Monthly Archives: March 2014

Mar. 19th Morning report

Things are going to happen fast this afternoon right after the FOMC statement is released so I’m going to go over a couple of strategies now so everyone can decide how they want to play this and be prepared. 

First off stocks: 

Here is how I’m going to play it with the stock portfolio. If the market can rally back to 1880 before the statement at 2:00 I will go ahead a sell our stock positions at that point. If not then I will wait till after the release as I think stocks will use the statement as an excuse to test the all time highs if they haven’t done so earlier in the day. 

For those willing to gamble a bit you might hold till the end of the day and see if stocks rally and break out to new highs and maybe even try to reach 1900 before this daily cycle tops. 


As of this morning gold has broken the daily cycle trend line just like we needed it to do to confirm a DCL in progress. All the buyers at the 1350 support yesterday woke up to their stops being run. This also had to happen.

Now for those of you that are going to try and pick a bottom you have to do so at some point that has a logical reason for others in the market to do so also. Just picking a random number is unlikely that anyone else is going to back you up and you will almost certainly suffer a draw down and in the volatile market that’s going to exist after the FOMC statement that draw down could be big.  

The first logical place to make an attempt is at the 38.2% retracement which comes in at roughly $1333 today. At that point you will likely have a bunch of hedge funds buying right along with you and the odds are better that the decline will stop there.

If that level doesn’t bring in enough buyers to stop the selling then the next place to take a shot is at the intermediate trend line (roughly $1318). The nice thing about this level is if the intermediate rally is still intact then the DCL will hit a brick wall at that level and up gold will go. If it does go through there you don’t need to stop out immediately because the market will almost certainly bounce tomorrow and give you a chance to exit, probably at a small profit or at least break even.


For those of you not brave enough to try and pick a bottom in a volatile DCL environment, you should wait till 10-15 minutes before the close and see if gold has exhausted the selling and printed a reversal candle. If it has buy your positions right before the close. 

For those even more risk averse wait for gold to form a swing before you buy. 

I’m going to wait for a swing in the metals portfolio unless we get a reversal candle that ends the day positive. 


Mar. 18


Well I’d say the Fed has accomplished their goal. Stocks have clearly reversed from the Ukraine sell off and I’d say the Fed now has the cover to initiate the third taper tomorrow.

I plan to sell our half position into what I expect will be a spike up right after the announcement. That may just end up being a test of 1880, or as I have depicted in the chart maybe a quick test of that 1900 level. But I don’t think it will hold and I think stocks will quickly reverse and drift down into a daily cycle low over the next couple of weeks. That cycle low is where I will buy full positions for the model portfolio.


The dollar is forming a tight coil as we head into tomorrows FOMC meeting. 

As most of you may remember about 70% of the time the initial move out of a coil will usually end up being a false move that is soon reversed. Given that the dollar is late in it’s intermediate cycle I suspect what we will see is the dollar breaking down very harshly tomorrow on the third taper. But one or two weeks of that and we should reach true sentiment extremes. Enough for the dollar to put in an intermediate cycle low and deliver at least a 4-6 week rally before it gets serious about collapsing down into it’s three year cycle low later this fall. 


I don’t think I need to go over the plan for gold again. I made it pretty clear in the morning report what I’m going to be looking for tomorrow.

If we get a reversal candlestick that will be the signal to buy before the close. If not then we will wait till gold forms a swing and make sure it doesn’t break the intermediate trend line. If it were to do that then we will lock up the rest of the positions in the metals portfolio and go on vacation for a couple of months while the ICL does it’s thing. 


Mar. 18 morning update

I’ve been thinking about this all night and I find it hard to believe that the first intermediate rally out of a final bear market bottom would fail to at least retrace 38% of the drop. As I noted in the next chart that would be a move to roughly $1460ish.

I also find it hard to believe that the first intermediate cycle out of a final bear market bottom would unfold as a left translated cycle. 

Granted in a heavily manipulated market anything is possible, but I’ve gotten it in my head that what we may be seeing is a stretched daily cycle in progress that was driven beyond the normal cycle duration by the Ukraine situation. 

The other three sector metals look like they are all dropping down into cycle lows here. None of them look like they formed a cycle low 9 days ago, which is roughly where I thought gold had it’s fuzzy cycle bottom. 

If I’m right then this isn’t day 10, it’s going to be day 32 and a cycle that is that late will form a bottom on the next swing. 

In order for this to qualify as a DCL gold would need to break it’s daily cycle trendline, but not break the intermediate trend line.

I also think gold would need to retrace at least 38% of the 2nd daily cycle rally. That would be enough to give it a trend line break but still keep the intermediate cycle intact.

If this is going to happen I think it will come on the FOMC statement tomorrow afternoon, and we should see a nice reversal candlestick by the end of the day.

Perhaps we also see a reversal candlestick in the stock market Wednesday afternoon only in the other direction. With the next DCL for stocks due during either the last week of March or the first week of April that would put the inverse relationship for gold and stocks back in place for 2 or 3 more weeks, allowing gold to finish it’s intermediate rally while stocks drop down into their DCL.

So for now I’m going to hold the reduced positions in the metals portfolio and plan on going back to full strength if we get that reversal tomorrow. 

I’ll also probably take profits on our half stock market positions right before the FOMC statement comes out at 2:00 tomorrow. The real money will come buying at the next DCL anyway. There’s no need to try to scalp a percent or two this late in the cycle. Today is day 28. There should only be 7 to 12 days left in this cycle. It’s late enough now that we might see a retest of the highs tomorrow followed by a 7 to 11 day slide into the DCL. 


MAR. 17

First off an update on the website. It looks like we are getting close. Unfortunately the subscription plugin is no longer an active company and we can’t obtain a re-install so we are in the process of transferring all the active files into a new subscription plugin. This is just going to take a little time, and from what I understand the new system once we go active will create new passwords for everyone. So be sure to check your email once the premium site comes back online for your temporary password. If you don’t see it check your spam folders.

As soon as the website is active I will post a notice here on the blog and the nightly reports will return to the premium site. 


I’m going to start off today by saying that nothing happened in the Ukraine this weekend that the market didn’t already know was coming. The market has known all along there was never going to be a war. It’s known all along what the vote would be this weekend and that Crimea would elect to secede to Russia. All of that was priced in by the close Friday. 

I would argue that the only thing that has changed is that the Fed needs the market rising when they deliver the next FOMC statement Wednesday afternoon, and I think they will do everything in their power to make sure that happens. The question is will they succeed? Based on the close today I would have to slide the odds in the Fed’s favor. 

The Nasdaq however has not regained that 4290 support zone. Until it does I’m not going to increase position size in the stock portfolio.


On a purely technical basis gold has formed a bearish engulfing candle today. It also closed below the Sept. FOMC top. Ignoring everything else the charts are saying that manipulation zone has been successfully defended … at least for today. 

If we were dealing with freely traded markets then I would say gold is just preparing to dip down into a half cycle low. No big deal. But as we all know there are no freely traded markets anymore, and this has to some extent become a business of trying to second guess when and where the next manipulation is going to occur. We anticipated the stock market manipulation correctly, now we have to look into our crystal ball and try to decide where the metals are going to be driven next. Will it be towards the moon, or over a cliff?

I think this all started as just a knee jerk reaction to the Fed’s manufactured rally in the stock market. Gold was holding up rather well for most of the morning and had even climbed back above $1380 at one point. However it wasn’t long before the now familiar dump triggered a sell off and before it was over gold had dropped over $30 from top to bottom.

I don’t expect there is going to be a lot of buying pressure between now and the FOMC statement on Wednesday afternoon so the potential is there for another middle of the night or premarket attack. If it happens in this pre FOMC environment there is risk that a well timed manipulation event could drive gold back down into the consolidation zone below $1350. It took a lot of time and effort for buyers to break out above that resistance zone, a move back below that level could be demoralizing for the bulls and we could see the buying pressure dry up completely. 

The miners have already dropped back down into the consolidation zone and on heavy volume. I was really expecting buyers to show up at $27, when they didn’t it triggered even more concern. 

This is a dangerous time right here. Gold could be just one manipulation away from breaking the daily and intermediate cycle. Until I have some idea how this is going to play out I’m happy to lock up most of our profits and be satisfied for now. 

Actually I’m seriously considering taking the rest of our profits and just sitting on the sidelines until the next ICL in May or June. It’s not critical we catch every last penny of this intermediate cycle, we’ve already made good money. 

The big money is going to come during the next intermediate cycle anyway, so I’m very tempted to just lock up our metals portfolio and go on vacation for the next two months (at least in the metals portfolio).

I’ll probably make a decision tomorrow based on if gold follows through to the downside. 


Another concern is that oil continues to drop into it’s intermediate bottom (ICL). As it does it’s dragging most of the commodity sector down with it, and this may include gold if today is any indication. A normal ICL for oil is 50-70 days. Today was day 45 with potentially 5-25 days yet before a bottom. 

We’ve had a pretty good start to the year so far. It may be time to take a much deserved break and wait for a better setup with less downside risk and more upside reward. I’m confident we will get that for sure at the next ICL, so I’m not extremely motivated to try to catch every last penny now that gold isn’t behaving perfectly. 

Basically once gold gets past 10 weeks into an intermediate rally, and intermediate term overbought, I need it to behave perfectly to keep me on board. Today gold misbehaved, and lost some of the romance. Anymore of that and I’m going to want a divorce…at least for a month or two.


Portfolio change

The Fed is fighting hard to keep the stock rally rising. Not only is there an FOMC meeting Wednesday but also options expiration on Friday. I think the Fed is going to be very determined to make sure the market goes back up this week. 

Gold is reacting with a knee jerk reaction down as stocks rise. This may continue over the course of the week if the Fed succeeds in driving the stock market back to new highs. This would also provide cover for another manipulation event in the metals. So just to be on  the safe side I’m going to book profits on 75% of our metal positions today and then wait to see what happens as we move into the FOMC statement on Wednesday. 

That statement always seems to be a good excuse to hit the metals and if they can force gold down today and tomorrow I don’t want to have a heavy metal position on right before that statement is released. 


Exiting 75% of each position:
GDX $27.02
GDXJ $43.37
SIL $14.31
SLV $20.48

Mar. 17 portfolio change

We knew the Fed was going to attempt to rescue the stock market ahead of the FOMC meeting. As of this morning it looks like a trend day is likely to develop and the Fed is going to succeed. I’m going to go back to half positions in the model portfolio that I will increase to full at the end of the day if the rally continues into the close.

25% position in QQQ entered at $89.66
15% position in SPY entered at $186.39
5% position in IWM entered at $118.81