Monday, August 22, 2011


As I have been warning investors for many months, stocks have now entered stage III of the secular bear market. Gold on the other hand is now in the final parabolic phase of a 2 1/2 year C wave advance. 

My best guess was that we would see a Dow:gold ratio of between 5-6 before this C wave ended. The ratio was at 5.71 as of today. For reasons explained in the nightly reports I think we may still have a little further to go on the downside for stocks and a little further upside in gold. So it's entirely possible that we could see a Dow gold ratio of 1:5 before the trends reverse.

However the low risk, large potential trade is now in the stock market, not playing chicken with the gold parabola (also explained in the nightly newsletter).

Cyclically the stock market is now in the middle of the timing band for an intermediate bottom. Presumably a sharp bear market rally in stocks will trigger a regression to the mean, profit-taking event in the precious metals market (the D-wave).

D-Wave's almost always test, and sometimes marginally penetrate the 200 day moving average. I've illustrated in the chart above a rough guess as to where I expect the countertrend  rally in stocks and the D-Wave correction in gold to retrace.

Keep in mind that the fundamentals for gold have not changed. A D-Wave is simply a profit-taking event triggered by an unsustainable parabolic rally. It has nothing to do with fundamentals. Once the D-Wave has run its course gold will enter a sharp snapback rally (the A-wave), after which it should consolidate for the remainder of the bear market in stocks.

Stocks on the other hand, after what should be a very convincing bear market rally, will roll over and continue down into a final four year cycle low, probably in the late summer or early fall of 2012. 

Depending on whether or not the Fed tries to fight the cleansing process stocks should either test the March 09 lows, or if Bernanke tries to stop the bear market with another round of quantitative easing, we could see the March 09 lows breached.

Either way I expect that 2012 will go down as one of the worst years in human history. Certainly in the same category as 1932 if not worse.


  1. Well Toby, nobody can accuse you of being shy about making calls.
    To me, technical analysis is more about understanding the present, than predicting the future.
    You obviously have a different approach, and I applaud you for being bold even as I hope you are wrong for all our sakes.

  2. I'm usually early, which of course brings out the trolls more often than not. But I'm rarely wrong on my macro calls.

    For all our sakes I hope I am wrong on this one.

    I'm sure the trolls will crawl back out of the woodwork once this bear market rally really starts surging higher, to tell me I'm way off base. It never fails. These clowns always show up right at major turning points. I've actually started using them as contrary indicators.

    Then of course once the markets turn and do exactly what I said they would, the fleas crawl back into the woodwork.

    Where are all those people who told me how wrong I was about an impending bear market now? Probably wondering what the hell just happened to their portfolio's I would imagine :~)

    My bet is they will buy back in right at the top of the counter trend rally and then ride another leg down.

  3. Gary,

    Your timing couldn't have been better! Just got a short term sell signal in gold today (GLD and DGP). Simultaneously, the NASDAQ was up 100 points today, confirming my short term leveraged long position.

    Still holding my 3X silver (AGQ), even though it took a pretty good chunk out of my armor today. No sell signal yet.

    These markets have been fascinating, and sure keeps us on our toes.

    Good luck with your trades, and again, congrats on a great call.

  4. Yeah, what a great call.

    It's all documented on this pages, everybody can read it for themselves.

    On Monday , August 1, with gold on 1622$ he called the probable top in gold.

    Then on August,9, with gold on 1700$ he said he would put his money at risk in stock market
    rathet than parabolic gold market.

    Then, on August 13, he said it was time for liquidity to find it's way into stocks and out of gold.

    And today, on August 23, you are writing about him making the right call?!?!?!

    Gold today is 200$ higher from where Gary called the top and SPX is 10 points lower than it was when Gary gave his buy recommendation.

    Gary, is that you writing from all those really supportive and admiring nicks?

  5. Gary

    you get some calls right and a few wrong, your record according to my analysis is better than most but not perfect.
    I think you should drop the abuse towards those who question or challenge you,it demeans you and your valuable analysis

  6. Exactly lodmund.

    I am only responding to Gary lately because he keeps calling people names and claiming that 100% of his calls were right.

    Apart from that, i like Gary's way of thinking and general approach.

    And he's had lots of good calls.

    But don't call people names just because they don't agree with you on something

  7. I'd love to see gold near $1,400. I'm in for a couple more ounces at least at that price.

  8. eri,
    You don't even have a subscription how can you say what my calls have been. I've always claimed to be early. I said back in March and April that stocks would enter a bear market this year. I took abuse from you and many others but I was exactly right.

    I exited gold early. But I've always said I would. The risk of getting caught in a large gap down open premarket is to great to try and catch the last penny of a parabolic move.

    One risks losing weeks of gains in a matter of days if not hours.

    With yesterdays rally and golds selloff I'm almost certainly going to be right on that call also.

    Like I said it's the difference in investing in real time, and in hindsight.

    The model portfolio for premium subscribers hasn't had a losing trade in quite a while.

  9. Gary, i am not aware that you're writing one thing on this blog and another to your subscribers.

    I only quoted you from this public site.

    I have'nt said anything about you being wrong on stock market decline.
    I think you've mistaken me for someone else.

    I am not invested in stock market so i don't really care what happens with it.

    Only thing i hold is physical precious and i don't intend to sell it in the near future.

    So, i don't care for corrections, or parabolic moves because my position doesn't change.

    I just hold on to it until i get blue in the face.
    It worked very well for me for the last couple of years.

    Anyway, just love to exchange opinions, that's all

  10. There's nothing wrong with holding through corrections, even a D-Wave correction. This bull market is far from being over.

    What I don't care for is comments "like how are those long stock market positions short gold positions doing".

    Your intent was clearly to aggravate.

    I have a little over 2600 subscribers. Most of those people cannot hold through an intermediate degree correction, much less a D-Wave correction. So I have to do the best I can to get them out before those happen, or they will end up selling at the bottom and never wanting to see another gold coin again.

    If I am going to keep these people riding the bull market I have to do the best I can to avoid large corrections and get them back in at intermediate bottoms.

    That's what I was trying to do in March and April, get people out of the stock market. It didn't matter if it was a little early or not.

    The same thing here with gold. I know from personal experience that when a parabola breaks, weeks, if not months of gains can evaporate in a matter of days or even hours.

    So it wasn't important to try and catch the very last penny of the parabolic move. I just had to make sure that I had people out before the parabola crashed.

  11. If "Gary" is the "man" behind the scenes, who is Toby Connor?

  12. Toby is the pen name that John Townsend and myself use to author this blog.

  13. Today was a great day for buying more gold...I added more to my portfolio at $1,750...hopefully the CME continues to play games so I can continue to add more to my position.

  14. Gary,

    Did we not just see Gold bounce off the mid bollinger ?? (a touch under). Not about chasing the upper limits, moreover staying the trend. will stay the upward fib. channel...with corrections as we have seen. The D-waves /corrections are shorting in both severity and time.
    Pullbacks will therefore be modest.
    CME cant hold back the surge.
    Besides fear and nervousness persist.
    BENNY will need to go to QEIII (or some equiv.)to undermine GOLD. That imo will trigger the D-wave you have been calling.
    Based on my best guess...timing for this will be late in the fall. Gold can therefore break the upside channel and power through in the ST. Your earlier call I think still has legs....lower stocks...higher Gold.

    D-Wave might be a bit premature.
    Still in with phys. and buying dips.
    Great insight/work buddy still follow all.

  15. What a great information that is! I got such a nice information from this part of article. Thanks for sharing such type of great information.


  16. It's going to get real interesting for gold and the USD in the next week or so. I have no skin in the game (yet) but might be tempted to short gold with a tight stop at or around the previous highs, depending upon the volumes I see in the various paper instruments. Didn't silver drop from around 48 or so to 43ish before finally hitting 50? A slightly higher high in gold ($2,000?) and then whammo. Starting to look potentially a lot like oil in July 2008, especially if the Dollar begins to rock.

  17. how low will gold go n when?when is the best opportunity to buy gold?can i buy it @$1480

  18. Hello Gary,how r u doing?when is the best opportunity to buy low can gold come in october as u have predicted bottom in november


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