Midweek Market Update – June 25th
This content is for members only
Entries by Bob Loukas
Few Believe Gold Can Shine
Considering that Gold has risen $80 off its low and the precious metals Miners have screamed higher, it's surprising how little bullish cheering we've heard. My discussion forum, Bull & Bear Talk, is very sensitive to Gold, but has barely seen an uptick in traffic during this move. In past moves out of Investor Cycle Lows, Bull and Bear Talk has had an immediate surge in traffic and a significant rise in the number of excited posts.
This is just a small sampling of sentiment, but I think it's telling. We've had a 3 year bear market in Gold that has battered and beaten the bulls into complete submission. All speculative interest and fond memories of the past bull market have been completely erased. This lack of interest was evident in the recent 3rd test of the bear market low - the volume and volatility was much lower than during the first two retests. The bear market has achieved its goal - to clear sentiment on a longer timeframes and lay the foundation for a real change in trend. The view of Gold and its sentiment on longer timeframes is a picture perfect example of the ebb & flow of Cycles.
The $40 "recognition day" last week was obviously more than enough confirmation to declare a new Daily Cycle (Daily Cycle is 24-28 trading days), but it was powerful enough for declaration of a new Investor Cycle (Investor Cycle is 22-26 Weeks) as well. This is the development we’ve patiently waited for. However, on shorter time frames, Gold has pushed the Daily Cycle into an extremely overbought state, so a $20 or more retracement is possible.
This is only a problem for short term traders; a decision to take a new position now at such overbought levels could mean entering just as the market cools off. Nobody ever said that trading is easy, and determining when to enter a fast-moving asset is a frequent dilemma. Getting the trend right is only part of the challenge. Gold's 1st Daily Cycle typically rallies until day 18-20 before topping, so on day 13 here we’re likely to see another push higher before Gold turns down into its 1st Cycle Low. There is no way of knowing how powerful the remainder of the Cycle will be, but the average 1st Daily Cycle adds 10%. If that happens this time, Gold will top at around $1,364.
The Right Turn
This content is for members only
Don’t Let Gold Lock You Out
Although I had become far more optimistic recently and my stance of late had rapidly shifted towards the bullish side, I certainly wasn’t expecting a $40 surge at this point in the Cycle. But that’s gold for you, easily capable of leaving traders behind while making extreme moves. What I like most about this move is that it was not reactionary, it did not respond to a fleeting sound bite. It also did not come from an oversold position where you would expect a natural counter trend bounce. What I had warned members about last night was that gold was looking stronger, and that a move above $1,285 would be completely out of character for a final (falling) Daily Cycle. Any move above $1,285, especially on a closing basis, almost certainly meant that gold had already begun a new Investor (Weekly timeframe) Cycle.
Gold Market Update
This content is for members only
Midweek Market Update – June 18th
This content is for members only
Expectations are Brewing
This content is for members only
Midweek Market Update – July 11th
This content is for members only
A Faithless Rally
Another week has gone by with yet another all-time high. There has been no material change in either the long term outlook for equities or in FED policy, so one can be forgiven for being dumbfounded by the relentless march higher.
However, as I’ve said often during the past 12 months, the current move cannot be quantified. This is the tail-end of one of the strongest bull markets in history, and the forces at play are far too powerful and extreme to be rationalized with traditional metrics. The current move entered into a runaway phase long ago, and the final speculative blow-off is driving non-believers absolutely insane.
By non-believers, I refer to those who fail to understand that markets are often irrational. And that during the end of large cyclical moves, assets can be divorced from underlying fundamentals and can even behave in ways that almost seem counter to them. These extreme moves are self-fulfilling and relentless, and can cause even rational observers to raise the question of whether this time may be different. As humans, we quickly forget that all things in life, and especially in financial markets, move in distinct Cycles. How else is it possible to explain the FED missing some of the largest financial storms in history?
Not For The Faint Of Heart
This content is for members only