CHARTS OF THE DAY – The Bubble Phase


Before any bubble phase begins you need two things to happen. First you need the central bank to make a policy mistake and create too much money and keep interest rates too low too long. Second you need a big corrective move to stretch the rubber band far in the wrong direction and get everyone bearish. This is the fuel to drive the bubble phase.

bubble phase - $WTIC


Folks try to use some common sense. We have negative interest in most of the world and have had ultra low interest rates for 6 years. Every central bank in the world is printing money and intervening in markets. This is not the recipe for a deflationary bear market. This is the recipe to produce another bubble phase.

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84 thoughts on “CHARTS OF THE DAY – The Bubble Phase

  1. Ralph Wiederzane

    Getting on the biotech Gtrain myself before it leaves the station, maybe even today.

    1. Gary Post author

      One doesn’t have to pick the exact bottom. Just get in and don’t worry about timing a perfect entry. The bubble will correct any timing mistakes.

        1. Herman

          because the bust will happen very quickly, there will be no time left to change one’s mindset and take the right action. That takes time. That is why it is so important to get prepared. It is already getting late.

  2. Stevie

    LABU down another 5%…
    If this market starts to correct, it can easily test the 4 dollar lows. How you can advise anyone to buy something and lose 40-50% of the investment in a week boggles my mine.

    1. Duncan Smith

      The LABU chart has been replaced by the IBB chart, I guess for the exact reason you have stated.

    2. Richard

      Rule #1:
      Gary is presenting an idea. Take it with a grain of salt, do your own research and make your own decisions and NEVER FOLLOW SOMEONE ELSE’S ADVICE UNLESS YOU HAVE A LEGAL CONTRACT WITH THEM! He presents excellent charts and research, but you are not compensating him as an investment advisor.

    3. Ralph Wiederzane

      Just avoid the temptation to ever touch those 3x leveraged etfs. If one buys them then they need to reduce size drastically, so what’s the point?

      The reason they deflate so quickly, and also can’t be held for long term up moves over several years, is that they are based on percentage moves, not point for point.

      1. Anthonyo

        3X ETFs could be held lngterm no problem. I held 3xshort oil ETF from $53 to $25 months, not weeks….Came out like a rose. The time decay varies depending on type of ETF, and a correct sharp move more than compensates for any decay.
        If you compare performance of 3XETF with the 1 on 1 ETFs in anything, the former’s performance is pathetic in comparison.

    4. Gary Post author

      Because I don’t trade like a retail trader. I don’t have to time a perfect entry. I just want to get in close to the bottom.

      I heard all this same nonsense when miners were bottoming and when oil was bottoming. I like to buy low and sell high. The opposite of what most retail traders do. On the weekly charts IBB is oversold. That means it’s a buy not a sell.

  3. Walt

    Very dovish fed . Surprised . Thought they would jawbone . Basically said buy all assests . Don’t hold cash or short any asset class .

  4. Stevie

    IBB breaking below the 200 week moving avg. it’s in bear market mode. Say what you want Gary but folks that don’t understand markets will be lead to the slaughter house by you. Just wreck less.

    1. Herman

      I have to agree with the slaugherhouse comment.

      The WTI chart, including the data up to this point in time, shows a bear market in full swing. Now, we experience a countertrend rally, but the bear will resume shortly and end in an implosion somewhere this summer (bubble to the downside…).

      1. Anthonyo

        Oil bear will not resume shortly. The high in this rally in oil is in its second wind after Russian withdrawal from Syria and Suaudis performing their end of that deal the next day by agreeing to cut production.
        This rally in oil has room to run still before oil comes back lower.
        The new range for oil is being defind through this procee.
        And $25 is the bottom, you will not see oil lower than $25-$30 for the foreseeable future.

  5. Ralph Wiederzane

    I’m not sure what else Gary can do for readers. Tripling their money in 3 months only has them crying on every little step backward as they position for the biotechs to bounce. Perhaps they could subcribe to Cliven Mound instead, so they could be short the rip snortin’ metals rally the whole way up?

  6. Herman

    anyways, calling other people ‘suckers’, ‘idiots’ and that sort of thing is a big red flag itself. What is this good for? Just take your profit off the table and enjoy that you have been right for the moment and got rewarded for that.

  7. victor

    oh-oh…, holding those LABU, it’s only 1000$ invested anyway, what bothers me it’s a possible big move down in stocks in summer…, Q. where’s Biotech can be then…? There’s a possibility for LABU to drop another 50% after split…

  8. Walt

    Oh man , this whole international central bank fiasco is not going to end well in a couple of years . All those preper people probably will be right . Inflate until collapse

  9. Gary Post author

    Based on the number of freakouts and negative comments we may have seen the bottom on the second tag of the 200 WMA today.

    There is a reason why most traders don’t make money. Why they buy high and sell low. Human nature never changes. At bottoms only the 5-10% that can see the big picture are ever able to buy. The rest are always slave to their emotions and recency bias.

    2 months from now I’ll be telling you “I told you so” again.

    1. Duncan Smith

      “2 months from now I’ll be telling you “I told you so” again.”
      And if wrong, you probably revert to manipulation theory.

    2. Rick

      BB Crash in IBB so far today (10,1.9 daily) . Will add another layer if it holds to the end of the day.

    3. tulip

      Hi Gary,
      Can you consider connecting yr WMA comments with the subject please…. as in biotech 200 WMA. There is quite a lot being followed here.
      Thank you~

  10. Frank


    Regarding , Nasdaq Bubble, there was a clear driver like the internet and people all everywhere around the globe wanted to be invested in.

    I remember an analyst saying that instead of using Price earnings multiples they changed to using price sales and used the same multiple instead.

    The question with IBB however is, what will be the trigger to form a bubble in Biotech with insane valuations like in tech?

    1. Gary Post author

      Because there is real innovation coming out of the biotech sector. Discoveries that will forever alter the world as we know it. Just like the personal computer and internet. Sure a lot of companies will eventually go bankrupt just like most of the tech companies. But the next GOOG, AMZN, AAPL etc are being born as well.

  11. Jonathan

    Hi Gary, Very intersting. If the bubble takes hold what could be our potential upside targets?

  12. Gary Post author

    My suggestion is to wait for a weekly swing before adding or entering. Let the selling pressure exhaust.

  13. Rich

    You can only buy the triple levered crack etfs when the short term trend is in your favor!!! Biotech clearly has fundamental issues (pricing, politics, Valeant BS, etc),and are technically very weak, so if one must position for the assumed bubble phase, just buy the IBB or XBI index, non levered.

    1. Gary Post author

      I like the triple leveraged funds here for the same reason I wanted to catch the bottom in miners. The initial rally can be explosive once the selling exhausts and the market figures out that emotions have caused a severe mispricing.

      If big money is scooping up LABU by the 100’s of millions daily then I want to buy it as well.

      1. Rich

        You do a lot of good work, Gary, and I’ve used your ideas to make some money from time to time, but the increased volume in the triple etfs are mostly due to traders increasing their share size (due to lower share price) while keeping their dollar exposure the same. And all the speculators trying to catch a bottom and hit a home run. Too much chance for a wipeout if you are wrong. Asymmetrical risk. Other than that, love the site!

  14. fubsy_cooter

    I like this set up. But there’s a lovely point a few pts higher that represents a higher high. Also, the first ICL out of a bottom is usu a cleansing event and def not too late to get in on a sustained bull.

    I’ve seen way more bottom calls be wrong than right, even in the recent gold correction of the last four years. Why not forego those as a strategy forever, and be disciplined and buy with evidence and a clear stop in case wrong?

    1. Gary Post author

      That one is easy. First off even in a bear market one can make good money off a bear market rally. So it makes sense to buy every ICL even if it isn’t the final bottom. And second when the final bottom comes the biggest gains occur during the first intermediate rally. Case in point the miners have rallied 90%.

      I don’t want to miss that waiting for confirmation because you will never get that kind of rally again until the final bubble phase.

      1. fubsy_cooter

        That assumes that everyone is catching that 90%….very few did, won’t panic a sell lower if they don’t catch the exact bottom etc..very few will. Your recs are good for your style and knowledge as a trader. You present them as must follow entries when they won’t work for most people’s risk tolerance, and a number of other variables that go into maintaining a value based buy. Anyway, I think people need alts as far as tactics when presented with this type of setup. You don’t know where the bottom is just as you didn’t know on gold. So far you got the last bottom right, but miscalled a few prior to that.

        1. Gary Post author

          On the contrary I called the ICL’s correct and we made money on them. Sooner or later one of them had to be a final bottom and it also had to come during a YCL which is what Dec. was.

  15. Dan

    He’s been touting this biotech bubble garbage for a while. No credibility. And they’re still tanking with a 13 VIX and surging oil. Lol

    1. Gary Post author

      We’ve only been buying for the last month. I waited patiently for this correction to occur. Now that it has I’m going to take advantage of it. `

      You need to learn how to use other tools than just a charting program. If that’s all it took to make money every Joe Sixpack retail trader would be rich.

      I told you so on gold, on miners and on stocks. Yet you still refuse to believe me now that it’s biotechs turn?

      I’ll say it again:

      Buy low sell high. Nice divergence forming.

      1. ensenada Jim

        Great chart Gary, on the Yahoo chart you can see the “buy” volume building at the same time. This is gonna be gusher !

      2. Enoch


        when do you see the next cycle top for the biotech sector? does it follow the stock market?

        1. Gary Post author

          Hmm I thought I drew the line from January temporary bottom. There has been a large divergence building ever since then.

  16. basspro57

    Hi Gary…So are you still holding (and recommending) LABU or are you saying that we should consider IBB when its time to buy during a weekly swing? I would like to get into LABU but Direxion has announced a reverse split for that ETF. Just wondering what you think…Thanks!!!

  17. pepe le pew

    *ooh* so many nervous nellies on the block today! I have no idea how many readers here know Gary from before 2011, but those of us who do, know (mark this!) that when he gets on a hot streak, you bettah get on board! Gary’s streaks can last months and months! And they is h a w t !
    As for me, I am suddenly, quickly coming up like a Phoenix from my financial ashes. So hang on….. ?

  18. Bill

    The USD just made a lower low than the last Trading Cycle Low in mid-Feb which means this Trading Cycle is Left Translated or has failed. A TC failure usually signals that the longer term Intermediate Cycle has topped as well and that the asset will start making lower highs and lower lows until the IC LOW is found.

    1. victor

      Bill, where that IC lOW are going to be? what time duration? it should be favorable for gold especially if stocks an USD move together …, Thank you

    2. Gary Post author

      The dollar is still trying to put in an ICL. It’s a bit unusual but there has now been two failed daily cycles. That being said an ICL will form soon. So be ready to go long the dollar once we get a swing low.

  19. Tim

    I find Clive Maund to be a very good contrary indicator. I hope he doesn’t get bullish on Precious Metals any time soon, they’re bound to tank if he does….

  20. Tom

    Walt: I agree.
    Also agree with poster indicating that biotech already had bubble phase. Folks: Biotech is not coming back anytime soon.
    Economy is not good. The Fed still has not overcome the deflationary earthquake. Look at the past couple of years in commodities, oil, and even transports.
    If I were long equities I’d be ringing the register here. I’d be putting on shorts.

    1. Anthonyo

      “Biotech is not coming back anytime soon.” Famous last words.

      Deflation’s worst dip is pretty much done now except in Eurozone and Japan.
      Disinflation in US is on the retreat too now.
      I think you are operating on old data and beliefs.
      President Trump will be inflationary as well.

    2. Herman

      I agree with you on biotech not coming back anytime soon, but it is oversold and could have a nice countertrend rally. Seems we had a swing low yesterday.

  21. Gary Post author

    Why oh why do you people keep trying to pick tops?
    It’s been a portfolio wrecker in gold and it’s doing the same thing to those trying to pick a top in stocks. Wait till the bubble phase has run it’s course and then short stocks.

    Don’t you remember that ROBO ratio I showed the other day. That is dumb money trying to short the stock market. Stocks don’t top until retail starts buying calls hand over fist. If you are shorting right now then you are in that camp that is on the wrong side of the trade 99% of the time.

    Wait till the ROBO ratio swings far in the other direction. Then it might be safe to sell short.

  22. jacob 2

    The PM miners have had it for a while and need a long rest. Not much interest here but the theme for today was … emerging markets. UP, particularly Brazil and Russia commodity producers as well as Uranium. (own), Not talking about LABU (own). Hope its little bear market is about done. Believe it makes a comeback once the shorts get through with VRX. Almost never happens that everything you own goes up together.

  23. j

    Ive know gary to make some good calls, and some bad ones, but he usually has a pretty clear view of the bigger picture. ive been occasionally reading his blog a long time, (since he only followed the COT and dismissed any TA as heretic), but a close below $240.00 and I think IBB could just as easily see the 2014 lows. If one really wants in, Id wait for at least a confirmation or scale in but to just tell people to go all in now because “theyre gonna miss the big first move” is fear mongering and foolish.

  24. Charlie

    So you are saying that the bubble phase is in front of us? How would you call last 7 years then?

    And also that SPX made a 7 year low being barely 16% below All Time High?

    Not even testing the 1550 long term breakout area?

    Also wait for the bubble phase in IBB XBI? They moved from 60 to 400 (IBB).

    I would call it if they are so weak now what happens when SPX loses 1800?
    Do not fight the FED?
    Well same thing in 2000 and 2007 would not save you.

    1. Gary Post author

      From from the breakout to the recent top biotech only rallied 300% and it took 3 1/2 years to get there. That’s not a bubble. Bubbles rally 100% or more in a year or less (many will do 200% in a year). They stretch 40-60% above the 200 DMA and they draw in the public.

      None of those things have happened yet. Biotech is just getting started. We’ve just seen the first leg up. We are going to see some absolutely amazing discoveries come out of the biotech sector in the years ahead.

  25. Ron

    You’re ALL by Brothers and Sisters *muffin top included”… We’re on a roll …lets hope it continues!

  26. Joseph

    WED, the VIX support of 15.64 was broken into THURs, were gonna test new highs once we correct 30-60 points. First Support is 1990… This should start next week on March 24th into April 7…..
    then were gonna test the previous all time highs

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