AS EXPECTED

I didn’t really feel like doing a full article, but it was time to do a new post so here is a quick recap of the big picture view which is unfolding pretty much as I expected. 

The CRB is now in the process of putting in a three year cycle low (this should correspond with a three year cycle top in the dollar) and stocks have put in an intermediate cycle bottom.

As I expected gold bottomed slightly ahead of the stock market and stocks. The trend is now up for all assets and all we are waiting on is confirmation that oil has bottomed. Once oil and energy stocks join the party the bull will be firing on all cylinders.

The economy will continue to respond to Keynesian economic policies until commodity prices surge into a final parabolic advance and prick the bubble. However that isn’t due until sometime in late 2014 when the dollar forms its next three year cycle low, so I think the perma bears are just kidding themselves if they think the US is ready to rollover into a recession right now. 

The recent stock market decline was just a normal intermediate cycle correction in an ongoing bull market. Yes it was rather severe, but this was just a normal regression to the mean event triggered by an extreme stretch above the 200 day moving average that was generated by the European LTRO and Operation Twist.

I expect stocks will continue to grind higher this year and start to stagnate next year as commodity prices began to pressure profit margins. By early 2013 the stock market should begin rolling over into what I expect will be a very drawn out, and volatile bear market as deteriorating fundamentals do battle with ever greater liquidity injections. This is the prescription for multiple violent bear market rallies in what I expect will be a very long agonizing grind lower as commodity prices gradually pick up momentum and move into the final parabolic spike in 2014.

Gold has started a new C-wave advance that should at least test the $1900 level sometime this fall. Don’t expect a breakout to new highs until next spring at the earliest though. 

Gold may enter the final bubble phase of the bull market in late 2013 & 2014, although I think a more realistic scenario would be that this just evolves into another garden-variety C-wave, topping around $3500-$4000 in late 2014 or early 2015 followed by a severe correction into the eight year cycle low in 2016 and a vicious rebound and final bubble phase of the gold bull in 2017-2018.

56 thoughts on “AS EXPECTED

  1. Gary

    This was never going to be a debt crisis. CB’s made that clear two years ago and every summer there after. This was always going to be a currency crisis

  2. Joe

    Hi Gary,
    Thanks for sharing your insights with us. When you say “currency crisis”, do you mean that all currencies (and therby debts) will be devalued vs. gold or that the US$ will be devalued vs. all other currencies? – Thanks, Joe

  3. Tiho

    Hahahahahaha! Well – don’t even bother reading my post at all. I totally disagree with everything in this post. I expect everything opposite that as written here including some type of a default, Eurozone mess with Spain and Italy, global bear market, no growth and a global recession, spike in the US Dollar and a spike in the VIX.

    Pretty much totally 180 degrees to Gary. I see no growth, I see a downtrend and I see a bull market from march 2009 over. Reflation is done and a recession is on its way.

    I assume things will be held together for awhile because (a) a lot of bears can be seen in the markets right now (I wouldn’t short anything with some many contrary indicators pointing to a rally) and (b) US elections are approaching. But when elections finish, I think 2013 will be a total disaster.

    Once again, I’ll state that I’m still long core Silver position without leverage and I am not selling it regardless of price. The lower it goes, the more I will buy, because I believe that all of the bad things I wrote above, will force CBs to print trillions and trillions (not before but after they occur).

    Only than will CBs create a huge mania in PMs and Agriculture. But first I expect a major Dollar and VIX spike, which will mark a lifetime buying opportunity.

  4. saif

    I think the USD has 15 days of correction left at most. Most of the correction in price is over.
    Second leg of the powerful USD rally will begin late June or early July.

  5. Keys

    Gary,

    You said “The economy will continue to respond to Keynesian economic policies until commodity prices surge into a final parabolic advance and prick the bubble. However that isn’t due until sometime in late 2014”

    But then you said “final bubble phase of the gold bull in 2017-2018.”

    Are you under the impression that the final bubble may start in 2014, but can end as late as 2018 for gold….but other commodities will cap in 2014…..

    or are you under the impression that all commodities can peak between 2014-2018.

    Thanks, the first comment threw me off in terms of commodities; I believe I understand your view in gold.

    Although I believe in most of your insights going forward, I lack the abilities in cycles to time events with such conviction, and find such a skill extremely interesting to say the least….for the most part I am still amazed at how accurate cycles can be.

  6. Gary

    Keys,
    There is a possibility that the bubble phase in gold will start in late 2012 and stretch into 2014 and early 2015, but I think it’s more likely it will begin out of the next 8 year cycle low in 2016.

  7. Keys

    Gary,

    I understood that…so thanks…my question was about commodities in general…you stated that they will peak in 2014…..

    If you believe gold will peak in 2016 or so, do you believe then that commodities outside of gold will peak earlier? Perhaps I misread your quote below…

    here is your direct quote…

    The economy will continue to respond to Keynesian economic policies until commodity prices surge into a final parabolic advance and prick the bubble. However that isn’t due until sometime in late 2014……

  8. Gary

    Keys,
    I think they will peak in 2014 just like they peaked in 2008 and 2011. That doesn’t mean the bull will be over though. As long as humanity keeps trying to kick the can down the road by printing money the commodity bull will continue.

  9. Liquid Motion

    Gary,
    If $3500-4000 is the topping of the next C wave then where does gold go in the final mania phase?
    Can you also explain how you arrive at the C wave top price. I dont believe a price estimation/extrapolation is a factor of charting, sentiment or COT analysis.

  10. Gary

    $3500-$4000 is just a guess. Each C-wave gets bigger. The last one almost doubled from $1029 to $1900 so I figure the next one will probably do the same or slightly more.

    The bubble phase should triple or more.

  11. Dang

    Gary,

    So if stocks do continue up, could we perhaps be heading for a triple top, S&P to test 1560 again?

    That would make sense to me.

    Great calls so far!

  12. TenYear

    Just thought I’d chime in what is really bothering me today: I really really really hate it when stocks are up (substantially) and the PMs are red, especially when stocks are up and the miners are red.

    Top 5 pet peeves.

  13. Gary

    mika zman,
    Gold is never going back below $1523 for the duration of this bull market. I’m certain enough that I’m willing to bet a burrito on it.

  14. Tiho

    Hahaha, I usually come here to read financial comments, but sometimes its just full of comedy punch lines. It seems that you have a bad memory. Turn to May 01st post on your blog titled:

    Bernanke has broken the Dollar, inflation trade to start!

    What happened afterwards? Dollar went vertical and made a new 52 week high. You cannot be bullish and bearish on the Dollar at the same time and than claim a win. That’s called “cheating” where I’m from… *wink*

  15. Liquid Motion

    Two Q’s
    Tiho …why are you so pessimistic (as opposed to being a realist) ?
    You mention a recession is on its way….wtf….the US hasnt exited the last one…and most of EUR is now experiencing one …so we wait for the next one…that is already here. That being said, how much worse can we get…worry abt a default when it happens…and the resulting contagion. The Dollar’s trade is the direct result of the EURO imbalance/fear. The USD has no sound footing other than liquidity.

    Gary…thanks for the response but cmon please…your subscribers and anyone wishing to subscribe need to work on something better than a guess. Anyone can draw a line on a chart and plot a point in time and say what they believe to be true. All your work on cycles and sentiment is meaningless if what you are suggesting, with a continued bull run in gold and a “guess” on its price level. Surely your subscribers deserve more than that ?
    Its one thing trading the cycles and knowing when to enter/exit…but also having some concept about the peak price so that the exit is not premature. Cycles will not give you that. Your “guess” seems it wont either.
    This also suggests that there are numerous cycles to cater for over the course of the next 4-6 years. When all is said and done wouldnt the trade be buy and hold knowing what the end game is ? This cycle counting and playing the upside trade seems pointless when one can spend their valuable time in taking the position now (knowing that this c-wave is good for another 2 years and the 8yr cycle low is 4 years away)…and take a holiday knowing that they can come back in 2 or so years and find gold at $4000. If i do the math…an almost 100% return over two years equates to 50% annual return. In a market like we have experienced isnt that kind of return acceptable?
    Just my 2 cents worth.

  16. Gary

    Tiho,
    I was fully prepared to admit you were right and that the dollar had topped. But as it turns out my original expectation was the correct one. So yes you owe me one burrito.

    1. Tiho

      I got the Dollar call wrong without a doubt. But so did you. No excuses like I thought Dollar topped than I didn’t, than I did. That’s called flip flopping.

  17. Gary

    LM,
    The problem is that the vast majority of investors can’t hold on through an intermediate cycle decline, so in order to keep people on the bull I try to avoid them.

    We managed to avoid all of the D-wave decline and all but the last month of the B-wave. Even so many people freaked out during that last month. So to say buy and hold is one thing, but to actually do it in real time is another.

    I expect the bull to end when we see a Dow:gold ratio of 1:1. When we get close to that I will exit and not worry about missing the last gasp higher even if it means I miss the last $1000. Why? Because when a parabola like that breaks it can lose a $1000 in one or two days.

    When the last bubble in gold broke it went from $850 to $700 in the blink of an eye.

  18. Liquid Motion

    Ok Gary I understand the logic and the exit strategy….but two things come to mind :
    1) IN your words the bull will take care of the next two years..so the issue of staying the ICL is nullified through a)the low entry point & b)with the secular trend protecting your position.
    2) what is left when they print fiat in unlimited quantities. Does gold necessarily crash (after the mania)like it did in the period 80-83.
    Perhaps some fodder for your next blog….

  19. Keys

    Tiho,

    you have ongoing said USD up, while at the same time saying. :hahahah: …….not sure if you just graduated or not, but this is poor form. Having a valid debate, which both parties learn from….since we are all about making money here….doesn’t include name calling, and other nonsense…..please grow up and control yourself. My problem is that you really do have something to say, but you are too much of an asshole to get it across. Please stop being such an asshole, because you really do have some smarts!

  20. EricH

    1 year to recover a broken parabolic move? The highs of a broken parabolic move usually don’t get tested for years.

    Even after 1 year, silver is closer to the 2011 lows then the highs. This puppy isn’t going anywhere for a while.

  21. Gary

    The last silver parabola in 08 took a little over 2 years to build up enough energy to break out to new highs. It’s certainly possible we could see a repeat.

  22. saif

    All those that pray at the Bernank Alter are about to get burned soon.
    Dollar about to begin the next move higher proving Gary wrong (and right because he takes both sides of the trade) again.

  23. Gary

    The dollar is due for a short term bounce but it looks like the intermediate cycle has topped.

    The CRB should put in a final three year cycle bottom anytime now if it hasn’t already.

    When the CRB bottoms the dollar should top.

    Like I keep saying I’ll be willing to bet a burrito on it.

  24. ILUVPMS

    gary,

    im not much of a fan for burritos… they’re pretty sloppy.. How about we up the stakes and bet a large veggie pizza πŸ™‚

  25. Tiho

    No new money printing is still good for the US Dollar. Now we move back to Europe as the main focus. Greece might not default tomorrow or by the end of the month due to can kicking, but it will default eventually. As long as Fed doesn’t print, path of least resistance for Euro is down, until we get a default!

  26. saif

    We are in the window for the Bull market to resume for the USD. The correction could end today or by 1st couple of days of July at the latest. I am shorting Aussie against the CAD and against USD. That sucker is going to get raped.

  27. Gary

    Based on the cycle setup the dollar will not make new highs and despite a bounce that is overdue will continue generally lower for another 3-8 weeks.

    Based on the CRB due to form a major three year cycle low the dollar should not make new highs for the rest of this three year cycle.

    The burrito bet is out there for any takers πŸ™‚

  28. Tiho

    I’ll take a bet with you on a burrito, when I come to the States. You live there right? However, I will only take a bet with you under a condition that you don’t cheat with a flip flop.

    I say Gold will break $1530 support and Dollar will go higher still from here on some type of a crazy event out of Europe. Timeframe I do not know, as I’m not a “cycle dude”, but if I had to guess I’d say it could all unravel pretty quickly after Obama gets elected or even after German elections.

    You take the other side, where the Dollar will not make a new high and where Gold bottomed and will not dip below $1,530 again. I know you are counting on your 3 year CRB cycle as the holly grail, so I’ll take a bet just because I never believe in holly grails.

  29. Piazzi

    FWIW

    cycle cannot be holy grail and that is regardless of whether 3-yr cycle is imminent or or

    a 3-yr cycle can happen and keep the periodicity as per stats while the ensuing cycle may become, after some bounce, left-translated with lower lows into another 3-yr low

    I don’t think Gary is saying cycles are holy grails, he just plays the probabilities which, if the 3-yr periodicity maintains, suggest a good bounce at least

    It all may rhyme with your (Tiho’s) outlook as well with the low coinciding with the default from Greece or the pullback after first bounce coinciding with a default or something that unleashes a massive injection (or print)

    cycles do happen but there are many more aspects to cycles than just periodicity, e.g. there is amplitude that determine structure (left or right translated)

    had it been as easy and simple periodicity, then all the world had to do would be count days and become rich

    in short, there is no conflict between your outlook and a potential, pending 3-yr commodity low at this point

    enjoy the burritos both of you and keep open minds

    only the delusional knows the future and only a liar is always right πŸ˜‰

  30. catbird

    Tiho,

    Gary sticks his neck out and gives time frames. The closest you come to that is saying that “after the elections…2013 will be a disaster.” Hahahahahaha!

    And, of course, you’re long silver – *right now*. So if silver breaks out of its narrow range to the upside, you can take credit for being right on the metals.

    Looks like you’ve positioned yourself to be right no matter what happens.

    Hahahahahaha!!!!

  31. Joe

    I’m not taking a bet against Gary either, but silver is only about a dollar above its recent low. That is very close, particularly if one expects crude to decline another 5+$ to 75$. Gulp, as Gary says it is extremely hard to stick to a bull market.

  32. Danno

    In my mind, silver came too close to tagging 26.15 again not to dip back down and actually tag 26.15 and get it over with. It feels like silver has unfinished business with that number and might struggle to go anywhere until that number is finally taken out.

Comments are closed.