Thursday, October 28, 2010


There are three things I watch for as a sign that a correction is imminent. They are in order of importance, cycles, sentiment and money flows.

The current cycle is already stretched to 45 days. Usually this cycle bottoms between 35 and 40 days so you can see we are now overdue for a top. That covers the cycles part of the equation.

Sentiment has now reached bullish levels (contrary sign) that should be enough to force at least a daily cycle correction. We haven't yet reached the extreme level that is normally required to turn the larger intermediate cycle. In bull markets it usually takes a push to new highs to get to that kind of extreme sentiment level.

Finally I like to see some sign that smart money is exiting the market in preparation for a correction. For me that sign comes when we see a large selling on strength day in the SPYDER's ETF.

Today we got that final sign.

Not surprisingly we now have a volatility coil forming on the S&P chart.

As most of you probably remember the initial move out of a coil is often a false move even though it is usually very aggressive. Typically the initial move will run 3 to 5 days and then reverse leading to a much more powerful and more durable move in the opposite direction.

Since we are 45 days into the current cycle and we now have all three signs for a correction lined up I think the odds are strong this coil will break to the downside. There are implications for the dollar and gold if this unfolds.

I went over them along with a game plan in tonight's report so I won't repeat it here but I think we will likely see a correction soon and since we still haven't eclipsed Monday's intraday high it may have already begun.


  1. Toby, if i understand your post, with he s&p correction, you also expect dollar rally and gold correction also, right ?

  2. I think there will be a surprice today and Gold will drop bellow 1315 and maybe test the breakout point at 1265 on Monday or Tuesday. If Gold start going up from here it is way too easy and predictable. So,my opinion is that we are going down to new lows for few days,let's see.....

  3. Hi Toby, i have just noticed one thing.I don't know if it matters but....
    From the beginning of this year lots of gold and silver stocks including GDX and HUI are moving three monthly candles up followed by two or three monthly candles of down or consolidation. We are finishing third monthly candle up this month

  4. Gold is in the most powerful C-wave of the entire bull market. There are no patterns that one can depend on other than gold is going up. So trying to find excuses to lose ones position isn't a great strategy.

  5. Hi Ivan,

    What do you think of the day with Gold. Your perspective is "off" or do you expect a sell till the end of the day ?

    And Silver, is this time to enter or wait for a pull back ?


  6. Toby, how can you expect correction in stocks and rally in gold at the same time?
    Oil and copper are also not following gold and silver.
    I don't know anymore, complete market is screwed up so bad that it will just fall like a house of cards

  7. I went over this in last nights report and will cover it again in the weekend edition.

  8. Toby,
    Can you give an explanation about Eri comments. Following your last public report i was expecting some more correction on Gold and Silver. Is it a refuse of all other things ?

  9. Even Dollar is not falling....

  10. I explained it in last nights report and the intraday reports today. If you don't have a subscription you might want to consider it.

  11. So by your answer, you expect gold and silver to still go up when all others stocks and others commodities may have a correction.

  12. Toby,
    If i get one month subscription, i can acess the lasts reviews of this week ? Or i will have only acess for the next reviews ?

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  14. You have access to all nightly reports.

  15. Like Tobi says "surprices in the bull market are always on the up side". Gold is going up ! I was wrong today. I thought we will have corection in USD index to 80,but didnt hapen.

  16. Toby,
    I have just paid one month subscription via paypal. How do i get acess to the reviews ?

  17. Ok Toby I'm gonna sign up. You got me.

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  19. Toby,
    As you pointed out the daily cycle is at day 45 and ripe for a correction.

    I have the weekly cycle at week 17 and just entering the timing to work into an intermediate cycle low.

    We also have the elections and the prospects of QE2

    I can't help but think that this is a classic buy the rumor and sell the news and the selling then news will not only trigger a daily cycle correction but a weekly swing high that could trigger an intermediated cycle correction as well...

    Now if we get an intermediate cycle correction, that would certainly give us another buying opportunity for the miners.

  20. pv,
    The problem with that theory is that its still too early for the intermediate dollar cycle to bottom. More likely we will get a quick dip into an extended daily cycle low and then the makret will rally, probably to new highs for several weeks before finally rolling over and entering an intermediate cycle decline in a stretched intermediate cycle.


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