SECULAR STOCK BEAR VS. SECULAR GOLD BULL

Since March of 2000, the stock market has been and continues to be in a secular bear market. Beginning in March of 2009, the stock market entered another cyclical bull market.

This means our current stock market is in a relatively short term bull rally within a much longer term secular bear market decline. A really big bear market rally, so to speak.

This cyclical bull will serve to separate the second phase of the secular bear from the third and potentially most damaging leg down in the ongoing long term bear market.

Now that doesn't mean the rally since March 2009 is finished. Obviously it isn’t, as most indexes have recently moved to new highs.

What it does mean is that one can't make a timing mistake and expect to be rescued by the secular trend.

At some point this bull is going to expire and we are going to head back down and break the SP500 lows at 666, either nominally or on an inflation-adjusted basis. I suspect it will be both.

The reason it’s going to do that is simply because we don’t have a fundamental driver in place to power a long term bull market and the Fed’s attempts to defeat the bear are actually just magnifying and prolonging the structural problems.

For instance, from 1982 to 2000, the stock market was in a secular bull market. The fundamental driver for that bull was the personal computer and the internet. Those were world changing new technologies. Millions and millions of jobs were created during this period.

Now that doesn't mean the rally since March 2009 is finished. Obviously it isn’t, as most indexes have recently moved to new highs.

What it does mean is that one can't make a timing mistake and expect to be rescued by the secular trend.

At some point this bull is going to expire and we are going to head back down and break the SP500 lows at 666, either nominally or on an inflation-adjusted basis. I suspect it will be both.

The reason it’s going to do that is simply because we don’t have a fundamental driver in place to power a long term bull market and the Fed’s attempts to defeat the bear are actually just magnifying and prolonging the structural problems.

For instance, from 1982 to 2000, the stock market was in a secular bull market. The fundamental driver for that bull was the personal computer and the internet. Those were world changing new technologies. Millions and millions of jobs were created during this period.

Gold is in a secular long term bull market. This means several things.

First off, we can expect this bull to continue until 1.) The fundamental driver is taken away. This means the printing presses have to be turned off and 2.) We see a final blow off top as the public panics into what they perceive as a “sure thing”.

Until the secular gold bull tops any entry will ultimately turn out to be a winning position no matter how poorly timed as long as one is willing to hold on. Investors would do well to remember that the secular bull will eventually correct any timing mistakes.

A buy and hold strategy is the only sure fire way to make money in a long term bull. It’s not the only way but it is the one that is virtually guaranteed to return tremendous profits.

That being said, it is possible to maximize gains and minimize draw downs if one can recognize where gold is in its wave cycle. As all of the gains occur during a C-wave advance one wants to be fully invested during this period.

Just as importantly one needs to recognize when the C-wave is coming to an end and exit positions before gold enters the inevitable D-wave correction.

 

 

At the moment gold may or may not be entering a second leg up in the ongoing C-wave that began in April of last year.

I will be monitoring the gold market closely over the next few weeks for the confirmations that should determine if gold is going to deliver one more leg up. If a second leg does develop, we then need to be on the lookout for the signs that a final top is approaching and exit positions ahead of the D-wave correction.

The Gold Scents premium service provides a daily email update on the stock market, dollar and commodity markets as well as a comprehensive weekend report that includes Excel spreadsheets of historical and current C.O.T data for numerous stock indexes and commodities with special emphasis on analysis of the ongoing secular gold bull.