Thursday, November 4, 2010

ONE OF THE GREATEST BLUNDERS IN HISTORY

Many years from now when we look back at history I think yesterday will be seen as one of the greatest blunders ever made by a central banker.

The dollar was already headed down into a major 3 year cycle low.

 
The first round of QE had already guaranteed that the dollar was going to be under severe duress by next spring. Bernanke just added insult to injury yesterday and virtually guaranteed we will have a major currency crisis by next spring.
 
I think history will come to view yesterday as the beginning of the end for the dollar as the worlds reserve currency and unless the Federal Reserve comes to their senses soon the dollar is doomed to follow every other fiat currency in history into an eventual hyperinflation and total devaluation.
 
One has to protect their purchasing power from the depredations of central bankers bent on destroying the dollar. That means one has to exchange their paper dollars for real assets. It's no longer safe to hold cash.

One can buy stocks but soaring inflation will destroy profit margins and the stock market is going struggle more and more to rise in the face of soaring input costs.

There is one and only one sector that is positioned to protect one's wealth from the Fed. That sector is of course precious metals. The more the Fed devalues the better the fundamentals become. Gold is now entering the parabolic phase of this particular leg of the ongoing C-wave advance.

I doubt we will ever see sub $1300 gold again for the duration of this secular bull. Now that the HUI and silver have broken to new all time highs we have a rare condition in that the entire precious metal sector is trading in a vacuum with no real overhead resistance. This is the only sector in the world in this position. That is the recipe for an incredible move higher in a short period of time as funds begin to chase the outperformance in the precious metal sector.

The key now is to spot the top and lock in profits, but not to exit too early, and believe me most traders and investors are going to exit too early because they will try to trade this based on oscillators and overbought levels. That will be a huge mistake during a parabolic surge.

I will reopen the 15 month subscription briefly for those that want to ride the bull and need a coach to keep them focused. And a voice of reason to get you out at the top when your emotions will urge you to stay at the party too long.

18 comments:

  1. Toby....You are right...the fed is a disaster

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  2. Gary, Sage vision in calling what we see unfolding. For subscribers, could you use HUI numbers along with those of gold in your recommendations for entrance and exit? My guess is most of us are invested in miners and the HUI is a clearer guage than Gold of where we stand ....

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  3. using TSI trader blog it seems D waves trace normally 50% (only last one is 61.8%) of ABC. With that if current C wave goes to 2200.. then ABC is 680 to 2200 .. 50% of that will be 1450 approx. So you are very correct this may be last 1300s before 2020.

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  4. Fergot to mention this is Gold ABCD and not HUI. If I am correct HUI can go differently up and down percentage wise. Toby can correct if I am wrong.

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  5. Actually the D-wave will correct up to 50% of the preceeding C-wave. This C-wave began at $860.

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  6. Ok. His charts shows 50% of ABC and in last case its 61.8% of ABC.
    (and its almost 100% if C .. C started at around 680 in sep 07 and then D ended at around 680 in oct 08 where current A must have started.

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  7. in fact lot of early ABCD's in his case are where D retraced even 61.8% of ABC.

    His link - http://thetsitrader.blogspot.com/2010/08/golds-abcd-patterns-from-2002-2010.html

    Of ocurse you may have different start/ends to ABCD.

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  8. The last D-wave was a very special condition as it also marked a major 8 year cycle low.

    If not for that and the market crash the D-wave would have bottomed at the 1980 top of $850.

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  9. Toby, I will really listen to you when to exit this one in Gold. I think you are the one of the best who can feel the that we are close to the top.
    I have 8 years experiance in Forex but never learn to wait for the profit long enought.Thanks to your analizes I pick up bottom twice but tops are diferent story.
    Are you still possitive 1550-1650 could be possible by year end? I start thinking to exit when Dolar hit 71 level. Do you think it is a good idea to exit for exampler at 71.50-72 little eairly?

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  10. 1440-1530 range for D wave if C wave at 2200 .. all happy!

    Thanks Toby for wonderful insights.

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  11. Toby, one more thought. Just like you mentioned 8 yr cycle low with last D wave, I think next 8 yr high is 2012 Jan assuming 1980, 1988, 1996, 2004.

    I would assume since its important high just like last 8 yr low, it should be top of C wave. So that is my delima. If current C wave extends till sprint and then D wave. Then I don't think we will get next C wave top by 2012 Jan but it may be top of next A wave.

    You may not want to deal with this now and thats ok.

    Thanks very much

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  12. Yash, till when will the D wave occur ?

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  13. Toby,

    Everything points to a lower dollar in the longer term, but today sure looks like yesterday could have put in a short term to somewhat longer term bottom in the dollar (1 week to 2 months). Big divergence on the 14 day RSI from 11/04/10 vs. the prior higher low on 10/14/10. Today looks very similar to 4/15/10 on both the dollar and the S&P.

    Am I reading too much into this. Thoughts? Really appreciate your blog.

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  14. Most likely you are. It's still too early for the dollar to put in a daily or an intermediate cycle low.

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  15. Toby,

    The dollar formed a swing low today, which is day 14 of the current cycle.

    The last daily cycle ran 28 days.

    Any chance the that the dollar just put in a bottom of a shortened cycle?

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  16. There is a chance but I never take a short signal until it's obvious. Besides the dollar didn't bounce off of any significant support zone so I doubt that it is finished going down.

    I also don't think the decline up till now has been severe enough to qualify as a yearly cycle low.

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  17. But the dollar closed above 76.14. Does that negate this being a failed cycle?

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  18. Not in the least. It just means the dollar bounced because the employment report came out better than expected. Heck it hasn't even regained the 77 resistance level yet.

    It would have to better the prior cycle high before we would be required to re-phase the cycle.

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