`t really reactive…yet. Almost like it`s wounded.

  153. Cory

    I think that now the stops were run on the QQQ’s below the June low, we can start to reverse. I’m sure the big boys were hunting those.

  154. Shalom Bernanke

    traderlady,

    We’ll see how it goes, but my bigger concern than a potential loss is that the potential upside of the next rallies when they occur is now greatly diminished. I suspect I’ll still make money on the trade, but new highs look to be off the table for many months or longer, IMO.

    I should’ve cashed in the other day and went golfing with you! 🙂

  155. Shalom Bernanke

    “Almost like it`s wounded.”- 86

    I know you’re referring to the general market, but this is fine wording for what I believe has happened to miners.

    Long term the bull is on, but enough damage has been done to muck up the short term.

    Anyway, I won’t need to watch the computer today as I have stops in, and don’t intend on buying today. I’ll check in later.

    Good luck!

  156. Felix

    Cory,

    Thank you. I’m also three days in ZSL, took profits yesterday and replaced half. I’m thinking about adding at close if nothing changes, what do you think about holding it over the weekend?

  157. Cory

    Oa,

    I just think when gold breaks then silver will get hit hard. Not looking for low 20’s, but would cover around the 32-33 base again. Gold is amazing right now, and silver is hanging on to it for the moment. Unless that was gold’s DCL yesterday, we should have some more downside. I hate going short, that is why I’m mostly long right now. We will bounce at some point. Smart money doesn’t sell the first dip, they sell the first bounce. People are puking shares on margin calls right now. Markets crash on the extremely left translated intermediate cycles. This is the best time to buy, and lowest risk, when blood are in the streets.

  158. Cory

    I’m weathering a drawdown right now, but the upside is incredible. Money is made going long, and the most money is made going long at intermediate lows. I will be shorting bounces from here on out, but Doc had called this continuing intermediate cycle in stocks perfectly, and I’ve been waiting to go long below the previous IT cycle lows with a very high $VIX.

  159. 86d4life

    Cory,
    so if Gary calls a bottom in the general market, you won`t be going long any more(forseeable future)? Thanks for your posts.

  160. Billy

    Cory,

    You gonna drop that UWM position or hold on tight? This feels like capitulation and the bottom should hopefully be near.

  161. Billy

    USD not looking good here, not rallying at all with equities dropping again. Looks like it could get slammed on any rally from the stock market.

  162. gold silver troll

    I’m no expert, but highest ever weekly volume in DZZ.

    This happened in ZSL back in April last week. I saw the volume and chose to ignore it…we all know what followed.

    If you’re gold long, please be careful.

  163. coolkevs

    Cool – the VIX just took out some of the spikes from last summer – are we having fun yet???
    Anyway, I’m still not getting that warm, fuzzy feeling when I was short the market in 2008.
    Where are the Bear Stearns, Washington Mutual, Fannie and Freddie, Lehman – to me the signs were obvious for collapse, not so much here other than stocks were pretty overvalued after 100%. We do have Europe, but we’ve had Europe since Thanksgiving 2009.
    I digress.
    Here’s a few of the latest Demark insights from Kevin Depew at minyanville.com:
    SPX recorded a 13 Sequential BUY on Monday, leaving a 12-day window into the week after next. Not very reliable this time, for sure – but we need a bullish price flip to confirm – close above the close 4 days earlier.
    SPX also will record a BUY setup on Monday – this is the 1-4 day window thing. So, Tuesday-Friday of next week, we should have some shot at the upside (provided of course that the market doesn’t crash).
    Overall, we are still in the 1-4 MONTHLY SELL setup window – which has been accurate. This ends Sep 30. As a reminder, we are emerging from the 12 year Sequential SELL window come January. This is one reason why I continue to think we will not see the 666 lows again.
    On a Weekly basis, S&P has a TD level in the 1230 region. This level cannot be qualified as a break unless we have an up close for the week. Look for the rubber band to snap back.
    Also WEEKLY, Nasdaq is on Bar 7 of 9 of a BUY setup. This will require a new low either next week or the following week to Perfect. Then look for a 1-4 WEEK Buy period – corresponding from late August into September.
    Russell 2000 still did not qualify a DAILY DOWN level way up at 794 today as it had an up open. (DeMark rules require an Up close, followed by a down close below that level, then down again). It has also recorded a DAILY BUY setup – today, so look for a 1-4 day reaction also next week.
    Whew! That was a lot!
    In summary, it’s looking like there will be a bounce next week at some point. It seems like it will correspond to Gary’s intermediate cycle low. Still, even though, we have 8 weeks left of additional weakness, I just can’t agree that we will be heading into a new leg of financial collapse like in 2008. Depew espouses dispersion in stocks – that it will be an INSIDE OUT recovery in the markets. Indices are not the place to be, but individual stocks. I know that Gold and Silver are the beat here, but minus a possible blow-off top in the near future, technically (DeMark-wise), they are due for a long period of underperformance.
    Well, lookie there – the Dow just turned positive – crazy market indeed!
    Thanks for reading!

  164. Moneyman

    Long SPX now.

    Dont think it will go lower without some kind of bounce..Stop at todays low.

    And I think Bernanke is freaking out now and QE3 is coming soon.

    And I also think that everyone knows that..Just look at the dollar..Normaly it should spike hard..Now its flat!

    Doing nothing.

    Nice call Gary on the fundamental.

    You talked about this correction for a long time.

    Actually sold my dollar long position today but are keeping my gold positions..+ SPX long.

    The dollar long was a nice trade..Actually dollar|sek.

    From Sweden..Oh la la!

  165. Michael

    Test,

    Thanks for your posts… you are a true believer in the miners… I too and SB are long…do you have any comments on this selll off in miners? You think they will show some strength with signs of QEIII on the table? Any input would be greatly appreciated.

  166. Cory

    thedocument.com

    Same style & amazing traders. Two sets of eyes on the market – great compliment to each other.

  167. MrMiyagi

    … sold my SLV and LVS puts a day too early…
    But, as I have said before, when the result is making money, it is forgiven. I will soon forget. What was I talking about?

  168. test

    Michael, a few weeks ago just the HUI was oversold, but this morning both HUI and the SPX are extremely oversold.

    There’s too much fear in the markets this morning.

  169. Harry

    Salty, I closed my copper short way too soon. I’m still happy with the trade but you must be significantly more happy…

  170. Salty

    yes I am, Harry. shorted 2x Dec copper at 4.39 Tues nite. Up about 12K so far. Doc thinks commodities won’t bottom till Jan, so I am holding on for now.

  171. samppa_nyman

    Who thinks its worth to keep ZSL till next week? If I sold now, I won’t lose money at least but no real profit either after taxes and expenses. Damn this silver is a devil… Why I keep falling for shorting it haha

  172. William Wallace

    86,

    What up partner…miss me…lol?

    Been trading gold futures all day, this volatility is crazy, but when gold starts trading in a channel its easier to stick 10 point swings long and short. Had a good day today.

  173. Cory

    Closed out my remaining ZSL at 14.6. Silver made me all my money, don’t like shorting it. Seeing if we get a dip in UWM to put the last 10% to work. DUST and ZSL were good trades, really want to be long here and not short.

  174. Michael (Hulk)

    Everybody, their uncle and their dog are calling for a bounce here – groupthink rarely works. Equities have gone paranormal here blowing through setups that should be working. In 2008 most tools similarly stopped working and the very best hedge fund traders were minus single-digit % for the year.

  175. Felix

    sampaa

    I closed out my ZSL, too much craziness in the news from Europe and here. It was a nice trade and I don’t want to push it.

  176. Keys

    Bulls and Bears battle it out to gain little to no ground…

    Another day of brokers making big money from bid/ask and fees…Puke buckets are free after your 1000th trade!

  177. Cory

    WW,

    I like to place my bids in ladders, especially in volatile markets, and I like stocks that move.

    I will do something like this to build into a full position:

    [email protected]
    [email protected]
    [email protected]
    [email protected]

    If my lower bids don’t get hit then I’m usually in the money quickly even though I don’t have a full position. It also bottom/top weights my entry so I’m not averaging down as much. That way if I stop myself out it’s only a small distance from my biggest buypoint. When I get out on a bounce I’ll do the opposite and buy and sell the opposite ETF in a ladder:

    Sell 10000 UWM : Buy 10000 RWM
    Sell 30000 UWM : Buy 30000 RWM etc.

    I’m horrible at timing, so it prevents me from getting too big too fast and my stop outs are smaller. At some point in this process I will be almost hedged minus the slippage as I transfer from long to short or viceversa. I don’t really use price targets, just above/below major pivots in cycle timing bands and major volume spikes.

  178. Shalom Bernanke

    Taking a look before the close, and see that I was within a nickel of getting stopped out of SVM at the lows.

    Other positions aren’t really close, so no concerns on those. I’d hate to get stopped out at a temporary low, but have found more times than not that honoring stops is better than second guessing. If I’m stopped out, something is wrong and I can usually get another entry setup within a few weeks.

    Enjoy your weekend. 🙂

  179. Gary

    Micheal,
    We are seeingyou truly incredible breath and sentiment readings at the moment.

    This will either bounce and then retest the lows before taking off or if the market starts to sniff out QE3 it’ll probably just take off to the upside.

  180. Gary

    I think it’s probably wishful thinking if you think gold isn’t going to correct.

    I can tell you that anything this stretched above the 200 day moving average isn’t going to get any attention from me.

    If somebody put a gun to my head and forced me to buy something right now, I would buy the stock market every day of the week and twice on Sunday before I would buy gold at its current level.

    I’m just not interested until it corrects.

  181. 86d4life

    Cory,
    Thanks for posting your method of laddering in and out. When I first read about laddering, I really liked the idea because I realized right away it would save me from my own suicidal tendencies of all or nothing. It seems when I look back at my notes, I`m weighted top heavy, so I really like your top lite/bottom heavy method. My question; where and how does your stop come in relative to your buy in. Thanks a lot.

  182. 86d4life

    W2,
    Do you ever remember a movie called A Bridge Too Far. It was about the allied invasion of Holland, I believe 1944. Well, it seems the planning might have been off a tad and the might have bitten off a little more than they could chew and went, you guessed it, `a bridge too far`. I think it was the British 1st airborne that lost 8000 men. Not good. So I figured maybe you were creating your own version of that, based on a Wall street script instead, A Gold Short Too Far.

  183. Cory

    My human nature always tells me that I’m right when I make a trade. I used to stalk a trade and then go all in, and when it went against me at some point, I had no consistent way to deal with it. By laddering I assume I’m wrong, and it let’s me trade more volatile stocks or thinly traded ones. I don’t place a stop because I believe that the big boys can see it, whether they can or not. I just start my ladder and have my mental stop 1-2% away. I always buy or sell when nobody else is, trading is an art and I try to be contrarian along with Gary’s wisdom.

  184. 86d4life

    Cory,
    Thank you for sharing that. As you add positions, do you keep your initial stop for the whole ladder or does each rung have it`s own stop? So, in effect, your rungs are stopping out in a ladder process. Thanks again, really apreciated.

  185. DP

    Cory —

    If stock turns earlier than price reached the bottom of the ladder, you basically missed the trade for certain extent.

    And you never chase, right?

  186. Cory

    That’s what I mentioned in one of the earlier posts. If I don’t hit the bottom rungs of my ladder, it means I’m already making money and I have to say oh well, because that’s what were trying to do here.

  187. Cory

    That’s also why I like the double ETFs. I just want the price movement and I don’t have to be as fine or have as big of positions. The way we trade here, we try to hit bottoms in cycle timing bands. I take a lot of risk there because risk is actually the lowest, and cycles help a lot.

  188. Cory

    I have all the bad qualities; I’m impatient, I position size too big, I hold on to a position too long. Buying at times like now during IT lows on capitulation volume, especially if we are blessed with an Old Turkey bull trend environment like silver was in, are the only way I’ve ever made big money. All other times are just chop without cycles, and even then it’s tough.

  189. Éamonn

    Jim Rogers speaks of being short a big US bank. Could it be Bank of America? That bank is mentioned a lot on ZH as having troubles. Anyone have any thoughts?

  190. TrendFriend

    That’s what being short a big bank means. I saw a interview with someone who said the same thing. They do biz with BAC, so they don’t mention it by name.

  191. MrMiyagi

    So…..
    Now that the S&P has downgraded the USA to AA+, I suppose all bets are off for a while.

    Gold up like a rocket or not.
    US stock market tanks even further maybe.
    QE3 sooner than expected.
    General selloff, mayhem and more people losing their shirts.

  192. jeff

    S&P downgrade might do nothing to the market. Japan was downgraded earlier this year and their bond yields didn’t increase, nikkei rallied (till this recent downturn) and Yen appreciated. If you think about it, the downgrade is a rubber stamp – the US debts (like Japan) are denominated in its own currency so they can always print and pay them off. Solvency is not an issue but the US can destroy the currency by monetizing debt (which is bullish for gold).

  193. flaunt

    Heard the comparison to Japan. Not an expert on Japanese debt but I’ve always heard it said the own most of their own debt, so the downgrade probably wouldn’t affect them as much. U.S. debt is owned far and wide around the world. I wouldn’t assume it’s going to have no affect here.

  194. Poly

    This had the hallmarks of a major blow-off from July 1st.

    Now you want a piece, even if a sharp correction is on the cards, this bull will save any position.
    Now the ECB will support Europe and the US downgrade plus a likely QE3 is going to see a mass exodus of the dollar. I think gold goes absolutely ballistic!

  195. Europe

    Cory,

    you spoke about the double etf, but in europe, i.e. The netherlands, we can go long/short on comodities with a leverage of 2 to 13.

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