Entries by Bob Loukas

Gold is Finally Ready to Launch

Summary

Gold appears to have wakened from what has been a very challenging 10 month decline.  Ever since its failed attempt to test the all-time highs last September, it has literally been straight downhill for gold.  But the signs of a trend change are everywhere, and this is evident technically in the charts and within the changing composition of the Cycles.  Be warned we are due a $50 pullback this week towards a Daily Cycle Low.  However beyond that, all indications point to a substantial rally about to take hold.  According to my Cycles analysis, we’re looking at a 10 week gold rally back to the $1,520-50 region.

The Weekly Cycle

There are plenty of reasons to get excited here, as the early developments of this new Weekly Cycle point to a longer term trend change.  Gold is now 4 good weeks into a Weekly Cycle (these Cycle average 20 weeks) which was confirmed once it broke above the declining trend-line and the Weekly Swing Low point (Above $1,301).  The technical indicators show strength is building while the slow moving weekly oscillators are beginning to bullishly cross.  There is no way of knowing for sure how far this Cycle will run, but the early indications are very encouraging as the Cycles on every time-frame are turning higher.

Hard to Believe

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Midweek Market Update Report

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Gold is Starting to Shine

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Gold is Starting to Shine

Within the member reports I outlined that last week's pause below the $1,300 level was very characteristic of the declining Cycles of this past 12 months.  It was at that very point, Day 12-15 where the Cycle would top and very quickly roll-over into yet another punishing Cycle Low.  Technically too all of my tracking indicators and oscillators were at the same level where Cycles typically topped.

But within those reports I’ve also been tracking a bullish secondary scenario that I said held a reasonable (30%) chance of developing.  It was the scenario where the consolidation below $1,300 and the declining Cycle trend-line was part of a Half Cycle Low.  The theory then was that if gold could launch this late in the Daily Cycle, then it would indicate that this could only be a powerful 1st Daily Cycle, and these tend to run between 27-33 days from trough to trough.

Look Out Below

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Bernanke’s Bubble Set For Final Blow

Chairman Bernanke rode into Congress on his white horse today and the markets just “ate it up”.  The man just loves double talk, saying all the right things about the economy while quick to point out that if something doesn’t go to plan then they will be accommodating.  In other words, he has found a way to “have his cake and eat it” and the market is more than happy to go along with it.  If the FED is to tapper, then that means the economy is just fine.  If the economy sours, then they keep buying assets (POMO). 

The FED is viewed as infallible and that has bred a lot of disrespect towards the natural Business Cycle forces.  The market (as it always does near tops) is essentially saying that “this time is different”.  But the kicker is that the economy is getting worse and corporate earnings have flat-lined, despite their heavy hand.  What the market is not pricing in is the FED’s inability to avert what will be an eventual Business Cycle decline down into a recession.  After $3T of asset purchases, all they’ve managed to do is sustain this economy at stall speed, nothing more.  But at the same time they’ve help blow yet another massive bubble as the equity markets have now seriously diverged from underlying fundamentals.       

So thanks to the FED, I have no doubt now that June 24th was a DCL and ICL.  This dramatically alters the Cycle makeup as this is now just Day 16 of the DC.  Still overbought on all time-frames, I expect to see no more than a 40 point drop to the 50dma and a HCL before it's off again.  The current double top showing should have the bears thinking that this is finally the big top.  But I believe otherwise, the market is getting speculative and far too overconfident, and this is what runaways are made of. 

Midweek Market Update Report

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A Blow Off Top is Brewing

A new Cycle puts us on Week 3, and already the weekly RSI is into the “sell zone”.  Typically it takes 7-8 weeks to get up into that region, so any long term bull here should be praying that this is not a new Investor Cycle, they should wish for 2-4 more weeks lower first.  From a breadth standpoint this is supportive of a new Cycle.  The S&P bullish percent index back to 78%, having dipped to only 70%, far short of where an ICL will typically bottom.  Net new highs are healthy at 687, while 81% of S&P 500 stocks are above the 50dma.  Again none of the indicators ever hit traditional ICL levels, so it’s either a new Cycle starting out at overbought levels, or a big bull trap with a very unusual end to an Investor Cycle.    

Running with the Bulls

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