Saturday, March 29, 2014


As most of you know by now I believe we are going to see a big surge in inflation this year. As I've noted in my previous articles the first leg up in the CRB has run its course and broken the 3 year down trend that's been in place since 2011. I think it's time for the second leg up in that inflation. 
The two-week dip in the CRB has cleared the overbought conditions from the initial surge and I think we will now get one more push to test that 2012 high before commodities experience a more significant pullback this summer to set up the big inflationary spike that I am anticipating to occur during the second half of the year. 
CRB oversold
And don’t forget, any move above that 2012 high will turn this three year cycle right translated.
CRB yearly outlook 2
The previous three year cycle was also right translated. That is confirmation that the secular bull did not expire in 2009 as some analysts suggest. I believe we still have two more big legs up before the commodity bull is done. One should top at the end of 2014/early 2015 and the last leg up should top sometime around late 2017 or 2018.

Those that want to trade hard assets should probably stick with general commodities for the next few weeks though and leave the metals portfolio alone for now. As far as I can tell, virtually all of the other commodities are trading naturally and I don’t foresee a 5000 contract dump in the middle of the night to knock the sugar market back down.
Precious metals on the other hand are being heavily manipulated right now. When gold was turned back down and lost the breakout above the September FOMC manipulation top, that was a warning flag for me to take profits in our metals portfolio. The pre-market attack last Monday to break the intermediate trend line confirmed, at least for me, that the precious metals were again under attack and the forces at work in this market were going to try to extend the bear market. 
gold manipulation events
Notice how gold is now deviating from the rest of the commodity sector. I don't think this would happen in a natural market.
gold CRB deviation
I believe the metals are being set up to take a massive beating when the CRB drops down into its summer correction. During that correction gold will be moving into its yearly cycle low (YCL's are the most damaging correction of the year for any asset). I fully expect the forces controlling the gold market will try to break that double bottom and take gold down to $1050.
Notice that gold's yearly cycle is left translated. Left translated cycles more often than not make a lower low. You have to hand it to these guys; they have played the metals market perfectly over the last year and a half. They managed to manufacture a completely artificial bear market, and now that they have turned gold's intermediate cycle back down they have set the stage to take gold down to $1050 this summer which has been their goal all along.
summer correction
And I think the motivation for this is the same that it has always been. The profit potential after releasing the gold market is much greater from the $1000 level than it is from the $1800 level. Make no mistake the entire purpose of this year and a half long bear raid has been to manufacture a lower D-wave bottom, thereby increasing long side profit potential. In the process they’ve managed to also make some good money on the short side. I think they’ve also intentionally damaged the physical supply side of the metals market knowing that that would exacerbate the rally once the manipulation was released, and the secular trend allowed to resume.
Not only are these guys having a banking cartel manufactured lucrative short trade, they have damaged the physical market enough that we will likely see a huge move from $1050 back to $1800-$2000 over a 4-6 month period once the manipulation is removed at the yearly cycle low.
I think over the next three months J.P. Morgan, HSBC, and Goldman Sachs are going to stretch the rubber band so tight in the metals market that when they finally release it it’s going to generate a surge comparable to what we just witnessed in the coffee market. Unlike the coffee market though, the metals market is big enough that these players can take large positions and make serious money off of that move.
gold yearly cycle low and snap back rally
On a more short-term time frame, and confirming my big picture outlook, notice that the bearish engulfing weekly candlestick was confirmed by a strong downside push this week.
gold bearish engulfing candle with follow
I’m up in the air as to whether or not gold is ready to bounce out of its daily cycle low on Monday. Now that I am convinced the manipulation is back in control of this market I just can’t trust anything to happen naturally. Heck they already broke the natural daily cycle low that occurred last Thursday and have stretched this cycle way past its normal duration. There’s no telling how long they can make this cycle stretch. $1280 is a logical support zone but they may very well break that just to take out all of the buyers that will likely come in at that level. And while the miners did bounce on Thursday and Friday signaling a possible impending cycle bottom, it’s also conceivable that the bounce over the last two days is nothing more than an oversold bear flag that will breakdown quickly.
GDX bear flag
Despite the partial reversal in the GDX weekly candle, the big picture tells us the rest of the story. As you can see any time over the last year and a half that the miners have dropped below their 10 week moving average, especially if it occurs late in an intermediate cycle, it has almost always signaled that an intermediate degree decline has begun. So I wouldn’t get my hopes up that the banking cartel is going to release this market and a third daily cycle is going to recover to new highs. I think these guys are intent on pushing gold to $1050, and I think they probably have it set up to accomplish that this summer. Notice how the mining stocks are still making lower intermediate lows, and lower intermediate highs. The sector needed to move above last August’s high in order to confirm that the bear market was over, and the cartel aborted that move before it could happen.
gdx weekly
Once gold does get a bounce out of the impending cycle low I intend on taking a large short position in mining stocks to play that move into the yearly cycle decline. For now though I continue to recommend staying on the sidelines in this market, and I would strongly discourage trying to catch the bounce out of the impending cycle low. We simply have no idea when the cartel is going to allow that to happen. It may start on Monday, or it may begin once gold tags $1280. Or the cartel could even drag gold all the way back to $1250 before they allow a short-term bottom to form and gold to generate a dead cat bounce.
Predicting where this market is going to go in the short term would require inside information as to the banking cartel's intentions next week. Unfortunately I doubt they are going to send us a memo on that. However I think we can probably assume that the third daily cycle once it rolls over, is going to be devastating to the precious metals market. And I expect we will also have a fourth daily cycle before the yearly cycle low is complete. That fourth daily cycle will probably take gold back down to $1050 and a final bear market bottom if the cartel has its way. 

So while I know this is tough to hear, as most of you are gold bugs, I am confident that the banking cartel has a purpose, and that purpose is to set up what will probably be one of the most lucrative long side trades in the metals of this entire secular bull market. Our job right now is to be patient and wait for that yearly cycle low later this summer. I think that low is going to drop at least down to retest $1200, and if the cartel has its way, they will push gold back to $1050 before this is over.
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Thursday, March 27, 2014

Monday, March 24, 2014

Friday, March 21, 2014

Saturday, March 8, 2014


Trying to predict short term direction is notoriously difficult, especially in the volatile metals market, but I'm going to take a stab at it today. 

First off let me start with the big picture: For almost a year now I've been saying that the inflation that's been stored in the stock market for the last three years is eventually going to start leaking into the commodity markets. You can see in the next chart that process has begun as smart money investors begin to move capital out of an overvalued and overextended stock market that is destined to top some time during the first half of this year, and into undervalued commodity markets where they are getting a better return on their investment.

While the stock market is up 10% over the last month and a half, the CRB is up 12%. But that's not the whole story. Gold is up 14% in the last two months, oil 15%, wheat 20%, corn 23%, sugar 27%, and the big winners, coffee at 90%, and natural gas at one point over 100%. 

These kind of gains are going to draw more and more capital away from the stock market, at least until commodities form an intermediate top (probably around the first or second week of April). Yes this kind of explosive rally is going to have some kind of corrective move later this spring, but I don't think the rally is done just yet. I'm looking for an acceleration of the move in March to at least test the 2012 high at 320 on the CRB index before commodities enter a multiweek correction/consolidation phase in April and May.

Next week has the potential to begin this acceleration phase if a couple of things fall into place. First off I think we need to see the dollar continue down into its next daily cycle low, potentially on the March 19 FOMC meeting.

I've also taken the liberty of extrapolating on the chart my expectations for the dollar index over the next month as it moves into an intermediate degree bottom. 

If I'm right about the next week and a half, then I'm looking for the dollar to drop down and test the October low between now and March 19. As that level is a major support zone I think we will probably get a strong enough bounce at that point to produce a daily cycle low. However, considering that this intermediate cycle topped on week two I don't think this intermediate decline will be done until the dollar breaks below that October bottom, producing a failed intermediate cycle. So I'm going to look for a shortened daily cycle during the second half of March with a final intermediate bottom probably on the April jobs report. 

With the January and February employment reports coming in very weak, and the March report respectable at 175,000, I think the market is going to want to see confirmation from the April report before the intermediate trend in the dollar reverses.

Make no mistake, currencies are what is driving the commodity markets, not demand, and I don't expect them to top until the dollar index finds its intermediate bottom.

While it's not absolutely necessary, it probably wouldn't hurt if the stock market were to drop down into a half cycle low over the next week and divert some buying pressure into the commodity markets as well. If Ukraine concerns were to flare up again this weekend that could presumably tip stocks over into a mild corrective event for a few days. I'm not sure last Monday's one-day drop qualifies as a true and complete move into a half cycle correction. If that's the case then next week would fit the timing band perfectly for this minor profit taking event that usually occurs around day 18-25 in the stock market daily cycle. (Monday will be day 21.)

So how does this all tie in to next week's move in gold you ask?

Well, if the dollar continues to drop into its daily cycle low over the next 8-10 days, and especially if the stock market lends a bit of a boost by falling into a half cycle low, I think gold should break through this resistance zone at $1350 and move up to the $1380-$1400 level over the next week and a half.

Then assuming that I'm right about a short dollar cycle into the April jobs report, gold should finish its intermediate rally with a test, or marginal break above the $1425 resistance zone in early April before dropping down into a multiweek correction that should form a yearly cycle low sometime in late May to early June.

It's the move out of that yearly cycle bottom this summer where the real fireworks are going to begin in the commodity and metals complex. I'll have more on that in later articles.

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Wednesday, March 5, 2014


Now that the first leg off the bear market bottom has been completed the mining shares have been consolidating for the last three weeks in preparation for another leg up, and I expect the second leg will be almost as powerful as the first.

As gold is now late in its daily cycle I'm looking for one more dip down into Friday's employment report to complete the short-term correction. Then I look for gold's third daily cycle to test the $1425 resistance zone over the next month.

Over the next few days stocks should move up to test or more likely marginally break above 1900 before settling into a consolidation as they await the next FOMC decision on March 19. As stocks settle into this consolidation phase buying pressure will move back into the commodity markets and drive gold aggressively out of the impending daily cycle low.

Then when a third taper also fails to halt the slide in the dollar I look for a mini dollar panic during the second half of March that will drive a very powerful rally in commodities as they move toward an intermediate top.

As gold rallies out of its impending daily cycle low, and especially during the dollar panic later this month, the mining shares should deliver a very powerful second leg up in this initial thrust out of their bear market bottom. I expect GDX will at least test the August highs, and maybe even fill one or both of last April's gaps before the intermediate cycle tops sometime in early to mid-April.

I think traders need to enter initial positions before the close on Thursday, and if gold is down Friday morning after the employment report use the weakness to complete purchases as I think next week miners will break out of the consolidation zone and begin the second leg up of this brand-new bull market.

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Tuesday, March 4, 2014