Wednesday, June 30, 2010


I noted in yesterday's daily update that we should be nearing not only a daily cycle low but an intermediate cycle low any day now. (the February intermediate bottom came on a reversal off the jobs report. Guess what's coming on Friday?).

Not only that but sentiment is again back to bearish extremes. We are even starting to see the haters & trolls appear again on the blog (generally a pretty good sign of an impending bottom), although not as much because gold and miners have for the most part completely decoupled from the stock market.

Not withstanding all of that the market is now just about as oversold as it was in March of `09. There are only 27 stocks in the S&P trading above their 50 DMA.

You can see from the chart these kind of oversold levels always spawn some kind of bounce and often bear market rallies begin out of these kind of oversold levels.

Considering how late we are in the intermediate cycle the market is due to put in an intermediate level bottom at any time.

Now just isn't the time to get brave and press the short side. Much safer to just let that trade slide on by than risk getting caught in an explosive bear market rally or a continuation of the cyclical bull which ever the case may be.


  1. If you had an unbiased mind, and threw up a monthly chart of the dollar and made a prognostication based off of it, what would it be?

  2. Well on the monthly chart we have a big nasty red reversal candle that got turned back right at prior resistance.

  3. On the daily chart there were momentum divergences at the recent high.

    On the weekly chart it won't take much more weakness to turn weekly MACD negative.

    And if the dollar closes below 85 we will have a failed daily cycle in progress. Usually a sign that an intermediate level decline is in progress.

  4. So you're negative on the dollar right now. I'm drawing a box around 88 and 82, just like the Darvas method. If it breaks 88, I stay in my trade and add more. If it breaks 82, I'm out. Longer term I think we have a Fibonacci retracement on the dollar somewhere around 100 over the entire bear market in the dollar, that would be a good place for the dollar bear to resume.

  5. Don't worry Toby - he's exactly the type of person the banksters look for. The USD can only go down - more QE to come with the recent market activity. Stay long the USD at your peril - congrats if your right, but know the banksters were heavily short the USD from 85+.

  6. "The USD can only go down"....except for the last 2+ years now while it has moved higher. All this QE worrying is what keeps people out as well and allows the dollar to push even higher until people finally get suckered in. I'll let the charts do the talking.

  7. What a bunch of techie,wreckie jibberish.

    You have way too much time on your hands writing about things you aren't active in.

    Your just filling space. Use that time to do some charitable endevours
    instead of wanking off online.

  8. I think gold bulls have gone an exceptionally long time without experiencing any real pain too. Gold has let people get loaded up at the breakout level of 1250-1265 for almost two months now, that is not a good sign near term for gold. Gold is just suckering people in right now for a false breakout. The breakout more likely will occur later this year or next year.

  9. I have to ask, what difference does it make if gold breaks out this week or in a couple of months?

    I simply can't take the chance that gold may decide to move and I wouldn't be on board.

    It's more important to me to be on board when the moves happens than trying to avoid a short term draw down.

    One doesn't get rich in a secular bull market by trying to avoid draw downs. They get rich by following Old Turkey's advice.

    Trying to avoid draw downs will just guarantee that one makes little or nothing by the time the bull is over.

    The people that can learn this lesson will ultimately walk away with a huge pile of cash at the end of the bull.

    Those that can't learn that lesson will reach the end of the bull with little or nothing to show from the greatest bull market of our time.

  10. Look at the Technical Toby "bounce" playing out today.

    Oh, right, I know you're not invested. don't play these markets, on-the-sidelines spectating while giving others bogus buy indicators so you can watch them lose money.

    It's over. Pork it and cork it.

  11. Look at the techinical Toby "bounce" playing out today.

    Oh, Yah, right, I know, you're not playing these markets, not invested in them but, sitting on the sidelines while...

    giving others bogus buy tech indicators while you watch them lose money.

    It's done. Pork it and cork it.

    And...keep your day job.

  12. On the contrary I've repeatedly told people not to waste their time on trading the market.

    I just gave people a low risk entry for those who just can't resist trading. The stop was hit yesterday so they are already out with a very small loss. Isn't that what trading is all about. Limiting losses when you are wrong?

    I tell you what, why don't you tell us when you cover and then we can judge whether you actually make money trying to short stocks.

    I suspect you already took two losses during the last two explosive counter trend rallies. The question is will you get caught again in the next rally and make it three in a row?

  13. Toby, now that 1040 is broken on the S&P, all the shorts have to do is stay short until that level is breached back to the upside. Meanwhile gold longs are going to get taken to the woodshed over the next few months as we finally have a real correction in gold after it's 5 wave advance. A lot of weak gold hands are going to get flushed out, even though they might think they are strong hands. I'm personally going to buy more metals once gold gets back around $1000.

  14. Toby:

    I may not always agree with your interpretation, but I find your comments insightful and thought-provoking....

    I'd suggest that the chart may be saying something different than you believe > in each of the past sequences, the 50 dma bounced off the bottom and headed back up with conviction.
    However, in this most recent iteration, it appears that there was an attempt to bounce in July, but the energy wasnt there and it has since rolled over back down ... no pattern continues on forever.

    In light of the above, I am 50% in cash and watching for the entry point at a lower level.

    Nontheless, you are right...the Old Turkey got old by being patient and smart. The bold young turkeys all get shot!

  15. your views on this topic are really interesting and give a clear cut view. Thanks for sharing the knowledge

  16. Divergence between momentum and prices does forewarn a rally in equities soon. However, volume analysis strongly suggest that rally would be of counter trend variety and most likely to fail to breach the April highs in S&P. Refer to similar formation and count rend rally from divergence in 2008 summer.


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