Friday, February 28, 2014
Tuesday, February 18, 2014
1ST HURDLE CLEARED
The Nasdaq has now broken out above the first of two major resistance zones at 4250. Once it breaks above 4290 there is nothing but air between there and the all time highs above 5000.
The SMT commodity portfolio is leaping higher as coffee surged 9% today and the grains and softs are just starting to join the party. Actually all of the SMT portfolios are racking up nice gains so far this year (currency portfolio, stock portfolio, commodity portfolio, metals portfolio and bond portfolio). I realize most people see this as a gold bug site but I actually think the biggest gains this year will be made in the AG sector.
I think we are in store for another 2010/2011 type year and the frustration of having to endure 2013 will turn out to be well worth the wait.
I think we are in store for another 2010/2011 type year and the frustration of having to endure 2013 will turn out to be well worth the wait.
Friday, February 14, 2014
ANOTHER PIECE OF THE PUZZLE FALLS INTO PLACE
Today another piece fell into place in my Great Inflation scenario that I'm expecting for 2014.
Before I begin let me recap. My overarching driver for the Great Inflation scenario is that the dollar would have some kind of crisis, or semi-crisis late this year as it drops down into its major three year cycle low. All other stock and commodity movements will be driven by this impending currency crisis.
For stocks, I'm expecting a final bubble phase parabolic spike over the next 4-5 months, followed by a devastating crash as the parabola collapses in June or July.
For commodities, I'm expecting a stealth rally for another month to a month and a half, followed by a super spike inflationary phase in the latter half of the year as the dollar collapse reaches maximum intensity.
Today the dollar broke through its intermediate trend line confirming that an intermediate degree decline is now in progress.
Since this intermediate cycle topped on week two in a left translated manner, the odds are very high that the dollar is going to break below the October low before this intermediate cycle bottoms. I'm actually expecting another test of the megaphone topping pattern trend line before this intermediate cycle bottoms sometime in March or early April.
The real damage is yet to come later in the year though.
The next component is the stock market. The movement in stocks over the next 4-5 months is a very important component for the Great Inflation to unfold. Stocks must enter a final parabolic melt up, bubble phase during the first half of this year. The very mild intermediate cycle low that bottomed last week has set the stage for this scenario to begin. In only five days the NASDAQ 100 has already moved back to new highs. This confirms my expectation that we are going to see the NASDAQ test the all-time highs above 5000 before this cyclical bull market comes to an end.
At that point the parabolic advance in the stock market will experience its initial collapse, and I expect the S&P will crash at least back to the 2000/2007 support zone at 1550. This is another critical component for the Great Inflation to unfold as it will cause Yellen to panic, reverse the taper, and probably initiate QE5 & 6. This won't reflate the broken parabola but it will trigger a reaction rally before the collapse continues into a massive bear market that will bottom below 666 sometime in early to mid-2016.
QE 5 & 6 will be the final nail in the coffin for the dollar, and will trigger a full break of the megaphone top. I expect a move below the 2011 and 2008 bottoms before the dollar completes its final three year cycle low.
Commodity markets have already begun the stealth rally that I was looking for during the first half of this year. They successfully tested the 2012 three year cycle low and have now broken through the multiyear downtrend line. The Great Inflation has begun.
During this stealth rally I'm expecting gold to test the initial April breakdown at 1520 over the next 1-2 months.
That should push sentiment levels to bullish extremes from their current depressed levels, triggering an intermediate degree profit taking event into May or June as the stock market finishes its final parabolic blow off top.
As you can see silver sentiment is already recovering nicely and today's move will likely push sentiment to levels next week requiring the metals to pull back and take a breather.
Over the next 4-5 months the easy money is going to be playing the final bubble phase in the stock market. Bubble tops don't come around very often, but when they do traders can make an obscene amount of money in a short period of time.
Once the stock market bubble pops, and Yellen starts QE5 that's the point at which the Great Inflation will begin in earnest, and I believe gold will probably rocket from an intermediate bottom of around 1350-1400 this summer, to test $2000 by the end of the year. This is the phase where the metals become the "easy trade".
Over the next couple of months everything should generally rise together. But once the dollar puts in an intermediate bottom sometime in March or April, commodities and gold will move down into an intermediate correction as the stock market completes its final blow off top. After the stock market parabola collapses later this summer it will be time to put the pedal to the metal in the commodity markets, and especially the precious metal markets as the Great Inflation begins in earnest.
If you are interested in reading my daily and weekend commentary on the movement of the markets, along with accessing the changes in my portfolio positions in real-time and conversing with other investor/traders via my blog, please consider purchasing a $10 trial subscription.
Before I begin let me recap. My overarching driver for the Great Inflation scenario is that the dollar would have some kind of crisis, or semi-crisis late this year as it drops down into its major three year cycle low. All other stock and commodity movements will be driven by this impending currency crisis.
For stocks, I'm expecting a final bubble phase parabolic spike over the next 4-5 months, followed by a devastating crash as the parabola collapses in June or July.
For commodities, I'm expecting a stealth rally for another month to a month and a half, followed by a super spike inflationary phase in the latter half of the year as the dollar collapse reaches maximum intensity.
Today the dollar broke through its intermediate trend line confirming that an intermediate degree decline is now in progress.
Since this intermediate cycle topped on week two in a left translated manner, the odds are very high that the dollar is going to break below the October low before this intermediate cycle bottoms. I'm actually expecting another test of the megaphone topping pattern trend line before this intermediate cycle bottoms sometime in March or early April.
The real damage is yet to come later in the year though.
The next component is the stock market. The movement in stocks over the next 4-5 months is a very important component for the Great Inflation to unfold. Stocks must enter a final parabolic melt up, bubble phase during the first half of this year. The very mild intermediate cycle low that bottomed last week has set the stage for this scenario to begin. In only five days the NASDAQ 100 has already moved back to new highs. This confirms my expectation that we are going to see the NASDAQ test the all-time highs above 5000 before this cyclical bull market comes to an end.
At that point the parabolic advance in the stock market will experience its initial collapse, and I expect the S&P will crash at least back to the 2000/2007 support zone at 1550. This is another critical component for the Great Inflation to unfold as it will cause Yellen to panic, reverse the taper, and probably initiate QE5 & 6. This won't reflate the broken parabola but it will trigger a reaction rally before the collapse continues into a massive bear market that will bottom below 666 sometime in early to mid-2016.
QE 5 & 6 will be the final nail in the coffin for the dollar, and will trigger a full break of the megaphone top. I expect a move below the 2011 and 2008 bottoms before the dollar completes its final three year cycle low.
Commodity markets have already begun the stealth rally that I was looking for during the first half of this year. They successfully tested the 2012 three year cycle low and have now broken through the multiyear downtrend line. The Great Inflation has begun.
During this stealth rally I'm expecting gold to test the initial April breakdown at 1520 over the next 1-2 months.
That should push sentiment levels to bullish extremes from their current depressed levels, triggering an intermediate degree profit taking event into May or June as the stock market finishes its final parabolic blow off top.
Source: sentimenTrader.com
As you can see silver sentiment is already recovering nicely and today's move will likely push sentiment to levels next week requiring the metals to pull back and take a breather.
Source: sentimenTrader.com
Once the stock market bubble pops, and Yellen starts QE5 that's the point at which the Great Inflation will begin in earnest, and I believe gold will probably rocket from an intermediate bottom of around 1350-1400 this summer, to test $2000 by the end of the year. This is the phase where the metals become the "easy trade".
Over the next couple of months everything should generally rise together. But once the dollar puts in an intermediate bottom sometime in March or April, commodities and gold will move down into an intermediate correction as the stock market completes its final blow off top. After the stock market parabola collapses later this summer it will be time to put the pedal to the metal in the commodity markets, and especially the precious metal markets as the Great Inflation begins in earnest.
If you are interested in reading my daily and weekend commentary on the movement of the markets, along with accessing the changes in my portfolio positions in real-time and conversing with other investor/traders via my blog, please consider purchasing a $10 trial subscription.
Saturday, February 8, 2014
THE GREAT INFLATION OF 2014
For over a year now I've been expecting 2014 to be the year when the unintended consequences of five years of QE come home to roost. By the end of the year we are going to have a massive inflationary spike in commodity prices that will collapse the global economy. It's all going to start with a final manic melt up phase in the stock market over the next 3-4 months. Make no mistake, this bull market will not be over until the NASDAQ tests it's all time high above 5000.
Over the next 3-4 months we are going to see the public pile into the stock market exactly like they did with tech stocks in 2000, and real estate in 2005.
Completing the final bubble phase in the stock market is the first component necessary for the Great Inflation. During this period commodities are going to start to rise in a stealth rally that everyone will ignore because they will be focused on the stock market. The CRB has already broken out of its three-year downtrend.
At some point later this year, probably in May or early June the stock market parabola will collapse. This is the second component necessary to initiate the Great Inflation. When the crash begins the inflation stored in stocks will flow into the commodity markets. This process will be exacerbated as Yellen reverses the taper and doubles down on QE to try and reflate the stock market bubble. This will be like throwing gasoline on a fire, and will drive commodity prices through the roof into the end of the year and probably the spring of 2015.
The Fed is going to make the exact same mistake they did during the last decade. Their easy monetary policy has produced a bubble in stocks just like it produced a bubble in real estate in 2005. When the bubble implodes the Fed will try to reflate. They won't succeed in reflating the broken stock market parabola, but it will trigger an explosion in commodity prices. The rapid spike in commodity prices will collapse the global economy just like it did in 2008.
Because the artificial and manipulated bear market of the last year has severely damaged the supply side of the market, I expect the precious metals will be the largest beneficiary during the Great Inflation of 2014.
By this time next year all of the Chinese/Russians/Indians, etc. who have been scooping up gold over the last year are going to look like geniuses.
Over the next 3-4 months we are going to see the public pile into the stock market exactly like they did with tech stocks in 2000, and real estate in 2005.
Completing the final bubble phase in the stock market is the first component necessary for the Great Inflation. During this period commodities are going to start to rise in a stealth rally that everyone will ignore because they will be focused on the stock market. The CRB has already broken out of its three-year downtrend.
At some point later this year, probably in May or early June the stock market parabola will collapse. This is the second component necessary to initiate the Great Inflation. When the crash begins the inflation stored in stocks will flow into the commodity markets. This process will be exacerbated as Yellen reverses the taper and doubles down on QE to try and reflate the stock market bubble. This will be like throwing gasoline on a fire, and will drive commodity prices through the roof into the end of the year and probably the spring of 2015.
The Fed is going to make the exact same mistake they did during the last decade. Their easy monetary policy has produced a bubble in stocks just like it produced a bubble in real estate in 2005. When the bubble implodes the Fed will try to reflate. They won't succeed in reflating the broken stock market parabola, but it will trigger an explosion in commodity prices. The rapid spike in commodity prices will collapse the global economy just like it did in 2008.
Because the artificial and manipulated bear market of the last year has severely damaged the supply side of the market, I expect the precious metals will be the largest beneficiary during the Great Inflation of 2014.
By this time next year all of the Chinese/Russians/Indians, etc. who have been scooping up gold over the last year are going to look like geniuses.
Tuesday, February 4, 2014
THE LAST GREAT BUYING OPPORTUNITY
It's been my opinion now for a the last year that the bull market that started in March of 2009 at 666 on the S&P would come to an end either in late 2013, or early 2014. I'm confident that will be the case, but based on the cyclical pattern of the current decline I believe we still have one last leg up before this bull comes to an end. I think the intermediate decline now in progress is going to create the conditions for a final manic melt up phase over the next 2-3 months to complete this huge parabolic structure that the Fed has constructed with 5 years of QE and 0% interest rates.
We've come this far and tested the 2000 reaction high, I have to think we're probably going to go all the way and test the all-time highs on the NASDAQ before this bull market comes to an end.
A similar percentage advance would place the S&P 500 at roughly 2200 points which when completed would represent a massive parabolic structure that when it collapses will tip the globe over into the next recession/depression.
So when do we buy stocks you ask? Should we buy today? The answer is, no I don't think the intermediate decline is done just yet. We first need to break the intermediate trend line to confirm this as an intermediate degree correction.
At the very least I think the S&P needs to retrace 50% of its recent intermediate rally. That comes in at roughly 1700-1705.
On a cyclical basis the current daily cycle is on day 31. The average duration from trough to trough for a daily stock market cycle is 35-40 days. So it's still just a little bit early for this cycle to bottom.
There are two events coming over the next week and a half and I'm pretty sure one of them is going to serve as the trigger for this daily and intermediate cycle to bottom, and the melt up phase of this bull market to begin.
The first is the employment report Friday morning. The second is Janet Yellen's Humphrey Hawkins address next Tuesday. Before or during one of these two events I think stocks will make a final plunge to test that 50% retracement/200 day moving average. That's the point where retail investors will panic and professional traders will be loading up the boat for the final run of this bull market.
The one caveat is, if the stock market were to crash 150-200 points over the next 5-6 days then it would signal the parabolic structure is already in collapse and the top of this bull market occurred earlier this month.
I don't really think this is going to be the case as the current intermediate rally lasted 30 weeks. That's not how a final intermediate degree move should behave.
When we do get a final top I expect it will come around week 10-12 of the then current intermediate cycle. An intermediate cycle that tops on week 30 just doesn't have enough time to complete an initial bear market move. So what I'm looking for once we complete this bottom sometime in the next 4-6 days will be a 2-3 month rally that will top sometime in late March to mid-April. That would give us a final intermediate top somewhere around that 10-12 week period. At that point we should get an 8-10 week crash as the parabolic structure collapses. The initial target would be the 2000/2007 all-time highs followed by a final bear market bottom in early to mid-2016.
Over the next week and a half I will be watching for certain timing signals to try and determine whether the bottom is going to come on Friday's employment report, or on the Humphrey Hawkins address next Tuesday. Either way, we should be on the verge of entering another bubble phase very similar to 1999, with the caveat that we not see a 150-200 point crash over the next 4-6 days.
We've come this far and tested the 2000 reaction high, I have to think we're probably going to go all the way and test the all-time highs on the NASDAQ before this bull market comes to an end.
A similar percentage advance would place the S&P 500 at roughly 2200 points which when completed would represent a massive parabolic structure that when it collapses will tip the globe over into the next recession/depression.
So when do we buy stocks you ask? Should we buy today? The answer is, no I don't think the intermediate decline is done just yet. We first need to break the intermediate trend line to confirm this as an intermediate degree correction.
At the very least I think the S&P needs to retrace 50% of its recent intermediate rally. That comes in at roughly 1700-1705.
On a cyclical basis the current daily cycle is on day 31. The average duration from trough to trough for a daily stock market cycle is 35-40 days. So it's still just a little bit early for this cycle to bottom.
There are two events coming over the next week and a half and I'm pretty sure one of them is going to serve as the trigger for this daily and intermediate cycle to bottom, and the melt up phase of this bull market to begin.
The first is the employment report Friday morning. The second is Janet Yellen's Humphrey Hawkins address next Tuesday. Before or during one of these two events I think stocks will make a final plunge to test that 50% retracement/200 day moving average. That's the point where retail investors will panic and professional traders will be loading up the boat for the final run of this bull market.
The one caveat is, if the stock market were to crash 150-200 points over the next 5-6 days then it would signal the parabolic structure is already in collapse and the top of this bull market occurred earlier this month.
I don't really think this is going to be the case as the current intermediate rally lasted 30 weeks. That's not how a final intermediate degree move should behave.
When we do get a final top I expect it will come around week 10-12 of the then current intermediate cycle. An intermediate cycle that tops on week 30 just doesn't have enough time to complete an initial bear market move. So what I'm looking for once we complete this bottom sometime in the next 4-6 days will be a 2-3 month rally that will top sometime in late March to mid-April. That would give us a final intermediate top somewhere around that 10-12 week period. At that point we should get an 8-10 week crash as the parabolic structure collapses. The initial target would be the 2000/2007 all-time highs followed by a final bear market bottom in early to mid-2016.
Over the next week and a half I will be watching for certain timing signals to try and determine whether the bottom is going to come on Friday's employment report, or on the Humphrey Hawkins address next Tuesday. Either way, we should be on the verge of entering another bubble phase very similar to 1999, with the caveat that we not see a 150-200 point crash over the next 4-6 days.
Saturday, January 25, 2014
THE MOST DANGEROUS CHART IN THE WORLD
Last month I warned about the bubble in the stock market, and what was going to happen when it popped. Make no mistake the chart of the S&P is the most dangerous chart in the world. When this parabolic structure collapses, it is going to bring down the global economy.
My initial target for this rally was a test of the reaction high on the NASDAQ in 2000. As you can see we came within just a whisker of hitting that target.
After what happened on Friday I think we can safely assume that the current daily cycle has now entered its declining phase. As I have noted before, the average duration trough to trough for the daily cycle in the stock market is 35-40 days. Friday was day 24. We should expect a bottom probably on the next employment report on February 7.
Now here's the thing, I expect the Fed, and the plunge protection team to go into full panic mode this weekend, come out Monday morning with guns blazing, and try to stop the sell off. Unfortunately this behavior is what has allowed this parabolic structure to develop. Every time the market has tried to correct over the last year the Fed has prematurely aborted the sell off. I'm pretty sure they are going to try again next week. If they succeed then we will probably have a final panic melt up phase with the NASDAQ testing the all-time highs above 5000 over the next 2-3 months.
If on the other hand the selling pressure overwhelms the plunge protection team and starts to spiral out of control next week then we are witnessing the breaking of the parabola and the end of this bull market.
Here's what we need to watch next week. If the Fed can turn this market around and prevent the S&P from breaking through this intermediate trend line over the next two weeks, then this will turn into just a normal daily cycle correction and will be followed by a fifth daily cycle that should include the melt up phase of this bull market.
If on the other hand the selling pressure overwhelms the plunge protection team's efforts to hold it back and breaks through that intermediate trend line early in the week then we are witnessing the collapse of the parabolic structure and I wouldn't expect it to stop until we reach the 2000 and 2007 previous bull market high support zone.
Back on January 3 I instructed my subscribers to buy long-term puts on the market to take advantage of the collapse as I knew it was eventually coming. We should know by early next week whether or not those puts are going to pay off huge in the next two weeks or whether we will take a modest profit and reenter them at NASDAQ 5000.
Whether the parabolic structure collapses next week or in two months we all know what the Feds response is going to be. They are going to reverse their taper decision and double or triple down on QE. The problem is that when a parabolic structure collapses it can't be put back together. My theory all along has been that when the stock market bubble pops the Fed would then completely destroy the dollar trying to pump it back up and that liquidity would then flow into the commodity markets instead of the broken parabola of the stock market and create another inflationary event similar to 2008.
Those people that say we have to have wage and employment growth in order to generate inflation are ignoring recent history. We had a severe inflationary event in 2008 while the economy was already in recession and unemployment was surging.
You don't need wage growth to have inflation. You just need a central bank to destroy your currency. The Fed has already destroyed our currency. At the moment the inflation is being stored in the stock market, bond market, and echo bubble in the real estate market. When those bubbles pop the inflation is going to flow back into the commodity markets.
My initial target for this rally was a test of the reaction high on the NASDAQ in 2000. As you can see we came within just a whisker of hitting that target.
After what happened on Friday I think we can safely assume that the current daily cycle has now entered its declining phase. As I have noted before, the average duration trough to trough for the daily cycle in the stock market is 35-40 days. Friday was day 24. We should expect a bottom probably on the next employment report on February 7.
Now here's the thing, I expect the Fed, and the plunge protection team to go into full panic mode this weekend, come out Monday morning with guns blazing, and try to stop the sell off. Unfortunately this behavior is what has allowed this parabolic structure to develop. Every time the market has tried to correct over the last year the Fed has prematurely aborted the sell off. I'm pretty sure they are going to try again next week. If they succeed then we will probably have a final panic melt up phase with the NASDAQ testing the all-time highs above 5000 over the next 2-3 months.
If on the other hand the selling pressure overwhelms the plunge protection team and starts to spiral out of control next week then we are witnessing the breaking of the parabola and the end of this bull market.
Here's what we need to watch next week. If the Fed can turn this market around and prevent the S&P from breaking through this intermediate trend line over the next two weeks, then this will turn into just a normal daily cycle correction and will be followed by a fifth daily cycle that should include the melt up phase of this bull market.
If on the other hand the selling pressure overwhelms the plunge protection team's efforts to hold it back and breaks through that intermediate trend line early in the week then we are witnessing the collapse of the parabolic structure and I wouldn't expect it to stop until we reach the 2000 and 2007 previous bull market high support zone.
Back on January 3 I instructed my subscribers to buy long-term puts on the market to take advantage of the collapse as I knew it was eventually coming. We should know by early next week whether or not those puts are going to pay off huge in the next two weeks or whether we will take a modest profit and reenter them at NASDAQ 5000.
Whether the parabolic structure collapses next week or in two months we all know what the Feds response is going to be. They are going to reverse their taper decision and double or triple down on QE. The problem is that when a parabolic structure collapses it can't be put back together. My theory all along has been that when the stock market bubble pops the Fed would then completely destroy the dollar trying to pump it back up and that liquidity would then flow into the commodity markets instead of the broken parabola of the stock market and create another inflationary event similar to 2008.
Those people that say we have to have wage and employment growth in order to generate inflation are ignoring recent history. We had a severe inflationary event in 2008 while the economy was already in recession and unemployment was surging.
You don't need wage growth to have inflation. You just need a central bank to destroy your currency. The Fed has already destroyed our currency. At the moment the inflation is being stored in the stock market, bond market, and echo bubble in the real estate market. When those bubbles pop the inflation is going to flow back into the commodity markets.
Wednesday, January 22, 2014
PATIENCE REQUIRED
In my last post I noted that gold could give a major buy signal in the next 2-3 weeks. Let me stress again that patience is required right here. Gold has to confirm the intermediate rally first. That means it needs to break above $1268 and make a higher high. If it doesn't do that then no buy signal will be generated. Without a reversal of the pattern of lower lows and lower highs then this is just another weak bear market rally destined to roll over and break the bulls hearts again.
So far every time gold gets close to breaking through the 1250-1260 resistance zone a huge seller materializes, usually in the pre-market, to dump several million oz. of paper gold on the market and drive gold back down. This happened again yesterday.
I can't stress enough that gold has to get above $1268 before the FOMC meeting next week. Gold can't enter the declining phase of it's daily cycle from a position of weakness below $1268. If it does then they are going to beat the crap out of it, and there is a serious threat that they could break the intermediate rally.
If they do break the intermediate rally then we are going to see $1030 gold over the next 4-5 months.
There is a serious war ongoing for control of the paper gold market and the big seller won a major battle yesterday when they prevented gold from holding above $1250. Gold needs to recover immediately and get above $1268 so the declining phase of the daily cycle can begin from a position of strength, not weakness.
So let me stress again: This is still a very dangerous market. The manipulation has not ended. Wait till the next daily cycle bottom before jumping into the sector. That bottom has to hold above the Dec. 31 low, and the only way it's going to do that is if gold can get above $1268 before this cycle tops. That means it's going to have to fight off the continued manipulation that's holding it down.
So far every time gold gets close to breaking through the 1250-1260 resistance zone a huge seller materializes, usually in the pre-market, to dump several million oz. of paper gold on the market and drive gold back down. This happened again yesterday.
I can't stress enough that gold has to get above $1268 before the FOMC meeting next week. Gold can't enter the declining phase of it's daily cycle from a position of weakness below $1268. If it does then they are going to beat the crap out of it, and there is a serious threat that they could break the intermediate rally.
If they do break the intermediate rally then we are going to see $1030 gold over the next 4-5 months.
There is a serious war ongoing for control of the paper gold market and the big seller won a major battle yesterday when they prevented gold from holding above $1250. Gold needs to recover immediately and get above $1268 so the declining phase of the daily cycle can begin from a position of strength, not weakness.
So let me stress again: This is still a very dangerous market. The manipulation has not ended. Wait till the next daily cycle bottom before jumping into the sector. That bottom has to hold above the Dec. 31 low, and the only way it's going to do that is if gold can get above $1268 before this cycle tops. That means it's going to have to fight off the continued manipulation that's holding it down.
Subscribe to:
Posts (Atom)