Wednesday, March 10, 2010

CRUCIAL TEST APPROACHING

The rally out of the February intermediate and yearly cycle low has now traveled far enough and long enough that it is due to take a short breather. That breather would be in the form of a short term pullback into the midcycle low.

The initial move out of the July intermediate cycle low lasted 22 days before forming a short term top.


The current rally is now on 21 days old and as you can see in the chart very short term overbought. Traders should now start looking for a brief pause in this market. A move back down to the 1120 support zone is probably in the cards some time soon.

I’m also starting to see divergences in breadth and signs that institutional traders are stepping aside for the moment. More on that for subscribers in Tuesday’s market update.

If we are on the brink of an asset explosion, and I think we are, then traders should be prepared to position long in virtually any asset class as we make our way down into this temporary correction.

I expect the stock market will also exert some influence on the precious metals market when it sinks into the low. As a matter of fact at 21 days it now appears gold has already begun the trip down into its next daily cycle low.



As this short term gold cycle is right translated (topped later than 12 or more days) the expectation is for this move to hold above the last cycle low at $1044. It would be a big plus if gold can hold above the last short term dip at $1087 and keep the pattern of higher short term highs and higher short term lows intact.

If it can, then I would be looking for gold to move above the critical $1161 level during the next short term cycle.

If gold can take out $1161 then the pattern of lower intermediate lows and lower intermediate highs will be broken. That will also force a re-phasing of the last intermediate cycle low from December to February. Again more on that in the subscriber newsletter. Suffice it to say that it is critical this re-phasing take place if gold is going to continue higher and not go through another multi month consolidation phase like it did from March 08 to Sept. 09.

So short term expect some weakness in the stock market which will probably continue to rub off on the gold market, but be prepared to buy the dip as this is not over yet.

5 comments:

  1. A left translated cycle is a cycle that tops left of center. For instance, if the rally out of a 3 year cycle low were to top
    out in less than 18 months we would consider it left translated. Generally speaking the majority of cycles that top in
    a left translated manner move below the prior cycle low.

    =============================

    3.12.2010

    Toby,

    Hope this finds you well ...

    A couple of questions please if I may as follows :

    Ok ... assuming this is true, and I do believe that it is, then how can we not know for absolute certain at this point in
    time that this "top" which is forming now (in mid March of 2010), is "not" within the first half of a much longer term
    left translated cycle ? In other words, how do we not know that this three to four year cycle which has begun as bullish
    as it obviously has, is not the bullish beginning of a longer term left translated cycle ? After all, in such a case, wouldn't
    it be true, that cycles are "scalable" and therefore, a left translated four year cycle might have begun (I've never heard of
    a three year cycle such as you mention) in March of 2009, so thus far we've only so far seen twelve months of it, hmm ?
    Such a new four year cycle would begin as this one has "very bullishly", and yet "could" still end up being very bearish in
    the entire four years, or even six, eight, or ten, all of which are only some of the cycle lengths that we do know exist, eh ?

    ALSO ... how do not know for certain, that what appears to be the beginning of the next cycle with the February 5th. low,
    is "perhaps" not "an extension" of the previous year long cycle beyond the "exact" time frame of one year ? After all, a low
    formed on February 5th. 2010, is not exactly one year from the March low of 2009, it was "short" about one month, thus it
    would seem still within the realm of possibility, that we "could" yet head down into a low of eleven or twelve months from
    the year + - cycle which obviously began in March 2009, hmmm ? The "year cycle" does not have to be exactly one year, eh ?
    March 12, 2010 8:42 PM

    ReplyDelete
  2. I answered part of your question on the Brink post.

    Of course anything is possible but the odds are very high that this yearly cycle bottomed just a little early in Feb. instead of Mar. It happens from time to time. Sometimes cycles stretch long too.

    We should now be in a brand new intermediate cycle that should bottom sometime in June or July unless it stretches.

    ReplyDelete
  3. We should now be in a brand new intermediate cycle that should bottom sometime in June or July unless it stretches.

    ---------------

    3.13.2010

    Toby,

    Yes, I know you answered it, I was just checking for a couple of details that I thought you might comment on in a further answer.

    So ... you are anticipating a trough to the new cycle which you are describing as a "intermediate cycle" which is then a sub-cycle of your yearly cycle and I have no problem with that. I believe that there is a distinct possibility that this "intermediate cycle" is going to have two distinct tops, one in March and
    one in late May, so your prediction of June / July
    for a bottom is close to what I see, although I see
    early August as more likely for the final bottom to
    form, and from there I think we "could possibly" go even higher than now or late May by year's end eh ?

    This forum is nice, however, it leaves me no way to communicate with you other than typing into this tiny box which is not desirable, ok ? IF you send an email address, I will be happy to send you one of my own charts which I do imagine that you will be appreciative of due to your level of intelligence and insight regarding such matters, hmmm ?

    Sincerely,
    Lindsay Holt
    Santa Fe, New Mexico USA
    lindsayholt@mac.com

    ReplyDelete
  4. "PS" ALSO ...

    The two relatively recent examples we have to look at
    I do agree with you are 2004 and 2006 ... the situation
    at present has aspects that are reminiscent of both of
    those rally tops, and I also agree with you that a 2006
    type of blow off is now possible, however I'm thinking
    that the current and near term scenario is going to be closer to 2004 simply for economic reasons alone as
    we cannot be in a situation that much like 2006 / 07,
    although your speculation about another $USD drop is obviously quite possible at any time. The
    way I see it though, is that the current surge in the indexes is due to everyone who felt left out or not on the train all through 2009, and is now desiring to catch up so to speak, like you and I, they were so waiting for the first opportunity to get in that all of the indexes globally have taken off too fast here, it would have been far healthier had we at least returned to the 200 day MA which is what we surely will do either now going into April, or as we agree in the coming summer months of 2010.

    LH

    ReplyDelete
  5. Lindsay,
    You minght want to bring your discussion over to the
    SMT
    .

    ReplyDelete