Wednesday, November 10, 2010

CURVE BALL

For some time I've been of the opinion that the dollar will control the fate of not only the stock market but also our favorite bull market...precious metals.

Since June the dollar has been collapsing down into a yearly cycle low. I didn't expect that low until the dollar reached at least 74 and I thought it even more likely we would see 71 before the cycle bottomed. However yesterday the dollar through us a major curve ball. What should have been a minor bear flag that would resolve with a downward break has gotten unexpected traction.

Yesterday the dollar broke the down trend line and it now appears clear that the dollar has formed a shortened daily cycle low.



If the dollar rises above 78.36 it will reverse the pattern of lower highs and the odds will rise significantly that we now have a shortened intermediate cycle bottom also.




If that turns out to be the case then we can probably expect stocks and gold to turn down into an intermediate correction.

The stock market is definitely due for the intermediate correction as it is on week 19. (The cycle usually runs about 20 to 25 weeks so a top is now due.)

The gold cycle is a bit shorter at 15 weeks but still in the timing band for a top. If we end they week about where we are today then gold will form a perfect exhaustion candle on the weekly charts.


This is why traders can't leverage themselves to the moon. These curve balls happen. If you get caught by one of these and you are leveraged to the max you will do catastrophic damage to your portfolio.

Trust me when I tell you this. Massive leverage always ends in a blown out account. There are never any exceptions to this rule. Never!

30 comments:

  1. Gary, Dolar may go or may not go to test 80 level. But what kind of corection will be that,when we have a program to print fresh new 600 bln. Dolars? I still think either big banks manipulated such move or there is something really wrong in Europe.
    Anyway about Gold,I saw last November we still have such moves down 40-50 pips and then explode higher.What about if we are forming first day cikl. low and there is another one by the end of November?

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  2. It would be nice if we could see the future wouldn't it :)

    Remeber nothing goes straight up forever. Gold drops into intermedite cycle lows just like everything else. If the dollar cycle has bottomed then we can probably expect that it's time for gold to dip down into the cycle low.

    There's nothing manipulated about that, it's just normal market action.

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  3. Gary, I think you are the one who can see the situation very realistic and I am really thankfull that I meet you and using your service.
    But In this case I am not convinced Gold is going in intermediate cycle low,even if I see Gold drops to 1360.
    Will see in the next few days:)

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  4. As long as you aren't leveraged then you can just hold and ride through the intermediate decline if you are wrong. They only last 3-4 weeks so it's not the end of the world if one gets caught.

    And we still have the final leg upo in the C-wave to go so by March this will all be redundant anyway.

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  5. My possition is open at 1257 in Gold.I closed at 1382 and then reopened at 1327.It was amazing how close to the tops and bottoms I enter and exit and 90 % ,that is thanks to your analizes!
    I still believe in at least 1500.
    I sold my silver yesterday at 29,33 which was maybe the best thing I did in the entire year. I bought it after your suggestion at 19.10.
    Anyway,in Gold I am possitive and will stay maybe until 1350,before I decide to close. Hope we are not going that far down:)

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  6. Hi Gary - I read again your warning against leveraged plays and I hear wisdom in them. If you do not trade spot and futures and, if I recall correctly, you do not own physical, what are then your favorite vehicles for trading gold? A hierarchical list, from most to least favorite, would be desirable. Thanks.

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  7. You can view my portfolio in every weekend report.

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  8. Gary, given dollar at 80, where does that put the hui? It is alot easier riding it out if it stays above 510... what's your estimate?

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  9. Without a crystal ball there's no way to know that. Just work stops below $1315 for now.

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  10. USD unexpected rally is not connected to C wave ending ..correct?

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  11. The C-wave won't end until the dollar puts in the 3 year cycle low and that isn't due until at least March of next year.

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  12. Thanks..one of your recent post you had shown USD weekly and 3 yr lows .. starting from 1992...

    1992 - 1995 - 1998 - 2001 - 2004?2005? - 2008 - 2011

    So after 2001 due to deep decline 3 yr cyle got extended?

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  13. Nope nothing is extended. Everything has been moving right on time.

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  14. sorry I guess I did not ask propely. 3 cycle low is 2004 or 2005? 2004 is 3 yr from 2001 but then 2007 is next 3 yr .. and if 2005 then that is 4 yr from 2001. I think it came end of 2004 so its like 2004-2005 low?

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  15. Pull up a long term chart and the 3 year cycle lows are obvious. Dec. 04 & March 08.

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  16. I don't think there's anything at all to be concerned about. Gold and the dollar can both rally together. That's my call. At worst we consolidate. The reversal yesterday was it I think. The dollar is irrelevant. We live in a gold centric world now whether the central planners like it or not.

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  17. Toby

    I respect your work alot, but have to agree with Noah on his comment that both the dollar, gold and silver can rally at the same time. It has happened before, what makes you think it wont happen again?

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  18. There's no question that it can. However gold will drop down into an intermediate cycle low at some point. It's certainly not going to do that if the dollar is falling.

    Gold is getting late enough in the intermediate cycle that it is in jeopardy of forming an intermediate top at any time. If the dollar has put in an intermediate bottom then gold will most likely use that as an excuse to drop down into it's intermediate cycle low.

    Don't make the mistake of becoming complacent just because gold has rallied strongly for 3 months. It will have an intermediate cycle decline. They come like clockwork about every 20 weeks. This is week 15 and don't forget you need at least three weeks to work down into the low.

    I certainly don't recommend selling ones core position but we need to be aware that the key reversal yesterday may be significant.

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  19. 5 weeks is a long time and can bring Dolar all the way to 71 and Gold to 1600. This rally in Dolar seems like it is going so slow and every 10-20 pips wonders what to do. There is no power in the dolar to move up like it should.I am defenetly expecting that Dolar will be hit hard after G20 meeting today!

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  20. There was a key reversal on Tuesday.

    Gold did breach a major level of 1400. It seems that the smart money pushed gold past this level, got everybody all giddy and then sold into it.

    With the dollar rallying, it does look like the top is in, for now, in gold.

    I took profits Tuesday & Wednesday and now I am waiting ( a little anxiously) for the correction.

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  21. In my opinion buyng Dolar here it is like siting on the bomb,that will explode any moment.
    Where will Dolar go,after 600 Bln. new printed dolars.To the moon?

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  22. Looks like we've got a night time ambush here. I wonder what triggered it?

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  23. Here is another good blog saying something big is going to happen to the SP500 and Gold around Nov 22 - Nov 23

    http://bullbeartrendlines.blogspot.com/

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  24. Well I wiffed big time today but I'm glad sell offs don't bother me like they used to. Today was strange in that everything got demolished and the dollar didn't rally either. I chalk this up as bearish for the dollar in that somebody must have been selling them, no? The only thing that worked was my bond short play today. I'm long gold silver and the shares as well as short bonds. But I am concerned about the ramifications of rising rates given what usually happens when rates rise. My vision is high long term rates, high gold, and a short term cash economy as things move forward. Toby what are your thoughts on the day and where things stand on this correction that came in overnight? You were right good call

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  25. The weekend report is already posted.

    www.smartmoneytrackerpremium.net

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  26. Hard to say....but the dollar may have finally posted the three higher lows (going back to 2008). This would complete the shift and blow everyone's mind (mine included)by starting an upward move. (I thought the fed might have put a stake in the dollar, but maybe I buried it a little to quickly). It gets a little higher and there is nothing stopping it from that 83 range....This starts to open the door to 89 and a market/commodity croaking...till everyone gets used to a stronger dollar. So I wonder if this will swing gold into a consolidation moment, possibly heading to somewhere between 1000 and 1100...and then it could turn around with a steep acceleration back up. The future contracts for the dollar, lately, have been moving up on higher volume and contracting on lighter volume. I wonder if the commodities started getting a sniff of this in the last couple of days, with all of them coming down last night.

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  27. The chances of gold moving below $1300 are pretty slim and I expect that a move down to $1265 would bring in such a wave of buying pressure it would overwhelm sellers.

    The dollar is on it's way down into the three year cycle low. I don't know if it will make it that high but a move to 80 would be an all out buy signal on virtually any asset.

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