Right strategy…wrong market

“you have to get on board now or risk getting left at the station”

How many times have we heard gold bugs use this as an excuse to buy into a declining market?

They have the strategy right, they are just looking at the wrong market. One doesn’t get left behind in a market that is correcting and holding below a declining 200 DMA. The world never just all of a sudden wakes up and decides hey we need to pile into a stagnated or declining market. That’s not the way human emotions work.

Humans are herd animals. We follow the crowd. It’s the reason why bubbles form. There are only two times one ever has to worry about getting left at the station. One is during a baby bull. We already had the baby bull rally in gold so there’s no risk of missing that again.

The other time one has risk of getting left at the station is during the final bubble phase of a bull market. This is the other period when price can just keep ramping higher and higher, going much further than anyone originally anticipates.

Yes traders have risk of getting left at the station, but the risk is in the stock market not the stagnated gold market. In this weekends report I’m going to cover the psychology that drives a bubble because we are in the initial stages of one right now. This is your second opportunity to make an insane amount of money very quickly. This time it’s in the stock market. If you missed the baby bull in gold, don’t miss this one.


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30 thoughts on “Right strategy…wrong market

  1. z3r-0

    I’m a little confused. Just a few days ago you said there would be another baby bull in gold after this ICL. So there is another chance to miss the boat.

    1. Gary Post author

      Baby bull type rally in miners, not gold.

      I think the banks are going to smash the crap out of the miners during the next daily cycle. Enough to drive them below the December lows creating the conditions for another baby bull type rally.

      But in order for that to occur we need to pull the pendulum really far to the downside first.

  2. pk

    Gary, I know this post is about the s&p but I wanted to run a scenario I am tracking in gold which I believe you somewhat alluded to as a possibility. Gold seems to be in a bear flag on the hourly. I am looking for it to roll over next week (instead of a continued bounce) and head slightly below the March low but not much further (1185-1190). The miners, instead of getting smashed, I’m looking to make a slightly lower low than this last one and that being the area where they begin their next rally. Is this a possibility for you?

    1. Gary Post author

      Possible but not very likely IMO. I think the S&P is getting ready to breakout of the 2 1/2 month consolidation soon. When it does we’re going to get another big rally in stocks and that will put pressure on gold sending it down into the left translated cycle and at least a test of the triangle trend line.

      We need deeper sentiment readings and the commercials need to cover a lot more shorts before gold will be ready for the next sustained rally.

      I keep telling people this but no one ever listens to me at ICL’s. The big potential right now is in energy stocks.

      Of course everyone will miss this one just like they missed the bottom in gold last Dec. and the top in gold three weeks ago. I try to warn people ahead of time but they never listen.

      1. Robert

        You might be right again but u and anyone who bought Dust will be in a world of hurt if gold continues to rally. Dust is already down 20 % + since the gdx bottomed. It could go down another 10-15% easily. By the time it turns around and rallies will the stress be worth it? It prbly won’t even gain that much due to the decay

        1. Gary Post author

          Gold is not going to continue up and up. Gold is doing exactly what I said it would do. It’s delivering a dead cat bounce and suckering in everyone to drag them down into the final yearly cycle low.

          Gold will rally for 5-8 days and then decline for the next 20-30 while the stock market produces it’s next leg up.

          I’ll say it again. This is your chance to exit if you got caught at the top.

      2. waverider

        Gary
        We’re not going to listen to you till you stop telling us we never listen to you. Worked on my kids. Love you playing the short side nowadays.

        1. Gary Post author

          🙂

          Normally I never bother with shorts, but in this instance I think the banks are going to try to run the stops below the December lows so I think we’ve got a little insurance.

  3. jskauai

    Gary with all due respect if you believe and I do also that there are interventions in the markets by the banks, then why would they not prevent parabolic moves in the SM? Wouldn’t it be in their best interest to create a “Goldilock’s market” for sustainability? Don’t you think they are clever enough to engineer that type of market scenario?

      1. jskauai

        I see posts everywhere about how the Fed, ECB, BoJ and BoE, etc. all are printing money blah blah. These clever bankers only let most of that money go to the manipulators. The “little people spenders” got very little of that quantitative money printing!

        1. Gary Post author

          What does that have to do with whether or not stocks finish their bubble?

          I would argue that quite a lot of that money filtered down to the general public in the form of new businesses opening and a big reduction in the unemployment rate.

          And yes I’ve heard all the BS arguments about the real unemployment rate being 20%. Obviously that’s just perma bear nonsense. I’ve traveled all over the country the last several years and I can say unequivocally that the economy is doing just fine. many cities are booming with construction everywhere and help wanted signs in many windows.

          If Trump manages to push through his tax cuts it will accelerate at a big rate.

          1. jskauai

            See original posted question about what would a SM bubble and crash do. Or do you believe bubble prices will be maintained?

          2. Gary Post author

            The bubble will without a doubt crash.

            Central banks keep making the same mistake over and over.

            And they keep getting the same result.

            But that hasn’t stopped them from repeating it again and again. It’s what will eventually drive the bubble phase in gold.

  4. jacob2

    Gary, thoughts on the sector composition of the SM bubble? Lately it’s been all about big cap tech FANG. Personally, have been expecting a summer SM correction prior to the bubble phase but instead find my self almost fully invested with recent buys in the laggards energy, biotech and emerging markets. A fan of regression to the mean but wonder if these groups will be invited to the party? Usually you only get a change of leadership after a significant correction. I could be too early.

    1. Gary Post author

      Originally I thought biotech would lead but then Trump started beating on it as well as Hillary. I think I would just play it safe and go with the index QQQ.

      1. ras

        tqqq is the word for it. It will probably keep going up as long as aapl,googl,amzn, fb,nflx, rsla, and semis keep going up. Financials are pulling back for a retest? When that is complete, we may get a renewed upward surge in sm.

        As for energy complex, we could be in a bottoming zone (bpener =20). Gush daily is still trending down. Some sideways action could remedy this. No rush here.

        Wrt to gld/slv. it is just a bounce. But, nugt has strong internal upside momentum behind it. Likely, it will pull back and deliver a pop with a higher high (Newton’s 1st law) creating -ve div and then roll over.

        Tomorrow’s price is not on the chart and no one has a crystal ball. All posts are just opinions until verified by price. So, it is best for everyone to follow what has been working for him without being ruffled by other opinions.

  5. ras

    To understand why Gary sees a good opp in energy complex, pull up a weekly chart of xle and macd reading below 20. But, the turn need not be immediate, some delay may occur. Sometimes, macd can run below 20 for a while before turning up.

    My personal preference is to wait until price begins to trend on intra day charts and enter the trade on a pull back. I do not mind paying a bit more for boarding the train soon after it begins to move.

    1. Gary Post author

      Below 20% is the buy zone.

      Miners still have a bit further to fall before they get interesting.

      There’s still way too many traders anxious to get back into long position or convinced they will recover if they just hold on. That’s not how ICL’s form. Those form during complete despair. No one wants to buy metals during ICL’s and this sentiment tends to last even as far as 5-6 weeks into a new intermediate rally. Clearly we haven’t reached that level of discouragement yet.

      Now we’re getting the rally that keeps everyone hanging on for the full ride down into the ICL. Without this rally sentiment would get too extreme too fast and the ICL would be done too quickly. We need a reprieve from the selling to get everyone hopeful again. That sets the stage for the next leg down which drags traders into the pit of despair. That’s what generates the fuel for the next rally.

  6. Steffmeister

    There is a very clear sign when the precious market will turn around and starting to get bullish again.

    You only have to know where to look 🙂 it may be a later date than most think but it’s not that far off from what has been discussed here.

    Have a nice Sunday 🙂

    1. LiesandDamnLies

      Steff

      I agree with you. I think that USD/JPY will top out at around at the 116-117 mark in around 4-7 days, It should prompt a PM bottom. This week miners seem to have gone off early could be a trap.

      If the USD/JPY hits my target I see a very steep reversal and a serious run up in PM’s

      cheers Lies

  7. WYSIWYGN

    Gary, I don’t get it. You say “Baby bull type rally in miners, not gold.” From your latest blogs I thought we would first set a low in miners, then in gold (1170?) and then get a huge bull type rally. Now you’re talking “baby bull”. What’s your expectation after that “baby” bull ? Miners down again, gold down again (à 950 or so) ?? And within what timeframe(s) ?

    1. Gary Post author

      I think I’ve gone over it pretty well. This is the counter trend rally that gets everyone bullish prematurely. Check that is happening right on cue.

      Once stocks breakout and start to run again gold should turn back down and complete the intermediate cycle low, probably in June or early July. This is the bloodbath phase. The time where no one ever wants to see another mining stocks ever again. The last time we saw that kind of sentiment was back in Dec.

      My expectation at this time is that it will come when gold tests the lower triangle trend line around 1160-80. I think the banks will make sure the miners break below the December lows during this final washout.

      That will create the kind of fuel for another baby bull type rally (by that I mean a rally that gains 100% or more). And gold will breakout of the triangle consolidation pattern and push into the 1400’s or higher.

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