166 thoughts on “WHY BUBBLES FORM

  1. zkotpen

    Gary,

    Nice to see some civility round here & not feel the Lord of the Flies scenario.

    I appreciate your continued emphasis on sentiment — sounds like a great technical indicator & I’ll probably at least give sentiment trader a trial run.

    I haven’t paid too much attention to the stock market, but giving a look at NDX.

    You often wonder why people pay so much attention to gold & miners. Well — if you remove directional bias, there’s a much bigger volatility play.

    In plain terms: How long does it take GDX, gold, and NDX to each move 10% — up or down?

    So the only real problem is directional bias in the metals sector. If one can scrap that, and focus on the next directional move, even a corrective move in metals can produce a larger return faster than a trending move in NDX.

    1. RTTPD

      Ped —–

      So in this analysis….if both the Yuan and dollar are devalued, the price of oil will rise in this process?

      1. Pedestrian

        Yes. All commodities will rise in price. This may in fact be just another version of how the dollar was devalued against gold in 1932. The difference this time is that the US cannot devalue alone nor can it be seen to be reneging on its debts via a policy choice. In essence, the Treasury and Fed need the cooperation of China and other major gold holders in order to achieve the same feat that was carried out many decades ago but to achieve it in a less transparent manner. So this process may be seen as beneficial to not just China but also the US and other heavily indebted reserve currency nations that seek a devaluation of their respective currencies to relieve the overwhelming burden of debt. In other words, don’t imagine that US policy makers will object as their end goal of a direct devaluation of dollars versus gold is still reached but just via another mechanism.

      2. Pedestrian

        Secondly, consider that we will soon embark on a gold bull cycle that could run 7 to 8 years. Even Armstrong has commented that gold could reach 5000 dollars. But think for a second about what that really means. It is just another way of saying we are going to experience a large currency devaluation taking place versus commodities.

        In the case of gold we can estimate this drop as being close to fourfold since gold currently trades around 1300 dollars an ounce. What will it mean to dollars if gold is four times that value in other words? The interpretation should be obvious. The result is a staggering loss of our buying power and a disastrous drop in our living standards.

        From that perspective we will also have to acknowledge that oil prices will indeed rise and perhaps sharply over the coming years relative to the new relationship between gold and dollars. While the current regime we face is still a debt deflation I don’t think that means we will be immune to resource inflation. But the combination of forces actually suggest many years of stagflation that erode our standard of living without the benefit of rising wages to offset the pain.

        We will indeed feel a lot poorer.

        This is virtually baked in the cake anyway as the level of taxation that will be required to meet the mountain of future social obligations is going to be so onerous that disposable income will be utterly eviscerated by rising taxation alone.

        Now compound that with buying power that is just a quarter of what we enjoy today and you may start to feel a little squeamish. Secondly, robotics and a reduced demand for labour means “welcome to a low wage world” where incomes are suppressed due to highly advanced automation rather than poor workers in the Third World.

        I think there is one thing that cannot be stressed enough. We will all need more income to get by in a manner that equals what lifestyle we currently enjoy. And so we should all seriously consider getting debt free as soon as possible while focusing our resources in income generation.

        Going into the new devaluation regime will be extremely painful for debtors as the easy credit days fade into the past and the dollar moves into a cyclical weakening period. But lets not be alarmed. None of this should really be news anyway. We in the developed economies knew all along that we were living well beyond our means and borrowing from the future. Countless articles and analysis over the years have warned about the consequences of our overspending debt-fueled binge.

        What has received far less attention is the actual mechanics of what is about to unfold and just how it will impact on our lives. And now we know. The dollar will most likely crash versus gold. But lets not celebrate quite yet because the misery it will inflict on society will be profound and make every gold bug wish it had never happened at all.

  2. Pedestrian

    So I just read an article by Hugo Salinas Price discussing the mechanics of the new Chinese gold-for-oil trade and how it may positively impact the price of gold at the LBMA. You will have to look at it yourselves but I think Hugo has come to a pretty interesting conclusion which is that this new structure which pays for an essential commodity (crude oil) with another commodity (gold) will in effect cause a devaluation of both Yuan and Dollars versus gold.

    What Price is suggesting here is that oil exporting nations who participate in this program will become the marginal new buyers for gold in a rising market by standing for delivery every month in London where the transactions get completed.

    Under normal circumstances most gold contracts on the exchanges are settled in cash or rolled over but only a small percentage are ever actual commitments for the physical metal so there is no great need for large physical supplies of gold to be kept on hand to meet demands from buyers. The gold market is almost entirely speculative with few traders interested in the gold itself as their goal is just to make a dollar profit on each trade transaction.

    But the Chinese gold for oil program could stand that tradition on its head.

    Salinas Price is saying that since the oil exporters will want to be paid in something other than Yuan that they will now take delivery of that gold which they can subsequently convert into dollars or other preferred currency at their leisure. They may want to just hold it in vaulted form as price rises for example during a time when currencies are unstable or falling.

    The point is that it will come off the market.

    Granted, this could all still take place without any gold ever being moved out of a London vault as the entire conversion process can still be completed as an electronic exercise. But what if countries like Iran, Venezuela or others began to demand physical delivery?

    Salinas is saying (by my interpretation) that gold would immediately start to rise in price as the market discovery process for the limited quantity of physical metal on hand came into effect and that as gold prices rose that more oil exporters would get on board favouring the Yuan/Gold exchange instead of dollars since the payment currency would be appreciating. Thus, the process would become self reinforcing and gold would rise further yet.

    The net effect over time would be a potentially large devaluation of the Yuan in gold terms which is another way of saying gold prices would be inflating. But dollars would also be affected by default. Don’t forget the Yuan still has a so-called soft peg in place versus dollars.

    So is he right? Will a commodity for commodity exchange cause major fiat currencies to devalue sharply and will the gold warehouses be cleaned out by oil exporting nations demanding physical metals and eschewing dollars?

    Salinas might just be on to something interesting here.
    http://www.plata.com.mx/mplata/articulos/articlesFilt.asp?fiidarticulo=323

  3. zkotpen

    Always looking for insights, perhaps the most orthodox chart pattern I have ever seen is XAUCHF. This is not a very practical market to trade. So I looked at CHFJPY, which is similarly orthodox — it adheres very strictly to patterns and also to the tenets of classical technical analysis. Recently, CHFJPY parked just below its 100 week SMA, probing resistance, before finally breaking thru. And after the breakout, like clockwork, it backtested that same moving average in textbook fashion. I thought I might need to start collecting some textbook drawings. Here’s my first piece of purely digital art,

    Resistance becomes support in a non-trending market

    https://drive.google.com/open?id=0Bw2Cu7KYAAPsQl9zVHA1SXlSbE0

    Happy Sunday to all!

  4. zkotpen

    I concur with gold target to about 1280 before a significant bounce.

    GDX looks like about 22.60 area.

    Also, revisiting our discussion from late February, I continue to think that GDX is following a different pattern than gold at intermediate degree, so whereas gold may exceed the September high, I don’t think GDX will.

    Once again, it would be amusing if gold topped on October 5…

  5. zkotpen

    For a potential short on gold down to 1280, I’m calculating a risk of about 0.2%, with potential reward around 1.3%. For GDX, about 0.5% vs. 3-4%.

    Seems to me like gold offers the better risk:reward scenario.

    If that plays out, then calculate subsequent upside targets, and their associated risk:reward ratios.

    That’s one key reason why I haven’t participated in the contest: I am forming the habit of calculating risk based on my own technical analysis, and setting my stop at that point. That way, if I’m wrong, I know exactly how much it’s gonna cost me to test my trading idea. And if I’m right, then I know how much profit I should make. Those calculations will determine whether the trade makes sense of not, from a risk:reward point of view.

  6. earthkitten

    Quantitative Tightening announced last week
    was the beginning of the end of the bull market.
    The Fed giveth & the Fed taketh away.

  7. earthkitten

    This bull will end with a whimper not a bang.
    If you look at market history, not all bull markets
    end with a euphoric phase.

  8. earthkitten

    QT will taper reinvestment by 50 billion a month
    by late 2018. That’s 600 billion a year. If you don’t
    think that’s going to create headwinds for the
    market, you are badly mistaken.

    1. Gary Post author

      The bubble should be finished by then. If we are starting the vertical phase now it should be over in 6-8 months.

      But even so, at 600 billion a year, how many years will it take to withdraw all the global QE? 20 years? 30 years?

      1. ziasDad

        There are two ways they can unwind the QE dollars: 1) sell some bonds that they originally purchased with QE funds (money created out of thin air) and then disappear the dollars they get from selling the bonds, and 2) keep the bonds till maturity (and then do not get their money back from the bond as someone like me or you would do if we had bought the bond).

        Question: Does the 50 billion per month include BOTH types of unwinding, that is, selling bonds in their portfolio AND letting bonds mature (and getting no dollars for those when the do mature)? Or does the 50 billion include ONLY bonds that they sell (and not include bonds they’re holding to maturation)?

    2. Christian

      It’s mind boggling to me how most people don’t seem understand the “snow ball” effect. Folks, it doesn’t matter that QE ended a long time ago in a galaxy far far away, and it doesn’t matter that QT is now within the realm of possibilities — THE DAMAGE HAS ALREADY BEEN DONE!!

      **Just like Global Warming.. there is no turning back from the damage that’s already been caused by the gluttonous, over indulgent dirty little piggies that we are πŸ™‚ Well done sheeple.

        1. Christian

          Actually it did – OFFICIALLY – back in 2014.

          Unofficially and behind closed doors is anyone’s guess.

    3. vin

      IMO, it is very doubtful that They have the “power” to take out that much dough from the system under present conditions without collapsing it.

      Isn’t it funny, the US federal government alone owing at least $20T and they are shivering taking half a trillion out of the system?

      btw I am not supporting the theory of the market going crazy in a few months, and doubling or tripling.

      It is very clear that the present economic system (worldwide as Gary says) is addicted to free money. And, at present it looks like that even endless supply does not seem to do much. Hence the experiment to see if the addiction can be reduced a bit. Will the addict survive? Let us watch and wait.

      Under these conditions can the market double or even triple within a few months? I have no way of knowing that, and neither does anyone else.

      On the other hand, Gary’r record hasn’t been that bad. So, I have decided to GAMBLE very small amount on his scenario. I may add that the amount is so small that if lost it all it will be less than what I have made following his suggestions (more or less) so far.

  9. jacob2

    A YES vote on some kind of SM top within 6-8 months. Gold, QT and rising rates, no current inflation …. bearish. POR bear for gold bear in November sounds about right. A resounding don’t fight the global fed. How about a retest of 1080 by next summer, can never happen, right.

  10. earthkitten

    Oh. They will and will continue on a rate hike cycle so they will have some ammo for the next crisis. Gary is right. The market will probably go much higher the next 6 to 8 months. Then the grind lower begins. Not a crash mind you. Just a slow steady decline.

  11. MegaMind

    Stock markets could drop 20% from here… I don’t understand this doubling nonsense… what are the drivers… its time for a typical 20% drop in the next 6months.. all in my IMHO

    1. Gary Post author

      The 7 year cycle low occurred in early 2016. It’s way too early in the cycle for another big sell off. As I noted in the video sentiment, is still way to bland to trigger a big pullback right now. We need to stretch the rubber band much much further to the upside before we get a 20% move back down.

  12. Goild

    I was looking for a long term investment deal, say 6-24 months from now.
    The stock market is like flipping a coin.
    Oil may reach $60 but does not look like a great deal. There is perhaps too much risk.

    Gold/miners have their basing problems in a changing world.
    But they look like it is becoming time to take off.

    For that long term trade my take is to get 1K shares of GDX and ad 500 more shares for every $2 bucks it rises. This should generate automating money.

    I wonder who has other ideas on where to put dough?

    1. ziasDad

      I like that plan. What is alternate plan B if GDX heads south? Buy more for every $2 it moves lower? (Not being facetious, just want to know what the fallback plan is if GDX doesn’t go up)

  13. Pedestrian

    Euro set to fall at the open as Angela Merkel has been weakened by the election outcome and will be forced to make more difficult decisions about a new coalition government with an upstart party as the two more established parties suffer a poor showing. The risk is that there will be less latitude on euro integration for the new coalition and the minority party of skeptics will be the proverbial tail wagging the dog. So we now have a catalyst to send the dollar higher and gold lower which many of us were expecting anyway. We will have to wait and see if gold falls lower than 1280 before bouncing however but the effect is not likely to be too severe in any case as Merkel herself will still be in power.

  14. ras

    $gold weekly stochastics have been turning down since 2 weeks. It could be some time before reaching OS level. Ditto gdx and its derivatives.

  15. dboz

    The volatility short is at an all time high. Meaning NO ONE thinks or fears the market will drop. At the same time retail investors are now jumping into the market. Most of the market gains have been in a handful or two of stocks. The majority of those gains have come due to company buy backs funded by zero and low interest rates that have allowed fat cat higher ups in companies to ensure themselves that they cash out at the top when to tower crumbles. Leaving the average shareholder to foot the bill when the fundamentals of these companies go to hell and the big pullback commences.

  16. dboz

    I am not holding any gold or miners at the moment. I still think that oil is going to tank in the near future which will take gold down the toilet with it. Figure on a rally in the short term but not yet. Followed by the annual blood bath into the end of the year.

    The trade for the end of the year will be DWT. Expecting large gains.

  17. Gary Post author

    Steve Tytler,
    Actually we got out within pennies of the exact top. $25.48 on GDX to be exact. The metal portfolio is up 157% in less than two years.

    Maybe you should get your facts straight before you make a bone head comment like that again. πŸ™‚

    1. Pedestrian

      What bonehead comment? Who is Steve Tytler? Is there a post missing or something because I can’t figure out who you are talking too Gary.

        1. Pedestrian

          Yes. Or maybe that comment belongs on the pay side of the site where there is a real guy with that name.

  18. Pedestrian

    Gold and silver both currently back-testing intermediate resistance zones and odds are good they will decline near the open. I am looking for gold to fall back to its 1280 pivot where I think it may be ready to bounce. We never did reach the gold COT extremes of 2016 however I still think that is coming this month. Bullishness on gold is still high and it looks like buyers will attempt to push metals into the oversold region once again and give us that record COT positioning that will signal buyer exhaustion before the *real* leg down gets underway.

  19. zkotpen

    Pedestrian,

    “Gold and silver both currently back-testing intermediate resistance zones and odds are good they will decline near the open.”

    I don’t know about silver, but looking at gold and USDJPY, looks like they will continue to consolidate on Monday, 1290-1298 area and 111.6-112.6 area, respectively, before the move you suggest: gold to about 1280 area, and I will add, USDJPY above 113.

    That’s how the patterns & maths look to me.

    1. Pedestrian

      Well, we are in the 1290 to 1298 area for gold already so no prediction required. I see a drop coming however timing is always the trick. I am using the hourly chart to check the backtests.

  20. Gary Post author

    As of the open this morning the ERX trade is back to even.

    Energy should still have at least 1-2 more months before the intermediate rally tops. So by the time we exit we should make a nice profit on this trade.

    If I had listened to the traders panicking at the bottom we would have produced a huge loss. Instead we should end up with a respectable gain even though I was too early on my entry.

      1. Nada

        Come on now, lets have a bit of perspective. Gary held in a paper account until it oil turned. Few are willing to take that type of draw down over that duration of time. I am not saying that the trade will not work out, but its hardly a trade one should be gloating about.

        1. Gary Post author

          And those that couldn’t hold produced a huge loss.

          Those that followed my instructions will make a respectable to huge (if energy retests the 52 week high) profit on the trade.

          I instructed everyone no more than 20% of ones portfolio in the energy trades. So no one was taking such a huge drawdown that they couldn’t hold and let the trade work.

          I said the weekly stochastics would cycle back to overbought and they are. But during a drawdown our emotions prevent us from thinking logically.

          If one can still think logically during drawdowns your chances of making money are much greater. Unfortunately very few people can.

          1. Bluebellkid

            And who can afford to tie up money for weeks or months or years waiting for a trade “to work”. Sometimes markets just work against you and the safe thing to do is get out with minimal losses. If you are good enough you can make those losses up quickly.

          2. Gary Post author

            If I thought this time was different then I would have taken the loss and moved on. But I knew this was a move into a YCL. And the rallies out of YCL’s tend to be the most powerful.

            We could have just stopped out over and over trying to pick the bottom and damaged our mental capital so much that we wouldn’t be able to pull the trigger again. So all we would have accomplished would be guaranteed losses.

            I can tell you from watching the challenge almost no one has been able to ride the rally out of the YCL except me. Everyone else is so skittish from the long pullback that they take profits very quickly so they aren’t making much of anything and are just missing the move.

            By the time I sell I expect we will significantly outperform everyone else who tried to trade the move and if we come away with a 20-50% gain in the trade I think even you would have to admit that is a pretty damn good gain for a year.

          3. Bluebellkid

            If you are now just back to break even then anyone can jump in here and do as well. If it can take out the 200 day on above average volume then I might be interested myself.

          4. Christian

            BLUEBELLKID — I once took the time to explain to you the advantage of “averaging down” if and when a security is over-extended and/or dropping down into an ICL or YCL (in this case ERX) and apparently you haven’t learned one thing. If you would stop being so stuck in your ways you might actually learn something and make some money.

            **WE ARE ALL HERE TO LEARN from one another in order to improve our game! You just have to keep an open mind my friend πŸ™‚

          5. Bluebellkid

            The object is to buy at the proper point and if that doesn’t work then get out. One can recover small losses very easily.

  21. zkotpen

    Troy,

    Looks extremely subjective to me — reminds me to continue considering goldtadise as extraneous.

    Though, as previously mentioned, I did get one technical insight there about 2 years ago. But it’s easy to get lost in the sea of extraneous indicators there, so I just don’t bother.

  22. zkotpen

    G’day Goild,

    I think we’ve seen the low for the day in gold & GDX — perhaps Yellen’s speech tomorrow will remind people to sell metals & miners?

    I say this because consolidations in gold & USDJPY both look to be incomplete — somewhere in the middle of a normal expectation for timing. And I do not measure time in hours, rather, just looking at the consolidation effects of price action over time — doesn’t look like short term volatility has contracted enough prior to a move — looks like it’s around halfway there. (and livin’ on a prayer πŸ™‚ )

  23. Bigdaddy

    Facebook, SQQQ, SOXS and SPXU are all going my way this morning. I’m smiling, the wife is pleased and I swear the dog is trying to smile too. I should not have sold LABD and maybe should have got in on crude oil but you can’t win them all.

  24. jacob2

    From worst to first …. OI!. Outpreforming on a down day. “Being greedy wnen others were fearful” has paid off, once again.

  25. Gary Post author

    I’ll be interested to see if we see another V reversal today indicating the PPT is still at work preventing the market from getting any real downside momentum.

    1. m0ntana

      Gary is so wrapped in matrix state of mind and “vertical phase”, I have a feeling somebody’s going to lose everything acting on this thesis. Fed will NEVER allow such runaway moves. But I give kudos for his Oil call.

  26. Jimsee

    if gold closes above 1300 today I expect that volatile run to new rally highs probability to skyrocket – watch AG and 7.2 imo.

  27. Bigdaddy

    I can understand Gary’s stance on ERX . I am back to even on a thousand shares of SQQQ and have held it almost as long as he held ERX, only difference being that it was real money for me. We must be the two smartest guys here.

    1. JJHarmen

      Breaking even sometimes is the best a person can hope for when recovering from a bad trade but holding a losing asset and waiting it out is hardly what the pros would call a winning strategy when dealing with leveraged funds. It’s a different story for plain jane stocks and ETFs where buy and hold does work (usually).

  28. Bigdaddy

    So what effect did the German election have on the markets or gold? As i predicted, Zero!! Fat boy and his nukes are far more worrisome to investors.

  29. Bigdaddy

    I am going to be studying the markets for some new trade ideas. FB is falling to pieces just as i predicted.

  30. Bigdaddy

    Hey, my ZJG just jumped past my break even point. Just need SPXU and SOXS to get back to even and then I will almost be making making a profit. Life is good. I think Gary and I are the only two smiling this morning.

    1. Sassybabe

      Bigdaddy, I am holding SLV which is getting close to my break even point and I am thinking I should get out . The dollar looks pretty strong. Your opinion please. Ty.

      1. Nada

        The dollar is not strong, its due to the weakened Euro. The German elections were not what the market were expecting. Merkel had a humiliating defeat due to Meuthen’s AFD party wining parliament seats.
        Finally, the Germans grew a backbone and might put an end to the immigration reform that Merkel used to destroy Europe.

      2. Bigdaddy

        Sassy, I would not sell if i were you. I am looking at expanding my ZJG holdings. The weakness in the Euro will not last and the YEN is looking much better so i expect the dollar strength to fade and be making new lows before too long.

        1. Bigdaddy

          Sassy, btw, my advice to do the opposite of Pedo no longer holds. You will get whiplash trying to figure out where he stands on gold. He has been changing his forecast from one hour to the next so he has become useless as my contrary indicator. Take heed.

    1. AT

      I think NK fluff may wear out quickly … plan to sell DUST today regardless;

      wanted to add JNUG but missed it under 19 this morning …

  31. Pedestrian

    Wheee! Look at gold go. Too bad I didn’t have any skin in the game for launch even though I was the one who just yesterday was saying I thought gold would power up and head for 1400 because there was still a lot of pent up energy in metals. Smart and dumb at the same time. Could kick myself. So then Zkot, now we all want to know your method. Also how come you thought this would be range bounce under 1300 as well? My idea was gold would decline for at least a day and fall to 1280 first before take off.

    1. Nada

      There is a difference between saying it will do something versus saying it will do something while you have actual money on the table. Now you will chase like the rest πŸ™‚

      1. Spanky

        Exactly. I am not going to toot my own horn for calling a double top in the markets last week because I have zero skin in the game.

        1. JJHarmen

          I remember Spanky calling a top but we have seen these chicken shit sell offs happen a hundred times and the end result has been the same, a V shaped recovery.

          1. Nada

            Yep, the buy the forking dip folks came in strong on the SPX. Maybe just maybe, one day they will be handed their asses.

  32. Goild

    Early in the morning I had made ~$680.
    But the rocket came and I lost them, and more to about -$2400.
    Though I managed to have the day trading account positive with $3.84.
    Thank you, thank you.
    On the swing I shorted the rocket and I am positive today.
    The books do not tell about how much guts you got to have in this business.
    No guts, no glory.

      1. vin

        ??????? I like him/her. He is fun.

        My views are similar to yours. But, then they are only my views. And, if he/she is real, then I wish him/her all the luck so that he/she can buy even more wine for his/her wife.

        Whatever. I find he is lot of fun.

  33. JJHarmen

    The sell off was pretty much confined to the tech stocks so I can’t see the PPT getting to excited. Now, if crude reverses and takes the energy sector down with it, that could trigger a sharper fall.

  34. Goild

    Nada,
    I am sorry I sort of unplease you. I do respect you and think you are gifted and knowledgeable in trading.
    Here are the trades in my swing account for +++$1200.00
    Again having 4000 JDST shares while in a GOLD rocket is not particularly awesome.
    JDST FILLED AT $50.9823 Market Buy 1000 at Market Day 11:11:21 AM 09/25/2017
    JDST FILLED AT $51.0318 Market Buy 1000 at Market Day 11:14:01 AM 09/25/2017
    JDST FILLED AT $50.744 Market Buy 1000 at Market Day 11:14:41 AM 09/25/2017
    JDST FILLED AT $50.4108 Market Buy 1000 at Market Day 11:15:19 AM 09/25/2017
    JDST FILLED AT $51.0998 Market Sell 4000 at Market Day 11:25:17 AM 09/25/2017

    1. Nada

      I can TYPE entry and exits out as easily as the next fellow Goild – its the same thing day in and day out.

      Don’t think I have not noticed “Oh I was down 45,000 dollars, but I shorted the shooting star candle between 10:05 and 10:07 am and made 50,000 dollars so now I am up 5k for the day. Good trading to all”

      Post a screenshot or don’t bother with the hindsight trading for forks sake.

        1. Christian

          Actually.. I think Nada makes a valid point πŸ™‚ And Gary has a rule about people posting baloney trades. Post in real time or (respectfully of course) shut it!

    2. vin

      Wow! Goild, you are so sharp. I guess you make all that dough by working less than half an hour per day because rest of the day spend on this site posting your trades or telling about wine, your wife and what not.

      Can you teach me how to make that kind of money daily. Every time try day trading I lose my shirt and under-shirt and ….

  35. Pedestrian

    Maybe worth a mention but gold is rising WITH the dollar today. Doubling it percentage wise actually. That was not really expected. On a day when most of the market was sure euro would fall it was assumed by most that gold would fall with it. But instead its once again Yen in the drivers seat as Abe makes an election call. So maybe a surprise awaits as the usual inverse relationship between dollars and gold does not hold up as strongly. And instead of getting less gold each time the dollar drops you might instead start getting more as they go up together. Oh happy days!

    One day is not a trend of course. Just something to keep in mind if this persists.

    1. Nada

      I believes it’s more about the Euro as we know the index is heavily weighted. The german elections did not go as planned, so we may be seeing a knee-jerk reaction. However, its always been about the yen and today we have a swing low.

      I think Gary has done a great job tainting the bull in gold, so what we have to ask ourselves, which one of the below scenarios will play out;

      1) DCL is in and we attack $1,400.
      2) The next daily cycle fails to make a new high, rolls over and drops below $1,204 (a left translated IC).
      3) A short cycle that peaked at $1,362 but bottoms above the July $1,204 low.

      My money is on scenario #1. However, I think we likely hit resistance at the double top from 2016 – a good place to take profits, wait for retrace and take another position for a run to 1400 and above.

    2. Jimsee

      Indeed – if China/Russia strike back sensibly and build an oil-gold link the EM economies can repay dollar debt by trading in yuan / gold and watching their dollar balance shrink each month. We walked right into this stupidity by ‘saving’ everything and demanding the world pay the tribute.

    3. vin

      Pedestrain, Thanks for the observation.

      But, I wouldn’t worry about $ index rising. It is not possible the way the “money” is being handed out even today. If that is not enough the present President will not let that happen. One may like him or not but one has to admire his resolve. He is not a man who gives up easily. He may not be a diplomat or even a traditional politician but he is intelligent without doubt irrespective of hoe he acts.

      He will not let $ index rise for long. If anything I would expect it is headed lower and significantly lower irrespective of its true value.

      1. vin

        No matter which country you go to, you find there are plenty of dollars in the hands of ordinary citizens, even third world country. And, yet they want more and some time (still) they are willing to buy in black market.

        One can only imagine what will happen when people will not want them any more. And, it is only a question of time. It will be watershed event.

  36. isavage

    Thank you Gary!

    You kept me in GUSH trade and buying the bottom dip with RSI now on extreme levels today with obviously oil short squeeze.

    Sold at a nice profit will we enter on pull back.

  37. Troy

    I sold some more UWT and ERX today too. Still have about 60% of my UWT, ERX and GUSH positions. I’ll keep selling as we get more overbought. Also holding a little GBTC from last week.
    I added some more TQQQ today and bought a little JNUG (for fun). A bit overloaded in TQQQ ow, but we should reverse soon.

  38. Bigdaddy

    I just bought another 1000 SOXS at 23.92 That gives me a total of 2000, average of 25.22. I have a gut feeling that there isn’t going to be a V recovery this time The Swiss National Bank is up to it’s neck in American tech stocks and it’s time for them to take profits and that’s what is happening. They have to stop printing money sometime to buy up everyone elses’ big companies or the rest of banks are going to get pissed off.

  39. Bigdaddy

    Anybody watching FB crack? It’s sweet. I am short 700 at 167.20 from way back. I have been doing the “hold till they go your way” thing that Gary does except i play with real cash.

  40. Bigdaddy

    Thanks Nada but I have taken the profit yet. I will puke if FB makes another come back. I might cover the short today because the margin requirement is high and maybe the money would be put to better use on SOXS.

  41. Nada

    Amazing the recovery in the SPX. Will be interesting if it closes over 10ema, like it has done for the past 17 days.

    1. Nada

      I am either going to loose all of this profit or cut a tad below 1375. I will post update when we hit or I bleed out the arse.

  42. jacob2

    FANGS have lost there fangs and there leadership. Market leadership and sector rotation underway to late cyclicals.

  43. vrancovich

    so gold is back to the same level as when the rates were raised about a week ago and rallied strongly with the dollar.

    I wonder at what point we start acknowledging that gold is not an anti dollar asset anymore (for the time being at least).

    is the secular bear market in gold that started last tuesday over? /s

  44. zkotpen

    Nada,

    I was referring to the low for the day in my comment to Goild — you can verify in my post addressed to him above.

  45. zkotpen

    Bluebellkid —

    I fully agree with your prudent approach. One’s system generates a potential setup. One calculates risk/reward, and if the calculation is satisfactory, one gives it a go. If you’re wrong, you get stopped out. If you are right, then you take profits according to your targets and your exit strategy.

  46. zkotpen

    I was on the verge of shorting gold, literally typing in my stop loss and take profit figures, when it took off. Since I’m not married to that or any other trade setup, I backed off. Though even if I had entered the trade, I’d have been stopped out with minimal loss, and zero emotional damage, as my stop was 0.1% above the limit order.

    So reassessing…

  47. zkotpen

    Pedestrian,

    Funny thing is, while I was tracking the consolidation in gold, I noticed two things:

    1. The consolidation did look a little wonky — i.e., ambiguous. Hence my plan to short with extremely tight stop (0.1% above entry). But fortunately, the blast off occurred just as I was typing in my order, so I backed off from it, to reassess.

    2. All along, I was tracking the consolidation at cycle degree which Gary et al refer to as “half cycle”. And that pattern has not been disrupted by today’s events — altered, but technically remains in play. Even your classic cycle guys will point out that both gold and GDX have met resistance at their respective 10 day SMAs, and USDJPY is still well above its 10 day SMA.

    Also, notice how GDX did not take the bait as gold took off and USDJPY plunged.

    That is why God invented the X-wave: To keep the overarching pattern intact despite most news-opera. πŸ˜‰

  48. zkotpen

    …XAUCHF says:

    “Daily” cycle still in decline, target around 1242 CHF;

    “Half” cycle in overbought territory, with upside target met.

    The whole world can learn so much from the drama-free Swiss!

    For example: Who is the president of Switzerland?

    Concentrating power in the hands of a single executive is as obsolete in 2017 as absolute monarchy was in 1776. Judicial and legislative branches of government all have several or many people sharing power in their top positions…

    The wise, low-drama Swiss have figured that one out… only problem is, they are so tight-lipped about it!

  49. zkotpen

    Goild,

    I appreciate your posting trades, especially with time stamps. It would take quite an effort to forge such a thing — probably not worth anybody’s time.

    Curiously, my best friend at Uni did 3 things for me, 2 of which are relevant to markets. First, he got me to broaden my opinion of soft science vs. hard science, making me realize that both were subjective, since they were performed by humans.

    Second, he told me, with my strong calculus background, that if I ever wanted to do research in any social science, such as Econ, I should learn as much statistics as possible.

    He once observed my grandma and her sister playing some dice game, and keeping meticulous records for every single roll of the dice, going back decades. He said that such raw, real world data was invaluable. Statisticians try to generate it using computers (this was in the late 1980s), but nothing compares to real world data.

    So if you take the time to share your real world data with us, I certainly extend my heartfelt thanks to you!

  50. TraderPete

    Kim Jong-Ding-Dong-Un is a total and complete Nincompoop!!! He would be an Idiot to start a war with the US. Therefore, I think the gains in gold will be wiped out, and then some.

  51. Goild

    Vin,

    Thank you for the comments above.
    Bottom line I am one more as every one else here trying to find the holy grail.
    Consider Kruzoe, he is trading since at least the 2000’s, consider others who are successful at this game.
    Most profitable traders likely have at least 5 years of training. I do too.
    While the profits I am having might look great, well everything is relative.
    Talented traders can bring $250K a year up to $1M, or more millions.
    I am not yet at a high level. I might have a basic trading diploma.
    My trading has a lot of errors. For example, I did not take advantage of today’s rocket.
    Instead I shorted it. At some point on both accounts I was losing around $4k.
    This is poor trading; but luck helps. There is a lot of tolerance in trading for errors.
    I am not waking up early in the morning every day just to say hi, I need to be paid for my time trading, or to put it in a different way for taking the risk to be cleaned by the talented traders.
    Recently I am doing OK working as an ANT. But there is a lot of room for improvement.
    I am aiming at trading excellence. I wonder at the level I will get at.
    We, I, live and breath trading, we love the challenge.

    Vin, I hope you are doing well. We miss you around here.
    I enjoy your sense of humor. You must be fun as a friend.

  52. Goild

    Zkot,

    Thanks for the comment.
    Yes, making up those execution lines would be quite difficult.
    I wonder what do you mean by “real world data” ?
    We were missing you last week.
    Did you take a break?

    1. Bigdaddy

      Goild, perhaps you could tell us what indicators you are using to time your trades. Five minutes charts? RSI? MACD? You sound like you are just guessing and there is no way anyone could have the daily success you claim to have by guessing.

  53. Bigdaddy

    I have been doing some studying and have come to the conclusion that it’s time to get back into the miners with both hands and feet. Don’t hesitate folks, just buy.

  54. Gary Post author

    I have to laugh. Without fail everyone always gets bullish after a trend has rallied for a long time. No one is ever bullish at the bottoms.

    How many were bullish on metals in Dec. 2016?

    Who was bullish on energy stocks a month ago?

    Who was bullish on the stock market on Sept. 21st?

    Folks you need to think like a professional. Professionals get more bullish as price declines and less bullish as it rallies. Most of you do the exact opposite.

    Notice that the COT reports get more bullish when price goes down. They get more bearish as price goes up.

    The NDX contracts were already mildly bullish last week. After the recent pullback they will probably be significantly more bullish.

    So the smartest traders in the world view a pullback as an opportunity. Most everyone else views it as a bear market starting.

    I just have to laugh. Traders just keep doing the same thing over and over no matter how many times they get it wrong.

  55. Goild

    BD,

    I use a single monitor, five minutes candle charts, I have two rows: top row GLD, JNUG, NUGT or JDST
    then bottom row FXY, SPY, TIP.
    Knowing the typical candle formations is indispensable. As well as the market rhythm.
    Time, cycles, support/resistance, pivot points, are considered.
    Daily practice leads to develop the skill.
    The day trading I do is quite different to swing trading.
    One must take decisions and act on the spot. Seconds make a difference.
    Playing little money is important, it opens the path to bigger gains. And to get into the “zone.”
    Playing big money means losing judgement, the more money in, the more one is subject to emotion.
    Hope this helps.

  56. Goild

    Oh, no indicators, only the exponential averages.
    I try to imaging the current play, why it takes place, and how is likely to develop.

  57. zkotpen

    Goild,

    Real world data, like my grandma & aunt rolling the dice hundreds of times per day for decades, and recording every roll. Like you reporting your trades as you took them.

    We use computers to analyze and simulate data. Last year, the NCAA hoops season was simulated 10,000 times before the season began, and Duke comes out on top. Who’d’ve thought their best guy would get injured, key player starts tripping opposing players on the court, and the gold-medal coach hurts his back and it out with surgery? All of that real world data.

    Of course, the real world data is used to create computer simulations. The more quantity, quality, and varied the data, the better the simulation. So the machine learns from the real world, and people in the real world learn from the machine simulations — or at least they have the chance to.

    But to be sure, the best quality data is that which is actually taken from real world occurrences: Real people, in real situations, making real decisions, and executing them as the various scenarios play out in real time.

    Yep, taking a little break — hope you saw my digital art, linked above.

  58. Anthonyo

    No “V” bottom recovery today.

    NAZ fell 4 times as much the amount that The Dow & SPX fell Monday…
    Something is not right this time around…
    FB down 5% in one day Monday…etc others…
    It could be setting up for a deluge waterfall dive … with or without any news or reason.

    Seriously considering exiting Longs in FANGs.

    Shorting for the brave hearts ;
    but if it slips and falls, it will be a real doozy; like 15% to 30% type doozy.
    Whenever someone says it’s easy to make money in anything now…Run.

    1. Gary Post author

      LOL. Every time the market corrects the perma bears start predicting a 20% crash.

      In the last hundred years how many crashes have there been?

      We were told the market was going to crash in August as well.

      The Nasdaq corrected 4.4%.

  59. Gary Post author

    The problem gold will face going forward is the dollar cycle has turned up. The euro still has potentially 2-3 more weeks before the daily cycle bottoms. Gold will have to rally in the face of a rising dollar. So far this evening it’s not doing so.

    This was the basis of the short cycle scenario. At some point the dollar was going to give us a counter trend rally and that has the potential to push the precious metals back down into the basing pattern. The yen as well is in a left translated cycle that potentially still has 3 weeks to go before bottoming.

    So I would be cautious about backing up the truck this late in the intermediate gold cycle. I tried to warn traders 2 weeks ago that it was dangerous to keep pushing leveraged positions in the metals. The rally had lasted 2 months and was due for a breather. Most ignored me as they always do but as it turns out that was very good advice as the miners then shed 10%.

    1. Gary Post author

      If the dollar cycle rolls over quickly and we get a complete test of the lower megaphone trend line (roughly 90.50) before the ICL forms then yes gold could probably give us a test of $1400 before topping.

      But if the dollar has formed its ICL back on Sept. 8th gold is probably going to struggle to recover to new highs before turning back down.

      1. goldfu

        Gary, you need to take a stand. You can’t keep saying either the USD has bottomed in an ICL or it will roll over quickly. Which one is it? It allows you to be correct either way as you tend to be wish washy – same as you accuse EW folks of being: they choose both sides of the coin and it allows them to remain correct either way.

        1. Pedestrian

          I don’t think Gary is making a call either way here. He is just stating the obvious using the conditional “if” which is OK with me since we all have a few doubts right now. Sometimes we just have to wait for patterns to reveal themselves.

          For example, I believe the dollar is in the process of reversing versus the euro however if you look at the chart you can see there are still more opportunities for the dollar to fail at different resistance points and still remain within its bear channel (albeit a larger degree pattern).

          This is a problem we contend with daily where break-outs look highly suggestive yet still remain unclear. I can also understand your point about the appearance of Gary holding two conflicting viewpoints simultaneously though but my suggestion is to just ask him which side of the market he is on to know his true sentiment.

          In other words, what did he actually trade.

          You might need to be a subscriber to find out though. I have no idea if he will answer that question on this free board.

          1. goldfu

            Gary was most definitely making calls on gold go back and read his posts for weeks now but he flips flops as he often does. He has no idea where gold is going. In 2016 he stated with conviction over and over again how when gold was around 1330s it would be going to 1500 and everyone should load up JNUG and then gold collapsed. Recently he has been wishy washy because he has no idea what gold will do.

          2. Gary Post author

            It was just too early to tell yet if the dollar has formed a final ICL bottom. There’s no doubt about the smaller degree daily cycle bottom though. Watch the newest video.

            There was also no doubt about how I traded. I make actual trades unlike 99% of other newsletter writers. I sold our GDX position at $25.48. Within pennies of the top.

  60. Pedestrian

    Would anyone here want to call this hourly chart pattern a cup and handle? Before jumping in and saying yes, please keep in mind it has formed at the BOTTOM of a decline rather than at the top following a rise. So is it bullish? Guess we will know soon enough if gold takes off like a bolt from hell.

    Hourly chart Gold — Possible cup-and-handle pattern
    https://finviz.com/futures_charts.ashx?t=GC&p=h1

  61. Pedestrian

    Yesterday I wrote a few posts on how damaging an effect it would be should the dollar fall versus gold in any significant way. But I didn’t append any charts. Today I have one that puts a little perspective on where we might be going during the next bull phase of precious metals.

    This is a chart of “Cumulative Inflation” going back to 1910.
    https://inflationdata.com/Inflation/images/charts/Inflation_Trends/cumulative_inflation.jpg

    All I want to point out is that as gold rose during the 1970’s and early 80’s that the dollar lost considerable buying power and it was never regained. So the inflation was compounding but not reversible once it set in. On the contrary the chart just keeps rising year after year proving the long run fact of our money vanishing in steps.

    So what you see there is that it took 40 years for there to be 200% accumulated inflation but only 25 years for aggregate inflation to double again to 400%. That took us to the very early 1970’s. In the ten years that followed during which time gold soared, the dollars loss to inflation doubled again to 800%.

    My point here is that its not impossible for our buying power to decline sharply relative to the rise in gold prices. As pointed out, should gold actually reach Martin Armstrong’s target of 5000 dollars that would represent a quadrupling of its current price and thus imply a similarly destructive decline in our standard of living.

    So much for Freedom 55, people. If you have not saved, not invested properly or are deeply in debt your life is going to be living hell ten years from now. All I am saying is be prepared and reduce debt. The credit cycle is almost over and we are closer than ever to the end of the precious metal bear market.

    Debtors will be the big losers in the future. That includes you guys with fat, oversize mortgages.

  62. goldfu

    Gary, I was referring to 2016. You must be referring to a few weeks ago in GDX.

    In 2016 you were leveraged in gold (example JNUG around 24) when gold was in the 1330s before it collapsed as you were certain gold would be heading to 1500 and that it was simply a pullback. I am simply pointing out that at times you make big mistakes with gold.

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