Wednesday, January 5, 2011


Let's face it almost every trader or investor dreads a draw down. Traders do everything they can to avoid them, even if it means they drastically reduce their ultimate gains.

It looks like the stop at $1361 will be hit and gold will begin the trip down into an intermediate low. I get the feeling that many traders assumed the stop was there only as a token gesture, but really had no chance of getting hit.

I'm also afraid that despite my many many warnings that too many traders took on way to much leverage. They never really planned on gold hitting the stop. When it does they are going to take a much larger loss than they planned on. I suspect they didn't plan on a loss at all. They planned on huge profits.

If you are one of these people let this be a lesson. Always plan for the worst and hope for the best.

Now is this the end of the world. Was it a huge mistake ...or is it a golden opportunity?

Without a doubt it is a golden opportunity! As soon as the stop is hit traders can return to a minimum core position and build up dry powder because there is going to be an amazing opportunity in the not too distant future. An opportunity that has the potential for 100%+ gains this year, just like last.

We've yet to see anything that looks like a final C-wave top so I think we will see one final leg up after this intermediate correction has run it's course. By triggering our stops we now have the opportunity to re-enter at lower prices for a much larger ride up.

Look at the chart below and ask yourself does it really matter if one gets stopped out for a minor loss now if it enables one to re-enter at the cycle bottom and ride a final move higher?

Personally I'll be ecstatic if I get stopped out of positions. It will virtually guarantee another hugely profitable year this year despite the fact that it may start out a little rough.


  1. Toby, do you expect this C-Wave to top out between $1500-1600, or go higher?

  2. Toby, I dont expect this move to test 1265. Already 200 MA is at 1267 and by the time such intermediate corection develop it could be arround 1290-1295. In my opinion drop has potencial to 1295-1310.
    I closed my levarage at 1389,feeling that something is going to develop.
    Will start adding since it test 1335 and down.
    The big surprice was the Dolar Index. Amazing tricky move!

  3. I am confused by your advice as I followed the same advice by your colleague (Gary Savage) and sold when he did before the impending intermediate correction and then bought when he did (4th Jan) as no correction was now forecast!
    the loss in trading costs etc. are piling up. Do I sit it out this time and wait for the secular bull to help me?

  4. Paul,
    Gary and Toby are the same person. Toby Connor is the pen name that John Townsend and I use to author the GS site.

    If you are a subscriber then you know what to do you follow the plan and if the stop at $1361 is hit you go back to your core position and wait for the intermediate cycle to bottom. Just like I detailed in the post.

  5. S,
    No clue my crystal ball is broken.

  6. I expect bottom of this corection will be just briefly bellow 1315,just to scare everyone ,that consolidation is broken.Looking at 200 MA at 1267,I think by the time we arrive at 1310 it would be MA 200-1300/

  7. Hi Toby/Gary,

    Thanks for the great work despite the recent whipsaw. I learn a lot from your cycle analysis, but did not jump in on Jan. 4. The reasons are that there are negative divergences in every PM charts I looked at and a positive divergence in the USD chart. Although the market can move higher/lower for a quite while with a negative/positive divergence in place, it will eventually play out. In this case it played out sooner. I found that your cycle analysis coupled with technical analysis could be a very powerful market timing tool. The market will show its hand pretty soon. I will be following your cycle analysis to identify the next intermediate bottom and use my technical analysis to time my entry.

    BTW the low for $Gold is $1364 for today. I am a little puzzled by your comment that the $1361 stop was hit.

  8. is it possible this is just a brief sell off and gold is going to head right back up again and finish this three month consolidation and break out to new highs?

  9. Anything is possible but I don't think it's likely.

  10. Rebecca,
    There where big positive divergences also. Like why didn't gold correct as the dollar rallied? Why didn't the stock market correct as the dollar rallied? Why were so many juniors breaking out and making huge moves?

    Divergences are really a 50/50 coin toss most of the time. The vast majority of rallies start off with a divergence. If one let's every divergence keep them from entering they will miss almost every rally.

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  12. Gold has form major rising wedges, it is due to a serveral week corrections before manage another wave up. Same as S&P. Godd Luck.

  13. Gary,
    Is there any,even a little chance that this could be a D wave in Gold?
    Sory if my question is stupid,but seems like dolar is acting like aking and to drop in 3 years bottom it should make a gigant reversal.Same time corection in Gold is going very fast.

  14. Ivan,
    First the dollar's three year cycle averages 3-3 1/2 years. March would be three years. But it could run all the way into the fall next year and not be out of the ordinary.

    Gold has done nothing yet that gives any indication of having formed a C-wave top. We should see the HUI stretched 40-60% above the 200 DMA at the C-wave top. So it's very unlikely this is over yet. I will be discussing this in the weekend update.

  15. Gary,Thank you very much. I am mentioning that because market sometimes is unpredictable as when it is making major tops or bottoms.Like the last week,when we had new High in Silver, Gold close to new high,Hui broke higher ,Dolar brake down the last cycle. Everything was set for big bull run,but didn't hapen.
    Thank you for your answer once again!

  16. Hello Toby,

    Will there Gold $ Silver take a U Turn From Here or there is a greater downside from here.

  17. The correction isn't over yet. The stock market hasn't even corrected yet.

  18. This is a golden buying opportunity which will see the gold and silver dollar value continue to rise.

  19. Watch what Adam from marketclub has to say:

  20. Hi Gary,

    True that divergences don't always play out. But when you have a negative divergence, the market is the timing window for a bottom according to your excellent cycle analysis and the market is over extended, then you have a higher probability that the divergence will play out. That is why I think the combination of your cycle analysis and technical analysis will be a great timing tool. Thank you for the great works. I look forward to following your analysis to catch to next intermediate bottom.


  21. Hi Gary, I am a subscriber, and I'd need to update you with a new emails address. Could you please provide you email address? I did kill my previous yahoo address and I did forget to copy/paste your contact info

  22. Now that the new website is running I don't have any need for email addresses anymore.

    But if you want to update it just for your own sake you can go to your profile page after you login and make any changes you like except the user name. That you can't change.


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