Monthly Archives: May 2018

Panic phase starting?

It’s certainly taking a long time to unfold, but remember last week when I suggested that a move below $1300 in gold would create panic? Most people will sell or sell short, but this is when bottoms occur.

The time to buy is when you’re scared. We’re about to get a whole lot of scared gold bugs. Some time soon the buying opportunity will arrive.

Recipe for losses

This is how so many traders lose money. They get frustrated, panicked, or overly emotional at major bottoms and they end up selling into oversold conditions when they should be buying, and then they buy into overbought conditions expecting the market to continue higher indefinitely when they should be selling.


This is how so many people managed to miss out on tremendous gains. The SMT metal portfolio has gone from +50% in December of 2016 to +371%. We didn’t time perfect entries on any of those trades but we got “close enough” to make a lot of money. Almost without fail we had to hold through a temporary drawdown during the bottoming process. Many many traders sold or cancelled right at the bottom because they lost sight of the big picture and panicked during the bottoming process. Look at the unbelievable opportunity they missed. All because they couldn’t control their emotions and think logically.

They are doing it again. Human nature never changes. Just like death and taxes, some things are inevitable. Many (if not most) traders will always sell when they should be buying, and buying when they should be selling. In 6 months the metal portfolio will be up another 25-50 or 100% and most will have missed it again. If people could think logically I would see a huge influx of new subscribers every time the weekly stochastics became oversold. They would learn how cycles work and take advantage of them at the bottom. But that’s never how it plays out. Instead I get traders cancelling at bottoms and the big influx of new subscribers occurs only after the weekly stochastics cycle back up to overbought. Let’s face it most people are, to put it bluntly, stupid. Logically they can see what they should do, but emotionally they just can’t do it.

This will play out all over again during the next intermediate cycle low and those very few that have learned to control their emotions will just keep racking up more and more profits while most just keep missing one opportunity after another.

Time for a correction soon

At some point soon it should be time for stocks to turn back down and correct again keeping the bears hoping, and the top calls coming.

It won’t be a final top but only a continuation of the sideways consolidation we’ve been in since February. Like I said, I think we probably still have a couple more months of this before we’re ready to breakout and head to 10,000.

Currency turns

I’m pretty sure the euro, yen, pound, franc, New Zealand dollar, and Australian dollar are all completing intermediate degree corrections. What does that imply for the dollar?

Higher highs

As of today the SPX and Dow have joined the Nasdaq and Russell in making a higher high.

I’ll say again that we probably aren’t done with the sideways consolidation just yet but there is no doubt the top callers got it wrong again. We are in a long term bull market. Don’t expect a final top until probably late 2020’s or 2030.

That being said: There will be 4 year cycle lows along the way, and even at least one recession. None of those will stop the bull market because none of those hurdles are going to stop technological advance anymore than the crash in 87, the recession in 1990, the Peso crisis in 94, or the Russian default in 98 stopped the personal computer or internet during the last secular bull.

10,000 is going to be a piece of cake. By 2030 I suspect 50,000 may not be out of the question.

Consolidation confirmed

With the Russell and Nasdaq making a higher high today there is no longer any doubt that this is a consolidation within a long term bull market. That being said I think it’s probably still too early for a breakout and run to 10,000. We probably have more back and forth trading ahead for at least another month or two. But the perma bears got it wrong again (remember the calls for an 87 style crash back in February?). Over and over they keep making the same mistake. If they try hard enough they may mange to miss an entire secular bull market because they can’t get the memory of 2009 out of their head.

10,000 is going to be a piece of cake, and by 2030 the Nasdaq is going to be a long long ways above 10,000.


How many times have you heard this? We caught the exact bottom (or exact top). We traded the move perfectly. My system produces 90% (or better) winning trades. We’ve been up 100% or better every year. How would you like to turn $1000 into $50,000 in three weeks?

Let’s face it, almost every newsletter writer in the world uses this kind of marketing tactic. But do all of them actually catch the exact bottom and exact top? Of course not. If something sounds too good to be true, then it is. The best traders in the world rarely win more than 65 to 70% of the time. The three best traders (actual traders making multiple trades, not the one or two that scored huge on a single trade) in the challenge all have a winning percentage between 65 and 73%. (My win percentage for the SMT metal portfolio is only 66% yet we’ve still managed to gain 100% in less than a year. )

So if you see outlandish claims of incredible performance, or sky high winning percentages you can pretty much bet the farm this is complete BS and nothing more than a marketing scheme to entice gullible retail traders into purchasing a newsletter subscription.

Here’s another dead giveaway. If an analyst claims to have an amazing trading record but won’t run a real time model portfolio, you can again bet the farm the reality is a far cry from the hype. If a newsletter is going to make far-fetched claims of incredible accuracy then they should be able to back it up with real time trades. Off the top of my head I only know of one other newsletter besides myself that will actually put his ass on the line and make real-time calls.

Here’s what you get with most newsletters:

Lots of alternate wave counts or scenarios. No matter which way the market moves the analyst will have covered all the bases and then several weeks later will claim to have caught the turn perfectly.

The system is so complex, full of contradictory rules and exceptions that it’s virtually impossible to determine what call the analyst is making. This is the baffle them with bull shit strategy, and many analysts use this to keep subscribers entangled in a never ending quest to unravel what the hell they’re saying. Most retail traders automatically assume the more complex a system is the better it’s likely to perform. When actually the truth is the more complex the system, the more likely subscribers are to keep shelling out money.

Here’s another great marketing tool I’ve seen countless times over the years. The black box.

This particular strategy claims to have a computer program that can predict the market. The particular black box that is in vogue today is the so-called artificial intelligence. But like most of these systems that have come and gone over the years, usually what the computer spits out is a hodgepodge of contradictory signals that can be interpreted to mean almost anything. One week will be a directional change. The next week will be high volatility. The week after that a panic. So when you put it all together the computer conveniently covers all the bases and traders are left scratching their head wondering how one could use the system to actually make money. Again I don’t think I’ve ever seen a black box system that actually makes real-time trades. Any institution that actually does have a profitable blackbox certainly wouldn’t sell you access to it. They would guard it carefully for as long as possible so they could keep the profits for themselves. The secret to most black boxes is that they are very good at generating subscriptions as people like to believe that machines can be programmed to beat the market. I can assure you machines are no better at seeing the future than the rest of us. What machines are very good at doing is trading at incredibly high speeds and shaving off fractions of a penny millions of times a day.

Here’s another tactic many newsletter writers use. They will outline a potential path going forward, and then immediately cover their ass by saying of course the opposite could play out. Again I’ve seen this kind of nonsense many times, and then two or three months later the analyst will claim to have caught the exact bottom or top. I’m of course scratching my head wondering when this guy actually made a directional call because all I ever heard in real time was “maybe this” or “maybe that”. I used to have a subscription to a newsletter writer who did this constantly. Everything was maybe this or maybe that. He would never put his ass on the line with a real-time directional call. Or he would out of the blue announce that he had taken a position in some stock that had been rallying for the last four weeks. I’m of course thinking why the hell didn’t you tell us that four weeks ago? Or after the stock had topped and crashed he informs us he took profits right before the crash. Again why the hell didn’t we get that memo before the crash?

And let’s face it a high winning percentage doesn’t mean an analyst is actually making money. I’ll give you a strategy right now that wins between 85-92% of the time. It’s called a Bollinger band crash trade. The rules are simple. When price closes below the lower Bollinger band (parameters 10:1.9) buy at the open the next day, and sell on the first profitable close, or after 15 days whichever comes first.

But here’s the problem. Despite having a very high winning percentage, most of the winning trades only produce a very small profit. And when the system produces a losing trade, even though it happens only rarely, the losing trades can be huge and ultimately even though they only occur 8-15% of the time, the few big losses ultimately overwhelm the many small winning trades. So don’t try this system at home boys and girls. By the end of the year you will find you have less money in your account than when you started even though you will have a ton of winning trades.

You can see how a gullible novice or even intermediate traders could be suckered in to paying for access to a system like this. One that produces a lot of winning trades but ultimately no sustainable gains. This is a great marketing tactic to generate subscription revenue, but it rarely generates any long-term profits.

Here’s another marketing tactic used by many if not most newsletters. They trade mainly individual stocks. Let’s face it, most retail traders are gamblers, not serious investors. They are looking for someone to give them trade ideas every day. The only way to generate that many trades is by picking individual stocks. But let’s face it there’s no way any of us are going to beat Wall Street at their game by trying to trade a bunch of individual stocks based on nothing more than chart patterns. These institutions have armies of analysts that know these companies inside and out and there’s just no way any of us are going to be able to compete against that kind of firepower. In reality one can make plenty of money simply trading ETF’s where you don’t have to compete against Wall Street’s analysts, or have company specific risk, plus you’re going to save a small fortune on commissions and fees.

When I started the challenge last summer many newsletter writers and analysts were invited to join. To my knowledge not one single analyst was willing to put their ass on the line in the challenge. I guess they were worried about damaging their pristine record if they actually had to play by the same rules as the rest of us and make real time trades.

The moral of the story is that if you are going to pay for a mentor, or access to a trading system you might want to demand the newsletter produce real-time trades to back up their spectacular claims. If they won’t make real-time trades you probably want to slide them over into the “to good to be true” column.

Trends changing in 2018

Take a look at the longer term charts. Where was the strong trend last year? What sector went nowhere last year?

Now that the stock market is taking a breather (no this is not the start of a bear market. The perma bears will continue to be wrong, wrong, wrong on their never ending calls for a top), where do you think the trending move will be this year?

I covered this in the weekend report if it’s not obvious to you.


Dennis G. +377%

Mika K +176%

Daniel M. +127%

Bob S. +124%

Troy S. +99%

The SMT stock portfolio is up 30% and probably stuck at that level for the rest of the challenge as I don’t expect the stock market to do much between now and July.

The SMT metal portfolio is up 100%, and back in 5th place.