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Gold on the Ledge

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Gold on the Ledge

 

Cycle Counts

Cycle Count Observation

Cycle Trend

Cycle Clarity
Daily Day 11 Range 24-28 Days –  4th Daily Cycle Topped  GREEN
Investor Week 18 Range 22-26 Weeks Topped
  GREEN

 

This is my favorite time within any Cycle.  Mostly because it’s one of three points within an Investor Cycle where the probability of getting it right is as favorable as it will ever be.  If played correctly, it’s also the type of setup where your portfolio can be given a significant boost.  In this case, I am of course talking about the final Daily Cycle top, where the move down into the Daily and Investor Cycle Lows is often the most powerful and convincing of events.

Of course, my usual disclaimer is provided here (mostly for any new members).  There are no guarantees to any technical study/discipline.  And although your confidence level in any given setup may be high, it’s still a fine balance between being aggressive and defensive.   On the chart below, I highlight the Day 5 peak in October, near $1,308, where if gold were to exceed any bearish interpretation must be abandoned.

But I doubt we get anywhere near.  So for the current Daily Cycle, all I can say is watch out below!  What I see here is a final Daily Cycle peak occurring on Day 9, right above the 20-dma.  From a timing perspective this is as perfect and as you would expect for a final Daily Cycle.  From a Cycle’s Setup standpoint, the chart below shows a very well constructed Investor Cycle starting in July with two Daily Cycles up and now what will end up becoming three Daily Cycle down.  It should end as a perfect 6-month Investor Cycle trough to trough.  From the way the market sold off last Friday leads me believe that the top for this Daily Cycle is already in.  And the $USD is also consolidating lower into it’s own Cycle Low, meaning that once it begins its new rally this week it with further add pressure to gold.

 

 

 

Providing more confidence that a big Investor Cycle Low is ahead in the December time-frame is by looking at the precious metal miners performance.  I mean just one look at the chart below clearly illustrates how underwhelming they have been and how bearish the chart looks.

Remember that miners are almost always a leading indicator for the gold cycle and they’re currently locked in a sustained downtrend.  Sadly too, the chart technically has plenty of room to support another major selloff before ending in capitulation.

 

 

What the bears should focus on is that we certainly have zero evidence of a prior Cycle Low.  Gold’s weekly Cycle Lows are always very clear events on the chart, which is obvious to me why we have the final capitulation phase of the Cycle still ahead of us.  With now a declining 10-week moving average and a fourth Daily Cycle right in position to turn lower, I’m afraid a major sell-off will be difficult to avoid here.

 

 

Could I be wrong?  Absolutely, I’m not a stubborn analyst, I merely trade with my knowledge of Cycles and the probability they afford.  If I’m wrong, then gold will move higher above $1,308 and traders should immediately flip bullish, as it would indicate a major change in market character.  But honestly, all the history suggests that gold is about to see a $100 fall.  However, it would not be the end of the world for gold, but just another trough in the ebb and flow world of Cycles.  In fact, I look forward to that Cycle Low, as I will be trading it Long aggressively and also plan to add significantly to my store of gold bullion.

 

Trading Strategy

If the market did top on Friday, then the potential downside in gold is such that the type of gains could offer up really massive gain in the portfolio.  It’s the type of high confidence Cycle trade I prefer because it offers an attractive asymmetrical trade, meaning that the risk is fairly well defined and managed, but the potential gains from this type of setup are in the magnitude of 6x or more the risk.

I’ve already entered into some aggressive short Gold and Precious Metals Miners positions.  My risk to capital on each trade is less than 1% because I am using the $1,308 level on gold and the $23.02 level on GDX as my stopping point.

One important aspect of such trades is to always remain patient and allow the trade to unfold.  You always want to ignore the intra-day market gyrations and stick to the plan.  This type of trade will either stop out for a small loss or you want to keep an eye on an early December Cycle Low, nothing before that.  As always though, we should accept what the market gives…or does not.  If the analysis ends up being incorrect, despite the heightened level of confidence, then that is OK too because the trade setup has planned (although do not expect) for that possibility.  Planning for both outcomes affords you the luxury of not having to get emotional on a trade or the need to babysit it.

 

 

 

The Financial Tap – Premium

The Financial Tap publishes a weekly premium member reports. The report cover the movements and trading opportunities of the Gold, S&P, Oil, and $USD, Cycles. Along with these reports, members enjoy access to a real-time portfolio with trade alerts, and constant education on trade and risk management.  Although an important aspect, the service is not only about trade signals.  I want to help traders and investors become better and to learn from experience in a way that will help them develop their own unique strategy/system.

 

Performance

The Financial Tap is primarily geared towards helping traders and Investors become better.  We walk you through the process of Trade Setup and identification through the study of market Cycles.  There is an extreme emphasis placed on Risk Management and on preserving capital.

The Financial Tap portfolio is current;y up 41.1% for the prior 12-months and for the calendar year is up 37%.  In the 10 months of 2017 trading the portfolio has taken 42 trades, for an average of 4.2 trades per month.  As you can see, this is not geared towards day or very active traders.  The portfolio is very patient and deliberate with trade identification and selection.  Of the 42 trades, 34 were winners and 8 were losers, a ratio that is above the 60% average win rate for the portfolio.   All trades are posted in real-time and timestamped.

The portfolio is also a low risk strategy, with aggressive risk management and almost never risking close to 1% of capital on any given trade.  Winners are given the chance to run and losers are cut quickly.  During the past 12 months no options or margin was ever used, and the portfolio sat with more than 50% cash for a significant portion of the time.   Obviously, these are uncommon results even by our own standards and are not necessarily predictive of future performance.

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The Plan is Set

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Gold Will Surprise In More Ways Than One

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Everywhere you turn today, gold is again being dismissed as a relic of the past, totally worthless, non-producing, with no place in any modern day portfolio. During the past 3 years, the gold complex has experienced the progressive stages of fear, capitulation, and despair, all classic bottoming phases of a long term Cycle. The question now is whether this high level of apathy is a symptom of a new secular bear market or a period of “stealth smart money” accumulation.

As an analysts of market Cycles, I’m encouraged by extremes in sentiment, as it correlates well with major Cycle turns. An asset’s price is just a reflection of the collective markets willingness to own it, so it naturally oscillates in response to changing sentiment, over a predictable period of time. Each ebb & flow of a Cycle may not repeat the last, but they sure do rhyme and they are as natural as breathing.

This brings us to the current Weekly Cycle, now standing at week 17 and in the early portion of the timing band for a Cycle Low. We know from experience that the final days of a Weekly Cycle can be thrilling; at times gold could lose $100 in the final 3 sessions. And that cannot be ruled out here, nobody can predict gold’s price movements over short periods of time. What we have is an asset that is in the timing band for a Daily and Weekly Cycle Low, sentiment at extremes, a COT report that is bullish, and miners that are showing relative strength. This is the very environment that spawns new Cycle rallies, not the setup for sustained declines.

 

Gold Weekly Cycle

I have been bearish for a while, for good reason, and I’ve been joined by most analysts of late as gold has fallen further. We’re seeing this reflected within extremely low (the 2nd Lowest of the past 15 years) sentiment numbers. Almost all financial analysts now expect to see a massive breakdown within the gold complex. And the recent Cycle failure and 4+ year lows within Silver has many expecting gold is just a step or two behind.

On the surface, this theory makes a lot of sense, the trend is lower. Gold is behaving in such a way that one can realistically expect a waterfall decline to quickly develop. But before we can entertain that idea, we must consider that this viewpoint has become a far too “scripted” notion. Setups that are so widely circulated and discussed, especially with sentiment at such levels, rarely ever develop that way.

To seriously consider a bear market continuation (from the 2011 top) or waterfall decline, we need to be aware that such developments require room (technically) and time (Cycle count) to transpire. In both cases, this is not an ideal position from which a significant gold sector breakdown could occur. The current deep Cycle count of the Yearly Cycle, the sentiment and technical readings, and even the U.S dollar’s massively stretched and overbought position do not support a sustained gold collapse.

Instead, what we should consider and focus our energy on is the coming Yearly Cycle Low, rather than what is likely to occur in the coming week or two leading up to that low. This current 15 month basing pattern is obviously very important because it is the foundation from which the significant move will be based from. At this time, we don’t know if the that move will be a continuation pattern lower or the next leg higher.  However in both cases, gold’s first surprise is that a significant Yearly Cycle rally is about to begin.

 

Gold Yearly Cycle

Notice how on the monthly chart above, the last 2 Yearly Cycles topped (red arrows) on month’s 4 and 2 respectively, that’s bear market behavior. Both were comfortably Left Translated, meaning that they topped early (Left of Center) and spent the most part of the Yearly Cycle in decline. But in each case, we still witnessed at least an 8 week rally to start each Cycle, in both cases adding at least $300 before topping. Yearly Cycle Lows occur only every 13 to 16 months and by definition coincide with the end of a (shorter) Weekly Cycle. What the evidence clearly shows is that we’ve come to another Weekly Cycle Low juncture, just as the Yearly Cycle is ready to turn here on Month 16.

The point here is that a (quick) loss of the $1,179, June 2013 lows within the next few weeks is a real possibility.  But that reversal will mark the end and the beginning of a new Yearly Cycle. As shown earlier, even within a Bear Market, we see violent counter trend rallies; this coming Yearly Cycle rally should be no different. This rally will dominate the remainder of 2014 and take many people by surprise.

It won’t be until the 2nd or 3rd month of that rally that our next gold surprise will come.  We will need to reconsider at that point whether this current 15 month Yearly Cycle basing pattern was just a continuation pattern (Bear Market) or a basing pattern (Bull Market) to support the next up-leg. It’s at the 2 to 4 month period where a bull or bear market will reveal itself again.

I could offer you an opinion as to where I believe gold is headed in 2015, but I see no point in making such brash predictions. My only concern is with where gold is headed in the intermediate future, that’s where the trade lies today. I will leave it to others who can do a much better job of entertaining you with lofty (biased) calls.

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, $USD, and US Bond Cycles. Along with these reports, members enjoy access to two different portfolios and trade alerts. Both portfolios trade on varying timeframes (from days, weeks, to months), there is a portfolio to suit all member preferences.

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