The four day rule says; After a long intermediate rally look for the first down day to signal an intermediate trend change after the market rallies 4 or more days in a row.
The four day rule is a sign of extreme sentiment. I would caution that it only works after a long intermediate rally lasting multiple months. We have those conditions right now. We have also reached extreme bullish sentiment levels. The kind of levels where we are in jeopardy of running out of buyers.
Add to that the fact that the intermediate cycle is now going on it's 23rd week and we got a large selling on strength day a couple of weeks ago (a sign institutional smart money is exiting in front of a large correction.) and we can probably expect any further gains to be given back and then some when the market moves down into the intermediate degree correction.
Now is not the time to press the long side in either stocks or gold.
That doesn't mean one should short. Shorting bull markets is a tough trade. You have to time the exit perfectly and survive the violent fakeout rallies to make money. Not to mention you will invariably miss time the entry several times. All in all you will probably be better off just going on vacation for the next 5-6 weeks.
We haven't seen much of any longer term correction in Gold & Silver for some time. From reading your last few blogs, you expect this correction to last between 3-6 weeks.
ReplyDeleteIs it possible that the correction won't be very steep? Could we see more of a consolidation phase vs. a correction? Thanks.
Every intermediate decline so far in this bull market has been obvious on a weekly chart (3-6 down weeks).
ReplyDeleteI don't see why this one would be any different.
We'll see how today pans out, but so far it looks like a big up day for gold/silver pre-market.
ReplyDeleteWell Toby.... What do think of the recent revelations that JPMorgan was in fact manipulating the silver market? JPMorgan has now come out publicly stating that they are going to be reducing their silver positioning and exposure due to rising public anger. Go to zerohedge.com and take a look at the recent developments. This is just one more piece of collateral evidence that there was truly an effort on behalf of the big banks to suppress the price and screw metals investors. Manipulation has always been a core belief of mine. I think now it's time for everyone to admit that we need to openly accept theories and hypotheses as worthy of investigation. The planners don't want us asking questions. I just wish more people would. Let's give some props to the bugs here. Let's crash JPMorgan. Buy silver!
ReplyDeleteWhat earthly reason could JPM have for manipulating the silver market?
ReplyDeleteThe dollar was never tied to silver so that can't be it. Nobody is watching silver and extrapolating inflation from rising silver prices, so that can't be it.
JPM was just playing a profitable regression to the mean trade in a particulary volatile commodity.
When silver got stretched they sold knowing that sooner or later silver would correct.
Nothing sinister about that. Just a shrewd trade and one I would do myself if I had enough money to survive the drawdowns.
If JPM was really trying to force silver down then they would not cover their shorts when silver corrected. On the contrary if they were trying to manipulate price they would pile on the shorts into a correction and really drive the price lower.
All this crazy manipluation nonsense is easily debunked with just a little commonsense.
I agree with you Gary. Silver was manipulated because they could. They decided to profit from a small volitile market.
ReplyDeleteThe only gray area is why it took so long for the current government agencies to actually investigate JPM. I'm sure that will just lead back to big banks with big pockets for the right people in charge.
Oh there's a lot of grey areas! Let's ask why JPM had a short position of 3.3 billion ounces? Why did they hold 40% of all the short positions in the market? How did this go on for so long and have regulators at the CFTC look the other way? How could HSBC and JPM be short more silver than will ever exist and be allowed to do this in plain sight? The manipulation was obvious in the price action and since this story started breaking the price action has markedly changed. There's NO denying that fact. The old price action in metals takedowns used to be blitz silver to sack gold. I mean... We've all seen it! That ain't happenin anymore boys. These dynamics are all part of the ongoing revelations that the metals are the only real currency and we are now entering into a gold centric world. This is causing the inflationary trend to be supported because it is much more difficult for them to kick the legs out from underneath the metals markets. JPM is not shrewd. They get free money fron the fed (they really are the fed) to support the de facto price management scheme that the planners feel is best for us here in our new Orwellian Bailout World provided to us by them. Why manipulate metals? There's so many reasons why, and now there's proof. At least give credit where credit is due. The cat is out of the bag and more evidence is being uncovered daily.
ReplyDeleteIf JPM is short more silver than is currently available and that is somehow despicable and there has to be a buyer for every position they sold does that mean all the buyers that are buying more silver than is currently avaiable are also evil?
ReplyDeleteLet's face it the world is never going back to a gold backed monetary system and even when the world was on a gold system countries still managed to debase their currency (in Rome they clipped the coins).
ReplyDeleteBacking paper with gold will not prevent human nature from running it's course.
So I will say it again what earthly reason would the government have for trying to control the price of gold? Nobody cares anymore. The governement is free to print all the money they wnat in our currnet fiat system.
The price of gold is irrelevant just as is the price of oil, cotton, wheat, copper etc. even though inflation has a much more deletrious effect if oil or food costs are rising rather than gold.
If the government was serious about trying to mask the effects of inflation they should try to suppress oil and food prices as the have a huge impact on the economy.
The price of gold is meaningless to the economy.