Buy on Cannons

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Is the Syrian rhetoric really to blame for this more than expected weakness, I highly doubt it.  In fact I can barely keep a straight face thinking how ludicrous the idea that potentially striking Syria is bringing the equity markets down.  The simple fact is that this is weaker than expected action for a 1st Cycle Low decline and there appears to be some significant distribution occurring in this market now.  I firmly believe that the more dominant weekly and monthly Cycles are topping out here, but one should not expect the equity markets to simply roll-over.  We’re still seeing a massive influx of retail and margin debt capital which will continue to sustain these markets for the immediate future.

For time being though sentiment has reached fairly extreme (negative) levels and the Cycle has stretched to 46 Days (Average is 38 to 42 days).  Based on the recovery this morning and now a confirmed Daily Swing Low we have to assume that we just left behind a slightly stretched (46 days) Cycle making this just Day 1 of a new Cycle.

Buying the dips at every Daily Cycle Low through out this bull market has been very rewarding, I expect this Cycle to be no different.  Even though I expect the equity markets to head into a massive 4 Year Cycle top in late September to early October, the immediate setup calls for at least a 55 point rally.  Don’t let this opportunity pass, just use yesterday’s intra-day low as a tight stop making an entry here fairly low risk.   

The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report.  The reports cover the movements and trading opportunities of the Gold, S&P, Oil, and $USD Cycles.  Along with these reports, members enjoy access to three different portfolios and trade alerts.  As these portfolios trade on varying timeframes (from days, weeks, to months), there is a portfolio to suit all member preferences.  If you’re interested in learning more about The Financial Tap and the services offered, please visit https://thefinancialtap.com/landing/try#        

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Laying Out Bear Traps

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The Bollinger Bands on the S&P are as tight as I’ve ever seen and there is no doubt now that the Daily Cycle has topped.  This being Day 37 (of an expected 40 day Cycle) this action is certainly part of a decline down towards a Cycle Low.  But the problem (for bears) is that the S&P isn’t dropping in price!  I will grant you that the chart is looking a little “toppy” here, but at the same time the bears have unsuccessfully tried to roll this market over for 17 sessions now.  You will notice that from a technical and detrended price standpoint this Cycle is well and truly approaching DCL levels. 

A divergence between price and technicals here tells me that the S&P is consolidating its massive Cycle gains and is readying for the next leg higher.  I don’t see a significant drop as a real possibility here simply because it’s too early in the Investor Cycle and also now fairly late in this Daily Cycle.  What we’re more likely to see is a solid 1-3 day drop this week to paint a very convincing breakdown, but that would only serve to trap in the bears.  The problem for the shorts is that the Daily Cycle is already deep in its count and it will not support the type of sustained move they’re expecting.    

At this point the 50dma should act as comfortable support, so the downside here over the next few session should be a maximum of 30 points.  Cycles are about time and this lengthy side-ways consolidation is healing the excesses of this past Cycle rally.  Once the selling pressure abates the force of the primary trend should prevail.

The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report.  The reports cover the movements and trading opportunities of the Gold, S&P, Oil, and $USD Cycles.  Along with these reports, members enjoy access to three different portfolios and trade alerts.  As these portfolios trade on varying timeframes (from days, weeks, to months), there is a portfolio to suit all member preferences.  If you’re interested in learning more about The Financial Tap and the services offered, please visit https://thefinancialtap.com/landing/try#   

Gold is Following Through

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This post is a short excerpt from the weekend Financial Tap member report.

Gold spent 11 sessions moving lower from the top of the Cycle, giving back 6% of the gains.  Judging by the blogosphere reaction during that decline I get the impression that very few people believed in this Cycle.  From what I can tell a majority expected gold to once again rollover in a steep decline.  That’s just the problem with bear markets; they scar us to the point where we can’t fully embrace potential when we see it. 

As the longs started bailing out in fear and the bears gained confidence again, gold come out with a 2 session $40 pop.  In its wake gold confirmed an end to the 1st Daily Cycle that in retrospect turned out to be a bullish Cycle.  From the table below we see that 1st Daily Cycles (excludes bear market Cycles) top on average after gaining 10.6% in some 20 trading days.  This daily cycle gained 14.3% to a top taking just 16 days.  In the end it was a bullish 1st Daily Cycle which from a timing standpoint ran the expected 27 day average.

Perfomance of Gold 1st Daily Cycles (2000-2013)

The surge out of the Cycle low regained back half of the prior Cycle losses in just one session.   By the close of Day 2 gold has regained the 10dma and closed above the declining Cycle trend-line, ending what has been a fairly textbook Cycle transition.  In my opinion we’re still looking at a bullish Daily and Investor Cycle that have none of the characteristics matching the Cycles that haunted investors since last summer.  What I expect now is for more follow through early next week with a quick move above $1,348 (current IC high).  This next target will likely offer some resistance with a possible 2-5 session consolidation period.

Ultimately though I believe in this gold Investor Cycle which means I’m expecting a lot from the 2nd Daily Cycle.  Looking back at the prior 2nd Daily Cycles of this 13 year bull market tells me we should expect another 10%+ gain here over the next 17 sessions.  An average gain puts this new Daily Cycle topping out at around the $1,400-15 area by the end of August.  However if we see a similar Daily Cycle to the last one it will be topping out around $1,450. 

Perfomance of Gold 2nd Daily Cycles (2000-2013)

The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report.  The reports cover the movements and trading opportunities of the Gold, S&P, Oil, and $USD Cycles.  Along with these reports, members enjoy access to three different portfolios and trade alerts.  As these portfolios trade on varying timeframes (from days, weeks, to months), there is a portfolio to suit all member preferences.  If you’re interested in learning more about The Financial Tap and the services offered, please visit https://thefinancialtap.com/landing/try#   

The Dollar Showing Signs of a 3 Year Cycle Top

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$US Dollar Cycles

This is only Day 3 of a new Daily Cycle, but the Dollar is struggling to lift off.  Normally after a long decline and consolidation we would be looking at a much more powerful response here.  Since the first Daily Cycle rallied 17 straight days to make new 3 Year Cycle highs, this 2nd Daily Cycle should be following through with more upside.  It's a little early to tell, but so far I'm not impressed with the muted response.

The Daily Cycle Low is showing up clearly on the Weekly chart below, but the 4 week drop it left behind so early in the Investor Cycle is not a bullish sign.  If the powerful start to this Investor Cycle was a true bull market move, then this recent consolidation should have formed as flag pattern and a move to new highs already in motion. 

Instead the initial 4 week surge in June to marginal new Investor Cycle highs now exhibits signs of a bull trap.  Unless this Daily Cycle gets busy putting in a similar rally as it did in the 1st Daily Cycle, then I will remain skeptical.  Because the 3 Year Dollar Cycle is now well past its midpoint, we must now entertain the thought that the recent highs were also the top of the 3 Year Cycle. 

We don’t have any confirmation of a pending Cycle failure, but the recent weakness here is most likely confirming that the FED is not going to be tapering anytime soon.  As long as we don’t experience a crisis like event that would spike the dollar, I believe that the coming equity bear market will force the dollar down towards its own 3 Year Cycle Low.  True equity bear markets normally coincide with a drop in the dollar and the dovish stance the FED will maintain during a bear market ensures the dollar will fall too.     

The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report.  The reports cover the movements and trading opportunities of the Gold, S&P, Oil, and $USD Cycles.  Along with these reports, members enjoy access to three different portfolios and trade alerts.  As these portfolios trade on varying timeframes (from days, weeks, to months), there is a portfolio to suit all member preferences.  If you’re interested in learning more about The Financial Tap and the services offered, please visit https://thefinancialtap.com/landing/try#   

The FED Keeps the Party Going

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Yesterday’s GDP release of a 1.7% gain underscored just how lethargic the economic recovery remains.  Now 4.5 years since the last recession, the fear for the FED is that the business Cycle is in the process of turning over.  Forget the rhetoric that the economy is going to gain steam and start growing quicker; we’ve been hearing this same nonsense since 2010.  The fact remains that the FED is keeping the economy artificially elevated and the best they can do is keep it right above stall speed. 

So when we hear talk of tapering asset purchases, I really do not see how they could do this.  The last time that thought gained any traction bonds sold off very quickly and this forced borrowing costs to spike.  I seriously doubt the FED is going to allow the stock market to tank and interest rates to spike right when the economy looks the most vulnerable.   

The FED’s message in the end was that as long as the economy remains near stall speed then asset purchases at $85 per month will continue.  They say if the economy improves enough then they will begin tapering purchases, but I still see that as being years from reality.  To me the new black swan event is the need for even larger asset purchases.  The thought of a new round of QE is never discussed, but I believe there is a greater chance we see more QE before we see any tapering. 

Yes it was an ugly late day sell-off yestersday, but in my opinion the FOMC was a bullish announcement and the Daily Cycle still has plenty of time before the next DCL.  Consolidation below 1,700 continues and this is understandable as the run towards 1,700 from the last Cycle Low was pretty extreme.  However it should not take long to break out of this zone, and once 1,700 is broken the runaway will enter its final parabolic phase.

The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report.  The reports cover the movements and trading opportunities of the Gold, S&P, Oil, and $USD Cycles.  Along with these reports, members enjoy access to three different portfolios and trade alerts.  As these portfolios trade on varying timeframes (from days, weeks, to months), there is a portfolio to suit all member preferences.  If you’re interested in learning more about The Financial Tap and the services offered, please visit https://thefinancialtap.com/landing/try#   

Gold is Finally Ready to Launch

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Gold is Finally Ready to Launch

Summary

Gold appears to have wakened from what has been a very challenging 10 month decline.  Ever since last September’s rally failed (bull trap) to take out the all-time high set back in 2011, it has literally been straight downhill for gold.  But the signs of a trend change are everywhere now, 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.

With a new Cycle, we’re on the eve of yet another significant rally.  We know from past experience that big Right Translated Weekly Cycles can easily gain 25% before topping.  When we look at the weekly chart there is some volume resistance at the $1,400 area, but besides that it’s clear sky back up to the $1,520-50.  It’s at that area where gold was supported numerous times in the past before eventually collapsing, and it’s at that level where resistance will now be found.  That area is where plenty of trapped longs can still be found and it’s where this coming Weekly Cycle rally will top.  

Precious Metal Miner Confirmation

I love looking towards the miners for confirmation of where gold could be headed.  We know from experience that the miners most often lead gold out of Cycles, and that is especially true around the major turning points. 

The miners are up 20% in just 4 weeks and they’re breaking out of the established bear market downtrend.  Unlike past failed attempts, this time the miners are showing great accumulation volume and rising relative strength.  With the first weekly MACD cross in over year, this is exactly the type of evidence we’ve been seeking to confirm gold has found a major low. 

The strength in the miners chart is showing up on the bullish percent chart.  This is an indicator that measures the percentage of miners that are now showing bullish long term P&F charts.  We've witnessed only one significant rally since the bear market took control early last year.  Coincidentally that was a massive 9 week rally that started almost at the same time last year.  So now with 25% (and climbing) of stocks showing bullish charts, we’re seeing early signs that the miners are breaking the long established trend and beginning a powerful new rally.

COT Confirmation

As seen within the COT reports, the speculative short positions were recently at record levels.  But as is the case at key turning points we’re seeing open interest spike while the record short positions have since receded, evidence they are being forced to cover positions.  That’s a result of this 4 week Weekly Cycle rally, the higher gold moves the more speculative shorts will begin to panic and start covering their positions.  This process creates a sell-fulfilling feedback loop and as they begin to cover their positions they become the driving force of the next big rally.

Courtesy Sentimentrader.com

Gold’s 4 Year Cycle – New Bull Market

I believe the bear market and therefore the 4 Year Cycle in gold is now over, but of course without real confirmation that statement remains just an opinion.  Yes gold has broken the weekly declining trend-line, which confirms a new Investor Cycle.  But to confirm an end to this bear market gold needs a monthly close above $1,423.  That’s currently monthly Swing Low level and with gold’s monthly chart showing early signs of turning, any move above $1,423 will also provide technical confirmation too.  During the 2009-2011 gold bull run every Weekly Cycle topped after week 10.  But since the Aug 2011 top, they have all topped well before week 10.  All forming in Left Translated fashion, those are classic bear market Cycles we experienced.

If gold is to close above $1,423 it will break that trend and it will likely put in the first Right Translated Weekly Cycle (Top after week 10) in over 2 years.  That’s the type of action that will confirm that this is a new 4 Year Cycle and more importantly the end of this bear market.  Although I firmly believe we will get there within the next 12 weeks, only then can we truly entertain the prospect of a new cyclical bull market.

The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report.  The reports cover the movements and trading opportunities of the Gold, S&P, Oil, and $USD Cycles.  Along with these reports, members enjoy access to three different portfolios and trade alerts.  As these portfolios trade on varying timeframes (from days, weeks, to months), there is a portfolio to suit all member preferences.  If you’re interested in learning more about The Financial Tap and the services offered, please visit https://thefinancialtap.com/landing/try#   

Gold is Starting to Shine

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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.

So the bullish scenario is now playing out with that massive upside breakout of the declining trend-line.  It occurred on Day 16 of a Daily Cycle, which was exactly where one would expect it to break-down and drop towards a Cycle Low.  This is extremely bullish and signals that we’re now in a new dominate Investor Cycle (These run 20 Weeks in length) and with it should make very quick work of taking out $1,400 and then $1,500 respectively. 

But first we need some more confirmation; break-outs are often fake-outs.  I suggest traders/investors buy this break-out to avoid being shut out of a potential series of powerful lockout days.  But if the break-out fails and gold falls back below the break-out point, then the reason for buying has been negated and selling positions is a must.

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Bernanke’s Bubble Set For Final Blow

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Chairman Bernanke rode into Congress on his white horse again 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. 

So as June 24th becomes the new ICL, that makes the 5 week decline into the ICL one of the shallowest ever, retracing just 33%.  The Cycle barely cleared out any of the bullish sentiment of that massive 6 month rally, so it only reinforced the notion that FED sponsored market is invincible, that every dip should be bought.  Over confidence is everywhere as the mere mention of fundamentals is scoffed at as being completely irrelevant to this market. 

So it’s no surprise that this new Week 3 (of expected 20 weeks) is starting out in overbought territory.  All of the characteristics and emotions that I remember from the big 2000 and 2007 tops are now firmly in play here and we could well be looking at an equity market that is about to go on one last big push higher.  I’m thinking that we pullback slightly here (40 points max) and then rip higher for some weeks into what will eventually be a big 4 Year Cycle Top.  Of course timing a top is difficult, picking a price even more so. 

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A Blow Off Top is Brewing

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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.    

Here is the problem for the bulls and why they need a good pullback.  This ICL was also meant to be a yearly low too.  But obviously that does not qualify; Yearly Cycle Lows take speculative and over leveraged traders “to the cleaners”.  June 24th simply does not qualify! 

The monthly RSI never dropped below 70 or moved off the top of the Bollinger bands.  From a monthly perspective the needles have barely moved off the overbought levels.  So if we keep going, then any new Investor Cycle has 20 weeks ahead of itself, that’s 5 months into the next low.  I doubt this level of increase can continue for much longer.  Without an ICL and YCL here in the next 4 weeks, this will end up being a short lived runaway or blow-off move that will result in an extended 4 Year Cycle Top.

One thing is for certain, after a 1,000 point 150% rally in just 4 years, this cyclical bull market is right near a top.  I don’t care how much Bernanke talks, recessions are inevitable and we’re approaching the timing for the next downturn.  Markets are cyclical and they always turn right around the time where nobody believes they could.  The bears have capitulated. 

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Gold Needs to Shine Quickly

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If Gold’s Investor Cycle Low were behind us, then this would be one weak and lifeless 1st Daily Cycle.  Typically the rally after a bloodbath Investor Cycle Low is impressive enough where you just know it’s a 1st Daily Cycle.  It doesn’t necessarily need to be a V like rally, but in general you should see broad buying day after day and strong daily closes.  By Day 10, a 1st Daily Cycle has typically gone a long way to recovering much of the previous drop, but here gold has barely made a dent into recovering any. 

So to this point gold has not shown any of the strength that has me thinking this is a 1st Daily Cycle.  I have been a little patient on the Cycle because the dollar was soaring, so I have waited for the dollar to drop to see if gold released quickly to the upside.  Today was that day for gold and unfortunately the dollar’s plunge did not equate into a broad precious metal sector rally.  Again as I observed over the weekend, silver and the miners were both flat again today.  This indicates that there just isn’t any meaningful interest in this sector yet. 

The bearish performance to date likely indicates that once the Cycle ages (Day 15 area) that it could quickly turn down sold aggressively.  This might well coincide with the dollar coming out of its own DCL late next week.  Up until then though, gold still has a chance to prove me wrong, it’s just on Day 9 and its back above the 10dma.  I believe even in the bearish case that gold should have enough steam to get it to $1,300.  But now is its only chance to shine, the Cycle has days 10 to 15 with potentially a falling dollar to really impress.  If the gains cannot come quickly from this setup, then I’m afraid gold is setting up for yet another big fall.

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