Today I’m going to start off with a look at the big picture. The next chart pretty much says it all.
is a fundamental reason why gold has been going up for 13 years. That
same fundamental is driving the cyclical bull markets in stocks.
For gold the fundamentals are
sustainable and that’s why the gold chart is rising almost parabolic
inter-spaced with normal corrections/consolidations along the way.
For stocks the fundamentals aren’t
sustainable. You can’t drive a true bull market in stocks by printing
money. It just creates bubbles and crashes. That’s why each one of these
bull markets is followed by a devastating bear market. It’s why the
stock market chart has gone nowhere in 13 years while gold has gone up,
up and away.
Until the fundamentals change this
pattern isn’t going to change. Pretty soon the stock market is going to
stagnate and start to drift sideways (followed by another bear market,
probably due to bottom in 2016). Pretty soon gold is going to generate
another C-wave leg up (followed by another sharp move down into the next
8 year cycle low, also due in 2016).
Did we bottom two days ago or not? I
don’t know. What I do believe is that the QE4 manipulation has basically
created a double B-wave bottom. As we saw last summer, B-wave bottoms
are frustrating SOB’s that whipsaw back and forth until everyone is
knocked off, or dizzy and ready to puke. Then they take off and leave
think gold is in the process of breaking the manipulation but as we
have seen it’s been tough to get a sustainable trend going. That is the
hallmark of a B-wave bottom. Ultimately I think the manipulation just
stretched the precious metals markets much further to the downside than
would have occurred naturally, so once gold breaks free of this volatile
bottoming process the rally will be just as aggressive if not more so
than the rally out of the first B-wave low last summer.
As we saw last summer, B-waves can
churn to the point were it’s pretty difficult to determine correct cycle
counts. It appears to be happening again. Considering the current daily
cycle is left translated it should drop back below $1555 before
bottoming. That being said today’s move looks like the cycle low may
have come on Friday. I wouldn’t count on gold to give us a clear signal
in this environment though. So it’s anyone’s guess if we now have a
strange left translated daily cycle that bottomed above the prior low.
For those of you trying to hold on to positions during this mess let me put up two more charts.
On the gold chart you can see the level
that triggered a 99 and a 98 Blees rating on the COT report.
Historically that kind of extreme only occurs when price is at, or very
close to a final intermediate bottom.
You can also see that this price level generated an 88 million buying on weakness
day in GLD. Again this is almost always a sign that price is about as
low as it’s going to go. Let me emphasize I said price, not time. Just
because price has reached a level that halts the selling doesn’t
necessarily mean that a sustained rally will start immediately. As we
have seen the market may still have to chew up a significant amount of
time before it’s ready to take off.
In our case I think gold is waiting for the stock market to stagnate before hot money starts to flow back into the sector.
So we may have one more lower low to
endure before this is over, and we may not, but two years from now
traders will be knocking their head against the wall saying “all the
signs were there, why didn’t I buy?” Or; “Why didn’t I hold my Old Turkey position?”
bottom is going to be too complex to time perfectly, and even if it did
bottom on February 20th it’s already shown that it can still throw most
people off just by chopping back and forth for a month. Maybe that chop
has finally ended. Maybe the daily cycle is still going to make one
more trip below $1600. I’ll let others compete to see who can second
guess the next wiggle in the precious metal markets. All I can say is
that the signs are there. Save your head the abuse two years from now
and pay attention to them.