Tuesday, October 29, 2013
Monday, October 28, 2013
Friday, October 25, 2013
Thursday, October 24, 2013
TIME TO SIT ON THE SIDELINES
Stocks:
My best guess continues to be that stocks will extend this consolidation on Friday and then deliver one more push higher into the FOMC meeting next week. I expect the Fed will confirm no tapering which will likely trigger a big rally and probably reversal as smart money traders sell into the emotional move. Barring an immediate Fed intervention, that should give us the drop down into the half cycle low.
At that point one could enter long positions and use the half cycle low as your stop.
Dollar:
We should be coming down to the final few days in this yearly cycle decline. As you can see in the following chart the dollar is rapidly approaching that major support zone we talked about between 78.90 and 78.60.
Again I think the FOMC meeting next week will be the trigger to put in this bottom. As I said earlier I expect the Fed will confirm no taper this year. That would likely cause a final spike down in the dollar where smart money traders will cover shorts on the news and reverse position to go long, leaving emotional retail traders holding the bag again.
Most bear markets will make one final test of the 200 day moving average before really starting to accelerate to the downside. I think this is probably what is in store for the dollar index over the next 4 to 6 weeks. A final counter trend move back up to test the underside of the 200 day moving average along with a resurgence of taper talk as traders try to rationalize some reason for the rally.
Gold:
I'm going to start off today by revisiting the one-year gold chart. As I have noted on the chart, there are several key levels where we saw blatant manipulation in the gold market. Back in late May and early June gold was clearly capped at the $1425 level to set up the final June crash. Not surprisingly this intermediate rally was also capped at that exact same level even though the dollar still had a long way to fall in its intermediate cycle low.
The next blatant manipulation came almost immediately after the September FOMC meeting where it was confirmed that tapering was off the table for the rest of this year.
With the dollar rapidly approaching its yearly cycle low, and gold chewing through a lot of days in this daily cycle, I suspect we are going to see a concerted effort made to hold gold at or below that FOMC top over the next week. If one is holding long positions I think that is the level where I would sell.
If on the other hand gold can manage to break through that $1375 manipulation zone, there is very little chance it is going to make it past the $1425 level and 200 day moving average before this daily cycle tops. At that point gold will almost certainly drop down into a daily cycle low that will retest the $1350-$1375 level before making another attempt at penetrating the $1425 zone.
What I'm trying to say is that there is no compelling reason to risk capital right now under the assumption that we are moving higher, because we will almost certainly make this same trip twice. With a major dollar bottom probably only 3 to 4 days away, and manipulation likely to return at $1375 level, it doesn't make a lot of sense to roll the dice right here and hope the rally continues.
If it does continue, then great, it will confirm an intermediate cycle bottom occurred at $1250. But the buy point will still be at the next daily cycle low, which will likely be at about the same level as we're at today.
I know it's hard for many people to sit on the sidelines, but there are times when that is the correct investment strategy. I suspect more money has been lost in the markets due to impatience than just about anything else. With the multiple threats of the $1375 manipulation level and impending dollar rally hanging over this market, I think it's important to not let emotions force one to make a mistake that one logically knows doesn't have to be made at this point.
This market isn't going to runaway from us. Runaway moves occur during a third or fourth daily cycle, not a first. Sentiment is still too depressed during a first daily cycle to generate a runaway type move. And after the kind of bear market we've seen, the bears aren't going to roll over and die easily. They most certainly aren't ready to give up yet. I expect they are going to return in force at the $1375 level while at the same time a lot of savvy longs are going to take profit at that level.
Wednesday, October 23, 2013
Tuesday, October 22, 2013
Monday, October 21, 2013
Friday, October 18, 2013
Thursday, October 17, 2013
QUEST UPDATE
Still hanging in. Closed another trade in the Quest portfolio this afternoon. Current total stands at $3055. Up 1000% over the last two months.
If by some miracle gold is forming an intermediate bottom here it will get a lot easier to keep the quest portfolio in the green and making money. If gold hasn't made an intermediate bottom then it's still going to be very tough to keep our streak alive and the odds will be good that the quest is going to miss a trade soon and quickly go back to $0.
If by some miracle gold is forming an intermediate bottom here it will get a lot easier to keep the quest portfolio in the green and making money. If gold hasn't made an intermediate bottom then it's still going to be very tough to keep our streak alive and the odds will be good that the quest is going to miss a trade soon and quickly go back to $0.
Wednesday, October 16, 2013
Tuesday, October 15, 2013
QUEST UPDATE
We're chipping away at the Quest portfolio. Current total $2655. Up almost 900%.
This got a lot tougher once it became apparent gold's intermediate cycle turned down.
Making money on the short side is much harder than on the long. Markets go down differently than they go up.
Friday, October 11, 2013
Thursday, October 10, 2013
Wednesday, October 9, 2013
Tuesday, October 8, 2013
QUEST UPDATE
We are headed back in the right direction. As of today the quest portfolio is back up to $2430 and up 700% since inception.
Sunday, October 6, 2013
IS THE NEXT BEAR MARKET ABOUT TO BEGIN?
The stock market is finally starting to show signs that the bull market may be coming to an end. Before I go into the stock market though, I want to discuss the dollar because I think currencies are going to be integrally tied to the topping process.
For the better part of the past five years a lower dollar has generally been positive for the stock market. However, we are now five years into QE and I think we are at the point where it's important that the dollar hold its value. At this point I think the stock market is deathly afraid that the dollar is going to crack under five years of continual debasement. As many of you have probably noticed over the last several weeks stocks have been dropping along with the dollar.
We have some interesting currents at play in the currency markets at the moment. It's been my opinion for some time that the dollar would adjust its yearly cycle low from the spring to later in the fall (this will set up next year's yearly and three year cycle low to occur late in the year. This is also the most likely time frame generally for the currency crisis to occur). I think that process is now in play.
For this to come to fruition the dollar needs to move below the February low sometime in the next two or three weeks. Keep in mind that other than a three year cycle low the yearly cycle low is the most intense sell off of the year and generally does not terminate until it looks like the world is coming to an end (we definitely haven't reached that point yet).
I suspect the government shutdown and debt ceiling debacle are going to intensify the dollar's yearly cycle low this year. This suggests that we are going to see a very aggressive and scary decline in the dollar index over the next 2-3 weeks.
I'm expecting the yearly cycle to bottom either on the debt ceiling resolution, or one day either side of it as the market starts to sniff out a deal. At that point I think we're probably going to see a significant intermediate degree rally as the currency markets breathe a sigh of relief.
However, within 1-2 months I also expect the currency markets to come to their senses and realize that nothing has changed and the dollar is going to continue to be debased, maybe even at a faster rate than before. At that point I think the dollar will roll over again and get busy moving down into next year's three year cycle low which should manifest as a moderately severe currency crisis around this same time next fall.
Now let's look at some of the warning signs in the stock market. To begin with, this is the first time in five years that the advance decline line has failed to follow the market to new highs.
In the next chart I have marked each intermediate cycle low with a blue arrow. You can see that the previous intermediate cycle ran quite long as it was stretched by QE 4 to 33 weeks. This is a full 11 weeks longer than a normal intermediate cycle duration. Often a long cycle like this is followed by a short cycle. Note that the last intermediate cycle had 4 complete daily cycles nested within it. I think there is a very good chance that the current intermediate cycle will only have two.
Considering that the current daily cycle is already on day 25 and due for a bottom somewhere between day 35 and day 40, I think the odds are good stocks will follow the dollar down as it makes its yearly cycle low and complete an intermediate degree decline as we move into the debt ceiling deadline on October 17. Since intermediate declines need to be large enough to create true panic, this suggests that we could be in store for a particularly rough 2-3 weeks, as investors start locking in profits ahead of the uncertainty around the debt ceiling and the government shutdown. This process could spiral out of control if the dollar really starts to crater hard.
The closer we get to that deadline with no resolution the more likely the market is to panic, and I wouldn't even rule out the possibility of some kind of semi-crash as we move into the final days up to the deadline. Wall Street may well let Washington know in no uncertain terms they need to get their act together, and do it fast.
I'm even starting to entertain the idea that this will be the initial top of this five-year bull market, although I do expect the topping process to draw out the better part of a year as the Fed will, without a doubt, increase QE above and beyond its current level in a futile attempt to stave off the bear market.
For a more detailed explanation of what I think is coming, I invite you to try a one week trial to the SMT premium newsletter. There you will be able to reference the current weekend report, as well as the current and historical cycles charts of the stock market, the dollar, gold, oil and much more.
One week trial
For the better part of the past five years a lower dollar has generally been positive for the stock market. However, we are now five years into QE and I think we are at the point where it's important that the dollar hold its value. At this point I think the stock market is deathly afraid that the dollar is going to crack under five years of continual debasement. As many of you have probably noticed over the last several weeks stocks have been dropping along with the dollar.
We have some interesting currents at play in the currency markets at the moment. It's been my opinion for some time that the dollar would adjust its yearly cycle low from the spring to later in the fall (this will set up next year's yearly and three year cycle low to occur late in the year. This is also the most likely time frame generally for the currency crisis to occur). I think that process is now in play.
For this to come to fruition the dollar needs to move below the February low sometime in the next two or three weeks. Keep in mind that other than a three year cycle low the yearly cycle low is the most intense sell off of the year and generally does not terminate until it looks like the world is coming to an end (we definitely haven't reached that point yet).
I suspect the government shutdown and debt ceiling debacle are going to intensify the dollar's yearly cycle low this year. This suggests that we are going to see a very aggressive and scary decline in the dollar index over the next 2-3 weeks.
I'm expecting the yearly cycle to bottom either on the debt ceiling resolution, or one day either side of it as the market starts to sniff out a deal. At that point I think we're probably going to see a significant intermediate degree rally as the currency markets breathe a sigh of relief.
However, within 1-2 months I also expect the currency markets to come to their senses and realize that nothing has changed and the dollar is going to continue to be debased, maybe even at a faster rate than before. At that point I think the dollar will roll over again and get busy moving down into next year's three year cycle low which should manifest as a moderately severe currency crisis around this same time next fall.
Now let's look at some of the warning signs in the stock market. To begin with, this is the first time in five years that the advance decline line has failed to follow the market to new highs.
In the next chart I have marked each intermediate cycle low with a blue arrow. You can see that the previous intermediate cycle ran quite long as it was stretched by QE 4 to 33 weeks. This is a full 11 weeks longer than a normal intermediate cycle duration. Often a long cycle like this is followed by a short cycle. Note that the last intermediate cycle had 4 complete daily cycles nested within it. I think there is a very good chance that the current intermediate cycle will only have two.
Considering that the current daily cycle is already on day 25 and due for a bottom somewhere between day 35 and day 40, I think the odds are good stocks will follow the dollar down as it makes its yearly cycle low and complete an intermediate degree decline as we move into the debt ceiling deadline on October 17. Since intermediate declines need to be large enough to create true panic, this suggests that we could be in store for a particularly rough 2-3 weeks, as investors start locking in profits ahead of the uncertainty around the debt ceiling and the government shutdown. This process could spiral out of control if the dollar really starts to crater hard.
The closer we get to that deadline with no resolution the more likely the market is to panic, and I wouldn't even rule out the possibility of some kind of semi-crash as we move into the final days up to the deadline. Wall Street may well let Washington know in no uncertain terms they need to get their act together, and do it fast.
I'm even starting to entertain the idea that this will be the initial top of this five-year bull market, although I do expect the topping process to draw out the better part of a year as the Fed will, without a doubt, increase QE above and beyond its current level in a futile attempt to stave off the bear market.
For a more detailed explanation of what I think is coming, I invite you to try a one week trial to the SMT premium newsletter. There you will be able to reference the current weekend report, as well as the current and historical cycles charts of the stock market, the dollar, gold, oil and much more.
One week trial
Saturday, October 5, 2013
Friday, October 4, 2013
Thursday, October 3, 2013
Wednesday, October 2, 2013
Tuesday, October 1, 2013
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