BACK TO THE BEGINNING

Bear markets are about cleansing the excesses of the prior bull market. Secular bear markets are about P/E compression, a move from extreme overvaluation to extreme undervaluation. The current secular bear market is now in its 11th year and in the initial phase of its third leg down.

As many of you know I expect next year to be one of the worst years in human history, at least economically speaking. Certainly on par with 1932 if not worse. This should drive one of the worst stock bear markets in history. Before this secular bear market expires we need to cleanse all of the excesses that were generated during the final bubble years leading up to the top in 2000.

I’m expecting at next year’s four year cycle low, which should occur in the fall, that we will see a true secular bear market bottom. That means single-digit P/E ratios, along with a dividend yields on the S&P above 5%. I also expect this leg down will erase all of the gains during the bubble years from 1995-2000.

However I don’t think we will be quite out of the woods yet. We will probably have to endure one more nasty leg down in this secular bear market before we put in an inflation adjusted low, likely it will occur in 2016 with a final bottom slightly above the 2012 bottom. At that point we should begin a new secular bull market that I think will be driven by truly astounding discoveries made in the field of biotech and nanotechnology.

But first we have to get back to the beginning.

379 thoughts on “BACK TO THE BEGINNING”

  11. Éamonn

    Gary Savage and SMT got a mention in Jim Puplava’s Financial Sense Newshour today….wow! First Marc Faber, and now Jim Puplava. Holy Beep

  12. Danno

    Warning about ZSL (double short silver).

    Due to the math, there is very little chance that ZSL will exceed $30 even if we experienced a couple more legs down and silver tagged $19.

    So realistically, ZSL is very unlikely to surpass the mid twenties.

    I would stay away from ZSL. It has other problems as well related to the way it is ‘recalibrated’ at noon in London (7am ET).

  17. Éamonn

    The audio is from: “Jim’s Big Picture: “Knowing When and What to Buy in Precious Metals”
    Also Kathy Derbes on the heavy buying wave of physical precious metal during the recent price correction, and your Q-Calls”

  18. Jason

    Gary,

    At any point along this timeline do you think it would be worthwhile to buy physical bullion? To me, that seems like betting on hyperinflation, which I don’t think is likely. Do you think hyperinflation is likely in this timeline?

    I ask because I have some friends who are hell-bent on stacking physical as their only investment strategy.

  22. ...at ease

    Gary,
    It was “Greg from Michigan” who promoted your site as you are a great technician. Listened to the radio broadcast. Thanks for sharing it Eamonn.

  23. Éamonn

    I thought “Greg from Michigan” sounded familiar. I’m sure I’ve heard that voice on Contrary Investors Cafe……..*cough*

  30. Brutus Maximus

    one of the worst years in human history, at least economically speaking. Certainly on par with 1932 if not worse…..
    For years and years many economies had to survive with 10-20% unemployment – and they did –
    we have socialistic welfare states in many countries with a strong support system but one big think Gary is missing here in his Armageddon views (in which he is certainly NOT alone – many subscription based blogs beat the same drums)over 70% do not own any stocks anymore – and they do not care if IBM would trade again @ 90.
    I guess Gary likes to think ahead and publishes these predictions but I trade what I see and for now the trend is down – nothing more.

  31. Keys

    Nice scare em blog post…don’t disagree…

    The only thing I will add is that the future will most likely also include a return to higher interest rates, which will bankrupt the US one way or another and personal credit will no longer exist at the bottom. IE credit cards and like will become debit transactions only. Housing will most likely fall to intrinsic value which is what…man got a number in my head but the number is too scary to mention….rent is definitely a viable option.

    The best we can hope for is a quick purge, but the fed will prolong things and make this depression at least a decade long….Ben is no longer a moron, but is now an F’ing moron…anyways I guess it takes time for the world’s best to realize what a bunch of BS all their education is worth.

  33. JEFFtheFLEA

    Gary

    why are you so big on biotech. I know its developing and comeing up on new developments, but what are you reading or studying that would give you such a expectation?
    Im not saying your wrong at all.Its just i have not heard very much about it ( no suprise there). Who, what , where are you gattering this conclution from?

  35. Gary

    Jason,
    I don’t think we are going to hyperinflate in the near future but we are headed down that path if we don’t stop piling more and more debt onto the government balance sheet.

  37. BinBad

    thats just like some people ie they always think conspiracy theories. i wish there were more opportunities to make money in these bear markets. even gold takes a beating – at least initialy. whats a guy to do just stay cash?

  40. BinBad

    i think i am my biggest enemy – trading wise, you are correct cash is a position! its hard to fight that trading high though and just stay cash, losses usualy cure me quickly of my itchy trading finger though!

  43. BinBad

    been there done that, sometime i overanalyze and by the time i decide i miss 75% of the up, gotta stay sharp and ready and jump before the herd moves, either you make dust or you eat dust. i always like to hear garys slant on whats going on, very unique and ahead of the curve,

  44. BinBad

    of course in the end you have no one to blame but youself though, just gotta be focused, if you cannot focus then just walk away. good luck to you guys

  47. fongs

    Bravo! this will erase all the excess liquidity that caused the dotcom bubble(2000), the housing bubble(2007) and the safe-haven bubble(2011). I just hope that it does not lead to any war.

  48. gideon

    Alhough much of the time stocks and gold trend in the same direction, over long time periods they are inversely related, and therefore the Dow Gold ratios is to me perhaps the single most important piece of info for a long term investor. I think after gold’s correction here it will go up strongly starting 3-6 months prior to stocks bottoming, and its ascent will far eclipse stocks. However, the really big upmove in gold should occur after stocks make their real bottom, during the period in which stocks are consolidating for their new bull market(in EW, gold’s wave 5, stocks wave 2 of 1). This will either be in 2015/16 or 2020ish, depending how this plays out.

  50. Harry

    I think 2016 is a good guess. These secular bulls/bears in stocks tend to last 17-18 years (1929-1947; 1947-1964; 1964-1981; 1981-1999; 1999-2016?).

    2016 would also make sense as a deflationary year – it should be Year 2 of a 3-year dollar cycle and the 8-year cycle low in gold.

  51. Elaine

    Mark Hulbert has an article on MarketWatch about stock dividends paying more than 10 year treasury notes. Looks like Gary is on the right track.

  53. thedocument

    Well said, Gary. I unfortunately share your dismal economic outlook for 2012-13, though I still have August labeled as a yearly low and believe there is a good chance we get the 4-year low in spring rather than autumn next year. I reserve the right to change my mind by spring, though!

  54. Éamonn

    Harry, if you are there, thanks for sending that link with money supply & Mises Institute. Hope you are making a fortune for you clients there :o)

  55. Greggy_M

    Gary,

    The mention I believe Eamonn was referring to was my Q line call. I’ve thought for a while now that you would make a good guest to speak on the technical analysis portion of his program. I called in last week asking him to invite you on. He said the producer would look into it. Keep up the good work.

  57. Danno

    I think the USA is heading for a total and irreversible implosion. It will be of such magnitude that the country will never recover.

  58. wmp

    Duuuude,

    Kind of the same thing Gary has always embraced…revision to the mean. Based on your charts then, at what level is the mean for silver? It looks to be much lower than the lower $20’s, i’d gusee the mid to upper teens.

  59. Duuuuuude

    WMP, I did not mean to infer a price. I think I just found the similarities striking. I think the pattern applies because silver was so much further stretched than gold was. I believe ultimately silver will follow gold as it goes higher.

  64. Hack

    If you think that the US is going to implode then why are you on this blog? Shouldn’t you be busy buying a cave in Arkansas and stocking it with food, water and ammo?

  65. Gary

    Silver isn’t in a bubble yet. Precious metals are still in the second stage of the secular bull market.

    When we get to the bubble stage we won’t get a measly 80% above the 200 DMA. Silver will probably be 200-300% above the 200 DMA and gold could rise 60-100% above the mean also.

    During the last bubble gold rose 300% in one year.

    We are still a long way from that kind of frenzy.

  69. Danno

    Hack,
    I did not mean to suggest the USA would implode immediately. If I had to guess I would say the implosion will come before 2030.

  71. Hack

    I’m not worried about the US imploding, we survived the Civil War, nothing can match that. But watch the Chinese. They can’t stop 1B people from rioting so there will be blood in the streets. This happens every 100 years or so, so it’s nothing out of the ordinary for them…

  73. Danno

    I would go into greater detail but it would require talking about religion and I won’t burden the fine people here. Let’s just say, it has everything to do with the USA’s relationship to Israel. I’ll offer one tip. If you see the USA pull support for Israel… brace yourself. This is the primary reason I no longer support Ron Paul.

  74. Danno

    To all you guys who bought (or wanted to buy) this guy’s stuff…

    Donald Lapre was found dead in his cell at a Florence facility Sunday morning.

  75. aklaunch

    I think Gary’s high percentage/probability trades are very cool. If i where a multi millionaire and had to move that much money around i would only buy stocks at 3-5 year lows hold for a year or a little more and just wait for the next end of the world to come. Making a cool couple hundred percent every few years on very high probability trades and then waiting out the rest is classy!

  78. Tiho

    We won’t make a new nominal low – that is already in during March 2009 low. You already missed it. However, I do agree that we will get a new inflation adjust low later in the decade.

    This bear market will disappoint many many deflationists like Prechter, Shilling, Rosenberg, Roubini and Edwards who you seem to follow.

    By 1932 Dow crash a lot. By 2002 Nasdaq also crashed a lot. That ws the nominal low for Dow in 30/40s secular bear, and that was also the nominal low for Nasdaq in 00s/10s secular bear.

    You are also wrong about another thing, the excess does not lie in the corporate world as much as in the public world. So therefore, since you are so extremely bearish, why are you recommending such dramatic lower corporate equity prices?

    Shouldn’t you be recommending to short Government Bonds instead? After all, they are win a 30 year secular bull which started in 1981 and will end very very soon. That is the bubble to short… while stocks just move sideways for majority of the decade like in the 10s, 30s/40s and 60s/70s.

    I bet you we will not make a new low below 666 on the S&P!

  88. Gary

    Tiho,
    Ask Japanese bond traders how well they did shorting bonds during the last 20 years. We are in the same situation, actually worse, but now you see why I don’t want to short bonds.

    Bond cycles turn very slowly.

  92. Docjohn

    Tommy D:

    I am getting a small piece of SDS at the open. Will add to it if S&P drops below 1100. Will sell no later than Thursday.

  93. Gary

    As long as your position size is 10% then you can’t do any serious damage to your portfolio even if the market were to reverse and pop back above 1220…which should be your stop BTW.

  94. Danno

    Alex,
    Thanks. Wish I could take credit. Just years of having it explained to me coupled with witnessing events unfold just as predicted.

  95. Tiho

    Gary,

    Why would I ask Japanese Bond traders that? You would be insane to short JGBs during periods of disinflation. Let me explain some history.

    If you recall the Japanese market cashed in 1989 and started its secular bear market which is still in process but about to end shortly. Obviously, I’m talking years here for investors like myself, who are students of history and cycles, not minutes for trading junkies.

    What were commodities doing during the 1990s Gary?

    They were in a secular bear market. What are commodities doing now?

    They are in a secular bull market. Brent Oil is up 10 times in the last decade. That is right, not a typing mistake – 10 times. Many commodities are up 3 to 5 times as well. And this is not the end, because all great bull markets end in a bubble. Stocks did into late 90s and commodities will in several years from now too!

    Therefore, just like the commodity bull of 1940s and 1951 blow off top led to the end of the bond bull market than, today commodity bull of 2000s and the upcoming blow off top by middle of this decade, will lead to the end of the bond bull again.

    We could be there pretty much around here, as every man and his dog are now piling in, creating a short of a century!

    So I bring my point back to Japan. Why short bonds during the disinflation of the 80s and the 90s as commodities were in a secular bear market?

    Its suicide to do so and I feel so sorry for those who did it. Looks like they didn’t do their research right.

    Overvaluations do not matter as much as primary secular trends. Look at Nasdaq from 1996 to 2000 or Gold from 1978 to 1980. So shorting based on valuations alone is not a good investment.

    Today we have a commodity secular bull market, unlike during Japanese era of the 90s, so lets just see how long this bond buying panic lasts…

  98. Gary

    Tiho,
    Hey, If you want to short bonds as the global economy falls back into recession/depression be my guest.

    I think I’ll pass on that trade.

  99. sophia

    What if Europe solves its issues? Don’t you think that we could have a major rally in stocks/selloff in Bonds? Danno? WDUT?

  101. Gary

    Sophia,
    There is no way to “fix” what’s happening. All the politicians are doing is making it worse.

    The only cure that has ever worked in the history of the world for a debt bubble is to bite the bubble and suffer through the depression.

  102. sophia

    Gary,

    I know…but what’s keep me alert is that I think that some of the move is now overdone..The DAX and the CAC40 are higher than they were in August/Sep with the same level of US markets…
    That makes me thinking that just a little bit of good news and this market will overshoot to the upside…Shorting here is fine, but with a very tight stoploss

  103. Danno

    Sophia,
    As to how the problems in the EU will affect our near term investments I would absolutely defer to Gary. What I know about the EU long term (or whatever it will be called in the future) is that it will be the world’s leading military power, which suggests the EU (revived Roman Empire) will only grow stronger and stronger. But, since nothing moves in a straight line it is still possible that in the shorter term their Euro currency could suffer further or even be replaced.

  106. DP

    Just learned that buying short-term debt of good European companies is the favorite Swiss investment banks strategy besides PM speculation.

    Anyone knows if such tools are available?

  117. oa92000

    if US slides into recession prior to elction, what is the chance that Republicans get the blame? Might republican road blocks back fire?

  120. Anthony

    The next two weeks will be quite vibrant for gold. I just purchased 200 Oct 170 calls, as my time series forecast line on the yearly has held under the price of gold. Combined with more than adequate spacing beneath dma 28,-14 I fully expect to make 300% on these calls next two weeks or so. Good luck to all enjoy this blog and comments. Comments are a blogs goldmine.

  122. Gary

    Unless you’re sure you know what the market is going to do during a selling climax it’s probably a bit risky to buy gold at the moment.

    If the market has a hard break lower we could get panic selling in everything and the baby might get thrown out with the bathwater.

    Missing one week of a potential rally isn’t the big of a price to pay to wait and see what happens during the coming panic.

    You never know, you might be able to get gold $100 cheaper as it could test the low or maybe even a slight move below that.

  125. Gary

    If I’m right about an intermediate low then we need to see some kind of panic selling climax. Even a daily cycle low should trigger some kind of hard selloff.

    We haven’t had that yet. So I’m assuming it still ahead of us. The fact that the dollar is very strong today probably means the close will be pretty weak.

  128. Movax2

    I appreciate the comment Gary, I see what you are saying. Gold looks really good here though. Just my opinion, of course. 1640 is a short term breakout, so it is something to watch. Plus we are at the levels on the Euro where it really started to tank last time they said the Euro was finished – from around these levels on the Euro and lower gold did very well. Of course if we do get a bit of 2008 type selling, cash is still king – for now.

  129. Le Fou

    Question:

    I have ITM SPY puts that I bought last week. Gave me a great day on Friday, but this morning they seem to be off the market.

    SPY is down and so are the puts.

    Can someone explain?

    Le Fou is confused.

  131. Anthony

    My timing model shows the int. cycle in gold has been reached. I’m certain it’ll not only hold but provide sizeablh the returns over next week or two. We’re good to go up to DMA. Since the DMA 28,-14 is downward sloping we’ll need a push to breach that to upside so I’ll take most profits on my newly initiated positioned there.

  132. Gary

    The SPY isn’t down much at the moment so you have theta burn that is probably offsetting the minimal decline in the underlying.

  133. Gary

    Anthony,
    Does your model factor in the unpredictability of a selling climax in the stock market, or even a normal 1-2-3 reversal that would be a normal bottoming process?

  134. Le Fou

    Thanks Gary,

    The SPY puts are OCT. Does it make sense to roll them over into NOV/DEC, when I only plan to hold them a few more days this week?

    TIA,
    Le Fou

  135. coolkevs

    Not looking for the worst year in human history myself – I think we have been living through the worst years already. Let’s see – what has already collapsed – Nasdaq in 2000, still more than 50% off its trading high and that was before AAPL got on fire. General markets in terms of S&P, collapsed over 50% twice in a decade. Our currency – the US Dollar – has collapsed more than 50%. Crude oil is down almost 50% from its 2008 high. Financials have collapsed and have returned to low levels. Even the giant squid GS is down 50% with talk of them going private. Silver is down 40% or so, so that’s a collapse. China in terms of Shanghai is way down and lots of small-cap Chinese stocks are down at 0. European stocks have collapsed again in the last few months, although the Euro hasn’t been hit as hard for some reason. Gold has been down 20% or so recently. The only thing I see right now that haven’t collapsed are US Treasury bonds – are these the next target?? Most of the time there is an inverse relationship between stocks and bonds – the money has to go somewhere, right??? Maybe we can give some money to the folks on Occupy Wall St so their student loans can be forgiven? Housing has collapsed and is at very low levels. Employment in the US has collapsed to historically low levels looking at U-6.
    Trying to be constructive here – believe me I was a bear of the bear of the bears in 2008/2009 and made a killing. This time just feels different. There is no Bear Stearns, Countrywide, Lehman Brothers. We all know that Europe is in trouble – Greek will most likely default – could that be a BUY? A lot of the excesses of that time seem to have been squeezed out – companies have made themselves leaner and meaner. There is still a long way to go for sure, but to me the worst year in human history would require famine, pestilence, lack of access to grocery stores and gasoline, nuclear war, a mark in our hands and foreheads, etc., etc. I just don’t see that yet – indeed, I could be wrong and I will admit that I am wrong – I have been wrong the last 20% down or so. If we collapse to the 500 level that Gary shows, the least of our concerns will be writing comments to a blog.
    In Demark land from Kevin Depew at Minyanville, we have TD Sequential 13 DAILY BUY signals in place for SP, INDU, NDX, and RTY, all awaiting confirmation with a close above the close 4 price bars earlier. These signals are good for 12 bars. We also are finally out of that wicked 1-4 MONTHLY SELL Setup window – one less bearish factor weighing on the market. And 3 more months of the grandaddy of them all SELL that recorded on the YEARLY in 1999 that will expire on Dec 31.
    The DAX did not respond very much to its recent DAILY Sequential 13 BUY, tho – a muted response in the range of 5130 to 5730. It’s getting a bearish price flip today which could see follow-through tomorrow with a lower low.
    Gold held its 1619.89 TDST line and will record a bullish price flip today. A high above today’s high tomorrow would be good news for precious metals.
    Thanks for reading and even Little Orphan Annie in the midst of the First Great Depression sang “The sun will come out tomorrow!” not until 2016!

  139. Gary

    Since it’s late in the cycle the move should happen this week so it doesn’t really make much sense to roll at this point IMO.

  141. Anthony

    Hi Gary,

    My model is showing that a waterfall selloff within the next weeok or two is highly unlikely. Based upon positioning of the major indices relative DMA in conjunction with angular displacement of said instrument I don’t see it. I’ll re-evaluate next week or so. As for 1-2-3 reversal I dont know what the definition of that is. My trading reversal decisions are based on time series forecast data , linear regression analyisis will a special emphasis on DMA. Thank you for all that you do here buddy. Like your passion and straight shooting no bs analyisis. Continued success I know you’ll go far just remember us little guys!

  142. DP

    Antony,

    Is your DMA 28,-14 is 28 Daily MA 14 days backward shifted?

    Then you get 14 days gap behind current date.

    Are you extrapolating it to fill the gap? Linearly?

  144. ver

    SB:

    You can say that again! GDX is underperforming gold, looks like an ugly bear flag. We may (hopefully) get a total washout like we did early August on a similar setup.

  148. Gary

    Because you don’t know how a climax selling event in the stock market will effect silver.

    Just be patient folks. Missing one week is a small price to pay if everything starts getting thrown out the window later this week.

  167. Poly

    Not much would surprise me, but the highest probability scenario for gold IMO would be for it to roll over, likely starting this week or next and move itself down into it’s final ICL, probably by Nov 1st-4th at the latest, likely a week earlier. $1,500 should hold firm, but those recent overnight lows in the $1,530 area should be challenged.

  179. Le Fou

    Haggerty,

    SPX tagged the August low. I’m expecting a breach, but if we don’t get it I’m cashing out at the close

    Good trading
    Le Fou

  181. Gary

    I doubt the low occurred today. The dollar just broke out above 79. There’s nothing but clear sky between here and 81.

    A bounce off the August low is expected but the fact that occurred on the first day of the week is not a good sign. I suspect this week is going to get really ugly.

  185. DD_Ing

    The dollar is getting stronger as the day continues which will continue to pressure equities – so I am with Gary….more selling to come…..

  187. MrMiyagi

    5 down days in a row bouncing off lows from September 2010.
    If this support breaks, it is going to be very very ugly. It may also bounce here a bit.

  189. Gary

    Intermediate degree bottoms tend to be pretty ugly, and if I’m right about re-phasing the yearly cycle low, then this should be not only an intermediate bottom but also a yearly cycle bottom, which suggests extremely ugly.

    This is why I keep stressing there’s no need to jump the gun on the metals at this time. Wait for the panic selling phase to run its course.

  191. Gary

    I would suggest you might want to control your urge to trade. Wait till you get the odds in your favor. Nothing about this looks like a final low. At least wait for a large BoW day before trying any longs.

    Impatience and over trading almost always end up costing one money.

  192. ckpc

    Sold my UUP at highs of day +28%
    Sold 1/2 USO puts for +60.6%

    Holding remaining USO puts, plus small SDS position.

    90% cash now, waiting for Gary’s call.

    I will sleep well tonight. 😉
    Thanks Gary!

  196. St. Deluise

    wow. stocks about as popular as a hunk of poop in a swimming pool here.

    last week /es had one of the bulliest buy/sell volume divergences i’ve ever seen. between the 27th and today that’s almost entirely been negated. whatever the strong hands were so certain was going to happen seems a lot less likely today.

    been takin’ ‘er easy otherwise. actually starting to watch /zn and /ab for any weakness as they move to retest their OpTwist highs. it was curious how they just blasted off then immediately erased that pop a few days later.

  197. William Wallace

    The only difference between now and 2008 is the fact that the market tagged the 50% fib level from the highs to the august low during this consolidation instead of during the bear market rally, before putting in a new low. Now the bear market rally can begin.

  198. Le Fou

    Confession time,

    I sold the last of my SPY puts for a very good price at the close. I think Gary is probably right, but my account has never been worth as much as it is today, and I’d like to enjoy that for awhile.

    Still holding about 15% in UUP Calls.

    Great trading,
    Le Fou

  200. 86d4life

    Le Fou,
    Good for you. Tough to go broke taking profits. With what this game has turned into, it almost wouldn`t surprise me if the Ball Headed Wonder(Uncle Benny 🙂 came out about 9 pm somenight to anounce another round of porkulus. Started trimming lightly today,euo & spxu. I go along with Gary on this one. Watching the after market sell off continue suggests something brutal. GL to everybody.

  205. Eriksven

    Gary,
    Could you add a BoW and BoS definition to the terminology section on the premium site, please?
    As a beginner, I want to know which ticker to look at, how much volume, etc. would define a BoW day.
    Thanks,
    ES

  207. ckpc

    Thanks SB. I’m heaving a sigh of relief to be booking profits, and waiting for Gary’s call.

    I just cannot thank both he and Doc for all the good advise and guidance I’ve received since signing on 9 months ago.

    But best of all, I’ve learned SO much! And you, SB, as well as so many others on this blog have been mentors of the highest degree.

    My most sincere appreciation to you all.

    Can’t wait to see what tomorrow brings! Prosperity to all, is my hope.

  210. Hack

    Sir W Wallace;
    Thanks for your market reminders throughout the day. It’s nice to have reference points. And congrats on holding your short…it’s tough when the noise level is so high…..

  213. Le Fou

    Haggerty,

    More profits to you. With the AH bump, my guess is that I got out too soon, and you’ll do very well holding on. Still, I’m very happy with the result of the last two days.

    I may get back in if there’s a bounce tomorrow or the next day, but I’ve been burned before by being too greedy. Markets move too much overnight these days, and it makes me skittish.

    Good trading,
    Le Fou

  216. Liquid Motion

    Gary,
    Alarmist calls ?
    Could you outline what will be the cause of the stock market correction into late summer / fall 2012. The washing out of the excesses and reversion to the mean are the by-products of the 4yr cycle low.
    Will there be an epiphany where the markets wake from their denial phase…?
    IMHO I do strongly believe that the DOW/Gold ratio is headed for a ratio of 1:1. That could imply a price of $6-10k/oz. The timing of this coincides with 2015-16.

  222. Russell

    The USdx went up .8 during market hours for a .21 rise in UUP. After 4pm the USdx went up .07 and UUP went up .23? Isn’t UUP increase directly related to USdx?

  228. Veronica

    WW, I’m getting a bit superstitious about revealing personal positions so all I’m going to say is that my system is long right now and very dangerously so.8 straight winners and one loser now so the odds say that this trade may well be a loser, and it has not established a stop yet.

  230. KAL

    LOL at JefftheFlea!

    Great timing on the Beanie call!

    ?Donde esta Beanie?

    Still holding EUO with 1% trailing stop in trading account, got out of retirement accounts with Gary’s call for cash earlier. I’m a happy camper… Also learning not to short and haven’t touched the options in months…

    Thanks Gary!

  240. Le Fou

    D,

    I don’t trade futures, and I’m gathering that you don’t either. The dollar trades around the clock on both a cash and futures basis, therefore it’s value fluctuates accordingly. Unless you trade futures, you’re only really concerned with the cash basis quote and the UUP ETF.

    Good trading,
    Le Fou

  242. Harry

    Eamonn, you’re welcome. That data page has come in handy more than once. And yes, my investors are very happy so far this week 🙂

  245. Ken

    Has anyone seen our good friend Bennie? Last I heard from him was a few months ago when he said Gary was crazy call in for a bear market and everyone should get long for his Dow 36k call. I wonder how all his out of the money calls on American solar panel manufactures are doing these days?

    If and when Gary’s call for Bernanke to panic print $10’s if not $100’s of trillions of dollars Bennie’s call for Dow 36k might be correct. Too bad he’ll have blown up his account(s) riding this bear down to S&P 500 looking for Dow 36k and the money he’d make off the trade would be absolutely worthless in real terms.

  246. Poly

    My favorite scenario here is seeing gold get caught up in this final panic sell off. This should be the last daily cycle for gold and we should be just 12-25 days from a major ICL! The final sell off with equities could be rather nasty seeing gold drop a quick $150.
    If it could hold above the last ICL, technically it will be in great shape. With a complete gold sentiment reset, equities and miners sentiment in the gutter, sweet COT positions, extreme oversold conditions and a fresh new IT cycle, it should be back up the truck.
    Remember, ICL come 2-3 per year only, they are the best way to “hit a home run”.

  250. Shalom Bernanke

    Joseph Lemma,

    Nothing in particular about SSRI, for the most part they all trade together. More important than individual names is to get the sizing (risk) correct, then timing the overall turn in miners, IMO.

  257. Shalom Bernanke

    I’m getting smacked pretty good on most of my holdings, but what is more concerning is that the damage done to the $HUI implies that a sharp bounce is all we get before resuming a downtrend. If that is the case, I’ll be forced to trim into the A-wave, rather than hold as long as I’d like (through the B wave pullback and into the next C)

    In short, too much damage to the HUI means a sustainable uptrend will not resume for a longer period of time.

  259. Shalom Bernanke

    Haggerty,

    You got that right. I’m not forced to sell into this, but I’ll have to time my next entries very well to have a shot at making money on this round.

    Check out RIC.

  260. kmisak

    I think RIC is victim of a National Bank downgrading today (from outperform to perform). Last time it was on sale like this I did not buy it, so I have today.

  264. Gary

    no panic yet. But if we do get a bottom here then we are back to the first scenario of a minimal break followed by another left translated daily cycle.

  266. Ohio Rob

    Alex,

    How about a chart read on ERII? Rumors flying that GE is looking to acquire them. It’s performed well relative to the market and it’s sector, let me know what your TA says. Thanks!

  270. Shalom Bernanke

    WW pointed that out the other day, and I added it looked feasible, but it’s not enough for me to buy on alone, as momentum has turned very negative. The sharp pullback without much panic is also what’s likely to keep a lid on the upside when it turns. The way things look, it’ll be a sharp rally but in the context of an overall lower trend unless something changes very soon.

    If it gets bad enough, the A-wave might not even last more than a week, even though it makes decent gains. Basically, only buy position sizes one is willing to hold for a longer time frame because they might be forced to.

  272. Poly

    I figure we’re 2-3 weeks from a gold ICL, so likely jumping the gun a little.
    But miners have been leading gold and they are so beaten down and oversold, that I picked up a starter position in NUGT @ $25.76. It’s about a 7.5% position, significant enough to catch a rocket off a low and most likely late enough in this epic carnage to weather further beat downs.

    Miners rocketed some 14% in just two weeks before the last July 1st ICL.

  273. Greggy_M

    Gary,

    If your scenario plays out, when do you expect the dow/gold ratio to reach 1:1? The 4 year top coming out of the 2012 bottom? Any thoughts?
    Thanks

  274. MBS

    Gary-
    Anyway the daily cycle bottomed in 31 days last week and managed to roll over in a few days? Maybe we are on a new cycle that is only 6 or 7 days deep?

    Thanks

  280. Neo

    One more question please ?

    Do you still think $Usd will go to $81 ? Or shall we go out of UUP position ?

    Thks again.

  281. William Wallace

    Nasdaq found support on 2300 as I have been expecting, this seems to be playing out exactly like 08 as I have been pointing out for months, especially if the bottom is in today. Let the bear market rally begin!

  284. William Wallace

    I expect that gold will bottom on the 300 day moving average ($1460-$1480) if it loses the 200sma, which I think it may if tested again. The weakness in miners suggests to me that we may see further weakness in Gold, I cant imagine how much lower the miners will go so I assume they will bounce before gold does.

  286. Gary

    Gurvir was working on the payment module. I’ve notified him that the site went down. I expect he will get it back up soon.

  287. sophia

    W2,

    wow, well done, you had this 2300 mark for a while and you were RIGHT my friend! Hope that you are going to take your wife out with the proceeds, there is only one life!!

  294. Poly

    at ease,

    As a long term (multi year) core holding, I would say this is a good spot to start building a position.

    TGLDX is primarily a play on miners.

    WW, don’t get any idea’s now 🙂

  295. MrMiyagi

    WW
    I think today’s bounce is due to the BB crash yesterday, I doubt it will last more than a couple of days. As Gary mentioned though Fridays jobs report may be the pivot point.

  298. Natanarchist

    As much as I would love to pick up the PM’s much lower, I am having trouble seeing that happen. Yes it is a Bizarro world so anything is possible. But there has been a huge reduction in Spec interest in Gold/Silver on the Crimex where we apparently get our price discovery (rolling eyes.) There is not many Specs left to sell. Same in Silver. Its 6-1 leverage now. Its almost a cash market by Crimex standards. If the Spec longs still in the market haven’t sold over the last two weeks, why sell now, especially when the smart money is long at levels not seen in a while and short interest at 2008 levels. this just looks like a bottom(ing).

    Gary’s COT info mirrors this.

    “Gold and Silver Speculators Have Left the Building”

    http://www.kitco.com/ind/Trendsman/oct042011.html

    The Physical market is very strong in gold and silver right now as well. Anyway, if we do go lower even if only a spike I am making my first buy at 1550. If it goes below 1600 but not reach 1550, I will by around 1600. I am going to go with 15% to start. I can handle any draw down and don’t expect this to last more than another 4-6 weeks if we haven’t seen the low already. When I buy it will not be for short term trade. Old turkey. I have been out of Gold in my account for a few months so I want at least a small position.

  299. William Wallace

    Miyagi,

    I hear you sensei…we may get a follow through day tomorrow and then rollover, but we may not put in a new low until after a bear market rally runs its course.

  300. Gary

    There is so much indecision the only thing I’m confident in is that this is going to continue to be a very tough market to trade.

  301. Poly

    Natanarchist,

    Good post and I couldn’t agree more.
    Every single technical indicator I follow in my models is flashing ICL levels.
    The only problem is the confirming cycles, both the daily and weekly counts, they are both short about 2-4 weeks IMO.

    These big ICL’s often get us drawn in a little too early, only to dump us for one last time right at the ICL. Patient investors would be fine.

  302. Rob L

    Poly,

    If we do begin to rocket higher this week or next, will you wait to put the bulk of your capital to work only when we are in the timing band for an ICL, or will you buy into a potential head-fake rally??

  303. NJ

    Gary:

    Why is today’s selling not panic selling? What do we look for signs of panic selling vs. non panic? If this holds into close, gives us a good chance to form a swing in the SPX tomm. Not to mention the BoW so far is helping as well.

    Boy….guess my fingers are itching to buy which as a contrary indicator = Lower prices!

    Thanks,

  304. LowTax

    SPY Bow has dissapeared and never really got that big. I’m guessing these are irrelevant numbers so far, good for only a short pop. We need to see $300M+, and even those are usually early… I’m hoping to see S&P down around 1025-1050 before we rocket…

  307. 86d4life

    Poly,
    Agreed that a buying oportunity in gold is close at hand. I know from your previous posts that you play options quite heavily at times. Looking at gld calls right now, the volatility is getting high. What is your thinking at this time as far as how to play an entry? If we have a couple weeks before entry, maybe a drop in volatility, significant enough to make it worthwhile? Or just enough upside on the gld to plow through the volatility mess and still wind up in the green? Leveraged etf`? Thanks a lot for your insights. I have learned a pile from your posts.

  309. Captain Morgan

    I’ve been traveling most of the last week. Could someboby please tell me when the long UUP position was closed in the model portfolio? I sold my EUO calls for a nice profit, but am still holding long EUO.

  313. Captain Morgan

    Gary, yes found it. Sorry to waste your time with that kind of question.

    Sophia, Thanks, yes, it’s been a good trade and was tracking very nicely toward 21.80 until BB started talking today. I’m staying with it for now.

  314. wolf33

    still think get 1075 on spx and still chance 4 avalanche. it ain’t going to be easy.—-

    brek back thru 1075 might cause panic. still too orderly

  315. Poly

    Rob,

    Reversing and plowing higher right here would probably not be enough for me to add the rest of the capital, so I would stick with my decent core and positions added today.

    I feel fairly strongly about the cycle timing. I also want to re-visit those $1,530-$1,550 levels. Lastly, major ICL’s always seem to throw a curveball before launching higher. Of course the last one did not 🙂

    86,

    I love speculative options at ICL’s, but I want to be very confident an ICL is in before using them. Not there yet. Also as you allude, many have not given up hope on GLD yet, judging by the premium.

    Can’t see, but certainly can smell it!

  318. Haggerty

    Hui getting close to that 487 low that was printed on 6-16-11

    I looked at what the retracement level would be for the HUI at 61.8% and it puts the HUI at the 395 level.

  321. Shalom Bernanke

    I have to quit taking naps after lunch, lately every time I do I wake up to a sound ass-kicking. 🙂

    It appears nobody can hang onto their miners. We must be getting close because I’m having second thoughts about adding when Gary buys.

  325. Gary

    Gold is probably going to test those overnight lows and if the market ends down we still have the selling climax scenario on the table.

  326. Shalom Bernanke

    If this ain’t a D-wave in miners, I don’t know what is.

    I just pulled my stop, and have decided to ride them as low as they need to go. Gary was right, D-waves are tough to ride through!

  328. RJ

    Miners aren’t taking a haircut, they’re getting beheaded. Something seems up to me, a la 2008, and I’m inclined to believe SB might be right that we’ve come too far here for a quick recovery.

    CDE at 19.50. It’s hard not to pull the trigger here.

    Gary, if this isn’t panic, then it’s going to be carnage when it comes.

  329. Gary

    If this is a D-wave then gold should still have another $200 points to go. We have almost a $100 swing today. We could easily get another $200 in 3 days.

  332. Shalom Bernanke

    It’s worth noting that miners of basic materials are up today, like FCX and BHP while the precious metals miners were weak even when gold and silver were still hanging tough earlier this morning.

  334. Shalom Bernanke

    It will be awhile before most people want to touch miners again, and even longer before they are willing to buy AND hold. This will almost guarantee that traders cash out into rallies rather than push for more gains, capping the upside on a longer term position.

    These smashings typically take a long time to turn around in earnest. We’ll see a day or two before long where miners are up as much as they’re down today, but I suspect it won’t last.

    Buyers must wither be quick to sell, or in it for the long haul, IMO.

  336. wolf33

    going to dentist—wold like to see closse –think spx moves 10 points from 1080. which way? going to stay with my work. till it changes.

    g/l

  338. Shalom Bernanke

    One other observation to consider, miners typically have rocket-like bounces in between sharp selloffs, but not lately. This has been all one-way with no respite.

    I was aware it was possible we saw another ’08 or even worse, I just didn’t think it was probable. I might be wrong on that. 🙂

  340. David

    FWIW, in 2008 miners went down like this every day for weeks. SLW went from $20 to $2.50. This episode doesn’t hold a candle to that one — yet.

    The recovery out of that d-wave was just as dramatic. I doubt that this one will be any different.

  341. St. Deluise

    less effective volume in /gc now than at 1536 or whatever the crash A low was.

    SPY building a base here but would not rule out another marginal low.

  342. Shalom Bernanke

    Joseph L,

    Thanks, I’m doing ok. I knew this could happen and sized accordingly, even if I didn’t think it would. Overall, my losses are manageable although the beating in a few names is astounding.

    I still have too much digital confetti that I want to get out of. I’m still seeing straight. lol

  343. Shalom Bernanke

    Joseph L got me to looking at the longer term charts, and although it appears GDX and gold miners could have lower to go (HUI to 400 maybe?), many silver miners have already retraced 50% of their bull market gains out of ’08.

  347. ver

    I think Poly may have this one nailed re: miners bottoming ahead of gold. Gold may ultimately drop into a daily/intermediate cycle low to retest the 200-day in 2-4 weeks, but in the meantime the miners could rally enough to retest or make higher lows on the dip.

  348. LowTax

    3:47 BoW update shows NO SPY, which was there pretty big at the 3:33 update. This has been going on all day – in, out, in, out. Frantic, manic, panic. That’s not a bottom folks.

  349. Wav_ridah

    Don’t know how many of you follow Gann360 on twitter but the guy called for a pop once the VIX 4 day trendline was broken. He posted it broke about 20 mins ago. Nice call Gann.

  354. St. Deluise

    i’m actually looking at buyside volume normalized to candle dimensions. this is definitely being bought regardless of what some php code at the wsj says (or doesn’t say in this case).

  355. ver

    Perhaps the market’s next daily cycle will roll over quickly but miner sentiment ($BPGDM) has to reset a bit before another multi-day / multi-week washout.

  356. Kate

    DG or any EUO aficionados: EUO just tagged my 19.49 breakeven stop in the LAST minute. Would you recommend buying again in the morning or leave it alone at this point?

    Many thanks,

    Kate

  357. Gary

    Kate,
    We almost certainly have a daily cycle bottom in the stock market today. That means the dollar will be going lower for a while in the euro higher. You don’t want to buy EUO right now.

  358. MrMiyagi

    Gary, what is the usual length of a cycle low to the end? In other words, how long would this rally last and id it worth buying into.

  359. William Wallace

    Miyagi,

    If this is a serious bear market rally, like we seen in 08 after we put in a new low, this rally should tag the 75sma on a weekly…if higher the 200sma.

  363. intelliblue2000

    Just looked at the stock market chart a few minutes ago. The last 30 minutes rally was probably why Gary doesn’t recommend shorting the bear market.

    Gary – Is there a situation when it is good to short?

  371. Bill

    Hi folks.

    I agree the S&P et al reversal candles look bullish. But they did on Sept 12th as well. Daily price action of late has lower highs and lower lows. We broke down from the horiz TL on Monday … today could be a short covering backtest of that TL which is now resistance … the late rally sure felt like panic short covering. Just saying, we don’t have a trend up yet, so be careful.

    Gold bouncing off $1600 looks more interesting to me. This is what may take off, in my humble opinion. An up day tomorrow and I’m in.

  372. Greenspansconscience

    If we get a weekly close below 490 on the HUI it will be very bearish. As it is, we should probably get some sort of pop in commodities across the board as they are extremely oversold.

    HL looks like it is finally ready to rally (put in a hammer today).

  373. Bill

    I’m just a p-brain, and only trade what I understand and have experienced.

    I can’t think of a single reason for the S&P to rally, not w/un/underemployment at 20%, Corp greed and lying – I’ve been there and have seen it all. I have no faith in it.

    Further, the debt situation of the US, Europe and Japan hasn’t changed. There might be a S&P rally, and yes I’d take a trade if the SPY broke above the horiz TL it broke down from on Monday, but until that happens, I’m not interested.

    Gold on the other hand thrives when there’s massive debt. We’ve had a huge correction. Today’s selling after Monday’s buying must have shaken off many gold bugs. The swing was $80. We went down hard today, but did not make a lower low, we’re still in that trading range. I’m buying if there’s a breakout.

    The HUI used to be a tell, but to me it’s more bipolar now, following gold sometimes, S&P others. Performance wise it’s not performing, so I’ve dropped it off my radar, for trading, and as an indicator of gold.

    I watch gold now; just gold.

  374. Vodni

    Moody’s downgraded Italy by 3 points about 2 hours ago – I hardly remember seeing such a countertrend rally in GLD before close.

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