169 thoughts on “PORTFOLIO CHANGE

  1. sophia

    W2,

    Thanks to you, I did so as well…just to portect my belongings…Sold a bit this morning at 1663.3 and bought USD/JPY…very sweet trades so far….

  2. SF Giants Fan

    BB crash on the VIX
    Everything bullish % is in nose bleed territory
    SoS # on Spy today should be big.
    Volume on TVIX this week was huge.
    News out of Europe this weekend ?

    Looks like the perfect setup for a top IMO.

  3. riley

    Man o man, good call Gary. I couldn’t resist WW shorted late at 1751, will see. Really good calls on this board. Thanks all.

    Sophia think you probably making the best play, will watch your usd/jpy with interest. Good luck.

  4. sophia

    Thanks Riley! This is all thanks to you guys and your unvaluable contribution to Gary’s work!
    Have a great trading day and let’s wait for that DCL in PMs!!!

  5. William Wallace

    We have to keep an eye on the 10dma right now, almost always a breach indicates a move into a DCL. Below that we watch the 150dma for first significant support. Gold could easily tag the 150dma and pop, DCL over and done with…if the 150dma cracks we keep an eye on the 200dma.

  6. Neo

    WW,

    Imagine that in an intense correction, Gold breaks 1523$. Can´t we return to the final D Wave scenário ? And then, we´ll have the A Wave ?

    It could be an streached ICL and a streached D Wave as the C Wave was.

    Il would follow with Jhnewman initial scenário also.

    Just a thought….

  7. William Wallace

    Neo,

    Anything is possible, but like I always said the only way I see that happening is if gold enters an 08′ type correction, the stock market would have to be collapsing I would think for gold to be pressured to that point.

  8. Neo

    Ok WW,

    Stocks markets still dont have iniate their correction. Gold started today (i suppose). So, everything is possible.

    Keep your excellent work. All of us, enjoy it.

    But, first of all, keep your health safe. We can´t live anymore without you 🙂

    A nice week-end to all of you.

  9. Michael

    WW, just so you know, you probably have a lot of fans here who don’t post often. About the only reason I come over here anymore is to read your stuff. I really appreciate the way you are kind, civil, and helpful.

    Best wishes on that leg, bud.

  10. ckpc

    WW,
    Just want to echo Neo, and especially, Michael’s comments with regard to what an asset you are, and how much your kindness, humor and civility are appreciated. It sets a tone for this board which is a welcome contrast from most other trading sites.
    Wishing you all the best on your surgery.

    Gary,
    Great call this morning. Your skills and intuition are priceless!

  11. Felipe

    WW,

    My best wishes for you and your family, thanks for your great work here and especially for be a very kind person with everyone.

  12. William Wallace

    At ease,

    I may be wrong but as I was mentioning early this week I believe the SPX is putting in a DC top either today or early next week. I always said, gold will do its own thing. You need to recognize when the correlations hold, and immediately react when they dont, to think that they will always be is simply a mistake. a couple weeks ago I began pointing out how gold was slowly decoupling from stocks.

  13. Ollie

    WW, hope the surgery goes well

    Take it easy and don’t rush back to your computer screen although I hope you’ll be back to give us the signal at the next DCL 🙂

    Just kidding of course, all the best!

  14. William Wallace

    Let me say this…if this is an A-wave top and not just a dip, B-waves are very tricky chop fests, DC’s top fairly quick sometimes, so just buying the next DCL and holding one risks getting caught in a B-wave.

  15. oa92000

    February 3, 2012 8:56 AM

    William Wallace said…
    SPX pierced the upper bollinger band today.”

    If JPM is going to be 40, spx should be higher..

  16. LotsofLuck

    WW, I am one of those guys whose been reading but never post. I always find your posts most informative. Maybe I’ll try a trade next time 😉 You are most helpful to everyone. Good luck with your surgery.

  17. MrMiyagi

    Hey WW,
    I’m not around too often these days but wish you well on the leg surgery (not sure what good that does though..).
    Don’t run around the hospital terrorizing the poor nurses again bud, I’ll catch up with you here sometime.

  18. William Wallace

    Miyagi,

    Yeah my friend I know you’ll be back when you settle down, looking foward to catching up with you 🙂

    I’ll be sure to give the nurses hell, as always, for some reason they love me for it, maybe it’s because I do it with a grateful smile on my face…lol

  19. sophia

    W2,

    Just back from kids duty…Wishing you good luck with surgery…Is Bertha the nurse taking care of you again? If so, please be nice to her, just let her know when is the DCL so that she can double her money in no time! Just joking, please take care of yourself!

  20. William Wallace

    Sophia,

    I’ll be on kids duty later.

    I hope I never see Burtha again, she makes my ears sweat she talks so much. My surgery is Feb 20th, so I will be here for a while still. Im going to be in the hospital for a week and then bed ridden for about a month, you’ll hear from me one way or another!

  21. sophia

    WW,

    Just read your earlier post…220dma, 275dma targets? Could you please teach me how you get to those levels? Thanks in advance

  22. sophia

    W2,

    When you saw Burtha last time, I was in New Hampshire and we were all worried for you…until we saw that you bought the crash that week and made 80+ dollars on it!! You rock! BUT, please dont over do it, there is one thing important, it is the family….LOL my friend and have a great w/e…

  23. sophia

    W2,

    got it thanks! will do so…need to run, have a great w/e all and thanks for a great week!

    Gary,

    thanks for your acute moves, I learn SO much!

  24. mikezza

    ww
    since you like statistics so much, heres one for you. its a mathematical fact that fifty percent of all doctors graduate in the bottom half of their class :o)

    best wishes for your upcoming surgery.

  25. EricH

    Gary,

    You posted this 2 days ago. I’m not trying to cause trouble but again, i think at times you just need to simmer down with your expectations.

    “Eric,
    We’ve got the setup we’ve been waiting 5 months for. We have an intermediate top in the dollar, we have strong hand status, we have a break of the D-wave down trend, stops are close to our entry, and it’s early in an intermediate cycle, now isn’t the time to worry about wiggles.

    If one waits till it feels right then it’s already too late.

    If something unexpected happens I’ll make an adjustment if necessary, but as of right now it looks like Old Turkey is the correct strategy.”

  26. Arun

    Eric
    The best way to follow Gary is to follow his trades, not his calls. He will change on dime when it comes to his bold predictions but he will make you money. Isn’t the latter why we are here?

  27. Arun

    W2, I remember you saying the same thing i.e “Look at how the 100dma stopped the dollar decline.” when we were at the 65 and 75 too. So, if $ drops on mon, it could be 110 and so on.. Somehow you are profiting with all this sma’s, its just too hard to say which sma will reverse it. Definetly, not picking on you.

  28. EricH

    Arun,

    I know that, i’m just saying he need to tune it down a bit because he’s setting up expectations for himself that can’t be meet.

  29. William Wallace

    Arun,

    Never think that a decline will be REVERSED on an MA, but always expect it, as I said many times, the bounces off the previous MA’s “weaken” the decline until a reversal occurs. If you notice I never said the BOTTOM was in on the dollar when mentioning the 65dma and the 75dma, only that the dollar found support on them, as you can see. when you see me call a BOTTOM on an MA, know that there are other indicators that I am looking at also.

  30. Arun

    W2, much clear now to your support/bottom reference. Why don’t you tweet your trades? I’m sure everyone will welcome it rather than keep refreshing the page. I will even create a twitter account and save you that trouble 🙂

  31. William Wallace

    Arun,

    Also, I can almost guarantee that if the dollar drops monday it will not bounce off what you may consider to be “the next MA” lower. This is a mistake many make when using MA’s, reason I mentioned the 65dma and the 75dma on the dollar was because they have shown to be support in the past, and we seen how they supported the dollar again recently. An even greater mistake is thinking only 1-2 MA’s (like the 200 etc.) are effective.

  32. William Wallace

    Arun,

    If you take a look at basically every intermediate decline during Gold’s last huge C-wave, you can clearly see how the 75dma and the 100dma (not the 60dma or the 90dma, etc.) “weakened” the declines before finding a final bottom on the 150dma.

  33. Gary

    At Ease,
    It is very late in the dollar cycle plus gold would seem to be telling us that the dollar is about to bottom.

    Seems like a pretty good trade to me.

  34. William Wallace

    Arun,

    Think of it like this…if you fell off a roof into a tree, just because you may bounce off a few branches on the way down doesn’t guarantee that one will stop you. When gravity takes hold your going down no matter what, until you hit the floor.

  35. ...at ease

    Gary,
    Most of My funds are tied up with 3 day clearing, so I only took a small UUP trade in my trading account. My experience in UUP has been like yours with shorting. That’s why I was finding it humorous after I bought it just kept dropping. Wondering how big a correction we will actually get as fast as gold is dropping today.

  36. Gary

    High volume sell off also. I think we definitely made the right choice with our PM positions. It remains to be seen whether we timed a good entry into UUP.

  37. William Wallace

    Arun,

    Im going to give you something to think about, just something to ponder, a little hint…if on your way down while your falling through that tree you happen to land on a branch strong enough to halt your decline, and there is another branch strong enough just above, you will become wedged between the two, but what happens to the weaker branches in between the two strong branches in which you are now wedged – they are useless and were too weak to offer any support or resistance.

  38. Arun

    W2, much appreciated on your concepts of MA. So, where does this GC halt its decline today. I’m thinking around lower 1720’s.

  39. William Wallace

    You see this decline today in gold, this is what I meant yesterday when saying the moves now are very exaggerated, it doesnt necessarily mean gold is on its way to hell. So be prepared to buy the next DCL no matter whether we are in a B-wave or not, just be prepared to get out sooner then later.

  40. ...at ease

    Gary,
    Booked some great gains 🙂 on those strong hand trades we took (sold off most of them yesterday) and sold off the less leveraged ones at the open which I picked up yesterday dips. Just have to wait now for the next dcl for another good money maker.

  41. William Wallace

    Arun,

    The 10dma is right there around 1722, maybe it halts the decline, maybe not…maybe before at 1725…but its really not important right now, unless your looking to take profits on a short from above. I definitely wouldnt be looking to go long yet. Like I said many times, a breach of the 10dma is almost certainly an indication that the move into a DCL has begun when in the timing band.

  42. William Wallace

    I just want to stress, its very different for those of us who trade futures…for example, gold may tag and bounce hard off the 150dma in the AH session and rally $20before reversing and continuing the DC decline. So I will use the MA’s to profit to the long side even during DC declines (many of the trades I post reflect this). In that case, looking at a historical chart it will look as if gold blew right through the 150dma and it was useless, this is usually the case with several other SMA’s thought to be meaningless…obviously one who just buys DC and ICL’s can only benefit immediately from using MA’s if gold bottoms on one during the daily session. This is the reason MA’s are extremely beneficial for me, and to others useless. As you can see I carry my use of them into the daily session, but they will not always be effective during the daily session because the setups are just not in the time frame.

  43. Ollie

    Silver showing some relative strength vs gold both in the size of the drop and volume too

    If it stays that way I will start buying AGQ at the next DCL which will be the first time for me since last spring

  44. ...at ease

    WW,
    I didn’t get a chance to read late yesterday or last nights comments, before getting caught up this morning on recent comments. I must have missed your comments on the last post. Hard to keep up on pages turning.

  45. William Wallace

    at ease,

    I didnt actually post the gold short, I just made mention of it to Riley that I had put it on yesterday in expectation of the Jobs number sparking a reversal.

  46. riley

    hey WW are you going to watch the super bowl or trade futures? I guess you are a giants fan(they beat my falcons) good luck if you are a fan. I’m awful tempted to take profits on the 10dma, hate losing profits. Then re-enter if fails.

  47. riley

    SB I think you own AUY, gotta like this one, I couldn’t sell any today, I think this one a double this yr(from 15). Although I bet you are not worried either way.

  48. Tiho

    The Dollar’s downtrend has just started. Don’t trade against the trend, instead wait for a bounce, if it happens and than add to Dollar shorts.

    Hundreds of thousands of contracts are short Euro, which means billions and billions of dollars of Dumb Money is betting on UUP as well. Don’t follow the herd!

  49. Gary

    Even more money is betting long on the stock market. The Nasdaq is stretched further above the 50 DMA than almost any other period.

    There will be a profit taking correction at some point, probably sooner rather than later as the market has clearly not priced in a Greek default, which will almost certainly escalate into Portugal Spain and Italy as we have a lot of short-term debt that has to be rolled over in March. Pretty soon the stock market is going to take notice that we have a big problem quickly approaching.

    When the market corrects the dollar will rally.

    And since you want to use the COT contracts to justify your trade then I would point out that commercial hedgers are now net short the stock indexes to one of the largest degrees in the last nine years.

  50. ver

    Gary:

    Then why not short the market since that is what you are betting on, rather than go long UUP? The dollar could just go sideways and continue to fall here while stocks correct the same way stocks went up while the dollar showed strength. Just set a buy stop to trigger on whatever sell stop you put into place for the dollar.

  51. Gary

    Because it’s too hard to make money on the short side, it’s easier to pick a cycle low than a cycle top, and the dollar is a lot less volatile than stocks.

  52. Tiho

    First of all, I agree with the up and coming stock market correction. It is overdue, we all know that. All one needs to do is look at the Russell 2000 and see it rallying almost vertically.

    Having said that, using the stock market as an excuse to short the Euro (that is what you are doing when you buy UUP) is not the best strategy.

    “Pretty soon the stock market is going to take notice that we have a big problem quickly approaching.”

    Sorry but I disagree. The only thing the stock market has figured out is that the credit markets have calmed and that interbank lending is slowly unfreezing.

    Now, once I again I state that a correction is overdue. But that is not because of “big problems approaching” like you mentioned, but because the market has run hard and needs to rest / consolidation / correction.

    After a correction / consolidation the trend for risk assets is still up. Cyclicals are outperforming the broad market, emerging markets are outperforming developed markets, emerging market currencies are rallying big time which indicates money flow out of US and breadth is super strong in the S&P 500. That is NOT a sign of a top… you should know that. Top is not an event, it is a process that takes time as breadth deteriorates.

    There is no signs of a recession right now and therefore we can conclude that US Dollar is a short – not the Euro. Any Dollar rally will fizzle out fast – just my 2 cents…

  53. Tiho

    “Because it’s too hard to make money on the short side, it’s easier to pick a cycle low than a cycle top, and the dollar is a lot less volatile than stocks.”

    Buying UUP is shorting the Euro also known as FXE. Same thing different smell man… you are still shorting.

  54. Tiho

    UUP (US Dollar) and FXE (European Euro) have a perfect opposite correlation over almost any time frame – link here.

    So you are essentially picking a cycle top in the Euro and shorting it like rest of Dumb Money net shorts on the COT.

  55. Danno

    Today $SPX hit my ‘Initial Trading Price Target’ of 1345 that was estimated by calculating the statistical averages of Inverse Head and Shoulders patterns. I posted the 1345 target here weeks ago. Before that, in mid or late December I posted a target of 1323 but revised the target up to 1345 when I found a math error I’d made. fwiw

  56. ver

    It wasn’t any easier to find the bottom on the dollar last time either. In fact UUP never even bounced. If volatility is a concern then reduce position size accordingly and go 10-30% short SPY vs. 50-100% long UUP.

    I struggle with understanding the religion against shorting when that is quite explicitly the bet being made. What’s more, given that surprises come to the downside in bear markets, I’d much rather be short a secular stock bear rather then being long a secular dollar bear especially given the confirmed actions and intentions of the Fed to keep deflation at bay.

    Anyhow I know and understand your position, just offering up an alternative and all too unpopular perspective on this forum.

    Also, for what it’s worth, I did got short instead of the last dollar long trade and closed out a loss at the same time the dollar long was closed. Based on my position sizing my portfolio loss was equivalent, no better no worse. I’ll say it again and again it’s the leverage and position sizing that ruins these trades not whether you are hitting the “sell” or “buy” button to take them.

  57. Gary

    Ver,
    You apparently think you are one of the very elite traders that will make money shorting. Let me suggest this. Go back over the last 5 years and add up all of your gains and losses from selling short. If it isn’t a positive number then why do you think it will all of a sudden change this time?

    The mistake almost everyone makes is to look at history and calculate how much they would have made selling short. They never take into account the real time action. The intraday rallies that knock you off your trade or getting caught at the bottom holding too long and giving back most if not all your meager profits.

  58. Gary

    Tiho,
    I didn’t say that the problem was going to derail the bull market. But it is a real problem and the market will use it as an excuse for why the profit taking correction is occurring.

    There is a lot of debt that has to be rolled over in March. No progress has been made toward solve that problem yet. Politicians are still kicking the can down the road hoping it will just go away.

    When stocks correct the dollar will rally. The dollar is much less volatile than stocks. It’s much easier to hold on to that trade than to try and hold on to shorts.

    I explained the process to Ver in the comment above.

  59. William Wallace

    Just want to point out (besides trying to pin point it in realtime) a few significant levels im looking at for a DCL in gold now that the move into a DCL may be underway…

    First of all, as I have mentioned many times in the past, a break of the 10dma this late in the timing band for a DC top almost always indicates that the move towards a DCL is in effect.

    If the requirement for a DC trendline break is fullfilled, the 150dma and $1700 handle will be breached, they have basically all converged.

    If the 150dma is indeed breached, below that we have both the C-wave 23.6% and the current Daily Cycle 38.2% Fib levels at $1673, which is also the 11/22 DCL pivot.

    If that Fib level is breached (personally I dont put too much faith in them as hard support)we have the 50dma currently at $1664, which I have much more confidence in for a firm bottom.

    If the 50dma is breached under heavy selling pressure we have the 200dma not far below, if this were the case most likely the 200dma (or slightly above it) will mark the bottom and give us a key reversal that will close at or above the 50dma.

    A into B waves are even more tricky to navigate than D into A waves…one A-wave daily cycle or two? Maybe three! If two the second possibly fails and one is caught in a B-wave…you know the deal.

    Wouldn’t it be great if gold was just entering the bubble phase and the ABCD pattern was abolished?

  60. William Wallace

    Danno,

    In Oct 2006 gold was in the first daily cycle of a new C-wave advance. The 200dma crossed back above the 50dma, not the other way around. had gold been still locked in a down trend the 50dma would have been crossing below the 200dma, hence a death cross. As the uptrend advanced further the 50dma began to turn back up and crossed back above the 200dma, giving us a true golden cross.

  61. William Wallace

    We saw the same thing in 05′. Its typical at B-wave bottoms, we will most likely see a death cross at the bottom of the next B-wave also as gold enters a new C-wave.

  62. William Wallace

    Danno,

    I mentioned this to you once before, what’s more important is whether or not the 200dma is at an incline or decline when the cross occurs…you see that with gold the 200dma was at an incline, so the cross was a meaningless indication.

  63. Gary

    Jason Goephert has covered this before. More often than not a death cross turns out to be nothing and is soon reversed. Gold had one in 04, 05, 06 and 08. None of them stopped the bull market or even led to much more downside except the 8 year cycle low in 08.

  64. Gary

    Pretty much every death cross will originally occur with the 200 rising because the 50 is a much faster moving average than the 200.

    In a bear market the 50 will hold below the 200 long enough or the drop will be sharp enough to turn the 200 down. Even then it doesn’t guarantee a bear market.

    The 200 turned down briefly last year and this year yet it looks like Ben was able to print enough money to reflate asset prices.

    These really aren’t free markets anymore and the 4 year cycle has probably morphed into a 5-7 year cycle.

  65. ver

    Gary:

    I rarely short the market, but then again I rarely go long the dollar either. The unfortunate reality is that I would have lost more in your long dollar trades than I have lost in my short trades. But that just distracts from the issue we are debating.

    The premise for this trade is “When stocks correct the dollar will rally.” The dollar is in a confirmed intermediate decline and at least multiple if not several weeks from the timing band for an intermediate cycle low. Every sign in the market and from the Fed that the dollar is going to weaken. Yet you buying and holding the dollar.

    I get that you want to caution traders from shorting but I don’t think that excuses the cognitive dissonance here. The only valid reason I’ve heard you provide for not going short is because it is hard to hold on the way down. But you’re kidding yourself if you think that holding onto miner positions while they are bottoming is qualitatively easier.

    Making money on these short-term swings, be it short stocks or long dollar, is hard period. In fact most people shouldn’t even take them, especially when there is a PM bull to ride. I’d be willing to be that most folks are levering up on the dollar trade, thereby defeating the purpose of avoiding going short.

  66. William Wallace

    “Pretty much every death cross will originally occur with the 200 rising because the 50 is a much faster moving average than the 200”

    -Gary

    Yup, only the SPX 2000 bear actually began with a declining 200dma when the 50 crossed. The death cross is just really a useless indication, bull markets are littered with them.

  67. Gary

    Ver,
    You’ve got to be kidding. We lost a grand total of .8% of our total portfolio on the last UUP trade.

    One would lose that much on one whipsaw trying to short the market and I think we all know there have been multiple whipsaws.

    By now anyone trying to short the market has no hope of making money on the trade. They have been whipsawed out so many times that even if they time a perfect entry and exit they are still unlikely to make back all the money lost on whipsaws.

    This is par for the course when shorting and the difference between Monday morning trading and real time.

    Sure one can look at a piece of history and calculate how much money they would have made going short. But to actually make it in real time is a completely different ball game.

    If you lose enough money you will eventually come to see this fact.

    I know I certainly had to learn the hard way and I was stubborn enough that it cost me a pretty penny before it finally sunk into my thick skull.

  68. ver

    Gary:

    No I’m not kidding. I entered and exited more or less when you said so. I simply chose to short SPY instead of buy UUP *and* I traded with a smaller % of my portfolio to do it..

    The real problem is that people get too aggressive with leverage and position size with no sensible stop and no discipline to honor it. The simple fact is that these tendencies will ruin any trade, especially ones going against the secular trend.

  69. ver

    WW:

    I can assure you I’m about as nimble as an elephant. I rely on Gary’s nimbleness to plan my entries and exits. I simply used a different vehicle, responsibly adjusted position size, and hit the sell button instead of the buy button. Not entirely different from choosing to buy less GDX vs. more GLD. I think it’s a shame that the message about managing risk–one of Gary’s best strengths–is a sideshow to railing against shorting.

    And all this from someone like me who hates shorting 🙂

  70. Gary

    Ver,
    You are doing the exact opposite of what I have been preaching, you incurred a larger loss than we did and somehow that is a direct result of the UUP trade?

    Shorting the stock market isn’t the same thing as going long the dollar index. Yes they often have a pretty tight inverse relationship but not always as has been the case lately with the dollar and stocks generally rising together for the last couple of months.

  71. ver

    Gary:

    Don’t know why you think I incurred a larger loss? I’m saying I lost less than 0.8% on my short trade. I followed your entries and exits but I sharply reduced the portfolio allocation to compensate for the fact the SPY is more volatile than UUP. Sure it could have up or down an extra few tenths of a percentage point depending on timing but the point is that there are responsible ways of going short for a short-term trade, in the same way you go long UUP for a short-term trade.

  72. ver

    Gary:

    You said: “Shorting the stock market isn’t the same thing as going long the dollar index. Yes they often have a pretty tight inverse relationship but not always as has been the case lately with the dollar and stocks generally rising together for the last couple of months.”

    This is precisely my point! That’s why I question why you are going long the dollar when your expectation is for stocks to correct. In your own words, “When stocks correct the dollar will rally.” Why then go long the dollar, which is in a secular bear trend and in the middle of an intermediate decline, when you are looking for a stock market correction that you can bet on directly? Yes stocks and short trades are more volatile, so then reduce the portfolio allocation for UUP down to a third or fourth (or a fifth, whatever) in an unleveraged short position.

  73. Gary

    Ver,
    I don’t know how many different ways I can say the same thing.

    You are obviously intent on shorting the market no matter what I say. Hopefully at some point you will have lost enough money that you will learn your lesson, but not so much that it destroys your portfolio.

    I’ll say it again, go through five years of trading history and if you haven’t made any money on the short side then why would you think it would all of a sudden change now?

  74. Tiho

    Shorting markets is much harder. Top if also a process of breadth breakdown, while bottom tends to be an event as breadth or momentum diverges.

    S&P’s recent top in May 2011 started in Feb 2011 first with Financials and Tech topping. Finally the index topped in May, but it wasn’t until July that it came down hard. Hard to make money shorting.

    On the other hand, Silvers crash in September to $26 was the initial part of bottoming out process, with the retest at $26 happening in late December with much smaller COT, Public Opinion, PutCall Ratio at historical record, huge GLD money outflow and an oversold technical picture.

    I hardly ever short anything in my fund. Obviously once in awhile there is a time and a place for a short and that is when you buy Put Options, especially since they are dirt cheap when the VIX is low. You won’t be shaken out, stopped out and if you focus on OTM they are super cheap, so all you need to do is follow the VIX more than the S&P.

  75. ver

    I don’t intend to go short stocks and I certainly don’t intend to go long the dollar either. I think both are particularly bad ideas, especially now that the dollar is in an intermediate decline and with a gold daily cycle correction in progress. But if you forced me to take a trade based on the rationale that “When stocks correct the dollar will rally.” I’d much rather short the secular stock bear than go long the secular dollar bear. Thankfully we have a PM bull so we don’t need to agree on this matter to make money together 🙂

  76. Gary

    Just curious, by what rational is the dollar in a bear market? The last three year cycle low occurred above the prior one. The dollar is above a rising 200 DMA and the pattern of higher highs and higher lows is intact.

    That is the definition of a bull market or at the very least a market that is still rising out of a three year cycle low.

  77. Rob L

    Gary,

    If the CRB found its 2.5 year cycle low in Dec. isn’t possible that the dollar is now extremely left translated and is now hunting its 3 year cycle low – six months up(after finding its 3 year low in May)and now in a 2.5 year decline?

  78. ver

    Fair enough, I can’t disagree with the charts on this one. Perhaps the dollar *is* in a secular bull after all! That would certainly make a more compelling case to going long the dollar for a trade like this.

    Do you think this is the case? What fundamental change or development would be driving a new secular bull trend from the low in April 2008?

    How would you square this with the secular bull in PMs?

    Now this is a far more interesting discussion 🙂

  79. Gary

    Rob,
    It is possible. But it would require the stock market to be in a runaway move. Those are pretty rare and not something that one can bet on.

    Speaking of the CRB, it’s probably noteworthy that oil has been diverging from the stock market and gold. It won’t take much for the current intermediate cycle to “fail” (move below the prior cycle low).

    If that happens it would probably drive the CRB below the October lows forcing the three year cycle low to occur this year rather than last.

  80. Gary

    Ver,
    The dollar may be in a bull market compared to other currencies, which appears to be the case since 2008, but it is not in a bull market when compared to commodities.

    That being the case we can still make money with a trade like UUP when the CRB is dropping.

  81. Rob L

    Gary,

    I haven’t found much information with regards to using cycle analysis and the CRB.

    Do you know the average number of days that make up a daily cycle in the CRB?

    On Friday the CRB had a big day to the upside after finding support at the 50SMA. I was wondering if this is the start of a new daily cycle.

  82. ver

    The recent weakness in the CRB and oil is puzzling. If stocks and metals are signaling that the Fed just introduced a game changer / QE To Infinity / etc. then why is oil incapable of reclaiming the $100 level and the CRB looking like it is rolling over.

  83. ver

    Though on a weekly chart it looks like the $CRB is just backtesting the breakout from the multi-month downtrend line. A strong surge up in oil soon would confirm it.

  84. Tiho

    “The dollar may be in a bull market compared to other currencies, which appears to be the case since 2008…

    Putting in effort makes one a better investor than just making short cut decisions or relaying on tools like DXY – it tricks so many investors into believing Dollars move based on what the Euro and the Pound do (two thirds of the DXY index). We could conclude that the Dollar is in an uptrend against the Euro and the Pound… but the Dollar is not in a bull market against “currencies”.

    Lets put in some effort and see what we get here. The Dollar is below 200 MA against following currencies:

    – Canadian Dollar
    – Australian Dollar
    – New Zealand Dollar
    – Japanese Yen
    – Singapore Dollar
    – Chinese Yuan
    – Mexican Peso
    – Turkish Lira
    – Chilean Peso
    – Gold

    The Dollar has made a lower low against the following currencies:

    – Canadian Dollar
    – Australian Dollar
    – New Zealand Dollar
    – Japanese Yen
    – Singapore Dollar
    – Indian Rupee
    – Chinese Yuan
    – Mexican Peso
    – South African Rand
    – Turkish Lira
    – Chilean Peso

    On top of that, South African Rand, Russian Ruble, Brazilian Real, Korean Won and many other currencies are sitting on 200 day MA vs the Dollar as of Friday. If the Dollar falls for a day or two more, than we got another handful of currencies breaking that level to be added to the list.

    Still not convinced?

    Another way to measure true Dollar strength is to look at cumulative gains over a period of 1 month or 3 months (or any other period) against global currencies. Just jump on some site or open up a Bloomberg terminal… here are the facts:

    The Dollar has not gained against any major currency in the world over the last 1 month or more – that is not a sign of a “strong” bull market. As a matter of fact, if this was a bull market why is the Dollar is a full on crash free fall mode against some currencies?

    Dollar has crashed (lost over 5% in a month) over the last months against the following currencies:

    – New Zealand Dollar
    – Brazilian Real
    – Russian Ruble
    – Indian Rupee
    – Mexican Peso
    – South African Rand
    – Turkish Lira
    – Polish Zloty
    – Chilean Peso

    Why is the Dollar is crash mode unto 7%, 8% or even 10% against some currencies in a space of a month? How is that a bull market?

    On top of that the Dollar has gained against only 40% of the major currency in the world over the last 3 month or more – that is not a sign of a bull market at all. Throughout 2008, Dollar was rising against 90% of the worlds currencies and precious metals into March 2009.

    Overall Dollar breadth strength is awful. The Dollar tends to stay above 50 day MA when it rallies majority of the time, like it did in 2008, and it tends to do well against ALL or MAJORITY of the worlds currencies when in a bull market. That is not the case across the world today. In some cases the US Dollar has been falling for four months in the row… how is that a bull market?

    The Dollar has failed to make a new high for over 4 months against following currencies:

    – Canadian Dollar
    – Australian Dollar
    – Japanese Yen
    – Singapore Dollar
    – Taiwan Dollar
    – Korean Won
    – Brazilian Real
    – Russian Ruble
    – Chinese Yuan
    – Chilean Peso

    DXY / UUP is just inverse Euro undercover, that is mainly used by novice traders to gage currencies on a fly. Those who follow currencies in depth, follow global currency breadth of the Dollar.

    So I’ll agree with ver and say that the Dollar is in an intermediate decline which started first in early October 2011 for Asian / Commodity Currencies, and than was followed in late December 2011 by Precious Metals and Emerging Market currencies, and finally the weakest lot has now turned against the Dollar too in middle of January 2011. So yes – Dollar downtrend is real, you are betting against the trend just because the stock market is overbought.

    Also, to disclose, I’m long Swiss Franc / short Dollar as of middle of January and long Silver in late December.

  85. Gary

    Tiho,
    And all of that doesn’t help me one bit with making money. The dollar index has a very clear cycle count. When it is rallying it almost always corresponds with other assets moving down into intermediate cycle lows.

    Since the dollar put in it’s three year cycle low gold and commodities in general having been moving down. Gold into a D-wave bottom and the CRB into a three year cycle low. Those trends will likely end once the dollar forms the top of the current three year cycle.

    Did that occur three weeks ago? Maybe.

    I need to see how the move out of the impending daily cycle low unfolds. If it rolls over quickly and continues to make lower lows then yes there is a good chance that the dollar index has topped.

    If however, the stock market rolls over into an intermediate degree correction then it will almost certainly push the dollar index back up to new highs and gold will at least test the recent lows and there’s even a small possibility that we see another lower low.

    The CRB would presumably move down into a true three year cycle low sometime in March eclipsing the low made in October.

  86. Gary

    That’s great for you, but my system for making money in the market is different than yours.

    That doesn’t mean one system is better than another, just that each of us has found a system that works for them.

    I have to use what works for me, and for me that means cycles, sentiment, money flows, a bit of technical analysis, and a bull market.

  87. Gary

    Over the last 6 months the model portfolio is up over 25%.

    I guess it just goes to show that no matter how good one does it’s never going to be enough for some people.

    The unfortunate fact is that when the dollar’s three year cycle low formed the nature of all markets changed. Trading styles had to change to adapt to that.

    You wish to stick with the prior trading style that worked pre dollar bottom (longer holding periods, easier to make money). Unfortunately those strategies just aren’t going to work in this environment.

    One is of course free to choose what ever style of investing they wish and if another analyst uses the style that you feel comfortable with then by all means follow them. Unfortunately that won’t change the fact that the market isn’t going to allow you to make money with a strategy that no longer works in the current environment.

  88. Gary

    This is the comment that I was answering. Apparently Phil decided to delete it.

    “You are usually pretty dependable but lately–over the past six months or so—following you with any significant amount of capital has become maddening. I’ll stick with Poly and Dr. N for my significant trades for now….”

  89. Tiho

    Have you ever managed money or do you just run an imaginary portfolio for the sake of a newsletter?

    Returning 25% as an individual or newsletter is different to managing public money, being pressured to be fully invested at all times to chase returns in fear of redemptions and under performance against your colleges.

    Not to mention the large amount of capital which restricts buying every asset for the sake of liquidity and the inability to jump in our out of trades like you do.

    Running a hedge / mutual / pension fund and having a portfolio is like night and day. Those who do this job and make money all the time are gladiators. Managing a portfolio with small capital without public pressure to invest is not the same thing.

    I prefer to just run my own personal account, that way I can make money slowly without pressure and plenty of time. You cannot do that in the public finance industry.

    I do not want to take away from your performance, which shows you have made money which is what is all about, but having said that, you are comparing apples and oranges there buddy.

  90. Tiho

    Another example would be this: if you were an equity only macro hedge fund team manager working here in Asia, you have to globally either buy equities or short equities or a combination theres of, right now.

    Equities are overbought, but you do not want to short them. And you cannot stay in cash coz your team mates will beat you and you will lose your job. You cannot own the US Dollar, because your lock currency might be Singapore Dollar as “cash” which pays peanut returns,

    What are you going to do? You have to do something… you cannot just sit around and wait like a private investor.

  91. mikezza

    tiho
    your site shows 3 months worth of performance and a portfolio of 3 positions, one of which accounts for 80% of the total. is this the experience that your talking about when you say that you manage money professionally. if you don’t mind me asking, do you have a defined strategy for your fund and have you raised outside capital.

  92. Gary

    Tiho,
    This is why I would never run a hedge fund. I don’t need those kind of headaches. There will always be times when the correct strategy is to be out of the market and in cash.

  93. DD_Ing

    Gents – I have been investing for 15 years, and would gladly take a 25% per year return. Take your account and run the numbers with 25% return over the next 10 years and will put a smile on your face. Even the best mutual funds (believe me, I have looked at them all) won’t even come close to that kind of performance. Keep up the great work Gary, very appreciated!!

  94. Gary

    He can’t be that good if he thinks we are in a multi year bull market for semi’s.

    Semi’s were the leaders during the tech bubble. Bubbles never reflate.

  95. KHC

    Tiho,

    Thank God that I follow Gary who does not manage anyone’s money. I’m very satisfied with the 25% return. For a small guy like me, who cares if we are comparing Apple and Orange? as I don’t have that crazy amount of money to be a fund’s customer anyway. Gary’s performance does beat many funds and that’s all I care.

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