Gold Traders Almanac

CNBC’s Larry Kudlow is still managing to find shills that are pushing their stock buying BS on tonights show.  Kudlow in his typical hackish style blurted “This is the best stock buying opportunity in 80 or 90 years.”  Our generation has never witnessed sentiment as a supercycle degree bear market ultimately bottoms out but I am sure it’s not like this . The Great Depression was a time characterized by widespread despair and hopelessness,  obviously and unfortunately we are not there yet.  I am not a big fan of using sentiment as a short or intermediate term trading indicator, but on a larger scale I think it can be useful in ”feeling” out the markets potential larger degree inflection points. 

In my last post, I was already positioned short the broad markets and have added to that trade heavily which is well in the money.  In addition, I clearly stated my entry requirements to go long gold and within days they triggered. I jumped in long GLD and GDX(see comment posted.) Both trades are working strongly in my favor.  This post will be brief because nothing has changed and I would encourage anyone to short equities  and buy gold on countertrend pull-backs;  easy way is to just wait for a 3 day correction or  use candlesticks but they don’t always print.  I expect both trends to continue to strengthen over the intermediate term.  The SP 500 has formed a beautiful wave 4, symmetric, limiting triangle that is hellbound to the 600-650 level.  Expect a little reaction at the prior Nov low, another good place to go short as the old low will get blown out.  Gold sure looks stoked to take out its old high from which it can launch to the multiple thousands.

          (Click to enlarge the charts)

    SP 500                            GOLD

So this is the lifetime opportunity every permabear gold bug dreams of!  You may never get another chance to make a fortune so easily while the world enters a new Dark Age.  Keep safe, friends.

Brad

Hope abounds that our new President Obama will somehow accomplish his promised changes of returning us to peace, prosperity, and respect among free nations. Already the signs of reconciliation and selfless sacrifice abound. Take for example the gracious acceptance of government welfare by our financial titans. They are once again dedicating themselves to mobilizing funds for productive, job producing domestic investment and have relinquished their prior predatory, risk-creating, speculation-driven extraction of wealth from taxpayers and the productive economy for their own short term gain. They have set such a fine example, how wonderful to see so many desiring to follow it, from automakers to the porn industry. On the war front, we finally will see our troops withdrawn from Iraq so they can be redeployed in Afganistan. At home, shortly postings for millions of new “green economy” jobs will appear to re-employ the millions that lost their jobs this past year. The list goes on but forgive me, I must get to the charts. 

OK, same old theme, housing and financials lead us out of recessions, right?  Lets see how they are doing:

            BKX                                HGX

The banksters (BKX) have broken down to new lows with a big, huge red candle.  The hucksters (HGX) is in a small consolidation just above its low and getting ready to break to the downside, when this happens the broads will follow.  Here is the relative strength chart of the BKX to the SP 500.  You can see it rallied in anticipation of the Oct bailout, then crashed when it happened, now RS is at a new low, maybe as soon as next week I expect everything to start falling as the new Pres actually takes office. I mentioned before I expect to see these both back at their 1995 levels before any possible bottoming in this bear market.

        BKX vs SP

Here is my SP FCS trading chart:

I closed my short trade from June for a 35% gain, lost a tad on this long signal whipsaw, and now I am fully short again, divided it equally between short the SP and Nasdog.  My advise remains the same, stay safe in cash.  If you must trade then use strict money managment and use signals or advice of someone with a good track record.  Just be happy keeping what you have, you are still better off than most of the crowd bagholding with a 40%+ loss and about to get skewered again.

Next support on the SP is obviously the prior low at 750,  maybe will double bottom here and that would be my most optimistic scenario but I favor a leg down to next major fibonacci support at 630-650.

I still am very suspicious of gold as it continues in a huge downsloping flaglike correction. A solid breakout above that upper trendline will get my attention to try an initial long position.  The HUI formed a nice double bottom and the FCS gave a nice profitable long trade off of it but I am too spooked of the overall market to take a trade and as a rule will start out lightly positioned if and when I do feel more comfortable with the precious metals. I think we have another big deflationary wave about to hit and it will once again take everything down with it.

         GLD                                      HUI  FCS

So there it is my 2009 preview,  looking at my last post I didn’t do to bad, we shall see how this one plays out.  In the meantime stay safe my friends and try devoting your time to a healthier new year.

Brad

Larry Kudlow has once again proven his stupidity as his latest, polyannish, little verbal tic of ”drill, drill, drill,” turned against him as energy markets crashed faster than world stock markets. Now spastic outbursts of “oil price tax cut.” are heard as he peddles his ridiculous notion that the drop in oil prices will save the American consumer and economy.  Remember Goldilocks? That was another of his repetitive utterances heard throughout the 2002-2007 bear market rally referring to an economy that was “just right.”  Well, now everyone realizes how very wrong he was. Kudlow over the years has constantly flipped his view to whatever supports buying stocks and whatever is in favor of “the investor class”  referring to the pig men elite that he represents.  Kudlow has been wrong on everything and should have absolutely no credibility. The real bottom will be in when he is finally expunged from CNBC and replace with a more balanced, objective, fair, and  gracious host. Recently I was watching as A. Gary Shilling, economist and long time deflationist, attempted to explain his four-stage deflationary scenario. He was unable to finish without Kudlow’s continuous bursts of manic blathering.  I really give credit to Gary’s calm persistance trying to get his message through, thinking the whole time why any viewer just as I would not be completely irritated with the rude manner in which Mr. Kudlow talked all over him. I read Mr. Shilling’s book simply entitled “Deflation” back in late 1999 when he was a lonely contrarian in the midst of the “New Economy” and Tech boom. His reseach, analysis and predictions have been right on and I still highly recommend reading his book. Mr. Shilling initially thought there would be an era of “good” deflation primarily caused by excess supply, but lately he has been warning that his view is changing  to one of “bad” deflation created by persistent lack ofdemand. He originally identified potential risks that may cause ”bad” deflation: 1)another long, expensive war and/or 2) massive derivative deleveraging and severe systemic financial distress. Well, now we got ‘em both!    Read the rest of this entry »

The HUI FCS remains on SELL after a dismal year so far at a 15% loss,  still the system has provided a whopping return over the past 6 years trading one tough, volatile market.  In early August, multiple long term indicators went negative and I unloaded all my energy and half of my precious metal long term investments the day before departing to my Canadian home. Unfortunately I am unable to access the internet from that location.  Here are the charts I use for long term positions showing the exit signals and major trendline breaks:

           HUI                            OIH  

                      click to enlarge                     

I am very concerned that despite the current extreme global financial panic and stock market crash gold has not been able to take out it prior two peaks, this to me is very bearish and says that deflation is weighing in stronger than safe haven appeal.

Lets look at the chart:

click to enlarge

The upper trendline is resistance and a rally up to it provides a third watch, solid break out from this level at 950 and I will re-enter.  On the downside, which I currently favor as the likely outcome, the last low at 723 is critical, if it gives I expect a rapid C wave decline to 500-550.  Boxed are some pretty bearish candlesticks suggesting a bearish reversal is near!   The HUI is in full retreat, the major impulse 2-4 trendline has been decisively broken and the 250 level at half the high hasn’t held causing my consternation and belief we have further downside.

  click to enlarge

The .618 retracement is just below at 220 and must be watched carefully!

In my last post, way back in June, I explained the SP 500 was in a large degree C-wave decline and to beware of the viscious nature of such. As previously posted here I exited the market in January, in early June a secondary ALL SYSTEMS SAY GET OUT warning occurred (see post)   Trying to catch C- wave bear rallies is like standing in front of a freight train and fortunately I exited the long trade without a loss before the June short signal. This short trade remains in effect with a big, juicy gain.  It is so much safer to play the short side only, but even that can be stomach wrenching and not conducive to position trading without daytime focus, much experience, and nerves of steel.  During these relentless events, bag holders (buy and holders) are unmercifully and repeatly beaten and teased until they finally get frazzled and bail out at the end. Most of the liquidation here is so-called smart money, most 401K’ers were like deer in the headlights this went so fast.  They are always last to get bulldozed and that will be in the final wave down yet to come.  

So let’s look at this sad picture:

 click to enlarge

Interestingly, I don’t see any real support until 640ish.  Right here the trend mirror tells us there may be a period of consolidation say from this low at 830 to 1080.  Yeah, big range but I will watch this carefully now, either we stay rangebound here, it fizzles fast and down to 620 or if we break back above 1080, could get quite a spectacular rally into early next year before the final plunge.   My twenty year composite cycle turns sharply up Nov-Jan, then we enter a steep downphase for 2009 suggesting the big bear rally into next year scenario.

click to enlarge

We are witnessing a deflationary tsunami brought about by a credit collapse of historic magnitude.  This is a major turning point in our nations history and my view is that we are likely entering a long period of slow growth, extreme consumer retrenchment (death of the American materialist dream), and persistant overall deflation. The magnitude of this pandemic decline of all asset classes at light speed is indicative of a major change in global economic dynamics as immensely leveraged debt implodes.  I am skeptical of the hyperinflationary scenario unfolding here and still hopeful that a complete collapse of the American financial system in relative isolation from the rest of the world is an unlikely event.  In future posts I will further provide reasoning for my position.  For now a mammoth tidal wave of deflation is undeniably crashing on our economic shore:

click to enlarge

So once again my friends stay safe with a little gold (don’t get too attached to it), short term Treasuries, and lots of cash.  Be content preserving your wealth and don’t do stupid things like trading markets without a proven system and discipline!

The HUI FCS has been on a buy signal since early May and I am holding a GDX/GLD split long position. This has been a trade that really tested patience with the system as minor rallies fizzled and most of the time the trade was flat. Finally it looks as though we have hit pay dirt with a nice triangle pattern break out this week. Also, June-July has been a common seasonal change in trend for gold all through this bull market. Hopefully this is the start of a seasonal move up into the end of the year. Gold looks to be ready for another run to 1000 plus. Here is the HUI FCS chart:

click to enlarge

Friday, as the Dow dove and wobbled after the previous days 300+ point plunge the CNBC experts continually debated if this was yet a bear market. After intense discussion the conclusion was that it was just a “crummy” market, not a bear market. Their sophisticated analysis required a market to be 20% off its highs to be labeled a bear market and the Dow ended only 19.5% off its high after the close. Obviously, I am only mentioning this to reinforce what has long been recognized here at the Wall Street Examiner; the incredible amount of worthless misinformation disseminated on corporate Crapvision. Here is the SP 500 chart I use to track bull/bear transitions with a very simple moving average cross over that has reliably made this decision for decades, and one that usually saves waiting for a 20% loss.

click to enlarge

Lee Adler using various technical measures as well spotted a major top forming last Fall and confirmed a bear market shortly thereafter. Again, on Crapvision a Dow 11,300 major support level was somehow identified. Sorry, but I only see minor support there, next major support on my charts falls at 10,750. The SP has major support at 1170, then 1080. I have continually referred to the Philly Banking Index relative performance chart and previously commented that if the last support gives (100% retracement) a total collapse of the broad markets is in the cards. Well, this has swiftly transpired the past few weeks. There is one last stand support which is a simple Gann 50% of a market’s all time high (check where the SP 500 ended its 2000-2002 bear market, yep, precisely at 50%) the BKX is there now, which is only slightly below the 100% last bull market leg retracement. If this level goes, complete decimation can easily take place. Lee Adler has commented he thinks it could go to ehhhh, well, zero. The ramifications of such an event for our nation are very frightening but I now must acknowledge that technically we ARE on the edge of the ABYSS. Here is an update of the BKX/SP relative performance chart:

click to enlarge

The first week of June EVERY broad market indicator I use turned negative. I broke even on the bear rally long trade and now well in the green having gone short 3 weeks ago. My OIH oil service FCS signaled a buy 2 weeks ago and is up slightly, this still would be a good place to buy in yet, I like trading the XLE etf. I continue to see foolish top calling in Crude. I do believe we will see a very significant drop after the top does finally come in due to the parabolic nature of this ascent. Since the beginning of the year I have reiterated to STAY SAFE. Holding cash isn’t easy either with raging inflation but it is still better than losing it.

This bear market has years ahead of it. The loss of confidence in our financial system, goverment, military, and leadership in general over the past 8 years is taking a terrible toll. Trust in American institutions has justifiably been lost and middle America is going to take the brunt of the consequences. The only long term investments I continue to hold are in energy, precious metals, and foreign currencies (primarily Canadian). I have a summer cottage in Northwestern Ontario that may sooner than I think become my year round home.

The HUI FCS gave a buy signal this week and I am long GDX/GLD in halves.  The weekly gold chart printed a bullish harami candlestick formation which has been a very reliable reversal formation in gold (green boxes on chart.)  This has occurred off moderately strong fibonacci support at the first level identified in my last post.  There still remains a much stronger support level just under $800 that remains a much higher probability long term support level for the end of this wave 2 of 3 correction.  In other words, I remain cautious about this trade,  both Raff and DTF indicators now are negative on the weekly charts as well. 

Read the rest of this entry »

Gold dropped over $100 the week following a surge to its all time high price of $1,011 an ounce. The following week, CNBC parrots repeated several times a day that gold just suffered its largest one week drop ever. During the huge move to new highs, gold was infrequently commented upon. This reluctant sentiment was interesting to witness, however now some respectable technical analysts are giving a long term bearish view based on what they interpret as a powerful reversal pattern evident in the HUI gold bugs index.  Read the rest of this entry »

The HUI FCS is currently on a BUY signal and up a bit.  The system suffered a nasty whipsaw but still posted a gain of 3.3% on the last trade; without the whipsaw that trade would be up 15% These types of “losses” are an unavoidable consequence of system trading due to the risk containing aspect of any trend following system.  The FCS has captured nearly a 30% gain (current trade included) of this larger degree move up that commenced last August.  A buy and hold if you had timed it perfectly would have you at a 50% gain.  I have received several e-mails commenting on the systems reduced performance particularly since this latest whipsaw and strongly advised they view a valuable trading lesson found at this link:  http://www.youtube.com/watch?v=xK0Xep5j2SM Here is a chart of comparative performance of the HUI versus gold.  So far the 0.5 ratio has held steady but the increased volatility of the miners has been the culprit in robbing performance with the FCS system.  In my last post I suggested trading 50:50, GDX:GLD positions as a way to possibly increase returns. However, these relationships can change very quickly and generally in the past as strong rallies in bullion unfold the miners gain relative strength and end up outperforming gold, that is, the Gold:XAU ratio declines as rallies mature. I am going to stick to GDX only trades. Read the rest of this entry »

The HUI FCS issued a BUY signal this past Monday and so far the trade is up 7.5%  This signal occurred with a confirming pattern trade, a triangle break-out, adding to its validity and profit potential.  The mining stocks have been struggling compared to gold itself and GDX is underperforming bullion since this move up began last year.  In addition, the volatility has been substantially higher in the stocks, especially in corrections.  I have posted a perf chart of GDX versus GLD to illustrate this and I would not fault someone for trading the system 50/50, GDX/GLD.

Read the rest of this entry »

The HUI FCS issued a SELL signal today with an 8.2% gainer.  Price behavior is maintaining a very bullish posture and another buy signal will be issued shortly.  I am looking at the daily wave count and maybe this is completing as a flat with this being the final wave down to a low very soon.  But a much more likely and easier to enter completion pattern would be a triangular consolidation for the Y wave (see chart).  A non-limiting type that really coils up with a huge drop in volatility would be so cool right before the third of a third wave rips through HUI 500 and gold $1000!Either way the HUI 410-420 level should hold up.

   click to enlarge

Read the rest of this entry »