A LESSON TO LEARN

At this point there’s no more doubt that the bitcoin bubble has popped. It’s approaching 50%. Again let me say this has nothing to do with fundamentals. During every bubble traders will be able to make a case for why much higher prices were warranted. But bubbles aren’t about fundamentals. They are about human emotions. And no matter what the fundamentals are when emotions take over and the public floods into an asset pushing price to the moon in a parabolic rise there’s only one outcome. At some point price just can’t stretch any further and people start to sell. Traders that bought in late quickly see their profits go up in smoke and they start to panic as well. Then as the parabola starts to go into melt down everyone starts selling.

I warned several times that bitcoin was exhibiting all the signs of a mature vertical phase.

Price had rallied more than 100% in a year or less. Actually almost 400%.

Price was stretched unsustainably far above the 200 day moving average.

And the general public was flooding into the market convinced that they had found a riskless strategy to get rich quick.

There should be some kind of bounce soon. That is the bounce that traps everyone for the final ride down as trades make the mistake of assuming price is recovering. But once the bubble has popped there is no recovering so the bounce fails and then the second leg down begins and traders finally realize in horror what is happening.

Maybe at some point crypto currencies do have a place in modern society other than just as a ponzi scheme to speculate on, but it always takes years to recover from a bursting bubble so don’t expect a return immediately.

This is your chance to learn. During the vertical phase of a bubble when price is going to the moon you have to at some point decide you’ve made enough and just get out. This is the only way to survive a bubble. You simply have to develop the ability to control greed and at some point be satisfied. I think you are going to need the ability next year in the stock market and again sometime in the next 3-5 years in the precious metals market. As both probably have a date with a bubble phase. If you can learn to control greed you will have the opportunity to make a lot of money in both markets. If not then you are going to suffer the fate of bitcoin traders who stayed just a little too long and got caught when the music stopped.

 

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115 thoughts on “A LESSON TO LEARN

    1. spectrum2105

      the weekly STO has topped overbought and crossed. It’s just a matter of how far gold will far at this point.

    2. Gary Post author

      I did warn that price hadn’t broken the uptrend line yet. It was too early to expect the cycle bottom.

  1. spectrum2105

    Look at the pattern of the bitcoin bubble and gold in 2011. History doesn’t repeat but it often rhymes.

    Oddly, bitcoin has dropped so much at this point that there might not be a double top. Very unusual.

    But after a drop to the $2000 – $2500 range I’d expect a temporary claw back up to $3000 then one final death rattle to $1000 – $1500 to reset for the next bubble down the road to $10,000+.

    Once the post bubble price flattens out for a while I’ll start slowly building an old turkey position in GBTC.

    1. Alexandru Popovici

      yes, I got stopped out of my eurjpy short at 132.
      as expected, on the other hand, EUR put its DCL yesterday and it is now on course of a left-translated cycle to top at some 1.22 post-fomc –> looking forward to shorting eurusd there ๐Ÿ˜‰

  2. Gary Post author

    We have a nice little flag pattern developing on the SPX right below 2500. That should give us a breakout through that level rather than a pullback from it.

    10,000 is going to be a piece of cake. 20,000 isn’t out of the question when we get to the really nutty phase.

  3. Gary Post author

    The calls for another top in oil are again premature. It’s now breaking through the intermediate down trend line.

  4. Gary Post author

    The one thing that continues to amaze me is the dollar. It continues to look like it still wants to go lower and the daily cycle still hasn’t bottomed (the daily cycle trend line hasn’t been broken yet).

    This would mean the euro is going to break through that resistance zone at 120.50 more or less on its first try. The actual megaphone trend line is a little bit lower at roughly 90.5. It didn’t quite make it all the way to tag that line during the last push because the euro ran into resistance at 120.50.

  5. rodvanmechelen

    Most of the people I know are barely aware of Bitcoin. Since 2011, I’ve seen it rise, retrace, rise, retrace, in patterns very similar to what we’ve seen this year, and each time it dropped commentators were saying it was finally going bust. Most of my portfolio is dedicated to following your trades, and I’m a happy subscriber, but I don’t see widespread public participation in Bitcoin, yet, so I wonder if this isn’t just a Fibonacci retracement and not a bust.

    1. Gary Post author

      I’ve even seen some of my rockclimbing partners buying bitcoin.

      That seems like public participation to me.

  6. Gary Post author

    Folks you might want to consider whether you are overtrading if you are making lots of trades but not really getting anywhere, or going backwards.

    The leading trader in the challenge has made one trade.

    1. Alexandru Popovici

      if the leading trader has made just one trade, then it is the wrong example to give: he/she put over 90% of the equity in NUGT or JNUG from one move in early July –> that is very very bad risk management and money management!

      1. Gary Post author

        Or he’s very good, recognized a bottom, and had the patience to just sit still and let his trade work. If he got in at the bottom and placed his stop right below the cycle low that would be very good risk management.

        1. Alexandru Popovici

          com’on, Gary! Putting virtually all of one’s equity in one asset from one move being given example as great trading ?!

          Furthermore:
          – there is always risk of slippage, particularly while trading ETF’s unlike trading round the clock and
          – in real life, there is also the T+3 violation risk in a cash account, so that exposing so much capital in one trade put the trader at risk of missing a profitable trade within the T+2 non-trading frame if stopped out from the original trade.

        2. Christian

          I don’t normally agree with Alex but this time I think will..

          The ‘so-called’ leader of the challenge took one hell of a gamble or just got plain lucky because a few things need to happen before you can RECOGNIZE IT as a bottom. Kinda like how you got lucky when you exited all of your positions at the top of Cycle high.

          Another reason I couldn’t be bothered with this contest. The winner will be the Goomba who got lucky using way too much freakin leverage :/

          You might as well give the winning prize to GOILD, Lol! His spoiled little wife needs another BMW ๐Ÿ™‚

  7. Alexandru Popovici

    Jimsee, it is unlikely to have a lower low for gold!

    In 2 minutes we will have a slate of macro reports which I expect to bring havoc on the Stock Market and USD, propelling gold up, up, up.
    One minute, now to the news….havoc!

    1. Gary Post author

      Nope, oil still has at least 1-3 months yet before the intermediate cycle tops. It hasn’t even closed above the intermediate down trend line yet.

      1. Alexandru Popovici

        nope, Gary, the IC trend line was breached yesterday on the bull trap; there is no need to close above it.

        what a better time than this to add long gold & short Russell to full positions? ๐Ÿ™‚
        also put in a pilot of short NG –> target for YCL the same I’ve kept preaching for months of 2.5.

  8. Goild

    Good morning,
    It appears today will be a good day for gold.
    Perhaps only in the morning.
    Play preferably JNUG long.

    1. Diego

      I can tell from your posts over the last week that you don’t understand how gold is priced. Comex is priced a hour and a half before the stock market closes. Once you start using spot or XAU these market moves will make more sense.

      I am trying to help and not be critical.

  9. Gary Post author

    The Semis have broken out of their triangle and are starting to run strongly again.

    Folks if you continue to listen to the perma bears or short term traders try to pick a top every other day you are going to miss the vertical phase of the bubble. These kind of opportunities only come around a few times in ones life. You really don’t want to miss it…

  10. Gary Post author

    And just as I predicted the miners are continuing lower. I’ll say it again. Take everything in the metals sector with a grain of salt. The banks paint the charts to fleece retail traders and hedge funds.

    Cycles almost never bottom before breaking the trend line. Expecting this time to be different almost always ends up with losses.

    1. Nada

      Whats more probable.. A stretched cycle of 44 days or misidentified cycle in the mix? I can’t say with confidence which one is true. Miners have yet to put in a lower low this morning, but it may very well be delivered after the SOS.

    2. Christian

      See.. this is what I don’t always like about you Gary. You’re not the only one predicting these kinda moves and yet here you are tutting your own horn. I’ve been talking about that trendline for the past couple of weeks, give credit where credit is due you egomaniac ๐Ÿ™‚

      1. Nada

        Well I think both of you bastards are wrong ๐Ÿ™‚ The DCL occurred yesterday in gold. I will be enjoying a tasty burrito on the moon, while watching you two chase gold!

  11. spike

    gold lanquishes in spite of new missile launch, London terror attach and renewed dollar weakness. What happens when gold positives go negative

  12. Spanky

    Well it looks like a push higher in GDX is out of the question in the very near term. Two scenarios could unfold from here. A bit of consolidation around the 20 dma for a week or two to allow the bollinger bands on the daily to tighten up again, or a scary move down to the 50 dma or even more dramatic, the 200 dma.

    The thing that is bit worrying is that the weekly stochastics are already well into overbought territory. If they come out of overbought, it is anyones guess if miners will have the power to get the stochastics moving back upwards before they reach oversold first.

    The confluence of key moving averages on the weekly chart is pretty stunning. Would not want to see the 200 WMA taken out (currently at 21.37). Obviously, anything is possible in this sector in the short run.

    The silver miners are a bit uglier for sure. It’s quite possible that stocks like AG and EXK drift lower and actually make lower lows, or at least test their July lows. Something like HL for example looks like it could easily test its 100 WMA about 10% lower from here.

  13. bginvestor

    well, I bought GBTC yesterday.. its up 18.4 percent today as we speak. Hopefully, I can squeeze a profit. ๐Ÿ˜‰

  14. bginvestor

    if GBTC breaks that trend line, that will confirm a new cycle..

    I mentioned this yesterday , but , really, do you guys think China is going to get out of the Bitcoin business? (answer: no)

    PS stops are in place.

    1. Americano

      Warning on GBTC :
      Has nothing to do with Bitcoin price – due to premium ( only game in town) rumors of Bitcoin ETF thru Gemini that are coming will destroy price.
      Gary will post another chart when this happens thinking its Bitcoin lol.

      Guys – GBTC has HUGE premium over Bitcoin you just buy & hold offline. Recently the GBTC -Bitcoin price eclipsed $11,000 ! Bitcoin ATH just barely got past $5K !
      GBTC is only for quick play & in a downdraft you will get your face ripped off.

      Just but Bitcoin straight up. If you don’t like the limits Coinbase gives you by OTC (for $100K minimum now) and store. I just hold as it’s breaking $10K next year BUT if you want to trade……simply take one or two Bitcoin & place on Bitmex & get up to 100x margin.
      If GBTC is your only Bitcoin play I suggest instead……continue napping with gold.

  15. Alexandru Popovici

    Gary, SOX’ merely seeks a bull trap while allowing NDX to produce its own smaller bull trap but take a look at trans, fins, energy, ibex, ftse as well as to gold and TLT which have swing lows today.
    Not to mention SKEW vs VIX, McLellan’s divergence etc.

  16. Goild

    How stupid.
    I got into the falling knife.
    At some point I was losing $5K.
    Fortunately, the big bounce came and I became positive with +$1200.
    How stupid, I told you no to get into falling knifes.
    When are you going to learn?

    Good and wise trading to all.

  17. Strike2

    The majority here appear to look for a further short-term pullback whether they favor a subsequent rally or further collapse. Two days ago I pointed out my two points of interest – (a) GDX 38% fib (from the Aug low to the Sep high) and (b) GDX 50% retrace. So far we are still meandering around the 38% (GDX 24.23) after two days. A glimmer of bullish hope amidst short term negativity.

    1. Spanky

      I think 23 is pretty much in the bag. There is a head and shoulders on the 2 hour that has triggered.

      Basically, all of the action from the pop on August 28th is going to be wiped out in due course.

      1. Strike2

        Actually that approximately corresponds to a date with the 200 day MA, probably our next to last stop before a 100% retrace (22ish).

  18. Christian

    A NOTE TO BLUEBELLKID — ERX dropped all the way down to $21.50 and just recently topped around $27. Had you bought a couple of thousand shares when I told everyone that ERX was over-extended, your account would be roughly $10,000 richer today. When was the last time you made that kinda money on a swing trade?

    TODAY’S LESSON: Yes, a shift in VOLUME is often an important indicator but you don’t always need volume to spot a trend change. By the time volume picks up, you will have lost that edge and your ‘risk vs reward’ will be much greater.

    1. Bluebellkid

      You’re the man. At $21/share I would buy more than 2000. Maybe you can teach me how to spot a trend change.

  19. jake

    GBTC is having a nice bounce off its bottom trendline,.
    Not unlike trading all the worthless pharma stocks on the reactions.

  20. Goild

    I am done for the day and for the week with +$4500 to enjoy the weekend.

    M + $2000
    T +$1000
    W -$2000
    T +$2000
    F +$1500

    I am going to walk the dog now.
    Have a nice weekend.

  21. espresso

    Good points, Gary. I personally got out of the Naz bubble late March of 1999 and just relaxed. Cringed might be a better word. But I held firm. I missed the last doubling of the market, but by Sept of 2001, I was (with help from my replacement investments) up about 100% from where I’d been if I’d just ridden it out as many I knew did.

    And even thought I got out a bit early, I had a great run up until that point. And much of the stuff I switched to had high yield so it wasn’t a bad wait at all for normalcy to return. I slept better, that’s for certain.

  22. Pedestrian

    Not sure why you dislike bitcoin here Gary.

    GBTC was good for the easiest 25% day gain we have seen in ages. Yesterday after hours I posted that the chart looked damned bullish and have not been disappointed yet. Straight up out of the blocks. It’s very hot with great technicals to back it up.

    ERX meanwhile is falling as I predicted. So much for good vibes on the oil sector. Buyers seem to feel differently than you. Volume is falling most of September and technicals are not on your side anymore. I think you missed your chance to sell and have a long wait for the next bounce. Sorry.

    I will be REALLY surprised if it goes up to the 200 dma but stranger things have happened.

    Gold meanwhile may need most of another week to retest its top. Looks like that is an odds-on bet right now so the bulls might be back in charge next week. Not really sure on this one though. It could go either way.The dollar looks really good to me as it consolidates its lows though. So the reversal is still on. Euro has similarly topped. Slow by slow though we are getting there.

  23. Christian

    BIOTECH — Folks, I would be extremely careful with LABD at this point. LABU is consolidating within a “triangular flag” possibly in preparation for the next leg up.

        1. Christian

          Like I said.. PRICE is consolidating within a triangle which often indicates further upside. And my spidey senses are telling me that if Biotech was ready to drop; it would’ve done it already.

          I could be wrong of course but I’m gonna stick to my guns on this one ๐Ÿ™‚

  24. Bigdaddy

    Picked up some more LABD this morning. What the hell is going on with the Semis? Did Trump say something that would drive them up? Man, that guy has been the best thing that ever happened to the SM.

  25. Spanky

    AXU getting utterly smashed today. It might hit $1.45 today for all I can tell. The entire pop from August 28 looks like nothing more than a pump and dump at this point.

    SIL is back under the 100 dma–not very bullish.

    If the IC has really topped, the silver miners are going to get annihilated.

  26. felix115

    First: how could you define btc a bubble, if less than 3% of global population own it…. btc is a global currency, it’s not the dollar, the pound, the yen. its market has 7 billion potential customers… you can not print it, you can not create it from thin air; its quantity is limited! and not possible to change it. If this is a bubble explosion, it’s a very little explosion on a very long way…. Bitcoin will fail if a better cripto, with a better technology , will emerge to replace it. Will not dissapair with out a reason. It ‘s a non sense to talk about bubble…. it start from ZERO, to arrive at 5.000$…. is it a bubble??? If its adoption will stop, it will be demonstrated it was a bubble; but if its adoption will continue to increase, 5000$ it’s NOTHING!!!
    second: A PONZI SCHEME????…. What are you talking about Gary????…. I was sure you knew what a ponzi scheme is!!!….. ๐Ÿ˜ฎ ๐Ÿ˜ฎ

      1. felix115

        you don’t know what you ‘re talking about.
        Blockchain is a revolution.
        You all are SLEEPING while the train has already left the station.
        Yesterday someone here told the bubble burst….
        That’s right. What’s the price of bitcoin today???….
        What’s the law today the congress passed…???
        Come’on guys: OPEN YOUR EYES!!!

  27. felix115

    P.S.: i don’t own btc. I’m not a bitc pumper, or a btc fan. I’m only an intrigued and informed observer.

    felix.

  28. Bigdaddy

    Okay, the semis are up big mostly because of one stock, that being Nvidia being up 6%. That stock has tripled in a year. Crazy shit.

  29. Bigdaddy

    I’m down 4 thousand bucks on SOXS . Doing like gary did with ERX. Hold till it recovers. That should give trolls like Pedestrian something to yap about. Where is that clown this morning anyway? Maybe he was up all night with a bad case of verbal diarrhea. Hahaha!

  30. Spanky

    Well AXU hit its head and shoulders target.
    The 2010 analog is officially over.

    TBH, it is starting to look a lot like 2012, lol. How low will she go???

  31. felix115

    The only bubble out there is the GLOBAL DEBT BUBBLE. Criptos (like pm in phisical form) give you the opp to escape from the money-debt scheme of failed central banks. Can you imagine the price of Bitcoin, or etherium, or ripple, or dash, or iota, or the one you want; if 5/7% of world population entry the market???…. The actual cap is 120 billion $, moreless. What’s the cap of Apple???…. Or Google, or FB….
    And what you think will happen on the next failure of a major Bank….??? Where money will go?? THEY WILL GO OUT OF THE SYSTEM. Phisical Gold, Phisical Silver, and…. CRIPTOS!
    This is not a bubble. Blockchain is a revolution. Like internet.
    Bye.

    1. victor

      felix is probably mining bitcoins a scared ( :
      with any major Bank fail people will rush to physical or something more tangible …

      1. felix115

        Money are tangible…??? Are you sure???
        Try to go to your bank and ask to have your Dollars back because you want to close the account, and listen their response!!!
        Or try to make a money transfer with your us bank to Australia, for exemple… You think there is a phisical passage of money???? :-))))))….

  32. Spanky

    At this point I would like to see AXU hold the $1.50 level, the 10 week ema. But at this point I have to assume there is risk down to the 100 WMA at $1.29 currently. Below that would be the 200 WMA at 1.07. I really don’t expect it to get that low but damn today did not exactly give me warm fuzzies.

      1. Spanky

        At this point, I wouldn’t be surprised in the least if it it gets down to 1.05. Hell, it could easily go sub 1.00 in the next few weeks. Was not expecting today’s ass reaming at all. Needless to say, even if by some miracle the metals bottom around the FOMC, there is going to be some follow through to the downside. Over and out.

      1. bginvestor

        if price breaks that trend line, and starts a new daily cycle, it can go up quite bit EVEN if it turns out to be a LT cycle..

  33. jacob2

    Interesting, Merrill Lynch summary, the top preforming equity markets for the last 3 months were Brazil, China, Poland, Russia and India the U.S. was 27 th. The only non positive asset… bonds.

  34. Gary Post author

    Folks I warned you that bitcoin would at some point deliver a very convincing bounce. People would start piling in or keep holding and then the second leg down would begin. That’s when the real horror of what’s happening will sink in.

    This isn’t over. Not by a long shot.

    1. Bluebellkid

      GBTC closed back above the 50 day and in the top half of the weekly trading range – that is not bearish!

  35. JJHarmen

    First time I have checked the markets today and I see I haven’t missed much. Got outside today and did some work in the yard. It’s a perfect day at 75 degrees. I have made the decision to spend less time watching a computer screen and doing more out doors activities. It helps to keep the mind clear when dealing with the markets.
    LABD is a bit disappointing but I have a stop on in case it goes against me. No stop for GDX as that is an long term hold that I intend to add to over time.

  36. Troy

    And the Dow, Nasdaq and S&P all made new all time highs today. If that ain’t uber bullish, then I don’t know what is.

    1. Gary Post author

      10,000 is going to be a piece of cake. 20,000 isn’t out of the question when we get to the really nutty phase of the bubble.

  37. jacob2

    Once again gold COT’s not encouraging if your long. Bitcoin and gold are the anti global QE trade. Central bankers don’t want you in these asset classes but in stocks and to a lesser extent commodities that support low inflation global growth. DOn’t fight the global fed… at least not yet.

  38. palobar

    In July I mentioned that September would bring a stronger turning point. It looks like that point is now behind us and Gary’s video, of course, came on spot. My next important dates fall in October, so there is enough time for a decent drop and I wont be surprised to see Gold test the July low if that happens. I highlighted the importance of the week of the 28th of August. Since, the all-time high in 2011, this was the second time Gold gave a high on this key geometric cycle. The previous time was in the first week of October 2012. Gold failed to get through and collapsed afterward. This time it went through at least far enough both in time and price. I went through my file to check when the last time Gold broke out of a similar high. It was in 2004 and once Gold went through it never looked back. Short term anything is possible. Long-term, however, we had a very positive development. If history repeats, once we get through the September high (whenever that happens), chances that Gold will not look back again are very high.

  39. palobar

    @Sassybabe,

    I sympathise the loss you took a few days ago on Gold. If some of my comments confused you I apologise. I do hope that you read carefully the comments everyone including myself made following your related post.
    Rule 1 = Don’t trade based on the opinion of others
    Rule 2 = For the past weeks I have been working very hard on Wheat. So, if you break the first rule, then, pay attention to Wheat. It is preparing to go substantially higher. I have already commented about Wheat in late August in this blog. Whish you good luck.

  40. WYSIWYGN

    Just compare the NIKKEI chart from 1988-1989 and lay the S&P chart of 2016-2017 over it.
    Breathtaking resemblance.
    And no parabolic exhaustion to be seen, just one final blow up and then minus 85% for 20 years on … (1990-…).

    1. Gary Post author

      We’re getting there but not quite finished yet. The Nikkei rallied almost 400% before topping. The Dow is only a little over 250%. We need to finish the vertical phase of the bubble to complete the bull market.

      Remember the rubber band theory. The further price gets stretched from the mean the more violently and sustained the opposite move will be when the trend reverses. We made a historic trip to the downside in 2009. We need a buying panic at the final top proportional to the selling panic that occurred in 2008/09.

      We haven’t had it yet, but I think it’s about to start. We need the public to pile into the market. When they do the chart of the Nasdaq is going to look like the chart of bitcoin.

  41. Gary Post author

    If you want to look for similarities compare the bitcoin chart to the chart of the Nasdaq in 2000. The top for both occurred a little above $5000. The initial crash for both once the bubble popped dropped back down to $3000. The counter trend reaction off the initial crash took the Nasdaq back to $4200 before the second leg down dragged tech investors into the bowels of hell over the next two years as the Naz lost almost 80% of its value.

    1. Bluebellkid

      At the Nasdaq top everyone and I mean everyone was talking about “tech stocks or dot.com’s” and the “new paradigm” – you know the one that said earnings don’t matter. Well, we found out earnings do matter. I have no one in my family or friends who even know what Bitcoin is. No way it has topped out.

      1. jacob2

        Tend to agree. Think BTC makes a comeback about the same time as gold and the next fiscal crisis
        ie. sovereign debt …. inevitable. In the mean time the market runs.

    2. felix115

      nasdaq is an index of companies. In 2000 pe of that companies were at absurd levels; that’s the reason why the bubble burst.
      Bitcoin is money. It could crash, but only if its adoption rate will fall.
      Today is just the opposite. Every day in the world someone says it accept bitcoin in his business, to buy his products. It’s a completely diffrent situation. You are comparing apples with cars….

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