Sunday, February 27, 2011

GOLDEN FIREWORKS ARE ABOUT TO BEGIN

The gold bull is now on the verge of launching the most spectacular up leg of this 10 year bull market. This spring we should see the final parabolic rally of the massive C-wave advance that began in April `09 with a test of the 1980 high at $860. 

First off let me explain gold's 4 wave pattern (and no it has nothing to do with Elliot wave).

Gold moves in an ABCD wave pattern, driven not only by the fundamentals of the gold market (which I will get into in a minute) but also by the emotions of gold investors and the thin nature of the precious metals market.

The A-wave is an advancing wave that begins and is driven by the extremely oversold conditions created during a D-wave decline (more on that in a second). A-waves can often test the all time highs but rarely move above them. Usually they will retrace a good chunk of a D-wave decline.

The B-wave is a corrective wave spawned by the extreme overbought conditions reached at an A-wave top.

The C-wave is where the monster gains are made. They can last up to a year or more. The current C-wave is now almost two years old. They invariably end in a massive parabolic surge as investors and traders chase a huge momentum driven rally.

Of course as we all know parabolic rallies are not sustainable. So the final C-wave rally ends up toppling over into a severe D-wave correction as the parabola collapses. This is about the time we hear the conspiracy theorists start crying manipulation. In reality all that has happened is that smart money is taking profits into a move that they know can't be sustained. 

Then the entire process begins again.


Next, let me show you the fundamental driver of the secular gold bull. It's probably no surprise to most of you that the Fed's ongoing debasement of the dollar is one of the main drivers of this bull. But let me take this one step further and show you how the dollar's three year cycle drives these major C-wave advances and how the move down into the dollar's three year cycle low always drives a final parabolic C-wave rally. 

Let's begin with a long term chart of the dollar. I've marked the last 7 three year cycle lows with blue arrows. The average duration from trough to trough is about 3 years and 3 months. As you can see the dollar is now moving into the timing band for that major spike down in the next 2 to 3 months. 


The extreme left translated nature (topped in less than 18 months) of the current cycle gives high odds that the final low when it arrives will move below the last three year cycle low. That means that sometime between now and the end of May we should see the dollar fall below the March `08 low of 70.70.

That crash down into the final three year cycle low will drive the final parabolic move up in gold's ongoing C-wave advance. Every major leg down in the dollar has driven a major leg up in gold since the bull began. I really doubt this time will be any different.




I will be watching the dollar over the next couple of months for signs that the three year cycle low has been made. Because once the dollar bottoms and begins the explosive rally that always follows a major three year cycle low it will initiate the severe D-wave correction in the gold market. Gold investors will want to exit at the top of the C-wave if at all possible and avoid getting caught in the D-wave decline.

There is a developing pattern on the gold chart that once it reaches its target will be a strong warning for traders and investors to exit so they don't get caught in the D-wave profit taking event as the parabola collapses.

This T1 pattern is a four part pattern with the first and second legs up being almost equal in magnitude, separated by a midpoint consolidation that allows the 200 day moving average to "catch up". The current T1 has a target of roughly $1650ish once gold breaks out of the consolidation zone. 




The fourth part of the pattern is the D-wave correction which should retrace to test the consolidation zone between $1300 and $1425. At that point the next A-wave will begin and we'll repeat the whole process all over again.

Let me be clear though. I have no desire to buy gold. I doubt I will ever buy another ounce of gold again. The real money will be made in silver during this final C-wave advance and in the miners (I prefer silver miners).

During the last major moves higher in the gold market, miners, which are leveraged to the price of gold, stretched 35% to 45% above the 200 day moving average. At the latest peak the HUI was only 25% above the mean - a strong clue that this was not the final C-wave top.

I expect we will see the HUI stretch 40 to 60% above the 200 DMA at the final top later this spring. But like I said, I really have no desire to buy gold or the major gold miners. The real money is going to be made in silver and silver miners.

Silver has been exhibiting exceptional strength compared to gold for 7 months now. The consolidation on the silver chart is much larger than on the gold or gold miner charts. I expect that massive consolidation to drive silver up to test the old 1980 high of $50 by the time gold puts in its final C-wave top.

The time to get on board is before gold breaks out of the consolidation. Once it does the parabolic move should be underway and your chances of a significant pullback to enter the market will decrease significantly.

I've been helping investors time the gold and silver bull for several years now. If you are the kind of person that needs a coach to keep you focused on the big picture, someone to cut through the meaningless noise of all the myriad top callers and bubble proponents, someone to show you how these long and intermediate term cycles operate so you can actually make money from the gold bull, consider a subscription to the premium newsletter which includes the daily and weekend reports. To subscribe click here. 



Now is the time to act before the bull comes roaring out of the gates and the golden fireworks begin.

Friday, February 25, 2011

Rebate

I've known this has been a problem for quite some time but have just chosen to mostly ignore it. I think it's now time to address the problem of subscribers forwarding the nightly reports.

Realistically there's no
way to police this kind of theft, and if you just want to forward one or two reports to a friend so they can sample the SMT I have no problem with that.

I do have a problem when someone copies the report and forwards it to 20 of his investing buddies though.


I think we can all agree that the price of the newsletter is chump change, especially compared to the profits we made last year or even so far this year for that matter.


I've kept the cost of a subscription down to a reasonable level to where virtually anyone can easily afford a yearly subscription. So price really shouldn't be an issue. 


So here's what I'm going to do. I'm going to give everyone an incentive not to pass on the reports freely. I'm going to rebate $50 for every friend or associate you send to the SMT that signs up for a yearly membership.


If you sign up 4 people your membership for the year is free. If you sign up 8 people not only is your membership free but you will make $200 (go buy some silver Eagles).
 

They have to sign up for a year. They will need to tell me at the time who referred them and give me your email address so I can deposit the funds in your Paypal account. 

There will be no limit to how many people you can refer but I'm not going to try and keep track of this on a yearly basis, and I'm not going to do retro rebates. The program will begin today. It's just going to be a one time rebate of $50 whenever you refer a new subscriber for a yearly membership. 

Hopefully this will be enough incentive to cure this problem.

Wednesday, February 23, 2011

THERE GOES THE FIRST SECTOR

Bear markets begin when something fundamental breaks. Usually the sector initially affected will roll over before the general market and tends to be a warning sign of what lies ahead.

The last bear market was triggered when the credit bubble created by Greenspan's foolish monetary policy burst. It was exacerbated by Bernanke's foolish attempt to debase the currency and reflate the bubble. All he succeeded in doing was to inflate oil to $147, which put the finishing touches on an already crumbling economy.


The market gave us a warning when the financials began to diverge from the rest of the market. Considering that the banks were one of the leading sectors during the `02-`07 bull the fact that they couldn't follow the rest of the market to new highs after the February `07 correction was a big red flag that the bull was on its last legs.



I've been saying for more than a year now that the unintended consequences of QE would be to spike inflation, which in turn would poison the global economy. I knew all along that Ben was never going to create any jobs by printing money and of course he hasn't.

So if
inflation is going to sink the economy and kill the stock market we should see warning signs from the sectors most affected by rising inflationary pressures, just like the banks warned us in `07 that the fundamentals were broken.

Sure enough I think we are starting to see those warning signs. 


Emerging markets have been the hit hard by food inflation. We are now seeing food riots in many third world countries. Emerging markets just like financials during the last bull were one of the leading sectors.
EEM is now starting to diverge from the rest of the global stock markets. It's now on the verge of breaking back below the November cycle low.


The other sector that is extremely sensitive to inflation is the transports. When energy costs spike shipping companies profit margins are squeezed. The last two days have seen the Dow Transports fold under the pressure of surging oil prices. Keep in mind oil is only on the 17th day of its intermediate cycle. That cycle lasts on average 50-70 days. I think we are going to see $5.00 gasoline by the time the dollar collapses into its three year cycle low later this spring.


If the market can recover from the recent correction and make new highs I don't expect the transports will be able to follow. That will set up a Dow Theory non-confirmation and most bear markets begin with a Dow Theory non-confirmation.

China is already in a bear market. I think most emerging markets have probably topped and I doubt the rest of the global markets have more than 2 or 3 months left before the next leg down in the secular bear market begins.


I think the brief party created by Bernanke's printing press is about to come to an end. 

Tuesday, February 22, 2011

$5 EXPIRATION

The 15 month & $5 subscription offers will expire at the end of the day.

Monday, February 21, 2011

$5 FOR FEBRUARY

I think we are on the cusp of an amazing run in the precious metals markets. The time to get on board is now before the train completely leaves the station.

Starting today I'm going to do a $5 for the rest of February offer. For $5 you will get the nightly reports for the rest of the month and access to all historical reports, COT data & terminology document.
 

At the beginning of March this will convert to a reoccurring 6 month subscription. This should be long enough to get new subscribers through the rest of the C-wave and possibly through the D-wave this summer.


If you decide you don't want to subscribe for the 6 months just log in to your account, go to the manage subscription page and cancel your subscription any time before the end of the month. Your subscription will stay active till March and then expire without any further billing.


To activate the $5 special offer click on the link below and click on the $5 February offer.


https://smartmoneytrackerpremium.com/?pagename=Subscribe


I will also reactivate the special 15 month subscription for the next few days. In order to view that option you will need to enter the word smtwebinar in the promotional code box and then click continue.

Thursday, February 17, 2011

DOLLAR ON THE EDGE OF THE ABYSS

The dollar is now poised on the edge of the abyss.

The current intermediate cycle has rolled over and is making lower lows and lower highs. The current daily cycle has formed a swing high and is in jeopardy of rolling over into a left translated cycle. If the dollar breaks below the November intermediate bottom of 75.63 it will be an incredibly bearish sign as not only will the current intermediate cycle have topped in only 4 weeks but the larger yearly cycle will also have topped in only 4 weeks.


If that happens there is little chance the dollar will be able to hold above the March 08 lows as the crash down into the three year cycle low begins in earnest.



This will not only drive the final leg up in gold's huge C-wave it will also drive a huge spike in inflation in all other commodities. Food riots world wide will intensify. The rest of the world will be in an uproar over the collapsing dollar. Spiking commodity prices will collapse discretionary spending just like it did in 08 and 09.

The phony economy driven by Ben's printing press will roll over when he's forced to turn off the presses to halt the dollar collapse. (Just like it started to do last summer when QE ended and the stock market started to collapse.)

The dollar's rally out of the three year cycle low should correspond with stocks beginning the next leg down in the secular bear market and the next brief deflationary period just like the bounce out of the 08 three year cycle low drove the second leg down in the secular bear market.

The rally out of a three year cycle low usually lasts about a year to a year and a half. The next 4 year cycle low in the stock market is due in 2012. I expect that year long rally out of the coming three year cycle bottom to drive stocks down into the next major 4 year cycle trough and drive the CRB into it's next major cycle bottom.


A lot is riding on the next 2/3 weeks. If the swing high in the dollar yesterday does signal the top of the dollar's daily cycle then the November low will almost surely be broken and the chain of events I laid out will be set in motion.

Tuesday, February 15, 2011

PORTFOLIO CHANGE

A portfolio change has been posted to the website.

Saturday, February 12, 2011

SILVER BULL

I've pointed out in the past how consolidation size is usually predictive of how large a move will be once a breakout occurs. I thought I would take a quick look at the silver bull today using that criteria.

As most people know I'm mostly interested in silver during this bull market. I really doubt that I will ever buy another oz. of gold again.


So let's start by taking a look at the long term chart of silver.



As you can see the consolidation principle works perfectly in the silver market. So far we've had three major consolidations and each one as been followed by a powerful rally driven by the size of the preceding consolidation. 

The relevant fact is that the longest consolidation has also produced the biggest breakout. If that continues to hold (and I think it will) then the current rally is probably only half over.

A meager 46% breakout is way too small for a 30 month consolidation.
If I had to guess I would say silver might be in the process of forming a triangle consolidation pattern, especially if gold has one more drop down into a final intermediate cycle low. 


Ultimately I expect this breakout to launch silver to somewhere between $43 and $50 before the next consolidation phase begins. 

Thursday, February 10, 2011

1-2-3 REVERSAL

While I don't think gold is likely to head back down and make a lower low I'm going to lay out a simple strategy to protect against getting caught in case it does.

It appears likely that we may see our first reaction against the new uptrend. This is the #2 test of the lows in a 1-2-3 reversal.



If gold then reverses and breaks through the pivot it will complete the 1-2-3 reversal and it will have begun a pattern of higher highs and higher lows.


That would be the signal that the down trend has been broken and one could add in full positions or leverage (don't get carried away) as they see fit.

The downside is of course one will lose some profit potential waiting for confirmation and if gold reverses the early morning weakness you will just have to immediately buy back.


The action would be to lock in some profits this morning and then wait for the pattern of higher highs and higher lows to complete before putting positions back on.

Tuesday, February 8, 2011

WEBINAR

Sunday night webinar

Sunday, February 6, 2011

SUMMER BREAK

It has been my contention all along that the Fed would print until something breaks. Once that break occurs we will enter the next leg down in the secular bear market. This time I don't expect it to be the credit markets, although we will almost certainly have trouble in the municipal and state bond markets. Some may even default.

I actually think the greater risk is from massive layoffs by state and local governments in an effort to cut expenses and avoid default. When that begins we will see unemployment levels start to spike again.


The real danger is going to come from inflationary pressures unleashed by the Fed's QE programs. We are already starting to see severe inflationary pressures in food and energy and it's already causing social unrest in many third world countries.
Expect this to continue and intensify as we move into the summer months.

Besides starting an inflationary spiral QE is also stretching the stock market cycles.


To explain; The `09 yearly cycle low occurred in March. The 2010 yearly cycle low should have arrived in the early spring roughly 12 months after the March `09 bottom. We did have a decent correction in early February. That should have marked the yearly cycle low. However, because of QE1 that cycle stretched into July, and was more severe that it should have been absent Fed meddling. We even witnessed another mini-crash. A direct result of the extreme complacency generated by the QE driven rally in March and April.


Under normal conditions the cycles would adjust and we would get a shortened cycle this year that should have bottomed right about now. Obviously that isn't going to happen since we don't even have a top yet.


It's now clear that QE2 is going to stretch this cycle also. I now look for the next intermediate bottom to arrive this summer sometime around July (roughly 12 months after the 2010 bottom).


This should correspond with a violent rally in the dollar index as it blasts out of the three year cycle low.



This should mark the beginning of the next leg down in the secular bear market. Confirmation will come if the correction is severe enough to test the July 2010 lows. In a healthy bull market each intermediate correction should bottom well above the prior low (higher highs and higher lows). A move down to the 1050-1000 level will be a clear sign the bull is in trouble.

We should also see the dollar rally out of the three year cycle low force the CRB down into it's 3 year cycle low (actually the cycle runs about 2 1/2 years on average).



And gold down into a severe D-wave correction. (We still have one more parabolic leg up before the D-wave starts.)

Even though I have been expecting the market to correct (into the normal yearly cycle timing band) I've been warning subscribers not to short the market because the dollar is dropping down into a major cycle low. I suspected there was the possibility the dollar collapse would stretch the cycles and make selling short very risky.

The time to short will come once the dollar puts in the three year cycle low and all markets begin the move down into the timing band for the next yearly cycle low this summer.

I will be watching for signs the dollar cycle has bottomed sometime in April or even as late as early May. At that point one might consider looking for a sector, or sectors, that are extremely stretched above the mean to sell short. (Not precious metals though. I never short a bull market.)

Until that time its still too early to play the short side. The odds are better positioning for the final leg up in gold's massive C-wave advance.

Wednesday, February 2, 2011

ENERGY? NO THANKS

Seems like everyone has now jumped back on the energy band wagon.To be precise energy, solar's, uranium and rare earths. I hear it constantly in the media.

However if something has gone up long enough and far enough to garner the attention of the media it's usually closer to a top than a bottom.


For instance, the oil service ETF is now stretched 33% above the 200 day moving average.



One has to wonder how much upside potential is left after a 5 month rally.

What I don't hear anyone talking about anymore is gold or mining stocks (unless it's to tell us that the bubble has popped).

While virtually every other sector has gotten extremely stretched above the mean the precious metal sector, the only sector in the world that is still in a secular bull market, has quietly moved down into an intermediate degree correction.

So when you hear the countless analysts spouting nonsense about the gold bubble bursting, or the fear trade coming off, or any number of ridiculous reasons they dream up for why gold has moved down, you will know the real reason for golds pullback is nothing more complicated than the average run of the mill profit taking event. An event that happens like clockwork about every 20-25 weeks on average.

These intermediate degree corrections are the single best buying opportunity one ever gets during a C-wave advance.

Also in the bullish column, sentiment in the sector has now reached bearish extremes. Even better is the fact that most of the sector has pulled back to long term support, and or tested a major breakout level.


The upside potential in many of the mining sector ETF's and bell weather stocks is now huge, even if they were just to get back to the recent highs.


One has to ask themselves whether they think the profit potential is biggest in a sector where everyone is falling over themselves to buy. A sector that has already had a huge move and is incredibly stretched above the mean.

Or if the odds might be better buying a secular bull market that has experienced a nice pullback. A sector where a return just to the old highs would already constitute a huge gain, not to mention gold should still have one more parabolic move higher this spring as the final leg of this two year C-wave finally tops out.

My money is on the area where no one is looking.

Buffett said it best. "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."


Be sure to sign up for the free webinar this weekend.

Tuesday, February 1, 2011

SUNDAY NIGHT WEBINAR

If you'd like to learn more about trading, gold and the
secular bull market… here's an invitation to a private event.

A long time SMT subscriber has convinced me to go
on a live call and answer your questions about gold, cycles, the stock market and the economy…

Here's what you need to do.. Go here:
http://www.AskAboutGold.info

Enter your name, email address and whatever question
you have for me.


There are less than 150 seats left so register now to get all the details. We will be looking at massive gains from the gold bull in the next few months so don't miss out: http://www.AskAboutGold.info