Dollar:

I think the Fed is in a real pickle next week. If they can’t get the stock market turned back up on Monday or Tuesday they will have to decide whether or not to taper into a falling market. 

On one hand withdrawing liquidity during a semi crisis may just make the situation worse. On the other hand aborting the taper would just confirm that something serious is happening and probably spook the market even more. This may be a no win situation for the Fed.

If they halt the taper the dollar is likely to collapse. If they do taper the dollar will go down anyway as the first two tapers have done nothing to halt the dollars slide. 

At this point I think the most likely bottom for the dollar will come on the GDP report March 27. That would be just long enough to balance the previous short cycle, but not so long as to run far beyond the normal timing band, which would be the case if we were to get a bottom on the April employment report. 

Stocks:

The fact that stocks couldn’t rally out of the Bollinger band crash signal today is not a very encouraging sign. If we continue down Monday and Tuesday then this is going to start to look like something more serious than a half cycle decline. We already have a warning shot as the German DAX has signaled a failed intermediate cycle. A major stock market signalling a failed IC is a serious red flag. 

Needless to say we won’t be trying to pick a half cycle bottom this time. I’m going to need to see a full recovery to new highs and a right translated daily cycle before I even remotely consider buying stocks again. As of Friday the market has topped on day 21. That has the potential to turn into a left translated cycle. Extreme caution is warranted at this time. 

Gold:

Let me say that while Friday’s drop was certainly scary I don’t think we’ve seen the top of this intermediate cycle. It’s pretty clear we have put in a final bear market bottom. That being the case we’ve already made a higher intermediate low, and now we should continue up until gold also makes a higher intermediate high. That would entail a move above $1434 before this intermediate cycle tops. 

It also means this third daily cycle must unfold as another right translated cycle. Since today was only day 9 (or maybe day 5 depending on how one wants to try to count the fuzzy DCL) that means no top for at least another 4 to 8 days. If I’m right about the dollar bottoming on March 27 then gold should have at least another 9 days before this cycle tops. 

If we use silver, platinum or palladium the current cycle count is clearer and it appears day 3 or 4 would be the correct count. That would suggest gold probably has at least 2 and maybe 3 more weeks before this intermediate cycle tops.

Moving on to the weekly charts, nothing about this week looks like an intermediate top to me. Gold delivered a strong 3% gain and looks like it’s ready to accelerate towards a final intermediate top. Miners a 6% pop out of the three week consolidation.

As the dollar should be ready to accelerate into it’s intermediate bottom, the metals should give us at least two more weeks of gains and push the intermediate cycle into a right translated configuration. Both events should be extreme enough to drive major moves in sentiment. For the dollar I want to hear talk about a complete collapse and losing reserve currency status. We haven’t heard much of that kind of talk for the last two years. Now that we are starting down into the three year cycle low it’s time it starts again. That will happen once the dollar index breaks the Oct. low. 

For gold I want to see euphoria take hold of the gold bug world. I want to see sentiment do something it hasn’t done since 2011 and that is generate a true bullish extreme. As you can see we still have plenty of room to rally before we have to worry about running out of buyers. 

That should happen once gold breaks above $1434. That will also set up a massive head and shoulders bottoming pattern with the potential to drive at least a retest of the all time highs later this year. 

And if all that isn’t enough gold is going to complete a golden cross (50 DMA crosses above the 200 DMA) either next week or the week after. Another sign the bear market is over.

Gary

Well gold didn’t hesitate at all to break through the resistance. I have to think we probably have a clear shot at $1425 at this point with minimal retracements. 

More importantly silver has finally joined the party and broken out of its bull flag. It’s got a lot of catching up to do. I expect the biggest move over the next week is going to come from silver. 

Hold positions. This is a monster trend now with no upside resistance for another 40 or more points. 

Gary

A few people have commented that they can’t post to the blog. Folks you will need to create a google account to be able to post to the comments.

Stocks:

After today I think it’s safe to assume that yesterday’s reversal was indeed a manufactured rally to allow Wall Street to hand off the bag on to technical dip buyers. The selling on strength number yesterday provided us with a very timely warning and prevented us from getting caught. 

It’s sad that virtually all markets are rigged nowadays and we have to second guess which way the big banks are going to take the markets in order to make money. 

Oh well since there’s nothing we can do about it, and there’s virtually no chance the government is going to crack down on the banking system, I guess we are stuck with this for the foreseeable future. Ever since the ban on short selling financials in 2008 it became glaringly clear that no effort would be spared, or laws ignored, to insure that the banks would be protected from now on. 

In that vein of thought I have to think it won’t be long now before the Fed steps in to stop this sell off. Even in a natural market today’s heavy selling pressure would probably trigger some kind of snap back rally. On top of that there was a Bollinger band crash trade in the NDX.

Let’s just say I won’t be at all surprised if all of today’s losses get reversed tomorrow. That being said I’m going to stay on the sidelines in the stock portfolio until stocks recover and make new highs. They also have to do it quickly. I wouldn’t be interested in buying if it takes stocks another two weeks to recover as that would be too late in the daily cycle to buy. 

As a matter of fact at this point barring a complete reversal tomorrow I probably won’t be interested in re-entering positions for the stock portfolio until we enter the timing band for the next daily cycle low (DCL). That’s not due until the end of the month or first week in April. So we’re probably going to twiddle our thumbs for a while in regards to stocks, unless we get a complete reversal tomorrow. 

Dollar:

Today the dollar dropped enough to test the Oct. bottom, and not surprisingly bounced. This is exactly what we were expecting, but again it’s too early for the DCL to be finished, so while we may rally for a day or two it’s unlikely the decline is done. 

I’ll say it again: An intermediate cycle that topped on week two in one of the most extreme left translated cycles of the last decade isn’t going to bottom until it moves below the previous intermediate cycle low (ICL). It’s not going to bottom until sentiment hits extremes, and not until everyone starts to freak out. We haven’t reached the freak out stage yet. 

Source: Sentimentrader.com

Gold:

As expected the miners finally followed gold and have broken out of their 3 week consolidation. They did so with a big move, also as expected. I figured there would be a lot of buy stops right above $27 that once they triggered would produce a strong trend day.

That being said the metals may now have to consolidate for a day or two. If the dollar bounces and stocks rebound we may see some short term profit taking in the metals after today’s big move. Both stocks and gold have generated powerful moves over the last two days and it wouldn’t be unreasonable to expect both trends to take a breather.

Another consideration is that gold is now bumping up against the notorious Sept. FOMC top. 

To refresh your memory that was the most blatant manipulation of this entire manufactured bear market other than the April stop run. That marked the only time in history a daily cycle topped on day 1. Obviously in a natural market we would never see a daily cycle top on day 1. So I suspect gold may take a day or two to get through this resistance level. I don’t however think it will take anywhere near as long to get through $1375 as it took to get through $1350.

Ultimately I think gold is going to test $1425 and I suspect we will see another manufactured top with a marginal move above $1431 to get gold bugs excited and buying into the breakout the same as they did last Aug.

I’m not really expecting much of a pullback here, more just some sideways chop for a day or two before the trend continues higher. So I wouldn’t advise one to lose their positions to try to avoid one or two sideways days.

Gary

Cycle counts:
Stocks = Day 25. Average duration 35-45 days.
Gold = Day 9. Average duration 18-28 days.
Dollar = Day 16. Average duration 18-28 days.
Oil = Day 44. Average duration 50-70 days.

Stocks:

Based solely on the reversal off the early morning selling I would say the half cycle low correction completed today. However during a brief period when the market was positive this afternoon I noticed a huge selling on strength number in SPY (it’s back as of the close). Granted this isn’t 100% any more than any other tool, but I have to think that someone who can throw around 300-400 million dollars probably knows more about what tomorrow holds than me so I’m going to stay on the sidelines for now and see what plays out. 

It’s entirely possible this is a manufactured reversal to allow big money to dump shares on eager dip buyers. So for now better safe than sorry, and let’s wait to see what tomorrow brings before we make any decisions on whether or not to re-enter stock positions.

Dollar:
So far so good. As expected the dollar has begun the final move down into it’s daily cycle low. This should accelerate over the next 5-6 days and I don’t expect to get the next bounce until the dollar tests the Oct. lows.

Oil:

Oil is getting late in it’s intermediate cycle (average duration 50-70 days). Once we move past 50 days I’m going to  watch for a swing to get us back into our DBC position, and probably DBA also. 

Gold:

As I was expecting gold has finally broken out of the multi-week consolidation. Also as expected it did so with a big move. As we should be entering the final scary phase for the dollar cycle, this should be the happy phase for gold bugs over the next week to week and a half.

The first daily cycle delivered a 100 point gain. The second daily cycle a 118 point gain. I should think a move to test $1425 shouldn’t be too hard to accomplish during this third cycle, and we might even have an outside chance of 1500 if the dollar cycle stretches or we get that final short dollar cycle I’ve speculated about.

Once the miners finally break out of their consolidation I think they too will deliver a large aggressive move to the upside. I don’t think it’s unreasonable to see a move to $30 before this third daily cycle tops. 

Gary

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