Thursday, January 26, 2012

BROKEN DOLLAR

It has been my theory that this year we would see one of the worst performances by the stock market since 2008. However that has always been dependent on Bernanke not being able to break the dollar's rally out of its three year cycle low. As of this morning the dollar has printed a failed daily cycle. More often than not a failed daily cycle is an indication that an intermediate degree decline has begun.




I have begged and pleaded with people not too short the stock market over the last several weeks. For one it's very hard to make money on the short side for the simple reason that markets move down differently than they move up. Now I'm going to give you another reason not to short the stock market.

If the dollar has begun an intermediate degree decline then we should see it continue generally lower for the next 7 to 10 weeks. If this turns out to be the case then we are not going to see any meaningful declines in the stock market during this period. As a matter of fact the risk is great that the stock market could enter a runaway type rally if the dollar has begun the move down into an intermediate degree bottom.


As you can see in the chart below the last runaway move in 2006 lasted almost 7 months.





Runaway moves are characterized by randomly spaced corrections, all of similar magnitude and duration. As you can see in the chart above the corrective magnitude in this particular runaway move was about 20-30 points.

Keep in mind we don't have confirmation that a runaway move has begun yet. We would need to see how the first correction unfolds. If it is mild and brief, followed by the market moving back to new highs, then the odds would escalate that a runaway move has in fact begun.


Another big clue will come when the dollar bounces out of its daily cycle low, which is now due at any time, and if that bounce fails to make new highs before rolling over. If that happens it will reverse the pattern of higher highs and higher lows and confirm that an intermediate decline has indeed begun.


The scary part is that this may also signal the top of the three year cycle. If so then we are looking at an extremely left translated three year cycle that should generate huge inflationary pressures by the time the next three year cycle low is due in the fall of 2014.





It has been my expectation that we would see another deflationary period in 2012 before the cancer infected the global currency markets. As of this morning I'm not so sure that process hasn't already begun and the deflationary period has been aborted.
Bernanke may have broken the dollar rally yesterday.

If this scenario unfolds it has the possibility of generating the bubble phase of the gold bull market. I elaborated on this in last night's premium report.


I am currently still running the one week, $10 introductory offer for the SMT premium newsletter.

25 comments:

  1. Stock market had its yearly cycle low in 2nd half of 2011


    bernanke has said many times that he does not like falling asset prices


    1240-1250 S&P is a first area of serious support

    ReplyDelete
  2. Toby, what kind of a gimmick are you? I've been following your site for quit some time now, and for months and months all you've been "predicting" was a higher dollar, lower stocks and even lower gold. Now that gold has started a rally and the dollar is declining, you've changed your tune. Jeez, what sort of a person are you? How do you sleep at night? Aren't you ashamed of yourself to ask for payed subscriptions to that crappy newsletter of yours? Toby, you couldn't catch a fish in a barrel, let alone give investment advice to people. Just let go. Take up a hobby, do some fly fishing, carpentry, sewing, needle work, whatever... Just let go of the economic stuff...

    ReplyDelete
  3. When the market changes I change with it. Are you just reading the free blog or following the premium newsletter? If you are a subscriber then you know why the model portfolio is up almost 25%.

    Mostly its because I'm willing to change my expectations 180 degrees when the situation calls for it.

    If you are a sub then you know that we have been waiting for confirmation as to whether Dec. 29 did or did not mark the bottom of the D-wave. We got that confirmation yesterday. We got back into GDX at $53.12.

    One could also wait until the next daily cycle low before entering positions as it will be due soon.

    I learned a long time ago that being right or wrong is meaningless. The only thing that matters is whether or not one makes money. If the market tells you your expectations are wrong you can either adapt as quickly as possible, or you can argue with the market.


    I've found I make more money by adapting :)

    ReplyDelete
  4. GOLD will be going UP, regardless of a useless article stating a "bubble". I would close this site IMMEDIATELY! HArry Dent has been wrong 100% of the time. You are in his league.

    ReplyDelete
  5. I'm not really sure how I can be consistently wrong and yet gained almost 25% in a portfolio that never invests more than 75% of capital. And this during a time when almost every money manager in the world struggled to break even or lost money.

    You might want to check your facts next time. You might also want to track the actual portfolio in the premium site instead of just the free blog. If you had done so you would know that I strongly advised not to sell short even though the market was and is in the timing band for a cycle low.

    You would also know that we were just waiting patiently for confirmation of an intermediate bottom in gold before jumping in. We got that confirmation yesterday.

    I even posted this in he last article.

    "Right now investors need to be on the sidelines while we wait to see how gold handles the stock market's move down into its daily cycle low. If gold can hold above $1523 while the stock market suffers what is likely to be a rather sharp correction then the odds will improve dramatically that the D-Wave did in fact bottom in December."

    The key phrase is "investors need to be on the sidelines".

    ReplyDelete
  6. Another gimmick snake oil salesman. Read last two posts - which are supposed to be the lure to have everyone put their hands in their pockets - and ask yourself why would subscribers be told something different than what gets published on the advertising portal ? The idea is that readers are in tune with market, not forced to do sudden 180% turns after market forces you to admit you haven't a clue. Worse declines than 2008 bear market, to runaway moves on the upside - you forgot to mention sideways just in case to cover last angle so you can say you were right no matter what happens lol.

    Give it a rest , you can try cover over it up, but pretty obvious why you have your hand out for a sub.

    Disgraceful.

    ReplyDelete
  7. Easy to criticise someone and attack their strategies without outlining what your own ones are.

    Get one thing clear NOT EVEN THE FED KNOWS WHAT THEY ARE DOING EVEN THOUGH THEIR MOTIVE IS TO DESTROY THE DOLLAR TO AVOID DEFLATION.

    This is clearly a world of constant change. Markets are volatile and manipulation is rife.

    If you have some concept about what is in store for the ST, MT or LT, its always a wise bit of advice to consider different perspectives from different mediums. Then you hopefully can make a judgement call. There are no free lunches.

    One thing is absolutley certain, no one single person will give you 100% guarantee about the success or otherwise of their advice or strategy. If you are too lazy to do your own homework, then you are gonna lose.

    If you are trying to play the game with more than you can afford to lose, then you will learn the game very fast.

    ReplyDelete
  8. i have subscribed to Gary for over a year now. what He watches to develop and what he trades and reacts to are different. He says do not trade my expectations, trade my trades.
    he does turn very quickly and yes we are up 25 %. Also this is during a very tough market. I cant wait for the next strong trend so we can have another 100% year

    ReplyDelete
  9. Liquid Motion, nobody attacked any strategy, because no strategy has been outlined, what was criticised was one post calling for huge bear market in 2012, with a runaway move to the upside in the next - with an offer to join up quick before you miss the next great insight !

    Shameful, and some cheek.

    Shouldn't be coerced into sharing my own strategy, since I'm not the one trying to sell subs, but since you asked, my portfolio is long precious metals, currencies and commods. I got that from Jim Rogers blog all for free, and my silver is up well over 25%.

    I didn't use the word disgrace lightly, someone needs to report this goon, a danger to the public !

    http://jimrogers1.blogspot.com/

    ReplyDelete
  10. Sarah (obviously not your real name since your vindictiveness is a male testosterone trait),

    Let's see if I can make this simple enough so you can understand.

    Just like everyone I start off with an expectation of what I think is going to unfold. That expectation is generated by where we are at in the daily cycle and sentiment. However that doesn't mean I would neccessarily trade my expectation.

    As an example: The stock market is due for a move down into a daily cycle low and has been due for two weeks now. That still doesn't mean I would do something stupid like try to sell short. Selling short is an incredibly tough way to make money and very very few people will ever do it with any long term success.

    So even though I've been expecting a drop you will never see the portfolio with a short position.

    On the other hand we have been waiting patiently for gold to dip down into its daily cycle low to determine whether the Dec. 29th low was indeed an intermediate and D-wave bottom.

    The fact that the stock market is due for a move down into a daily cycle low had/has the potential to exacerbate the move down in gold. So the prudent thing to do is stay on the sideline and see what happens.

    Yesterday the dollar was at a crossroads. In the morning it was clear that a daily cycle low was forming and gold was beginning the move down into its cycle low. All that was aborted later in the afternoon when Bernanke made his announcement on rates and asset purchases. The dollar continued down and gold rocketed higher confirming that Dec. did in fact mark the D-wave bottom.

    Unless one had a crystal ball and knew what Bernanke was going to say AND how the market was going to react to it then one had to wait for the outcome.

    Once it became apparent that Ben had aborted the cycle low that was forming in the dollar it was our signal to re-enter the precious metal sector.

    If the dollar has begun an intermediate decline then all assets should enter strong trending moves. These are the kind of moves where real money can be made.

    That being said we will have to wait and see if the next cycle in the dollar confirms the down trend by making a lower high.

    ReplyDelete
  11. "I didn't use the word disgrace lightly, someone needs to report this goon, a danger to the public ! "

    Ouch! I have been a sub for at least 3-4 years now, I guess...Gary is a honest person that truly values his subs...when he is wrong he beats himself up, as rare as that is.

    He has navigated many a novice from personal destructions through 2008, and more recent corrections. He has also navigated subs out of two parabolic rises and during this recent decline in gold was able to generate a 25% return in causal quick trading...all in real time, which can be measured and verified.

    Gary does have a flare for the dramatic, I suppose, but it makes for a good read. Beyond being human, I am not quite sure where the vicious attacks come from?

    agg remind me never to start my own site....thick skin is not enough...blah....this is like reading venom.

    ReplyDelete
  12. BTW our entire portfolio is up 25% in only 6 months with very little risk and never investing more than 75% of capital. Last year most subs where up 100+%, depending on their risk tolerance.

    I dare say that on a risk adjusted basis there are very few money managers in the world that have even come close to the SMT returns in the model portfolio.

    ReplyDelete
  13. BTW our entire portfolio is up 25% in only 6 months with very little risk and never investing more than 75% of capital. Last year most subs where up 100+%, depending on their risk tolerance.

    I can verify that as well...

    ReplyDelete
  14. Mr. Savage, I didn't intend to be vindictive, nor did I ask for the long winded attempt to save face. It doesn't wash for a second or divert from the very points I made which you have curiously failed to address. Not the least vindictive, instead a clear statement of the undeniable facts - for which there is no defence no matter how many paras you type at us trying to duck it.

    Anybody who is calling for a 2008 style collapse (during which shorts did very well contrary to your nonsense statement) on one day, and then calls for runaway upmove the next, is a complete disgrace to analysts everywhere, and the fact you seek to charge money for playing guessing games at what happens next simply beggars belief.
    Bernanke said nothing that hasn't been said before, there isn't QE of XX trillion yet, merely reiteration of the rhetoric previous, with added emphasis on accomodatitive policy. What's changed so drastically ? Try nothing much as of yet, at least not sufficient to do complete 180 degree turn. Where's the fire, or is one days up move in market, or one down day in DX sufficient to sway you lol ?

    As I was saying, Jim Rogers had everyone long Silver from $3, long Gold from £300, long Ag for a decade ...... guess how many times he done complete about face last twelve years ? Try not even once.

    And, remarkably (or not since he doesn't need to sell scatterbrain guesses) it's free :

    http://jimrogers1.blogspot.com/

    Silver up 1000% +,Gold up 400% +, need we continue ?

    Who really needs it made simple as possible if we are going to trade insults instead of valid opinion ?
    I'm allowed to think what I wish of your blatant inconsistencies, and thank heavens also allowed freedom to express those thoughts.

    ReplyDelete
  15. Sarah,
    I've said all along that a bear market in 2012 is dependent on Bernanke not being able to break the dollar rally.

    There's no way we have a deflationary scenario in 2012 if Bernanke has the dollar index collapsing. In that scenario the exact opposite will happen. We will start and inflationary period that should culminate in a dollar crisis at the next three year cycle low in 2014.

    You are simply choosing to ignore what I say.

    ReplyDelete
  16. And furthermore, as a PS, if you were calling for a cycle decline past two weeks - it's hardly a triumph not to have sold short - your subscribers have just missed the biggest January gain in S&P since 1987.

    Great work, take a bow, I'm sure the wool is pulled over everyone's eyes this afternoon !

    ReplyDelete
  17. I see you conveniently used Jim Rogers as a model for your investing. However you fail to mention how many people were able to hold through the crash in 2008 when silver went from $21 back down to 8 dollars.

    The answer is of course no one, other than maybe Rogers himself, was able to hang on during the crash. So no one actually had those kind of returns. I also dare say that nobody has been able to hang onto their silver during the crash from $50 down to $25.

    It's the same old story I get time after time. People come on to Monday morning quarterback with the benefit of hindsight. Unfortunately none of us actually gets to trade in hindsight. We have to trade in real time. My real time record is right there for anybody to see.

    As I pointed out, on a risk-adjusted basis, there are very few money managers in the world that had even come close to what the model portfolio has done over the last six months and over the last year only one hedge fund in the world has matched the returns of the SMT.

    ReplyDelete
  18. Sarah,
    A missed opportunity is not a loss. There will always be more opportunities. A loss is a loss.

    It's the difference in how a pro views the market, and how an amateur thinks.

    ReplyDelete
  19. Why do you continue to try address me as though I were a dimwit ?

    We are not discussing Silver falling from crazy overbought just recently which any analyst with even basic grasp could see coming once indi's crossed in the daily.

    We are discussing your bear market worse than 2008 call, which has morphed into next stop the moon calls, based on some rhetoric from the Bernank, and 24 hours price action.

    Hilarious for me, but grossly irresponsible for you, and very misleading. Never met a guy selling yet that hasn't outperformed Soros, but funny how they never make it past Wordpress, when they should be on CNBC instead of Rogers ?

    Silly me, indeed, lol.

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  20. Nope not even close to Soro's and I never will be because I will never leverage like he did.

    You also have no idea what you are talking about. I started this service to help people ride the gold bull market. It's never been about selling subscriptions.

    I'm moderately wealthy, with plenty of money to last me the rest of my life. I could care less if I ever sign up another subscriber. I give away a big chunk of the profits from this newsletter to charities and friends.

    I purposely keep the price low enough where virtually everyone can afford it. I think anyone who has been a subscriber for any length of time will say that it's probably the best bargain in the world on a return on invested capital basis.

    You are way off base if you think this is about generating subscribers.

    ReplyDelete
  21. Sarah (??),

    Q: Why do you read the blog.
    You onviously follow the blog religiously in order to articulate the "inconsistencies" / "shortcomings". What are you the "blog police" ? For whose benefit are you making accusations/insinuations.
    Suggest ...Take the blog for what it is...some free observations and analysis based on amongst other things cycle analysis and sentiment. You dont have to agree with it. Its not a perfect science. If one is inclined to subscribe because they can see some benefit ...good luck to them. This environment is very delicate and some people do need a guiding hand.

    Gary has his methodologies...which obviously suits his subs....you apparantly have yours (i.e. JR's). You follow JR and thats something. Kudos to you if you have actually held through all of the market gyrations. You either have deep pockets / you are able to filter out the noise and have avoided the greed/fear mentality. Come back in a year and let us all know how well you're doing.

    Gary,

    your prior prediction of a very bad year 2012 could still be achievable. Sure we might see a ST stock rally based on the belief of USD putting in 3 yr cycle low, but the bigger picture is still the unhealthy state of the economy, housing, unemployment, debt levels. The anticipated lower dollar implies inflationary trends, but his can only happen when there is inflated money supply with dramatic increase in velocity of money. The velocity of money will be determined by the expectation/realisation of impending reduced purchasing power.
    Yes indeed the Benmeister has put the brakes on the dollar breaking higher. But there are a multitude of other reasons and scenarios in the background which are all playing to work in tandem with BB's words and actions. Which btw amplfies the current economic woes.
    I reiterate that the game is still the same....currency debasement.
    Currencies affect all markets..that's where it starts and ends.
    Believe it or not, the strongest hand in this situation is still the US Govt. Debt will potentially be extinguished via inflated dollars....but they will still hold the largest single store of GOLD in the world. On latest pricing that equates to approx. $500bln. If the inflationary trends continue exponentially, then the value of the gold holding does too.
    With recent moves by several large international states to avoid $$$ denominated transactions, the trend is clear and alarming. Some could say the beginning of the end for the USD.
    Most important to keep watching the dollar and the ongoing acceptance/refusal of the very same in international trade and settlement. That IMHO is the single most important issue to watch for 2012.
    All the rest is just noise.
    The PM bull market will continue until the FED is extinguished.

    ReplyDelete
  22. I don't understand why some one like Sarah is even allowed to attack Gary this way here. Gary posted his excellent analysis here for free and it has been proved that most of his analysis was correct and captured the trends and junctures of the markets. What else do you expect? He of course cannot post all his trading advice here since this is a free site and he is not obliged to do that. TO be honest, I have never seen an analyst being as nice as Gary before, he not only told you the results of his analysis, but also the way he analyzed the markets for absolutely free. You should respect him as a nice gentleman. Sarah, please take all your vicious words back and apologize to him.

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  23. Gary, you are one of many precious metals analysts I read and I appreciate your view. However, the below statement is just not true.

    "However you fail to mention how many people were able to hold through the crash in 2008 when silver went from $21 back down to 8 dollars.

    The answer is of course no one, other than maybe Rogers himself, was able to hang on during the crash. So no one actually had those kind of returns. I also dare say that nobody has been able to hang onto their silver during the crash from $50 down to $25."

    I held all my stocks, silver, and gold through both the 2008 crash and the silver crash from $50 down to $25. In fact, I was buying MORE on the way down, so I actually accumulated MORE silver during those crashes. And its not just me. There are many bullion stackers that buy precious metals into significant weakness. For example, those of us that follow Stewart Thomson were buying heavily into the lows (that is the basis of Stewart's Strategy). As well, I can tell you that members of the Bullion Stackers community were buying big time.

    Yes, many people (perhaps most people) got fried during those crashes. Especially leveraged players. But to state that nobody buy Rogers held onto their silver is just untrue. Plenty of people, including myself, not only held on to our silver, but INCREASED our silver.

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  24. Markets are dynamic. Forecasts are seldom reliable. Market letter writers tend to make plenty of forecasts in the hope that some of them may pan out. Anyone who acts upon them without due diligence is asking for big trouble. Be your own market guru. There is no other way for consistent success.

    ReplyDelete