Tuesday, July 6, 2010


I've been waiting for a swing low to mark the daily cycle bottom and likely the intermediate cycle low also.

As long as we close positive today we will have that swing. (We will also have a four day rule possible trend change) I think there's a very high probability that Thursday marked the bottom.

Folks this is just how intermediate cycle bottoms unfold. They always make everyone believe the decline will continue forever. They always bring out the calls for a crash. And they always bring out the trolls on this blog :)

The thing is they also always eventually bottom. Then the market rallies long enough to reverse sentiment back to bullish extremes. In bull markets that means new highs. In bear markets the fundamentals pull the market back down before new highs can be made.

Once I become convinced we have indeed put in the intermediate cycle low (a pretty good tell is when the bears start blaming the rally on the PPT. A sure sign they got caught short at the bottom) then the bounce out of that low will tell us whether we are back in a bear market or whether this has just been a correction in a cyclical bull.

If the market rolls over and moves below the intermediate low (which appears to be at 1014 as long as the swing holds) then yes the markets are back in bear mode. If we go back up and make new highs...well that would be obvious now wouldn't it?

So the next month or two should tell us the true direction of the market.


  1. I agree with Tony that Stock markets are at their bottom.
    Even if we are wrong, the risk/return ratio tells us it is worth to risk! Target must be higher than 1220 and only cost investors 40 points. This chance is much more easy to realize than the crash in Nov 08.
    At last, Tony you are great!

  2. Sorry, I mean "Toby" not Tony.

  3. Yes we closed up, but it wasn't very impressive though.

  4. But is does give us a four day rule possible trend change :)

    I would like to see a large buying on weakness day though as a sign that institutions are ready to step in.

  5. I hope it goes one way or the other - trending sideways would be frustrating!!
    Sorry I just had to rant LOL

  6. SH tested support in the low 54's I wonder if that gap will even fill at the 53 level, could be a breakout gap. Gold would have gotten crushed today if the dollar would have held up, in fact gold priced in Australian dollars broke a support level today and it looks like it could fall off a cliff.

  7. So what? Do you think that would mean the secular bull is dead?

    Do you advise losing ones position (possibly at a loss) and then trying to time a better entry?

    If by fall gold finishes it's C-wave (which I think it will) and be much higher what difference does it make if it looses a few points in July?

    And what if the collaping dollar all of a sudden puts a floor in the gold market and the second leg of the C-wave starts tomorrow? Where would one be if they lost their position?

    I've been at this for a long time and I've seen gold kick almost everyone off many times and then I've seen those same people that got bucked off unable to pull the trigger at lower prices so they just end up missing big sections of the bull or heaven forbid they buy high and sell low (the only strategy that will allow one to lose money in a bull market).

    Do you really recommend following the only strategy that can lose one money?

    Folks Old Turkey really did know what he was talking about and he learned it the hard way over many years. Unfortunately I've had to learn that same lesson the hard way. I just don't think I need to make those mistakes all over again.

    BTW ultimately did it make any difference at all if someone rode the entire correction into Feb. all the wat to the bottom? No of course it didn't because the bull corrected the timing mistake didn't he?

    Look at it this way. If you've tried the trading route and it's not produced any gains then why keep doing it? Einstein said the definition of insanity is doing the same thing over and over expecting a different result.

  8. Let me continue predicting: We had too many down days in a row, so now that we've had an up day, we can continue down!

  9. Why are you so convinced that swing trading is a fruitless endeavor? It's like you believe that there's one method only to make money in the markets. I feel sorry for that attitude because I know it's false. I fully believe you can trade multi-month to multi-year moves in the markets, especially when we are in a gigantic bear market that is going to swing back and forth multiple times before it is over, pushing most people out of the market.

    You want to know what the only thing, and I mean only thing that gets people out of the market is? Losing money, plain and simple. That is why I believe another round of massive pain is in store for anyone that thinks holding equities for the long term is a good idea. Because frankly during certain periods in a credit contraction as massive as this one, possibly the most massive one in history, you are going to get your ass handed to you on a silver platter for being long the stock market.

    I think you're missing the point of what I'm saying, I'm saying there is no collapsing dollar over the next couple of years so if that's your investment thesis than I think you're wrong. And I'm just going to take the other side of your trade, that's all. You refer to shorts as "trolls", I could care less who is on the other side of my trade if I'm right. If I'm wrong so be it I'll adjust accordingly.

    As for the gold bull the long term chart suggests it is still intact, but I've also traded gold for a long time now and I know how vicious these corrections can be. I'm also accumulating for the long term, but I just think I can get better prices in the future, so I'm being patient and waiting to buy more. I think where most people actually get trapped is when they try and buy pullbacks too early in a gold correction, and end up selling out at the bottom of the correction in disgust when they lost 20 or 30 percent.

    Wouldn't Old Turkey say "It's a bear market!" right now? Honestly the best way most people should handle this market is holding a little metal, staying out of debt, trying to keep their job, and mostly staying out of the stock market.

  10. Well of course I agree with you on stocks. We are in a giant secular bear market and have been since March 2000. So holding the general stock market for long periods of time is guaranteed to generate lots of pain at some point.

    Gold however is a completely different story. It is in a long term bull market. Holding gold for a long period of time is guaranteed to generate tremendous wealth.

    Here's the problem trading. If you are going to use stops and take losses then you simply can't take large positions. That being the case you are never going to make huge gains.

    If you are good and control risk (which most people aren't and don't) then you might make 10-15% a year with an occasional losing year from time to time.

    If that is your goal then great trade away.

    That's not my goal. I have no desire to sit in front of my computer and fight with the markets just to make 10 or 15% and make my broker rich.

    I have no desire to put stops on winning positions and take unnecessary losses in a bull market. If a position doesn't do what I want, when I want, it doesn't mean it's a losing position, just that my time frame is too short and the position needs more time to work. Time costs me nothing.

    By the way how many times in the last nine years did we see a 30% decline in gold or miners? Answer once for gold and three times for miners. What makes you think this late in an intermediate cycle this will be another one of thos times? They have only occured during D-waves and this is without a doubt not a D-wave.

    And finally when you say you will get in at better prices no one every actually does that.A bottom never looks like a bottom so anyone who gets knocked out, especially for a loss, never gets back in until the bottom is long gone and they end up buying higher than they sold. The old buy high sell low conundrum again.

    So while everything you say sounds good in theory it's not practical in real time, especially for 95% of investors or traders who can't control emotions and will end up losing money.

    Like I always say just take your best shot and if your timing isn't perfect the bull will correct your error anyway.

  11. Justin,
    You seem to have an overpowering need to be right and to avoid drawdowns.

    I just have an overpowering need to make money. Whether I make it today or tomorrow or in 5 months doesn't matter to me I just don't want to do the things that can prevent me from making it :)

  12. Toby,

    I made vastly more in 2009 than 10-15% that you think I am capped out at because I'm not following the only way you think there is to make money, which is to buy and hold this gold bull market. Which coincidentally I am also doing, I bought a bunch of silver during the 2008 correction and I'll do it again when I see that opportunity, which I believe will come again.

    Disciplined traders know how to take stops, limit losses, and admit that you are wrong. It takes any trader some battle hardening to acquire those skills. I wonder if the technical picture for gold changed and for some reason it looked like a bear market, would you ever get out then or just let your capital sit in a wasteland for who knows how many years? At some point you have to use stops even if it's the top of a bull market.

    So there's been a number of junior miners that have virtually gone bankrupt during this bull market, did you buy and hold those into oblivion too? If you think you are never wrong and you bought some of them then that would be the case. I've watched some juniors I rode to 400-500% gains early in the 2000s collapse into literally pennies on the dollar. But since I used stops and didn't get greedy I kept a lot of my gains.

    I don't follow the ABCD wave theory to this gold bull market or whatever you are talking about. I think it's probably similar to what the Aden Sisters talk about but I've never tried to apply it myself. I use my own charting techniques which I guess you could describe as a combination of a number of things, I like stage analysis, box theory, chart patterns, and I have my own moving average techniques for describing what I consider structurally sound markets.

    I think the next big trade is short the market, and long the dollar or treasuries. Maybe the gains aren't as big as during bull moves in other asset classes, but so be it, that is the only thing I see out there. I'm planning on sitting on this trade for as long as I can, maybe a few years if it grows that profitable. I don't even have to sit in front of a computer to watch it grow, I know exactly where I'm wrong right now and all I have to do is adjust that higher as the profits grow if it goes that way.

    I'm really not at all concerned about missing profits in the gold bull market either, the big profits won't come until late anyway and we aren't even close to that yet. The junior miners are still a wasteland and until there is manic buying in them it's obvious I'm not missing anything.

  13. I actually only started buying juniors after gold put in it's 8 year cycle low. So no I didn't ride any of them into oblivion.

    But the fact remains a trader because he has to limit position size simply can not over any extended period of time make more than 15-20% and only the very best traders in the world ever average 20% for any significant period of time.

    Certainly one can have a good year and do better, but they will also have sub par or losing years that will reduce the overall average back to the mean.

    I just have no desire to go that route. The great opportunities in this business come during a secular bull markets.

    And the only way to reap the full reward from that is to take a big stake and hold on to one's positions.

    There is a reason Buffett, Soros, Paulson, Rogers, Greenblat, Etc. are worth billions and it has nothing to do with trading and everything to do with their ability to spot bull markets and the patience to hold on until the bull ends.

    That is my goal during this bull and I know I can't get there by trading and trying to time every swing in the bull and I certainly won't do myself any favors by getting side tradked trying to fight the Fed in a bear market.

    And the vast majority of people are going to be just like me. If they listen to you and try to emulate what you are doing they will just lose a lot of money.

    If they listen to me and follow the same strategies as the Buffett's, Soros or Roger's of the world they will come away from this with a fortune (relatively speaking).

  14. I've never paid attention to how Soros trades, but you can't compare Buffet or Rogers to what you are trying to do. Buffet especially, all he does is buy what he considers quality companies, i.e. businesses that people will need for decades to come, when prices become distressed. So he's a market timer to a certain extent but the reason he got so rich is he was astute and unbelievably patient, and he also was alive during tremendous bull markets.

    Rogers from what I read seems to be always doing a big trade here or there every year, maybe he's held commodities for a long time but every time you hear a quote from him he's usually taking a contrarian stance on something. Like the dollar for instance he's been long dollars even a few times while probably also long commodities. I've never once heard him say I'm riding the gold bull forever and that's all I'm doing and I've never seen anything that says that's how he made a lot of money, just one big bull market at some point in his career.

    Let me ask you this why didn't you make a fortune on the oil market if you spotted that bull? You seem to think you have the secret sauce to making fortunes on bull markets. Longer term, I'm just as likely to make a fortune on gold and silver as you are, it's just that I'm not going to get bucked off this train during big drawdowns because I know how to use risk management.

    I'm not sure I believe you either when you say you never touched juniors until now, I don't know anyone else who has traded gold stocks whose never entered that area. You contradict yourself when you say "I don't know when to get off this bull" but yet "I knew until now not to buy juniors" since you must have known they would get blown to shreds during the middle of this bull. Seems like you simultaneously know the future yet don't know the future.

  15. I beg to differ I know excatly when to get off the bull. When we see the Dow:gold ratio at 1:1 it's time to exit for good.

    On a shorter term time frame when we see a C-wave get extremely stretched above the mean it's time to exit and wait for a pull back. At the recent top gold was 12% above the 200 DMA and miners 13%. Sentiment never even got vaguely frothy in the PM sector.

    Those are not the kind of conditions that make me want to bail on my positions.

    Gold is just working it's way into an intermediate cycle low and we are very deep in the cycle so it could come at any time. That's why I'm not willing to let go. Not to mention the stock market is also very deep into an intermediate cycle.

    The fact that the dollar is also working it's way into an intermediate cycle bottom and still has quite a lot of time left to do so (still very early in the cycle) is also a big consideration.

    I'm guessing they will both (gold and stocks) bottom together just like they did in Feb.

    Now if gold was stretched 25-40% above the 200 and miners were 40-60% above the 200 then yes I would be with you and say it's time to step off for a while and wait for the law of regression to the mean run it's course. But that just isn't the case now is it?

  16. Can you put up a chart showing your cycles or the different ABCD waves you are looking at? Like I said besides the Aden Sisters I'm not sure I've seen that stuff laid out.

    As far as gold being stretched yes I agree it's not as stretched as in the past when gold has had major corrections. But also consider that gold was not significantly stretched above moving averages in mid to late 2008 either before the miners and gold took big hits. Also consider that gold has gone on a very long run now, almost 2 years without really ever doing anybody any damage, except maybe late 2009 to early 2010. That just seems a long time for the bulls to get complacent to me.

    I could be wrong, but it's very clear to me where I'm wrong on gold and the miners. That's 1265 gold and mid to late 50s on GDX. The market will tell me I'm wrong if I am.


Note: Only a member of this blog may post a comment.