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The $NYAD line is making higher highs. There is virtually no doubt at this point that the 7 year cycle low in sticks is complete, and a new 7 year cycle has begun. Also, there is no chance of this new cycle for stocks topping in less than 3 years.

The next daily cycle low in the stock market isn’t due until the first week of April. It will be a buying opportunity.

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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.

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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And again you see why you never short a baby bull. Just as I predicted, the $GOLD and $HUI shorts needed to get kicked in their shorts one more time. That being said, be careful as somewhere in here the big money will manufacture a breakout to sucker in buyers so they can unload their shares and ounces to them.

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Way back in December I called attention to the huge explosion in volume in the triple leveraged mining fund NUGT. I warned that it meant smart money was accumulating ahead of a big move that was coming. Of course the usual dumb money crowd said that I was wrong. They had a million excuses for why I was mistaken and it was different this time. Well the rest is history and the mining stocks soon rallied 85%.

A huge explosion in volume is now occurring in the energy sector. As usual the wrong way crowd is disbelieving. They are convinced that the “fundamentals” will turn oil back down and as usual are missing another great opportunity.

And now we have probably the most intense surge of all in the biotech ETF LABU and again, Joe SixPack cannot see past the daily action to the bigger picture. An incredible investment opportunity is developing in this sector. Biotech is in the final stage four bottoming process of the stock market’s 7 year cycle low. You can learn from previous mistakes and take advantage of this opportunity or you can wait until it has rallied 100, 200 or 300% before you finally get on board.

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Retail traders love to sell short. I’m not sure what the appeal is but I’m going to urge you not to do it. I’ve been doing this for a long time and I can tell you that there are only 3 people who ever make any long term gains selling short. One is the professional short sellers. They have big research departments and they make money by finding sick companies that are on their way to bankruptcy.

The second group of traders that make money selling short are the big banks and huge hedge funds that can manipulate price. They know when price is going to start down, and they know when to take profits because they are the ones that initiate the sell off, and they know where they are going to cover.

The third type of trader that makes money on the short side are just lucky. How consistent do you think those guys are?

Folks here are the simple facts. Markets go down differently than they go up, and the mathematics on the short side are against you. You simply can’t make that much money selling short because the maximum winning trade is only 100%.

This holds for bear markets as well as bull markets. As a matter of fact I would suggest it may even be harder to make money selling short in a bear market than it is in a bull market because the counter trend moves are more violent, and more likely to knock you out of your short for a loss.

Like I said, markets go down differently than they go up. A strong trending move up is not that unusual so trend followers on the long side often make money. However, a strong trending move down like we had in oil last year is an anomaly that is pretty rare. Let me show you what most bear markets look like.

After the initial crash that took gold down to $1180 it then took 2 1/2 years for gold to lose another $140. I watched as bears lost money on trade after trade after trade trying to short this market. The simple fact is the only way to make money in the typical run of the mill bear market is you have to correctly anticipate where each bear market rally will top, and where each leg down will end. I can tell you that in all of my years trading markets I have never yet seen anyone call bear market tops with any consistency.

Now notice that four of the legs down didn’t make lower lows. Bears holding shorts during those intermediate corrections got caught in short squeezes and lost money because the markets didn’t do what they were anticipating. They didn’t actually deliver a leg down.

I would challenge any of you to actually look at your trading history over your career (if you have it), make an honest assessment, and most of you will find that over the long haul you haven’t made any long term gains trying to sell short. And for 90% of you it’s probably actually cost you money in the long run to sell short.

The simple fact is that for most retail traders selling short isn’t about making money, it’s about bragging rights. They have an irrational desire to try to call tops. In trying to fulfill that desire they ignore the fact that they are losing money. I’ve watched over the last two months as trader after trader has tried to call the top in gold and short the market. Whether it was a reversal candlestick, or an oscillator that was overbought, or they counted a certain number of waves, or the market just looked toppy to them (I never understood what that meant by the way), every one of them failed, and the end result was they gave back some, if not all the gains they had made on the run up.

I can’t stress this strongly enough, and again I’m trying to prevent you from making the same stupid mistakes I made as a novice trader, if you think a market or sector is topping it doesn’t mean you need to sell short. You may be wrong and the market just continues rising, and you end up giving back the gains you made on the long side. If you think a market has rallied far enough, and you don’t trust it to be long anymore then go to cash, or move your money to some other sector that is going up instead of making the amateur mistake of trying to sell short.

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Here are the cons to shorting the stock market:

The Fed and the PPT have a printing press. They have access to unlimited amounts of money, and they are extremely motivated in keeping the stock market propped up.

Most of the world is experiencing negative interest rates. Money is flowing out of those bond markets and it has to land on something.

The combined contracts in the COT index funds are net positive 29 billion. The biggest, smartest, and best capitalized traders in the world are bullish, and not just mildly bullish, they are heavily bullish. What do they know that Joe Sixpack retail trader armed with his stockscharts subscription doesn’t?

The larger intermediate cycle is only 4 weeks old and barely half way through the first daily cycle. There is virtually no scenario where an intermediate cycle tops this early other than a potential financial earthquake in the immediate future and that clearly isn’t impending. As a matter of fact, the one sector that could have triggered a financial panic was energy but that has reversed aggressively over the past 4 weeks. So that bomb is being quickly defused.

Stocks tend to rally the strongest when the dollar is rising. The dollar is going to be due for an intermediate bottom next week followed by a multi-week rally.

We know that a 7 year cycle low is due, actually it’s overdue, and the rally out of the recent bottom has been one of the most powerful in terms of breadth in the last 60 years. That’s exactly what I would expect to see as the market comes out of a 7 YCL.

Sentiment isn’t even vaguely close to levels that would trigger an intermediate top, not even if this were a bear market rally.

The intermediate score is dead neutral. That’s not the level where we are likely to run out of buyers.

Source: Sentimentrader.com

The most clueless traders, dumb money retail, are still buying puts hand over fist. Until these emotional traders start buying lots of calls it’s unlikely that we are anywhere close to this intermediate cycle topping.

Source: Sentimentrader.com

The advance decline line is again making higher highs.

And finally the PPT has murdered what should have been a half cycle low, and in the process driven the S&P and Dow through resistance, and back above the 200 DMA.

So if you are trying to short this market, I have to ask: What the hell are you thinking? I’m about 85% convinced the 7 YCL is complete and we are at the very beginning of the bubble phase of this bull market. This isn’t the time to be shorting. This is time to get in early and ride that bubble phase to some really big gains over the next couple of years.

For 16 years the pattern hasn’t changed. The Fed prints too much money and keeps interest rates too low too long. It causes a bubble. The bubble pops. Markets crash. Then we start all over again.

The time to short will be after the next bubble forms. Be patient. Wait for stocks to go parabolic. Wait till you see the public piling into an asset class like they were in tech in 2000, and housing in 2007, and then short the market.

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The Advance-Decline line is starting to make higher highs. That should be a pretty good sign the 7-year cycle low in the stock market is behind us. The stock direction from here is up.

Folks you have to quit listening to perma bears. They caused you to miss an 85% rally in mining stocks. They were focused on the “fundamentals” in oil and you’ve missed a 50% rally there. And these same perma bears are convinced we’ve started a long term bear market.

We have not begun an extended bear market. We are just completing the deep correction that must occur in order for the bubble phase of the bull to begin.

Are you seriously going to let these nitwits cause you to miss another great opportunity?

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Time to buy gold? Well, maybe not. And so far I have been proven correct.

Gold has made a higher high in overnight trading. However, this is not the place to START buying. Gold is 14 weeks into an intermediate cycle. This is the spot to be scaling out and taking profits as gold is going to be due for an intermediate correction soon. And, gold is not due to bottom until May. That will be the time to back the truck up again.

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