Sunday, May 16, 2010


Until the pattern of higher highs and higher lows is broken this will remain a cyclical bull market. Shorts trying to jump the gun run the risk of getting caught opposite the Fed's printing press.

The secular bear trend can't resume until a yearly cycle bottom is broken. That yearly low came this year on February 5th.

As long as the decline holds above that level this will continue to be an ongoing cyclical bull market.

If the decline were to break 1044 then we would have our first warning that the secular bear trend has returned. The correct strategy would not be to sell the break though. Sentiment has skewed extremely bearish already. That kind of sentiment almost always spawns a multi-month rally in bull markets and a powerful counter trend rally in bear.

A safer strategy would be to sell the rally not the breakdown.


  1. How about the huge increase in volume coming into the inverse etfs? I think it's safer to be out of this market until we see if this is a top or not.

  2. I haven't wasted my time on the stock market in quite some time. It's much easier to just ride the one remaining secular bull market. I'm talking gold of course.

  3. I think you are right about the situation. I am waiting for ealy July bottom and then late August top and then sever crash.

  4. Excellent stuff. I absolutely agree here. The decline in gold price today and perhaps a few more days will give us a fantastic opportunity to join the rallying train.

  5. Toby, are you prepared to buy and hold a 40% correction in gold stocks if that happens again just like in 2008? I'm not sure it will happen again, but it could. What about 2008, did you just buy and hold that correction? Why not make a little money on the downside if a nice trend forms in that direction. Also the dollar is forming a nice long term bottom on the monthly chart, looks poised to go over 100.

  6. That correction was the 8 year cycle low for gold. It's probably way to early to expect this 8 year cycle to top out so I'm not particulary worried about a 40% drawdown.

    No way would I ever short a secular bull market. I learned that lesson a long time ago. That my friends is a fools trade. One never knows when the secular trend is going to resume so it's next to impossible to guess when to cover.

    If you miss and the bull comes roaring back you can lose all your meager profits in the blink of an eye.

  7. And no I didn't hold thru that correction. I was mostly invested in energy stocks at the time as that was the leading sector. I got out slightly before they topped.

  8. I was referring to shorting the market indexes if a trend develops to the downside like in 2008. What's your analysis on the long term dollar chart, I see a base that could launch it up over 100, then maybe the bear resumes in the dollar. Until then it might be profitable to play the dollar long for maybe the next year or so.

  9. As long as there is a bull market it just isn't worth fighting the Fed on the short side for meager profits.

    Let's face it even if one managed to time the exact top and bottom and shorted with 100% of their portfolio during the second greatest bear market in history you still only made 58%.

    Hell a roaring bull market can do that in a matter of months.

    Shorting is a last ditch effort only when nothing else is working.

    And we do have a secular bull market that is intact.


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