DANGEROUS TIMES AHEAD

Friday’s big rally on the better than expected employment report has now generated the kind of euphoria that often creates intermediate degree tops. This coming week will be the 18th week of the current intermediate cycle. As you can see in the chart below the intermediate cycle runs on average 18-25 weeks from trough to trough.


The time to buy “anything” is when the stock market puts in one of these intermediate degree bottoms. It’s way too late in the intermediate cycle, especially with the NASDAQ stretched 9% above its 50 day moving for anyone to be buying now. Now is the time for investors to be taking profits. And by taking profits I don’t mean selling short. I mean moving to cash.

The simple fact is that selling short is a fools game designed to take money away from retail investors. The only people that will ever make any consistent long-term gains by selling short are the very elite traders of the world, or big funds with massive research departments that can ferret out and find sick or failing companies.

What most traders who try to sell short fail to understand is that markets go down differently than they go up. This fact makes it very difficult to make, and more importantly keep, any profits garnered by selling short. 

First off, tops are often a long drawn out process. They tend to whipsaw short-sellers to death before finally rolling over. I would say we have seen a very good example of that over the last four weeks.

Then even if one does manage to catch the top the intraday moves are often so violent that they  knock one out of their positions. And finally if you mistime the bottom you will give back most if not all of your meager profits during the first couple of days of the new rally.

All in all, the best position for 99% of traders is to go to cash when a correction is due. As you can see by that first chart a correction is now due. That doesn’t mean that it will begin Monday morning or even this week. What it does mean is that it is now too dangerous to continue playing musical chairs with a market that is at great risk of a sharp corrective move.

The fact is that ever since the dollar put in its three year cycle low in May, trading conditions have changed. Trades had to become much shorter in duration and profits taken much quicker. 

Until the dollars major three year cycle tops that isn’t going to change. As you can see in the chart below we still have no confirmation of a major trend reversal yet. The dollar is still making higher highs and higher lows. It’s still holding well above a rising 200 day moving average and it hasn’t even turned the 50 day moving average down yet.

Once the stock market begins moving down into its intermediate cycle low it will almost certainly force another rally in the dollar, possibly (probably) back to new 52 week highs.That should at a very minimum pressure gold to retest the December lows, and if the selling pressure from the stock market is intense enough we could see another marginal new low somewhere in the high 1400s to low $1500 level.

I should point out that gold still has not broken the pattern of lower lows and lower highs despite the powerful rally out of the December 29 bottom. Technically gold is still in a down trend. That down trend may be reconfirmed when the stock market drops down into its intermediate degree bottom.



I know we all want gold to immediately return to the days of strong trending moves, long trade durations, and easy money. It’s only natural for investors to long for the good old days. It’s what causes investors to chase (in vain) the last bull market. Think of all the investors that are still chasing the tech bubble of 2000, or the millions of investors still trying to pick the bottom of the housing market, or more recently energy investors struggling to figure out why solar and oil service stocks have underperformed so badly for the last three years.
 
These are bubbles that have already had their day. They are never going to see those glory days again. Living in the past never made anyone rich. The people that get rich are the ones that figure out early where the next bull market is going to be.

That being said, gold is most certainly not in a bubble yet. But the last massive C-wave obviously topped in September. That was the largest and longest C-wave of this entire secular bull market. Once something like that tops it takes months if not a year or more to consolidate those gains before the next leg up can begin.

Analysts that are predicting $2000 plus gold for this year are just kidding themselves. Gold is almost certainly going to be locked in a very choppy, extended trading range till at least the fall and probably into next spring before the next C-wave can breakout to new highs.

As distasteful as it is, investors need to accept the fact that it’s going to be very hard to make money in the precious metals sector this year, and the only way to do so will continue to be with short-term trading strategies until we have confirmation that the dollars three year cycle has topped.

At the moment precious metal investors have the guillotine of the stock market hanging over them just like everyone else. Historically the selling pressure from an intermediate degree decline in the stock market will force an average decline of about 19% from peak to trough in mining stocks. Right now the mining sector is in a weakened state with the HUI holding below a declining 200 day moving average. That’s not exactly the best position to weather the intense selling pressure generated by an intermediate degree decline in the stock market.

My advice for precious metals investors is the same as it is for everyone else. Go to cash and be prepared to buy when the stock market puts in an intermediate bottom in late February to mid March.

329 thoughts on “DANGEROUS TIMES AHEAD

  1. Russell

    Gary,
    I re-read Jan 29th blog comments and I don’t understand how SOS for GLD in a timing band for a dcl brings back the D wave scenerio. Your comments on Jan 29th ….”Bernanke didn’t actually confirm QE3 Wednesday afternoon, but the market obviously perceived the Fed statement as a guarantee that QE3 is in the works. That has the potential to break the dollar’s rally out of its three year cycle low and derail the expected move by stocks down into a four year cycle low later this year.”
    I love the ability to turn on a dime when the market tells you something different, I just question how the above changed. I think we still have ZIRP now until 2014. Is SOS all there is to this change, or is the historical nature of A waves the bulk of this change. I always felt that you did not put 100% confidence into those who argued based on historical charts.
    I guess I’m just a disappointed “old Turkey”
    BTW, I’m still impressed by the 25+ % gain. I just want more insight into your crystal ball.

  2. KAL

    Good point SF Giants. I hadn’t looked at that chart recently, since the earnings announcement. That’s pretty big gap.

  3. Gary

    Russell,
    We all want the Old Turkey days to return πŸ™‚

    For that to happen though Ben needs to break the dollar rally. Still no sign of that yet.

  4. stemphos

    Great post. One of the most straightforward ones I have read in a while.
    Market may go higher for a little while, but it always pulls back and usually sharply.

    I have very limited resources, so I do not try to short the market (My 401K and IRA do not allow me to short).

    I value average my monthly contributions. I try to make 1% a month. If account earns >1%, then I sell positions and buy whatever has lost the most.

    On 02/01/12, I moved ~5% of my stock portfolio (sold some EEM, IYM,IWM, and IYR and bought bonds).

    Thanks for the frankness of your post. Makes a lot of sense to me

    stemphos

  5. KAL

    Wow SF that’s a massive #. Super huge. Somebody wants to take profit and be in cash right now. I need a list of those companies to keep an eye on. Not pleased about my fill on Friday on GDX, would rather be ahead of that big money selling curve, or at least prepared for it in my mind.

  6. ILUVPMS

    Not sure how you can keep flip flopping from a dollar breakdown to a runaway market to a consolidation… .How do you’re readers ever keep up with your….

    Also, weren’t you one of those analysts predicting a runaway market and gold being in the final mania phase?

  7. Gary

    ILUVPMS,
    It’s possible that stocks could be in a runaway move and that gold has entered the bubble phase. For that to happen then Ben has to break the dollar’s rally out of the three year cycle low.

    So far we still don’t have any indication of that. It would require a lower intermediate low.

    So right now it’s up in the air. Runaway moves are pretty rare though so I would prefer to bet that the stock cycle will run a normal length and begin moving down into an intermediate low pretty soon.

    I certainly wouldn’t continue to stay long with stocks stretched this late in an intermediate cycle. I mean just look at the Nasdaq. When have we ever seen anything that stretched above the mean and not seen a sharp correction soon follow?

  8. Yash

    tony c of oew is expecting uptrend till spring of 2013 with spx testing all time high. recently terry from ttheory is becoming little bullish with his long term confidance indicator. fact remains gold increases when spx increases as both depend on falling dollar .. my only dilema is by 2014tony c is expecting gold something like 3750 which gary will agree too but where will be spx that time. I don’t know 1980 scnario but i am looking if we ever had gold /mining stock rising and general stock market spx decreasing?

  9. Gary

    ILUVPMS,
    I’m not sure what 5 year period you’re talking about and any five year period still has to weather intermediate cycle corrections. Like I’ve pointed out they occur pretty regularly about every 18-25 weeks no matter whether we are in a bull or bear market.

    I’m not really sure what you are disagreeing with. Do you think that the stock market will never suffer a profit taking correction again and that investors never have to worry about holding through a drawdown?

    Are you advocating holding or buying with the Nasdaq stretched 9% above the 50 DMA?

    Or are you just looking for something to argue about?

  10. ILUVPMS

    Im advocating hold precious metal stocks as I’ve been holding for a while… I’ve weathered the corrections but they are short lived and it beats having to time bottoms… anyways game time.

  11. Gary

    Nothing wrong with holding. By the time the bull market is over you will be up huge.

    It’s just that most people end up panicking at intermediate bottoms and selling when they should be buying.

  12. KAL

    Haha SF Giants. One thing I learned from my Dad, never take points off the board, and don’t let the other team put them on. Sad ending to a great game.

  13. Elaine

    One of my faculty advisers is Greek, I think he’s probably in his early to mid 50’s. He said Greece has defaulted twice in his lifetime. The only difference is that now they are part of the Euro. He says the Greeks don’t really care about the default, they are used to it.

  14. Gary

    The problem this time is that they can’t print their way out of it so they are going to suffer a deflationary depression.

  15. Elaine

    Gary,

    I’m sure you are correct, but it’s unlikely the populace really understands what will happen.

    I think they are also anxious to leave the EU so that they can control their own currency again.

  16. Mr. Dad

    Defaults wipe out the currency, or at least create hyper inflation. I’m thinking why save, maybe I should just spend my savings and enjoy life under a palm tree for a few months.

  17. pvm999

    Gary

    You point out that the dollar has not broken the pattern of higher highs and higher lows. Since the dollar just had a failed daily cycle, I would expect that we will see a lower high on this dollar rally. Because the dollar had a failed daily cycle suggests that the intermediate cycle should be working towards its intermediate cycle low. The intermediate cycle is now in week 15 which leaves plenty of time for one more failed daily cycle for the dollar and that would bring the intermediate dollar cycle to week 19 or 20, the normal duration of an intermediate dollar cycle.

    B.T.W. I have not seen many large Selling on Strength numbers. Just on the 26th there was a 200 print for a BOW for the SPY and 345 BOW on the 31st.

    On Friday there was a mild 108 Selling on strength for the SPY. Shouldn’t there be heavier selling on strength leading into an intermediate decline? I would think the 108 is more suggestive of a daily cycle decline.

  18. Gary

    PVM,
    I think we are probably seeing a short ICL forming now.

    Above everything else I expect the stock market IC to run a normal duration. Everything else will follow from that.

  19. sophia

    Gary,

    I know that you work more on sentiment and cycle than on charts, but the fact that Gold broke 1720 this morning is not good right? Is the next picnic area at 1680?
    Thanks for guiding us last week, it was a great 180degrees turnaround!

  20. Gary

    Sophia,
    I’m pretty sure gold has begun moving down into a DCL. When the stock market starts moving down into an ICL it will add tremendously more selling pressure to everything.

  21. sophia

    Gary,

    My eyes are glittering to the propect of a nice sharp selloff that will cauterize all buyers except us, SMTs!!! Yummy yummy

  22. Tiho

    “My eyes are glittering to the propect of a nice sharp selloff that will cauterize all buyers except us, SMTs!!! Yummy yummy”

    Actually the Dollar has already topped (for those who can see it), so at best you will get a dead cat bounce rally there and a re-tracement in PMs. Next thing you know, you will be chasing something you should have bought in late December at much much higher price…

  23. Gary

    James,
    Why not wait till gold forms a swing. The odds are high that gold has begun the move down into a daily cycle low. It would only be day two, and those can last anywhere from 5 to 10 days.

    You can greatly decrease your odds of suffering a significant drawdown if you just have the patience to wait for a swing.

  24. Gary

    Tiho,
    I don’t know if the dollar has put in a permanent top or not.

    If the stock market does move down into an intermediate cycle low over the next 4 to 6 weeks then the dollar is going to rally back to new highs, probably big new highs.

    I’m just wondering if you will disappear at that point or whether you will admit you were wrong.

  25. Tiho

    Sophia, my bad. I misunderstood than. Great buy, well done. I think you sound smart enough to hold onto that and not go long the Dollar. It will pay dividends, as you probably already know.

    Gary, it doesn’t matter what the stock market does, the dollar has already topped. I tried to explain it already. The Dollar would have to rally 10%, 15% or even 20% to make highs against currencies like Aussie Dollar, Mexican Peso, Singapore Dollar, New Zealand Dollar, Brazilian Real, Turkish Lira, Hungarian Forint or Russian Rubble. That will not happen. The Dollar is about to stage a bounce only…

    I’ll tell you where you went wrong – you just keep following the Euro, thinking you are one step ahead of the Dollar. Didn’t you find it strange that the Euro kept falling while the stock market kept rising over the last couple month before the mid Janurary Euro bottom?

    That shows you that the Euro does not always correlate to the Dollar. Same happened on late 09 and early 10. Following the Euro on its own is pointless. DXY is not “US Dollar”, DXY is “inverse Euro short”. You need to learn how to track the Dollar instead and that means following currencies against the Dollar globally.

    And yes I will stick around no matter what happens and admit I am wrong (if it happens), coz I like reading many blogger thoughts including your own.

  26. Gary

    Tiho,
    I’m not trading a dollar cross with a specific currency. I am trading the dollar index via UUP.

    All I care about is where the dollar index goes. If it makes a new high then I will make money on my trade.

    That doesn’t mean that the dollar will make a new high against any and every insignificant currency.

    I can’t analyze the dollar against a specific currency with cycles. I can however use cycles analysis on the dollar index.

  27. Tiho

    I forgot to say the following:

    Even if the Euro by some miracle makes a new low below $1.26, which makes the DXY make a new 52 week high, as you stated in this post, you will still not be right on the Dollar. Here is why…

    There will be NO CONFIRMATION that the Dollar has made a new high against any other global currency that doesn’t fall into a money printing category like Euro, Pound and USD.

    It’s almost impssoible for the Dollar to stage a new high against any Asian, Latin American or Commodity related currencies.

    The Dollar is not making higher lows against these currencies, but lower lows instead. The Dollar is below its 200 MA against these currencies alread, not above ity.

    So in other words, the Dollar has topped already and yet you are still wondering if it has more juice left. I’ve been saying it for over a month now. Eventually you will figure out that there is more to gagging currencies than following DXY or EUR/USD.

    That’s just my 2 cents.

  28. sophia

    Tiho

    DOLLAR VIEW: UBS strategists Gareth Berry and Geoffrey Yu note that
    Friday’s CFTC data (for positions as per Jan 31), the first seen since
    the Jan 25 Fed decision (US rates lower for longer), showed “that dollar
    longs held by speculative investors had fallen by 40% six days
    afterwards,” which takes positions back to those seen in early November.
    Euro views were largely unchanged (COT data for non-commercial showed
    net short at -157,546 contracts vs record net short of -171,347
    contracts from Jan 24). “It seems no rally in EURUSD is expected and
    this chimes with our own assessment of the situation,” the strategists
    say.

  29. ...at ease

    Sophia,
    Thank you for asking. Coming home is easier than going to London. Probably because I have a tighter schedule here and have to hit the ground running. πŸ™‚
    I actually have a harder time going in London direction. Saw the snow storm hit right after I left. πŸ™‚

  30. Tiho

    Hopefully someone is learning something wi this constant back and forward debate about currencies.

    The reason I am following more global currencies than the DXY or Euro is because it helps us understand what is happening withal major assets. It has nothing to do with trading specific crosses like you said. Look at it this way:

    Euro weakness does not impact PMs and Equities as much as Dollar strength. When the Dollar is strong, it is deflationary and it is strong against almost all currencies and PMs and also puts pressure on equity prices as well as many commodities.

    However, when the Euro is weak, and the Dollar fails to be strong against “good currencies” which are not printed everyday, than PMs, commodities and Equities brush it off or just experience a mild correction / consolidation.

    How many times have you see the media say Dollar and Gold rallied together on some day or during some week. Well actually, they didn’t.

    Further research would show Dollar was falling against majority of currencies, but was beating the Euro. So essentially Gold was rising against both Dollar and Euro

  31. slw_fiend

    I always thought the dollar lead stocks (and everything else) not the other way around. I wouldn’t count on stocks “pushing the dollar up” but would wait to see what the dollar does with its next bounce.

  32. Gary

    Actually the dollar and stocks affect each other. Sometimes stocks and the dollar can move up together. This would be the case during periods of high productivity, and sometimes it can happen in the short term for technical reasons.

    However the dollar and the stock market cannot move down together unless inflation is surging out of control, like we saw in the spring and summer of 2008.

    That is obviously not the case right now so when the stock market moves down into an intermediate degree bottom it is going to force a powerful rally in the dollar.

    The only way to avoid a rally in the dollar is for the stock market to enter a runaway move. Those are pretty rare so it’s hard to bet on an occurrence like that. 9 times out of 10 you will lose that bet.

  33. gold silver troll

    buy the dips and you make money…the trend is your friend until is isn’t..

    we keep getting dips to buy into..money has never been this easy to make and most are still on the sidelines

    hope everyone’s making a lotta money these days..

    safe trading.

  34. Veronica

    My data feed is back up and the sell stop has now moved to 1714.00. As in most cases I would expect a surge to the downside once hit, as there seems to be big money that follows similar systems to mine.

  35. smartbullion

    Veronica, thank you for your info. May I ask you, did your system have a buy point for the last daily cycle (beginning Dec 29)? If so, what price was the signal to buy? Thank you, as always :o)

  36. Liquid Motion

    I thought this blog was abt Smart Money Tracking…?????
    ..ie…HF’s, MMM’s..CT’s….those are the ones controlling all markets (paper)!!

    2 ..just 2..trading options for them….

    1)USD / US T’s OR
    2)Commod., Stocks, PM’s
    Half the battle with any trading/ investment is to guess which way they move next. The other half is executing… The short term trade.
    Buy and hold strategy in the greatest bull market to ever be experienced is the only way to play this nightmare.
    Currency moves and stock market cycles are all part of the WHOLE BULL TREND (in PMS’). But the problem is they are being savagely distorted with duration and magnitude.
    WARNING…Balls of Steel required.
    To invest or trade are traps…so too is going to cash.

  37. Veronica

    Smartbullion, it had an add on buy in low 1580’s as it had been holding the original buy without a stop.I wrote on the blog the day the add on buy happened.Both of the buys will sell when the system goes to a sell.The statistics I have posted about my system do NOT include any add on buys.

  38. Veronica

    It’s been very good the last several years, but going back 10 years or so it is 65% winners with the profitable trades 2.2 times the size of the losers.

  39. Gary

    If it wasn’t so late in the stock market’s intermediate cycle I would be all for surprises to the upside.

    However, 18 weeks into an intermediate cycle and I’m more worried about a flash crash than I am a flash melt up.

  40. Liquid Motion

    Smarbullion….
    Is that a topping or consolidating (after a small chop)..severity ????
    Interesting times ahead with plenty of opport. for those with Kahunas. USD minor rally expected. Will not be convincing or break 82.
    Gary’s IC decline coincides with what the SM has forecast.
    That is unless we have a “STRIKE” or a “DEFAULT” then all bets off.

  41. TZ(8155)

    An update on what I’m thinking here:

    -I think it is a reasonable BET that gold bottomed late december.

    -I furthermore think the large surge up on the 25th for gold was a recognition move and we likely won’t go below that (about 1650). Another reasonable BET I think.

    -That large move up on the 25th also broke above a downtrend line of about 5 months (daily chart) in gold. Making a drop below that difficult (at least without a bounce).

    -We have probably moved up enough (gosh I hope $250 is), including that recognition move, to suck in sufficient buyers allowing us to now correct and hurt some people.

    -The first place such a pullback should stop is above the 25th recognition day and/or the large downtrend line. This zone is 1700 give or take $10 or so. That is my first BET.

    -If that doesn’t hold I suspect we could go lower to the 1600 area which was strong congestion and support/resistance. (Again, give or take maybe $20 or so.) That would be my second BET.

    If that doesn’t hold then we’ve got problems and likely more badness to the downside. 2008 scenario or a mean D.

    Clearly (as the private blog argued over the weekend) nobody KNOWS if we are going up or down or whatever. Discussing that stuff without a plan is not helpful. So many people there just argue “it could do THIS”, “no…it will do THIS”.

    Sure. Both right. Meaninless cause you still have to do something NOW. You have to make a bet and do SOMETHING regardless of what MIGHT happen (and ‘cash’ is something also).

    My bet is currently going to be that we get a selloff to those levels and at least one of them HOLDS.

    A BET for me is going to be a risk of approx 1-2% net worth on each zone. I should be able to get 2-4x leveraged (gold futures) if things work. And If I lose you can see what I lose.

    That’s what I’m thinking and how I’m looking to bet in the near future.

  42. TZ(8155)

    >-The first place such a pullback should stop is above the 25th recognition day and/or the large downtrend line. This zone is 1700 give or take $10 or so. That is my first BET.

    Correction. The first zone that should hold (the start of the 25th and the daily downtrend line) is actually about 1650 to, maybe, a bit under 1700.

    We can break the cycle uptrend line by going to 1700 only, but I think dropping below a round number like that stops out more people. I think we have to get closer to 1650 than 1700 to blow out enough stops, but I’m going to have to see the volume in real time.

  43. TZ(8155)

    There continues to be no outperformance of mining stocks (compared to ‘straight metal’ of 50/50 gold and silver):

    stockcharts[PUT.DOT.HERE.TO.FIX]com/h-sc/ui?s=GDX:CEF&p=W&b=3&g=0&id=p20207788931

    You can bet on ‘this time it will work’, but I will keep my distance till that chart curves up for a few months and clearly shows something has changed. Just personal preference.

  44. TZ(8155)

    >TZ, if I may, you might consider the use of a url shorten-er in your posts. There is one available at http://goo.gl/

    Too much extra work for me and I still have to post a single link. I can’t shorten it to zero links from one link.

    Besides, I doesn’t reduce any work on the readers part.

    To select an ENTIRE LINE in a browser (the entire link) just triple-click any part of the line.

    If a person is getting the posts via email instead, then the links should already be highlighted and they just click once regardless of size.

    In either case the size of the URL makes no difference I’m aware of. (Although having to remove the [PUT.DOT.HERE] is still necessary, I can’t do anything about that because gary continues to use a crappy google service and they kill accounts left and right for posting any sort of URL. You then have to give them phone numbers, emails, dogs name, and just about anything else to get them to unblock it).

  45. TZ(8155)

    If you have an example of how the URL shortener benefits then I’m all ears.

    Their use works for URLs going through twitter which has a hard limit on size, however anybody getting these posts via twitter is already missing most of what everybody posts anyway. SO that doesn’t make sense either.

  46. Gary

    TZ,
    Just learn how to make a link and you won’t have to worry about your posts getting flagged as spam. Plus people will be much more likely to click on the link than go through all the trouble of fixing the modified links.

  47. TZ(8155)

    Gary, I know how to make a link.

    You simply arent aware of how bad and tight Google’s “spam” filter is since you OWN the blog and it doesn’t attack you.

    The posting of ANY link counts against a person as spam (shortened or not. In fact a shortened link is worse cause often they are used to hide the ultimate location and the spam presumption is higher.)

    After a high enough count (or after a suspicious enough count) Google locks the account and ask for more personal information. Remember these counts are being made by Google’s system autmatically and not the readers or the owner personally which is really the way to go.

    If a person doesn’t post a clickable (or identifiable) HTTP link then it doesn’t register in the system. Hence my obfuscated text in the link.

    I do what I do cause you have chosen to use Blogger and I have to go with it. I don’t have a choice and have been unwilling to convice you to either move it or use Disqus for the comment section.

    I had about 3 different “TZ” account locked out before I decided I simply wan’t going to keep posting URLs anymore. Sorry, but that’s just how it is as long as we are on this crappy service.

  48. Tiho

    sold back my USD/JPY on the spike this morning….

    I’d sell all Dollars before its too late and the decline accelerates. Too many dumb money investors are still bullish on the Dollar via close to record historic Euro net shorts, which are now being squeezed week by week.

  49. TZ(8155)

    The account is still locked out once flagged for spam. Nothing you do changes that. The account can be unlocked after giving google all kinds of juicy personal information including wanting my personal cell phone number. F them.

    Oh…and I don’t post to ANY other blogs or any posts you haven’t seen from me already in the past year.

    CLEARLY you know that I have never posted anything remotely spam related and yet google still hits me for posting a few charts or something as simple as WSJ or Bloomberg stories.

    It is simply a bad system (designed to trap people and ID them for advertising purposes) and a bad blog service that just happened to be one of the first and, thus, won’t go away.

  50. sophia

    OK Tiho….

    Do you need to hate everybody? I posted when I bought, I am posting when I am selling…I am not a big geeza trader like you with views right left and center, but I am trying to give my views from time to time… Relax man, take a load off as you say in English…

  51. Tiho

    I have no idea when you bought and I wasn’t commenting on what you were doing. Sorry if you misunderstood. I used your comment to just comment on the Dollars direction that’s all. I don’t hate anything but the Dollar right now. πŸ™‚

  52. Aaron

    Ben is testifying (you can watch it on cspan)…just seems like everytime he has air time, the dollar gets scared and retreats!

  53. Gary

    Maybe a DCL for gold. That still doesn’t change the fact that we are 18 weeks into an IC. I’m not at all confident I will be able to pick the top of the rally and if I miss it then I would risk getting dragged down into an ICL by the stock market.

    Right now I’m more worried about that than I am about trying to catch every last penny of the rally.

    Hey but if one is good at spotting tops then by all means push the long side as long as possible.

  54. William Wallace

    at ease,

    As I mentioned earlier, gold DC tops (especially A-wave tops) are a process, a move down , move back up to test the highs, then continuation lower. Although this could very well be a DCL here, the first bounce is not confirmation of a DCL, a move to a new high is. If the stock market is ready to roll over into an ICL, gold will most likely not make a new high.

  55. SF Giants Fan

    Sophia

    The demark intraday 1370 call is the May 2 2011 high. Probably a ton of buying would come in and he and big money would sell or short into that.

    How close did gold come to hitting your sell stop this am?

  56. SF Giants Fan

    Dollar down 0.5% and all the SnP can manage is a few points?
    I agree with Gary. There will be a big up move soon in the DX. We are stretched and we all know the snap back theory. Of course when it happens, it will be pre-market trapping the longs.

  57. Hans

    Two months ago, Dr Savage, stated that gold was going to “explode”…

    What has now changed to wait for Gold Spring 2013??

  58. Hans

    Two months ago, Dr Savage, stated that gold was going to “explode”…

    What has now changed to wait for Gold Spring 2013??

  59. Gary

    It has exploded. Now I’m just more nervous about an intermediate degree correction in stocks than I am trying to catch every last penny of the rally.

  60. Bill

    On 30 & 60 min charts, GLD looks like it’s trying to put in a lower high. But if we get above 171 the trend resumes. The daily chart looks like the Nov top, as EricH said.

  61. Bill

    GLD’s 30 min chart looks like it’ll go down tomorrow … if Mon/today’s bottom of 167 holds I’ll go long w/a stop just below 167. Small 10% position, ’cause the daily chart does look like a top.

  62. Bill

    About gold, even if the cycles say it should correct, I worry about 2 things: 1) Bernanke’s stmt last week, and 2) gold’s price action off last July/Aug, meaning how hard it was to get on if one got on late. Mainly though it’s Bernanke – to me, that means that despite cycles or anything else, he’s bent on killing the dollar, so gold will go up, though choppily. Just me.

  63. Danno

    The dollar seems to be looking for some kind of bottom. The price cluster it just broke through is reminiscent of the cluster in mid October, which was followed be a final stab down before the rally began.

  64. Gary

    I don’t really have a thesis. I just know that 18 weeks into an intermediate cycle is too late to buy anything.

    Now if you are really good at spotting tops in real time then by all means push the long side as far as you can.

    I know I can’t spot tops with an degree of consistency. The last time I tried silver kicked me in the teeth.

    So I am content to be on the sidelines right now.

    This is the same rational I used when gold put in the C-wave top. I knew I wouldn’t be able to time the top perfectly in real time. So it was safer to be out than get caught when the crash came and it did come. The first three days saw gold drop over $200.

    I didn’t catch the last surge but I also avoided the entire D-wave.

  65. Beksachi

    SFG Fan,

    Your DEMARK link did not go to a recent interview (??)

    Anyway, here is one on Feb 7th. – not an interview but Bloomberg talks about DEMARK – he is in CASH and he also saying $ has bottomed…..

  66. Slumdog

    Gary’s right that we’ve not seen serious profit taking on this recent run and time is running out.

    I’m the old turkey of old turkey’s here, holding a rather huge silver position from $5-10 and watching it reach nearly $50 and drop by half.

    I just think that when coins get grabbed and taxed every which way fabricated silver and gold, the old fashioned “plate”, will remain untouchable as after all, it’s art, which in fact it was and is, ephemera that it may be.

    Anyone else as committed to $200 silver as am I?

  67. sophia

    Is it me or the price action of Gold and Silver is not so exciting? Relative to the dollar selloff, Gold is still 15 dollar below last week’s high….

  68. ver

    sophia:

    I think the $HUI says it all. It can’t even make it over the 200 DMA after such a huge initial surge, gold continuing to rally, and even stocks melting up. It could have another “catch up” moment if everything else keeps rallying but perhaps the fast-money traders who play in the GDX sandbox sniff a wicked correction coming across risk-on assets. Another SoS day today for SPY (~$100) and QQQ (~50) too.

    Not huge numbers but we’re seeing a lot of the BoW on dips and SoS on rallies. One of these days the dip will keep dipping and everyone is going to run to the exits at the same time. I think Gary may be right that we’re getting into flash crash territory with this melt up.

  69. Veronica

    My system will go back to a buy at 1763, and these quick sell to buy patterns (if it works out that way) can be extremely powerful. Right now I see a lot of traders frozen and they will be a chasin if this scenario works out.

  70. SF Giants Fan

    At ease

    I just follow him on YouTube. Click on the link I posted at 7:42 then follow him on “marketstudies”

    @AJinsight

    Adam Johnson on Bloomberg posts updates on twitter also

  71. William Wallace

    Its rare but not unusual for gold to close below the 10dma, the move back above it for a day, and then breach it again as the process of churning out a top continues.

  72. EricH

    As noted yesterday, today’s action is following the November top to a tee. If this keeps up, Gold will have a nice fall next week.

  73. William Wallace

    Eric,

    I agree,

    “Riley,

    DC tops are a process, not always a swift collapse and bounce out of a DCL(though possible), for example look at the last two daily cycle tops.”

    February 7, 2012 7:31 AM

  74. sophia

    ErichH,

    yes I agree with you, this blog has taught me a lot and I am learning everyday! The most important lesson I learned was patience…I sometimes feel like a hunter….

  75. TZ(8155)

    Anybody who wants to play with a parabolic SAR can do it as one of the overlays on stockcharts

    stockcharts[PUT.DOT.HERE]com/h-sc/ui?s=$GOLD&p=D&b=3&g=0&id=p48147116812

    There are a few settings and instructions elsewhere on the site.

  76. TZ(8155)

    You can see on that chart that the dots represent stop points, so once you are long something (in the case usually with gold), your stop rachets up parabolically until eventually you stop out. (It tightens higher and higher).

    In a true SAR, you then reverse and go short (using the dots now at the TOP as you SHORT STOP point.)

    But in a bull it would be best to just sit out and wait for the next buy.

    In the current chart settings you can see that the long would have gotten stopped out 2 days ago.

    If you don’t take the short,then what you are waiting on is for gold to RISE up and hit the dot at the top which is then your indication to go long again.

    That would be (if I’m right) why Veronica says her buy is 1763 or whatever. That price will slowly (then faster) decline as long as gold doesn’t rise until eventually the price hits an upper dot and you go long.

  77. TZ(8155)

    You can see how a SAR worked beautifully in the Jul/Aug massive rally and get’s you out at a pretty tight stop.

    The problem with SAR’s is that they chop you up in a non-trending market and also can give you very late entries well back highs or lows.

    Like always nothing is perfect but it is a useful tool.

  78. TZ(8155)

    Good SAR tutorial here:

    stockcharts[PUT.DOT.HERE]com/school/doku.php?id=chart_school:technical_indicators:parabolic_sar

    As well as describing the parameters that stockcharts accepts.

    Clearly there are different versions and refinements. Different calculations to accellerate or slow the stop. All kinds of stuff.

    Even if Veronica’s is an SAR it doesn’t mean she hasn’t found a much better implementation than the default at stockcharts. But this lets people learn and experiment on their own with what is going on.

  79. James

    I’m seeing too much dumb money wanting to “invest” in gold. I’m a huge gold and silver fanboy but this bull market stinks to high heavens.

    Central banks buying gold? Dumb money top ticking the market.

  80. Gary

    Louise is good but she doesn’t have a crystal ball any more than anyone else. We should get an ICL sometime in March. I would be a buyer at that point but not until.

    No one in their right mind should be buying with the Naz stretched almost 10% above the 50 DMA this late in an intermediate cycle.

    One would have to bet on a runaway move and they are so rare that it’s just impossible to ever make that bet. You will lose 95 times out of 100.

  81. mikezza

    gary
    don’t get me wrong I’m certainly not a buyer here but thanks for the warning. i’m just a little surprised by her call that we are initiating a new structural bull for the nasdaq. her last few calls have been off but i have alot of respect for her work.

  82. ALEX

    Thanks R41 (and JAMESR : ]

    I have been on a bit of a different path , and there was some “healthy debates”??? … here (lol) that I had a hard time wading through so I just kind of stopped posting.

    I’ll share a few ideas and charts that I made and add this disclaimer

    NO RECOMMENDATIONS :]

  83. TZ(8155)

    There are more people saying that the market is trying to tell us something and that we should be listening instead of looking down:

    http://www.financialsense[PUT.DOT.HERE]com/contributors/chris-puplava/stop-talking-and-start-listening

    It is very possible that the massive worldwide printing and zero rates is FINALLY (after 3-4 years) overwhelming the system and pushing us back into reflation – serious reflation, not the balanced printing/debt-destruction before this point.

    This would, of course, be good for gold and mean that sooner rather than later we will head for hyper inflation (or else the banks will have to start raising rates…which kills the system either way.)

  84. TZ(8155)

    PS: before anybody says anything, YES, we have had LOTS of ‘inflation’ in the last few years, but only if people understand what inflation is. However that inflation was ‘stored’ for lack of a better word so it didn’t really trash the system during that time.

    The flood of bank printing now (EU, US, Japan) and this stored inflation may be coming to the surface now.

    This could be the next phase. And it could also coincide with the big-boy leg of the metal market.

  85. ALEX

    Decided not to sell until I see a good reason So far I see these 2 scenarios using both Cycles and T/A

    we are in QE 3 stealth LTRO…so these look like strong mkts (to me) .

    In DEC I drew this and waited for this to play out… we ended up breaking down..then a double bottom worth buying using T/A DEC 29th (so I bought 100%) THEN WE RALLIED through JAN & we broke above the trendline.

    http://www.screencast.com/t/tR5R7PcE

    I then looked at the DOWN-TREND-LINE as support?? and Moving avg’s, this is what I thought for DCL #1 (but again, Miners may stayed relatively strong in 2003-maybe again??

    http://www.screencast.com/t/G6yvKBEa

    BLACK DOTTED LINE would be B-Wave ORANGE dotted line a DCL and DC2 starts.

    Today I drew this , maybe a 2nd DCL came in yesterday (orange line on the other chart) ?? Gold had support at the 13 sma again and a trendline…still no reason to sell.

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

    an UPTRENDING channel with support that held (SO FAR)

  86. TZ(8155)

    Guys,
    I really don’t understand all the dots and the reading problems people have with the blog here.

    To read an article, click the ARTICLE **TITLE**

    NEVER read the article first and then click “167 Comments” (or whatever the number is).

    If you click the title you will be taken to a new page with the entire article and then the first 200 comments under it. When you want 201+ comments, just click “Newer” at the BOTTOM of the page next to comment 200 (clicking it near the top of the page at comment #1 is BROKEN).

    More:
    NEVER read from the page you post from. ALWAYS read from the pages that you get to by clicking the article TITLE (or “newer”).

    INSTEAD…to post a comment…RIGHT-CLICK (or CTRL-CLICK) on the bottom left link of “Post a comment” which will open a NEW TAB.

    Fill in your comment on that tab in the box, post it, THEN CLOSE THAT TAB and go back to the main tab.

    To keep the main tab up to date, just refresh it as needed. (Unlike the posting page, the main page (from the Article Title) will NOT reset back up to the top of the screen each time.

    IN SHORT:
    You should be READING the article and comments from a page with a LIGHT BLUE BACKGROUND.

    You should be POSTING COMMENTS only on a page with a LIGHT BEIGE COLORED BACKGROUND.

    Don’t do one from the other and you won’t have any problem.

  87. SF Giants Fan

    Yamada Seeing Nasdaq Bull Market

    She waits untill feb 8th 2012 to make this call??

    WOW. Frigging brilliant. Such insight and analyst.

    Let me guess, her next call is to buy AAPL

  88. TZ(8155)

    I think a good bit of these problems are from the template or coding of the site and probably fixable by Gurvir in an hour or two.

    I have looked at other blogger sites and there are different configurations and I dont see the same problems.

    But we would have to convince gary to have Gurvir take a look.

  89. TZ(8155)

    Well, that was fun.

    I spent all that time typing a long comment about how to read this crappy blogger and google promptly killed my post for spam cause it didn’t like the punctuation.

    Kiss my butt google.

    Gary, would you please unspam my comment?

  90. ALEX

    I posted these here in Dec

    http://www.screencast.com/t/7A3wXPNIfUI

    weekly chart after it started rising-

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

    also said $1.75 would be great, if it hit there on the pullback and took off.

    http://www.screencast.com/t/FN61GNDXYZ3

    It’s NOW on this downtrendline..I added more yesterday. Maybe Miners took off…consolidated , and are at 10 & 20sma for support.

    I think these and many other miners look great .

    ALSO commodities (ENERGY, SOLARS, etc)are screaming %-wise.

    look at 2 or 3 month daily charts of… JASO , YGE, CSIQ, TSL ,JKS

    and

    REE, Urg, DNN, etc

    DQ , KEK , SWI, CLNE , GEVO , TPLM

    Even Housing??? LEN, MTH, BZH

    so it’s been a traders paradise for fast gains %-wise.

    My thoughts are that as SECTORS rotate …breaking out one at a time…the markets have a hard time pulling back because “shorts are being covered” and “Under funded FUNDS” must enter . How can they report to customers that they sat on the sidelines during this move in January….and now Feb??

    so I believe we may have just seen the DCL in Gold and second daily cycle will be strong too.

    Just my Opinion, no recommendations

    Time will tell.

  91. ALEX

    AT EASE

    Thx , I just went away because I tried to catch up a few nights on the blog and hundreds of comments (most were somewhat trying to make a point , but maybe while also a little attacking Gary, if you know what I mean?).

    Hard to sift through , and also my thoughts were to go ‘long’, and I didnt want to sound like I was joining in harrassment.

    I kept in touch with some like ROBL, DG, NIKEBOY , and BOBLH, who I found is a good fast trader in fast markets.

    So my thoughts here could be verified , if needed. I’m just here to try and say..

    SO FAR these markets have been rather strong , first leg up in Gold never broke below the 13sma….MAYBE QE3 is stealthily entering MKTS, maybe the DCL is in…MAYBE Gold puts in a swing?

    MIners charts (SO FAR) look set up nicely. As are MANY MANY MANY commodity sectors.

  92. ...at ease

    Alex, Poly is starting a new site launches this weekend. Been following him and BOBH on tweets. BobH moves fast!
    Anyway, missed your posts here, you always have good instincts and good insights.

  93. ALEX

    NASDAQ in a new bull?

    Well, it looks like it needs a pullback , no doubt..BUT QE3 may have the same affect as QE1 and QE2 (and may have already started)

    Remember those Gains?

    — check out 3 month chats of FNSR, CIEN, , MSFT , NVDA , EMC…not bad gains %-Wise in 1 1/2 month , some doubles, some 50%

    MOBI, RENN,YOKU, DANG

    Crazy stuff

  94. ...at ease

    Alex, I dont’ think Gary ever minds varying views, I think he welcomes them. Keeps things jumping. πŸ™‚ Amyway, don’t stay away, so long.

  95. ALEX

    I signed up for POLYs reports too , and BOBLOVES HAWII and I keep in touch.

    BOB trades faster than me ( In and OUT quicker) , but we look for the same ‘set ups’ and use similar t/a analysis—

    Right now he is looking at a lot of Energy set ups (and I am too). Many have run well , consolidated , and are breaking out for what looks to be a second leg.

    Charts of KOG, DQ, TPLM, and solars ( I bought JASO today) look healthy to me.

    (BUT thats trading, and watching it live) . I am OLD TURKEY on a LARGE CORE of Miners…and am thinking they are setting up for another leg up.

    I watch the 10sma and 20sma , and many run up and settle there / stochastics no longer overbought.

    I read GARYS POST here when Gary was BULLISH last week, But then POSTED the A-Wave was over…B-Wave sideways, but THATS why I wanted to post that in 2003

    GOLD Markets were sloppy ,

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

    MINERS were BUY & HOLD…

    http://www.screencast.com/t/tdhqZh5u2

    –THAT pattern may happen again with inflation Ben at the helm.
    It’s tricky when HE adds the intravenous liquidity.

    G-nite

  96. ALEX

    I read through many posts to catch up…

    you’re right -No Traderlady.

    And W W , I wish you well on your upcoming surgery, a speedy recovery. You too are a fast trader.
    TZ is quick too, so there is a good variety here :]

  97. ...at ease

    Alex,
    Yes, I decided since it was going to be rough times for miners, took Poly’s advice and bought on the ICl TGLDX for old turkey hold and then could feel more comfortable trading in and out without losing out on the bull run. G night! Thanks for checking back in with updates. πŸ™‚

  98. ALEX

    SUMMARY (sorry, forgot to sum it up B4 I go)

    One could buy GOLD here , and you see in this chart that

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

    1)The 13 sma could be your tight stop

    2)The 20sma hasnt been tagged…so the 20sma can be a safe stop.

    3)Trendline break & Close under can be your stop.

    The 2nd daily cycle may be starting. (Doc, I know you look for a trendline break, but it’s tagged the trendline).

    I AM LOOKING FOR FOLLOW THRU 2NIGHT OR 2MORROW, downside limited.

  99. Slumdog

    The USD is 6.2905 Yuan, just about to make a new low.

    The best possible scenario for the US will be a drop to 5.29 over a period of a month, and then drop lower.

    The faster that parity sets in, the faster the west will abandon China as a manufacturing site, and the jobs will pour back into the US and Europe.

    China will be fine; they’ve kick started their economic development and their internal demand will consume plenty. They’ll have to work out what to do with their unemployed labor. Maybe send ’em to Syria which is depopulating quickly? Or they can just wait til the gender imbalance takes a bite out of their labor force.

    It’s clear that the advantage in industry is to the cheap skilled labor. It’s the old location arbitrage game.

    For we investors, it means the price of commodities rise… Whoopee, we made money. Hoghuey, all we did was stay stable in terms of world buying power.

    China’s power will erode like water pouring out of dynamited dam, as soon as the USD begins to seriously reset. And I personally hope it’s now and sooner.

  100. Tiho

    “China’s power will erode like water pouring out of dynamited dam, as soon as the USD begins to seriously reset. And I personally hope it’s now and sooner.”

    That is fairy tale buddy! Chinese Yuan will be a reserve currency in a decade to a decade and half – who knows maybe sooner or later – but its coming. China will have so so so much more power than it has today.

    We here in Asia do not even want to use US Dollar anymore. China and Japan trade without it already. US Dollar only looks ok in the DXY index because of the weak Euro & Pound.

    Check some other currencies and you will notice the 2008 low was taken out long time ago… and when Europe finally has a few defaults, the Euro will finally bottom properly and begin strengthening in a long term bull market…

    …than its game over for King Dollar!

  101. dddddddddddddddude

    We should get an ICL sometime in March. I would be a buyer at that point but not until.
    No one in their right mind should be buying with the Naz stretched almost 10% above the 50 DMA this late in an intermediate cycle.One would have to bet on a runaway move and they are so rare that it’s just impossible to ever make that bet. You will lose 95 times out of 100.

  102. Tracy

    Hi all,

    >>>>> IMPORTANT UPDATE <<<<<

    Instead of placing (…..) you can add [ &page=2 ] to the above url and you will be taken to messages after 200.

    Hope this will useful and helps in removing all the clutter here.

    Tracy

  103. TZ(8155)

    To all the people reading this blog who keep posting “.” to get to the last page or who have trouble reading it or are tired of SCROLLING, please, LOOK UP ^^^ and read my post about 10 comments above starting with:
    —–
    “Guys,
    I really don’t understand….”
    —–
    You will realize that you are using this blog wrong and causing yourself a big headache.

  104. TZ(8155)

    Recapping the process to read SMT:

    READ the site on pages with a BLUE background (by clicking each article’s TITLE).

    POST to the site on pages with a BEIGE background (by clicking “Post a comment” and then CLOSING that tab after posting. Go back to blue page/tab and refresh to keep reading)

  105. TZ(8155)

    Deleted a post before this one. I’m wrong. You can only email subscribe on blogger on a PER ARTICLE (not entire blog) basis. I thought I had found a contrary example. Nope.

  106. Haggerty

    So the politicians are going to pass something that saves the bankers from being sued for billions for unfair practices, in return they throw out their loose change(2k) to each individual to put their head back down and shut-up.

    We really need to cane these people in the middle of times square, along with the politicians.

  107. Danno

    A few of you may remember I have been waiting for UUP to print another red candle that engulfs the previous day’s red candle (as a short signal). It hasn’t happened in months and price has gone up.

    I just noticed that since May 2008, SLV has not printed a red candle that engulfs the previous day’s red candle… where price has not dropped significantly not long afterward.

    Now today is the 2nd occurrence in a one week period where a red candle in SLV is engulfing the previous day’s red candle.

  108. Bill

    Danno, for SLV, on Jan 31 the red engulfed the red … but price then went up. May be a fluke, but short term this may not be a signal.

  109. Danno

    The 31st candle is the 1st of two instances I just mentioned. I misspoke when I said in ‘one week’. I meant within one ‘week’ of trading days not calendar days.

    I’m not saying SLV will or will not take a dive. I’m just say’n…

    take a look.

  110. Bill

    Although the SPY appears topping, and UUP has a hollow red candle today, despite that, the action in GLD and SLV to me is still bullish – price is above the 10, 20 and 50d EMA’s, and price action these past few days looks like sideways consolidation before a rise up. A break above 170 for GLD and 33.5 for SLV would be a signal for me to go long.

  111. Bill

    The fundamental reason to back this up is what Ben said.

    I’m not predicting the future or anything, but I WILL FOLLOW if GLD and SLV break up.

  112. Bill

    EricH, the other day you made the point that price action on GLD’s daily chart looked then much like the top in Nov. How about now?

    I agreed w/you then, but now, to me, this top is taking a bit too long … it may just be consolidation before a rise higher, me now wonders.

  113. kmisak

    Anyone here tracking or buying VIX? The day I bought T.HVU someone else had done so as well on this blog (forgot who). Earlier today I increased my holding in it by 20%; then it rocketed up at the end of the day. VIX is now up three days in a row with the s+p up each of those days. Just sayin’

  114. thedocument

    The big boys always generate some sort of bullish technical move in order to unload shares to the public before a significant decline. I find it highly probable that the S&P breaks above the 2011 high before rolling over. This process may yet take several more weeks.

    Gold is in consolidation mode following last year’s parabolic move. Consolidations typically test the previous high multiple times before breaking out. The current daily cycle is forming as RT and is almost extremely RT. The next daily cycle should therefore set a higher high, and I believe it will flirt with $1900 before we see a sharp retreat along with a more serious equity decline. Again, the path to $1900 may take several weeks.

    So, although sentiment under the dollar is getting weak, I believe we will see one more LT daily cycle before the DX forms an ICL. Intermediate dollar cycles often end with a short daily cycle, so perhaps the next daily cycle only lasts 3 weeks or so and bounces off the 200DMA.

    I certainly would not want to mess with stocks here, but I believe an opportunity in gold could be missed if one believes the dollar will bounce simply because the intermediate equity cycle is aging.

  115. Gary

    I’ll let others catch anymore upside. It’s just not worth the risk and I know I won’t be able to time the top and would just get dragged down into an intermediate decline anyway.

    There are times to swing for the fences but this isn’t one of those times especially with the Nasdaq stretched almost 10% above the 50 DMA and AAPL starting to trade parabolic.

    Not my cup of tea.

  116. William Wallace

    Looking at a measurement of this SPX DC it is now pretty much the same length as the first QE2 stretched DC, if tomorrow turns out to be the top it will be exact, meets 1356 resistance also.

  117. Gary

    The McClellen oscillator continues to drop even as the market is rising. This is a market that is rising with fewer and fewer stocks participating. The percentage of stocks above the 50 DMA is at nose bleed levels.

    I know from experience what happens when stocks move down into an ICL. It usually isn’t pretty.

    This is a glass of kool-aid that I refuse to drink. I’ll let others who are better at spotting tops catch the last few pennies of the rally. I’ll just wait patiently for the next intermediate cycle low.

  118. RRL

    I first saw Gold Scents by Toby Connor, read it for a few weeks before thinking of subscribing, but got confused when the “subscribe” button leads to Smart Money Tracker by Gary Savage.
    Please explain.

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