Thursday, June 30, 2011


It appears that the approval of Greece's austerity measures has finally halted the correction in the stock market. But has it really?

I would suggest that this correction has never been about Greece. The market has known for over a year that Greece would be back looking for more money. Let's face it no one is under any delusions that Greece is going to be able to solve their problems. Greece is going to default, there's no avoiding that. What the EU is trying to avoid is a domino effect of cascading sovereign debt crises.

Last summer the crisis was solely centered around Greece. Does anyone really believe that this is going to stop with Greece this year? I doubt it. I suspect in the next week or two were going to see bond yields spike in Spain or Italy or Portugal, or maybe in all of the PIIGS.

What started as a financial crisis in `08 has now infected sovereign debt as countries around the world have acted to bail out the banking system. I really doubt that this is going to start, and stop, with Greece again this year. As we found out during the real estate bust, there is never only one cockroach.

Striking similarities to last years correction are now starting to pop up. In May of last year the market put in what looked like a final intermediate low. It was followed by a higher low and higher high. The only problem was that the daily cycle was too short for the May bottom to be a final cycle trough as the bottom had occurred on day 13 and a normal daily cycle runs 35 to 45 days.

I also noted on the chart that we saw a large selling on strength day (smart money distribution day) one week from the top. The market then proceeded to move down into a final intermediate low in the normal timing band. I can tell you that many technicians got caught during the May bounce.

Now take a look at the current chart.

This time the market appears to have bottomed on the 15th day of its daily cycle. Again we have a pattern of higher lows and higher highs, convincing technicians that the bottom is in. Also note that we have another large distribution day just like we saw last year.

We have been expecting some kind of counter trend rally all along because sentiment had become too bearish by the middle of June. In order for the market to continue lower we were going to have to see some kind of relief rally to work off the oversold technical and sentiment conditions. The question is, is the rally for real or is it a counter trend move to be followed by another leg down. In bear markets the counter trend moves are very convincing.

I tend to think that this is probably not over yet. If the daily cycle runs a normal duration then we should look for a final bottom somewhere around July 22. However Congress is going to vote on the debt ceiling August 2. It's possible that this daily cycle could stretch just a bit long and bottom on that vote.

Traders should probably be careful about placing too much trust in charts right now. Last year trading the charts suckered investors into the counter trend rally only to drag them down into a final intermediate bottom. 

One final note. The market is now nearing the 50% retracement level. This is the same level that turned back the market last year.

Let me caution everyone that while I think we have probably entered a bear market no one has any business shorting the market yet until we get complete confirmation that a bear market has begun. The first confirmation is a penetration of an intermediate cycle low. In our case that would be a move below the March 1249 pivot. The second confirmation would be a Dow theory sell signal. And the final confirmation would be the 50 day exponential moving average moving below the 200 day exponential moving average. Until those three confirmations are complete bears should remain on the sidelines.


  1. Gary, you think that we could chop around for the next 3 weeks to a month; this consolidation period to be followed by a surge higher in prices?

    How does this prediction square with your dollar trough and then go one?

  2. DIdn't you say bottom was to be expected in the middle of August?

  3. you advise not to put too much faith in charts, yet you use charts to make your case!

  4. The last four days are meaningless. The real test will come next month after QE2 has ended and the dollar has bounced out of its daily cycle low.

    This is just window dressing and an attempt to create momentum going into the end of QE2 in the hopes that the market can continue to levitate without the Fed's constant money pump.

    Unless the current cycles have warped beyond all recognition we should see a final bottom sometime in late July to early August.

    But like I said in the article this is not a time to short the market. Tops are a long process with many whipsaws that will chew up bulls and bears alike.

    The real money will be made once gold has put in its intermediate cycle low, do sometime around the end of the month.

  5. Spinoza,
    The article would be rather boring without the charts don't you think?

    Actually I use technicals as my third level tool. It cycles and sentiment lineup then I use technicals for entries and exits. The tag of the 200 day moving average was the technical signal to exit our shorts two weeks ago.

    I will not be shorting again until I have complete confirmation that a bear market has begun.

  6. Hey TC or GT or whatever the hell your initials are...I think you had this one coming as "I TOLD YOU SO" time wait before you open your rock climbing, granola munching yap..

    anyways enjoy :)

    don't take this personally but you know you had this coming you AMATEUR :)

  7. Oh by the way you are dead wrong on your know nothing about financial best you are a good plagiarizer of others material and a you attacked my comments for no reason...there is a good reason why you are always offering your worhtless analysis at 99.9% off the regular price..

    I tried to help but you made it personal..

    funny how you will not let any of your 2 or 3 subscribers know about the material I blogged re:NYSE cumulative advance decline line as "IT HAS NEVER BEEN WORNG" unlike yourself...wrong, wrong wrong


  8. this is a typical day at your other blog:










  10. The market hasn't even made new highs yet. It hasn't even broken out of the down trend line.

    We are just seeing window dressing and an attempt to create momentum before QE2 comes to an end.

    Let me say this again. I clearly said that there would be a counter trend rally. I told all subscribers to cover when the 200 DMA was tagged. So all of us made money and now we are sitting in cash waiting for gold to bottom.

    I will not short the stock market until all three confirmations of a bear market are completed.

    Now let me ask you this. I'm here everyday. I calmly listen to your abuse, it does seem to give you great pleasure, even though nothing has deviated from what I said would happen so far.

    If in July the market does roll over again and head back down like I think it will when the dollar starts to rally. Where will you be if I say I TOLD YOU SO?

    I suspect you will be nowhere to be seen.

    Hold your I told you so's until next month or until the market makes new highs. Other wise you are going to look extremely foolish if things don't pan out.

  11. this will be my last comment....folks I invite you to go to june 26th blog and the previous blogs and see if I am not correct and what I said would happen going into early july and then july 29th MAJOR BRADLEY TURN DATE, NEVER once did I abuse you and in fact I stated you do good work, I commented on how your merry band of followers talk and brag about how much money they are making shorting etc...(laughable)

    you really should grow up and learn from others as you do not know everything and are more than right.

    good luck no need to reply just go read my blogs and enjoy the fireworks in the markets and I hope you guys enjoy shorting


  12. What part of covering at the 200 day moving average and sitting in cash do you not understand?

    What part of not shorting until we get complete confirmation of the bear do you not understand?

    Are you talking to me or somebody else because nobody here is shorting the market. We are all setting in cash waiting for gold to reach its intermediate cycle low.

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  14. as I recall you were nowhere to be seen the day after you came out with your bear raid comedy store nonsense.

    The big down day obviously caught you completely by surprise and you weren't man enough to admit your mistake.

    If the market makes new highs then yes I will admit that I'm wrong, that the cyclical bull is still alive. But until it does that the market is just doing exactly what I said it would do.

  15. I think that charts are of only limited use, because they ignore other factors. This has become more and more true now thar the Fed is intervening in fiscal policy so much. Central bank decisions, and government politically based decisions also impact so greatly now. And with the advent of interconnected international financial markets, political and other economic events overseas can add to the turmoil and unpredictability.
    hypnosis & hypnotherapy Los Angeles

  16. Toby, it appears here you say that the market will bottom late July/early August at around 1250 then rally (or at least bounce)then when the debt ceiling gets raised. But Thursday, June 16, 2011
    THE BEAR IS BACK AND THIS TIME IT WILL BE MUCH WORSE you show the bottom in late July early August way down around 1025. Which is it ? Referring again to the June 16 article, it certainly seems we bottomed near the March low (almost, as we bounced of the 200DMA), and we have had a violent countertrend rally since. But there's obviously a wide disparity between the two articles (then vs now) about how far we fall from here.

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  18. niteowl,
    I'm going to cover this in the weekend report. One of two things is happening. Either the bulls are trying to force a massive momentum move as QE2 comes to an end in the hopes that the market will continue to levitate.

    Or Bernanke was not telling the truth and QE2 is going to continue. The market is acting like another round of QE has been announced.

    The dollar will be the key if it breaks to the downside and takes out the May lows then it will be pretty obvious that QE did not end and all asset markets should continue to move generally higher into the fall when presumably we will see a true three year cycle low in the dollar.

  19. Gary, it's very simple: the end of QE2 is priced in already - you are 3 months behind the curve.

    "... and QE2 is going to continue..." Wow, you now finally realized a key factor. QE3 or not QE3? My very humble impression is, that this question is around for months. But it's never too late to share it with your subscribers.

  20. I remember last August somebody said that QE2 was already priced into the market. I said at the time that it was impossible to price and QE2 as it was fresh money being printed and thrown at the market everyday, or nearly every day.

    Well we all know what happened after the market finished its correction in August. QE2 had not been priced into the market.

    The ending of QE also cannot be priced into the market. There's no way to know in advance how the forces of deflation will play out if the liquidity pump is turned off.

    However if quantitative easing really isn't going to and, and this was just a show to try and drive down commodity prices, then yes the dollar is going to continue down. It hasn't put in its three year cycle low yet. And all asset markets should move generally higher.

    The stock market is acting like QE3 was announced this week.

    The key will be what the dollar does after the bounce out of the impending daily cycle low. If it tops quickly and then rolls over and makes a lower low then yes QE2 did not end and yes all asset prices are going higher.

  21. Gary,

    Respectfully disagree.

    This was massive short covering. There was a genuine fear of a Grecian default which was taken off of the table for now.
    Plus sentiment was too bearish-for example the title of your post "Signs of the Bear". I'll add the fear of the end of QE2 as well.
    Third we had end of the quarter/month window dressing.
    If you have a moment, please comment on my current thinking...

    Savings, CD's etc are paying between 1 and 2 percent annually.
    Is it reasonable to expect gains in the stock market outside of 5 to 7 percent plus 2 percent in dividends? Isn't the risk premium normally 4 to 7 percent in a mature economy? Thanks.

  22. Whether this was manufactured or not we obviously have an intermediate cycle bottom. The bulls have managed to initiate a very powerful momentum move. I seriously doubt this is going to roll over and die quickly. (I've been warning subscribers since the tag of the 200 day moving average to cover shorts and go to cash.)

    The key will be whether or not the dollar did actually form its three year cycle low back in May. If Bernanke isn't telling the truth and QE really isn't going to end then all asset prices are going to continue to reflate.

    It's possible that the stock market smelled out the lie this past week.

    So just watch the dollar over the next couple weeks. Once it puts in its daily cycle low, and if that low gets breached we will have confirmation that the dollars three year cycle low is still ahead.

  23. Smart money - large option traders with huge pockets - started to buy heavily in 1 week ago. They continued with their extreme bullish bets ($100m+) for the entire week. They are positioning themselves for a pretty large bullish move into the end of the year. Bears better cover on dips...

  24. This past week there were 1+% moves up every day in the SPX. Two more since the charts you posted, so we are already up near 1340 at the close Friday July 1st. All it will take from here to hit the recent high of 1365 (approx) is +2%more upside. That isn't much. So if we do that and break clearly above it, I guess they lied again and QE2 still lives.

  25. The key isn't in what happens to the markets it's in what happens to the dollar.

    My assumption is that the dollar put in its three year cycle low in May. If quantitative easing really is coming to an and then may should be the three year cycle low and we should be moving into a deflationary period.

    If however, QE is going to continue then the dollar has another leg down before the final three year cycle low. In that scenario all asset markets probably have another leg up before the deflationary scenario begins.

  26. Oh, I keep forgetting to mention, when you posted this on Jun 30 using the Jun 29th closing SPX chart, the SPX was "only" at 1308. So the 50% retracement level was still north of that. But by Friday's close, we even waaayyyyy surpassed the 62% point and are now at 72%. !! Does that mean now we have very high likelihood of hitting resistance at 100% (i.e., 1365 to 1370 range) ? Your thoughts ?

  27. The market has obviously put in an intermediate cycle low. Like I said in the above comment the key will be the dollar if it's still moving down into the three year cycle low and that low didn't occur in May then all asset markets could make new highs.

  28. Ok, the intermediate low is in, then what about this:

    Don't let the perma bulls fool you, this is not a normal correction, and it has nothing to do with Greece or Spain. This is the beginnings of the next leg down in the secular bear market and the start of the next economic recession/depression. And this time it's going to be much much worse than it was in `08.

    For months now I've been warning investors to get out of the general stock market. I was confident that once the dollar put in its three year cycle low the next deflationary period would begin and stocks would enter the third leg down in the secular bear market.

  29. Still the same. It's way too late in this cyclical bull market to be long.

    We are in a secular bear market and have been since 2000. The four year cycle low is due sometime in 2012.

    In a secular bear market the move down into a four year cycle low is associated with a bear market and a recession.

    If the top didn't occur in May then it will almost certainly come during this intermediate cycle. The average 401(k) investor should be out of this market and waiting patiently for the next four year cycle low for they buy again.

    The only market I wish to be long is precious metals because it is in a secular bull market. Once gold reaches its intermediate bottom in the next two or three weeks that is the market to go long.

  30. there is no basis for your comment on this being a SECULAR BEAR some ORIGINAL data....your comments are based on being a follower of others claims

    from an ELLIOT WAVE perspective we are about the see a Wave 3 and it will catch most totally off guard

  31. Never in history has a secular bear market ended with valuations at their current levels.

    In 2000 the PE ratio was in the stratosphere at 42. P/E ratios have regressed almost back to the historic norm of about 15. However human emotions don't go from extreme overvaluation just back to normal, they go from extreme overvaluation to extreme undervaluation.

    No bear market in history has ever ended until the market became ridiculously cheap.

    Also no secular bull market has ever been built on the fundamental basis of debt. Secular bull markets are driven by a new emerging industry (railroads, automobile and mass production, electronics and plastics, personal computer and the Internet)

    For a new secular bull market to start two things have to happen. First the massive debt bubble has to be cleansed from the world. That deleveraging process will ultimately drive the stock market back to true bear market bottom valuations (P/E ratios between 5 to 8 and dividend yields roughly on par with the P/E ratio)

    Finally for a true secular bull market to start we need a new industry to create millions of jobs that we lost as the tech bubble burst and then lost again as the phony real estate bubble burst. I'm pretty sure it will come in the biotech industry.

    How's that for data?

  32. By the way you can't be serious about Elliott wave???

    Elliott wave is probably the single best tool ever invented for predicting the past. Other than that it's completely worthless.

  33. but the markets keep going higher and this will fool most investors...HOW CAN THE MARKETS GO UP IF THE ECONOMY IS SO the way watch your comments about Elliot Wave...RN Elliot predicted a top for financial markets in 2012 - by the way Mr. Smart Money Tracker that prediction was made in the 1930's..

    lets look at your recent data:

    The Bear is Back (wrong)
    we are in a recession (wrong)
    we are heading into a depression (wrong)

    stick to cycles on gold as it is pretty simple as Gold is in a bull market and is bottoming approx. every 6 months with a nice higher ...everyone looks like a genius picking up moves in a bull

    you lack the intellect and analytical ability to predict future bear markets, recessions and for sure not depressions

    don't take that personally as you are no Richard Russell, Bob Prechter and definitely no RN is that for data

  34. you assessment of the dollar and its inverse relationship to other asset classes is guess are hoping that if the other asset classes go up the US dollar drops...what is Mr. Smart Money tracker we enter a period where the US dollar goes down and most other asset classes drop like they did between 1980-1999...explain that genius

    you pin your hopes on past events and hope they carry out the same day we are heading into a parabolic C wave and next day we are in a Bear market, recession and need to spend more time analyzing...instead of looking like a lunatic cause the markets are not done with you and I am sure of that

  35. We have been in a secular bear market since 2000. The bear never left.

    I never said we were in recession. I said we should be starting rollover into the next recession soon. Most leading indicators are already starting to roll over.

    We absolutely will have a depression. Never in history has the world been able to escape a depression after a credit bubble has burst.

    The question isn't whether or not we will have one, it's how bad we are going to make it by printing money and trying to avoid the deleveraging process.

    Avoiding the short-term pain just means much bigger problems down the road. We already got a front row seat to this when Greenspan created a housing and debt bubble by trying to avoid the recession we should have had after the tech bubble burst.

    You really need to study history.

  36. Asset classes went up from 1980 to 1999???

    I think what you meant to say was that the dollar and asset classes rose.

    That of course is easy to explain. Think about it what happened from 1980 to 1999? That's right we had to completely new industries come online that boosted massive productivity, and massive job growth. In that climate currency and asset classes should rise together.

    In 2000 the fundamental driver for the secular bull market had reached its parabolic blowoff bubble phase. Since then we have had no new industry other than a phony real estate and credit bubble created by none other than currency debasement.

    Without a new industry to drive productivity and job growth there is no way to keep asset markets inflated other than to debase the currency.

    So I may not be a genius but at least I understand basic economics and what drives markets.

  37. Tell me since you are such a perfect market timer where the hell were you in may before the market tanked?

    How about last September before silver started its monster move? I don't recall hearing anything from you at that time.

    How about last summer when all the bears were saying a new bear market had begun and I was telling people that we probably still had further to go in the bull market? I don't recall seeing anything on here from you urging people to buy into the dip.

    Are we really supposed to take you seriously when all you do is pop-up after a move has already occurred? I don't recall seeing anything from you last week about buying the dip.

    You seem to have a serious credibility problem. If you want to impress me then tell me beforehand where and when this market is going to top.

  38. what you are trying to say is that you had nominal GDP growth from 1999-2011 because your dollar is being debased...that is called nominal boy....

  39. In 1965 30 year bond yields were at 6%. In 1982 they were 16.5%.

    I'm not really sure why you got sidetracked on bond yields as it wasn't pertinent to our discussion.

  40. I am 44 and retired and shorted the stock market in july of 2008 using double short etfs and covered in march of 2009....Elliot Wave analysis allowed me to do that.

    you want to know what I know but that is for my clients but I had them go all-in in march 2009 and again last summer and we are still invested because Mrs. Market and a few special indicators say the top is yet to come but my advice for the sake of you followers go read Martin Armstrongs work and learn

  41. LOL I spotted the bear market in November of 2007. I was mostly short drillers for the duration.

    I missed the exact bottom in March by one day, mostly because I was waiting for a swing low before making the call.

    My subscribers road the entire silver move up and most are up 100 to 200% for the last year alone.

    We've been waiting patiently for the last several weeks for gold to move into its intermediate cycle bottom. Once it does we will jump on board for another leg up in this bull market.

    By the way we shorted the move down 1311 when the daily cycle penetrated its prior cycle low and covered at almost the exact bottom when the S&P tag the 200 day moving average. Have been in cash ever since waiting for gold to bottom.

  42. Unfortunately you have no credibility because you have made no real time calls.

    Here's your chance make a real-time call, tell us when this market is going to top.

    I understand that no one can look into the future so you don't have to predict a target. But you do have to come on the blog and in real time make your call. Not after the move has already happened.

  43. If you want anybody to take you seriously you can't just show up after a move has already happened and say "see I told you so"

    You never really told us, you just showed up after the fact.

  44. as you know not all markets top at once, so your question is too vague, don't know because many indicators will flash a top but right now none of them flash a top and in fact we have probably seen a major bottom and this rally could continue for years....this market will top when every last bear stops trying to pick a top...we are far from that

  45. tops occur when we see bullishness at the top end of extremes and right now no bullishness, in fact too many like yourself see the end of the world and depression, I will guarantee that at the top no one will see a depression coming...thats how it works my boy

  46. we are seeing the birth of a new industry and my clients and I are still heavily invested in this sector and if you were so narrowly focused in PM's you would see it too....all I will tell you is that this sector rallied 400-1000% from last summer to early january...go do some research

  47. Wrong again. Financials, housing and semi's were already diverging from the general market at the May peak.

    During the rally up to the February peak sentiment had reached bullish levels more extreme than were seen at the 07 top. The complete failure to follow through on the breakout in April was a serious warning sign. The move all the way back to the March intermediate cycle low was another serious warning sign.

    Now can the Fed keep the market alive with a manufactured rally on the low volume holiday week? I don't know. But if the economy is starting to roll over into recession then the rally will fail.

    The problem continues to be that the dollar is due for a three-year cycle low. The rally out of that low will initiate another deflationary period. The only question is whether or not that major cycle low occurred in May or whether it's still in front of us and will occur later this fall.

    I have been assuming that the bottom came in May because it fits the cyclical timing band better. If however that major low isn't going to arrive until October or November then yes the market should make at least marginal new highs, commodities should have another leg up and the next bear market won't begin until later this year or early next.

  48. Sorry it's not possible to have a secular bull market and told the deleveraging process is complete.

    Many things have gone up thousands of percent since the 09 bottom. Silver Wheaton went from $2.50 to $47.

    Not only must the deleveraging process complete but we also must cure our energy problem before a new secular bull market can begin.

  49. this is what I mean by narrow focus....there is a world outside of the US and by the way many US companies are showing higher profits and sales due to other parts of the world.....

    too bad so sad...

  50. Why should I diversify when I can simplify my life by concentrating on the one secular bull market left?

    It just doesn't make sense to follow multiple markets when one can get rich with very little risk by just riding the bull market.

  51. since you asked, this is not for you to comment or question...we are about to see the greatest run by any sector in the history of financial markets within the next 18 months and it will eclipse the run by gold stocks

  52. Not a chance.

    But just so you can tell us I told you so. Tell us now before it happens instead of after the fact.


  54. Making your prediction on a gold blog with less than 7000 viewers will have zero effect on any true bull market.

    Since most of the people that come here are only interested in riding the gold bull almost no one would pay any attention or act on your recommendation anyway.

    So there is no reason for you not to make your prediction in real time other than having to admit your mistake if it doesn't work.

    Just like I said no credibility.

  55. Gary, NotGLOATenough is just trying to get to you. In fact...Have you caught it yet ? He retired.....but yet he has clients. Who has clients and is retired at the same time ????? Too much hot air. All hat and no cattle. He won't tell us about his "secret sector" because it doesn't exist. Put him on ignore.

  56. :) Yes I pretty sure Notgloat is Tom the Trader. I've been through this nonsense with him before.

    As I recall the last time he claimed to manage a hedge fund worth over a trillion dollars except Bridgewater is the largest hedge fund in the world at about 58 billion.

  57. Can anyone explain how Toby see "a large selling on strength day (smart money distribution day)" from the chart where he inserted that comment? The volume seems average?

  58. Gary,

    I think that Bernanke is continuing QE2 somewhat via using the maturing debt of his original short-term T-bond purchases to continue to goose the market and keep T-bond prices high/yields low. So while it may not continue to push the market upward with the intensity that it did via his hundreds of billions of dollars each month, it will still be there. We will not have a market truly free of manipulation apparently for quite some time...

  59. If the debt ceiling legislation does not get signed or if it gets signed at the 11th hour (Aug 2nd), and if leading up to that, the stock market stresses out about it, then indeed the cycle low could occur right in the window of time you specify above. Recently, I think it was last week, (the week of July 11) we saw a suspension of the usual inverse correlation between the dollar and the stock market. I think it had everything to do with the debt ceiling issue, and I think there is more to come. The abberant direct correlation between the two was on down days. Interesting how on Friday the stock market began to ignore the Washington impasse and concentrated on earnings - towards the end of the day. I think both the dollar and stocks will rally when the legislation gets signed. That as well could line right up with your cycle timing. I tend to bias to the short side (stocks). At the moment I am out of the market due to (1) It's a new earnings season and I am hearing predictions of positive surprises (like last Friday ?) (2) the (sometimes) suspension of the inverse correlation of the $USD vs the $SPX throws me off, and (3) the debt ceiling issue hangs like a cloud over everything and it kind of makes sense to wait for that to get cleared up. I suspect that the inverse correlation $USD vs $SPX will return after the debt ceiling issue is resolved. Now you (Gary or Toby or whomever you are) has been saying lately that the key to everything is the $USD. But that thesis assumes the usual inverse correlation (or at least it appears that way to me, the way you illustrate it). And again I suspect that inverse correlation will return after the legislation is signed. Only thing is, if we are really going to have a cycle low later July/early August, and IF it occurs many points or tens of point below the current $SPX level, it is very tempting for me to try to trade that. Don't know if I can resist (heh-heh). Your thoughts ? Anybody ?


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