Sample Premium Report published on May 15th, 2016.

 

 

Gold Cycle

Cycle Counts

 

Cycle	Count	Observation	Cycle Position	Cycle Clarity
Daily	Day 16	Range 24-28 Days – 1st or 2nd Daily Cycle	Rallying to next DC Top	Green
Investor	Week 3 or 7	Range 22-26 Weeks	New Cycle Rally	Green

Supporting Indicators

Sentiment Level	70% (Up 1%)	Significantly Elevated
Commitment of Traders (COT)	Blees Rating – 3 (0-100)	Extremely Bearish (Slight Improvement)
Primary Trend (Weekly Chart)	Down – (Possible Change)	Bearish to Neutral

Gold has reached an interesting crossroads, but it’s not alone in doing so.  All of the assets that we track are at similar inflection points in their own Cycles.  The inter-connectivity between Cycles is on full display, and is currently showing a high degree of both positive and negative correlations between assets.

The Gold sector is doing well, and has held up after impressive gains.  It has seen a couple of weeks of price consolidation, but no serious selling.  This points to a strong underlying bid, and is reflective of a bull market.

After bouncing off the 20dma, Gold has been jammed between the 10dma and 20dma.  It has yet to resume the uptrend, as expected, and the coming week should reveal whether the short term bullish case for Gold will play out.  But whether it does or not, Gold is out of excuses.  If it cannot resume its move higher, the bears will likely take control and drive significant selling on the backside of the current Investor Cycle.

 

The precious metals Miners have also held their huge gains. Normally, once the Miners top, the trip to the next DCL is quick and severe.  But not so this time.  The lack of any real retracement in the Miners is indicative of a Gold Cycle ready to move higher.

The sky above the Miners is not completely clear, however; there are warning signs that should not be ignored.  The Gold Miners Bullish Percent Index is a reliable indicator of a Gold Cycle top, and as shown below, appears to have topped and turned lower.  The Miners are leveraged to Gold, so if Gold has topped, the over-stretched Miners will suffer far greater losses than will Gold.  So any current Longs should be in the metal itself this time around.

 

Nevertheless, markets often fool traders, and commodity bull markets especially so.  History shows that once a Gold bull market has begun, standard technical indicators can be ignored for the first 6 to 12 months.  Gold can be so relentless and unpredictable in rising off of a long term bottom that technical indicators don’t work well for a period of time.  And if you’re still unsure whether Gold is in a bull market, take a look at the price action in the Miners.  Or look at the level of Gold bullion buying, shown below.

 

Looking at the weekly chart, I still believe that a $200 surprise rally is in the cards.  Few others believe such a move is possible, but I still see the setup clearly, and have good skin in the game to capture such a move.

Despite my being positioned for upside, there are still reasons to be skeptical of Gold’s immediate prospects.  Chief among them is the lack of a clear ICL when one was due.  If Gold were to lose the 20-day moving average or the 10-week moving average, the near term bullish case would be negated and I would brace for a more traditional IC price decline.

The lack of an IC price decline is a primary reason that I see the potential for a $200 rally.  And the presence of a (bullish) pennant consolidation, followed by a new high, provides fuel and a target for a move higher.  All of that said, seeing the upside scenario is exciting, and we can’t be so blinded that we forget that it is only one of several possible outcomes.

 

 

Investor Cycle Trading Strategy

I’m Long the Gold ETF rather than the Miners as a precaution.  If Gold breaks down from here, I’ll be out of the position before Gold suffers a 5% decline.  On the other hand, to give the trade the room it would need, a position in the Miners at current levels would need a huge, 20% Stop cushion.

 

Daily Cycle Trader Strategy

I have 2 Long positions in Gold to capitalize on my view that a strong rally is imminent.

 

Portfolio Positions Summary

Open Positions – Investor Portfolio –

30% Long position in GLD.  Stops set to $114.50

Open Positions – Daily Cycle Trader Portfolio –

2 Positions long GLD (Gold ETF)- Bought at $123.19 STOP $114.50

 

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Equities (S&P500)

Cycle Counts

Cycle	Count	Observation	Cycle Position	Cycle Clarity
Daily	Day 27	Range 36-42 Days – 2nd Daily Cycle	Likely topped – Many days before next DCL.	Green
Investor	Week 17	Range 22-26 Weeks	Possibly Topped	Green

Supporting Indicators

Sentiment Level	62% (Down 1%)	High Optimism
Commitment of Traders (COT)	NA
Primary Trend (Weekly Chart)	Flat- (Possible Change to Down)	Neutral to Bearish

In past weeks, we have discussed every conceivable equity bear market scenario.  I continue to believe that equities have already peaked, and that they are in the process of printing a wide top that will eventually give way to a significant move lower.  From the lens of a bear market, the “give way” point appears to be very near.

On the daily chart, the S&P rallied out of the Half Cycle Low before being rejected, essentially at the 20dma.  As I mentioned at the time, the reaction out of the Half Cycle Low would tell the tale for equities.  If the S&P had been able to push to a new high in the 2nd half of the DC, the bulls would have been cheering and the bearish case diminished.  But that’s not what happened.  As it stands today, the S&P is showing a clear, day 9 DC peak and a large, Left Translated Daily Cycle.

This is exactly what we expected, as mapped below.  The resistance at the 20dma turned the S&P lower, so now it’s a question of downside follow-through.  A DCL is at least 10 days away, and that’s plenty of time for the market to inflict serious damage.

 

I’m sure that Readers are tired of hearing about the macro case for an equities price decline, especially when it has not correlated well with stock prices for nearly 5 years.  But I think it will be different this time.

Past equity rallies were induced by quantitative easing (QE), and the correlation between QE and equity prices is very clear.  But now, the FED is backed into a corner.  They are so fixated on moving off of a zero interest rate policy (ZIRP) that there simply is no will to pursue a new round of QE.  And without QE, I don’t believe that stocks can sustain prices at 17 times earnings (PE ratio) in a declining revenue environment.   The FED has lost its ability to, beyond rhetoric, intervene in equities, unless the economy rapidly deteriorates or the stock market loses a rapid 20%.  But if that were to happen, the bear market thesis would have played out.

 

Like Gold, the S&P is at a critical point in its Daily Cycle.  Although the DC hasn’t completely given way, cracks are clearly evident.

Take a look at retail stocks.

 

And the Dow Jones Transportation index has confirmed the negative action.

 

The IC topping pattern is gaining traction, and the action could get ugly.  I am mindful that equities have not broken down yet, so am careful to remain patient and open to all possibilities.  And remember, the bullish case I outlined 6 weeks ago called for a consolidation similar to what we’ve seen before a move higher can begin.

Even so, the bulls should be concerned since the market appears to have chosen a bearish path.  If the current Investor Cycle is to recover, we should see an almost immediate rise in prices from here.  But that’s not what I expect.  I believe that the recent turn lower will soon give way to serious selling.  The Cycle timing is perfect for a top, and the technical indicators (below) clearly show a Cycle that has topped and is turning over.

 

 

Investor Cycle Trading Strategy

I’m still Short with a sizable position.  Unless price rises to exceed the previous all-time high, I will remain patient.

 

Daily Cycle Trader Strategy

I’m now Short 2 positions, and might add a 3^rd if equities break down next week.

 

Portfolio Positions Summary

Open Position – Investor Portfolio –

40% Short the S&P 500 via the ETF – SDS.  Bought at $20.33 and $19.76  STOP $17.26

Open Position – Daily Cycle Trader –

Two positions short the S&P 500 via the ETF – SDS.  Bought at $18.85  STOP $17.90

 

 

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CRUDE OIL

Cycle Counts

Cycle	Count	Observation	Cycle Position	Cycle Clarity
Daily	Day 31	Range 36-42 Days (2nd Daily Cycle)	Near DC Top	Green
Investor	Week 14	Range 22-26 Weeks	Near Top due to Bear Market	Green

 Supporting Indicators

Sentiment Level	40% (Down 1%)	Neutral
Commitment of Traders (COT)	Blees Rating – 32 (0-100)	Bearish – Improved.
Primary Trend (Weekly Chart)	Down	Bear Market Trend

Crude Oil has surprised me.   I expected a Left Translated Daily Cycle, similar to the S&P, but that’s not what we’ve seen.  Instead, Crude’s price has continued to move higher.  It’s not a huge surprise, though.  Crude Oil is coming out of a 12 month, 70% decline, so an overshoot on the counter-trend rally is well within what’s reasonable.

The Right Translation of the Daily Cycle (below) might appear bullish, but I don’t believe that it carries the usual longer-term bullish implications.  I expect that when the equity markets begin to give way, Crude will suffer a serious decline along with them.

 

Since Crude makes extreme moves into and out of Cycle pivot points, an overshoot on the counter-trend rally is not really a surprise.  But regardless of the strength of the rally, I fully expect that the last IC Top will hold, and that the series of lower IC tops common to bear markets will continue.

That being the case, $50.92 should be the ceiling of the current move, although I doubt price will manage to get close to that level.  Crude has had a nice run off the bottom, but it is still a counter-trend move that will turn sharply lower when the selling begins.  I do not know if the February lows will eventually be taken out, but I believe that the bear market will last for several years.  My bias remains to expect downside action from Crude, especially late in a Cycle.

 

 

Investor Portfolio Trading Strategy

No positions.

 

Daily Cycle Trader Strategy

No positions.

 

Portfolio Positions Summary

Open Positions – Investor Cycle Portfolio –

None.

Open Positions – Daily Cycle Trader Portfolio –

None.

 

 

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$US DOLLAR

Cycle Counts

Cycle	Count	Observation	Cycle Position	Cycle Clarity
Daily	Day 9	Range 18-22 Days – (DC #4)	Seeking DC Top	Green
Investor	Week 14	Range 18-22 Weeks	Topped – Failed Cycle – Seeking ICL	AMBER

 Supporting Indicators

Sentiment Level	44%	Slightly Pessimistic
Commitment of Traders (COT)	Blees Rating – 97 (0-100)	Extremely Bullish (Dropped 3)
Primary Trend (Weekly Chart)	Flat	Neutral

The Dollar is showing surprising strength for week 13 of an Investor Cycle.  The reversal off the May 2^nd low has been strong, but the weekly timing is not supportive of May 2 also being an Investor Cycle Low.  So we’ll need at least 1 more Daily Cycle to complete the current Investor Cycle.  With the current Daily Cycle on Day 8 (the location of the last DC top) there is a good possibility that the current Dollar rally has run its course.

 

The Dollar’s downtrend since December remains dominant, and the Weekly cycle count is too early for an ICL.  These two factors lead me to believe that more downside is ahead, with the best case for the Dollar being a double bottom over the next month.  If the worst happens, the Dollar could see a sharp decline to 90 or below.

 

 

Investor Cycle Trading Strategy

No trades for now.

 

Daily Cycle Trader Strategy

No Trades

 

Portfolio Positions Summary

Investor Cycle Portfolio –

None.

Daily Cycle Trader Portfolio –

None.

 

 

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U.S Bonds

Cycle Counts

Cycle	Count	Observation	Cycle Position	Cycle Clarity
Daily	Day 14	Range 20-26 Days – (DC#?)	Approaching Cycle Top	Green
Investor	Week 3 or 10	Range 22-26 Weeks	Unknown	AMBER

 Supporting Indicators

Sentiment Level	54%	Elevated
Commitment of Traders (COT)	NA
Primary Trend (Weekly Chart)	Uptrend	Bullish

 

Bonds are gaining a bid at present, with capital flooding to the perceived safety of the sector.  As with the action in Gold, the Bond market’s Cycles are aligning well with a bear market in equities.

Months ago, I drew a potential Cup and Handle pattern for Bonds, and it’s shown below.  The pattern is now complete, and a continuation of the rally that began in 2014 is likely to begin.

From a Cycle perspective, we have an early IC count regardless of which spot we choose for the last ICL.  An early Cycle count means that Cycles can accommodate a rise in Bonds if equities decline and a flight to the safety of Bonds ensues.

 

 

The Financial Tap – Premium

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, US Bond’s, and Natural Gas Cycles. Along with these reports, members enjoy access to two different portfolios and trade alerts. Both portfolios trade on varying time-frames (from days, weeks, to months), there is a portfolio to suit all member preferences.

NOTE:  It’s just $99 for a full 3 months of membership, a fraction of what one stopped out trade is likely to cost you.  Consider joining The Financial Tap and receive two reports per week and the education you need to become a better trader or investor    See >> SIGN UP PAGE!

 

Bob.

 

 

 

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Natural Gas

Cycle Counts

Cycle	Count	Observation	Cycle Position	Cycle Clarity
Daily	Day 21	Range 20-26 Days – (2nd  DC)	Late in Cycle – Seeking DCL	Green
Investor	Week 11	Range 22-26 Weeks	Potentially topping point.	Green

 Supporting Indicators

Sentiment Level	47%	Slightly Elevated
Commitment of Traders (COT)	Blees Rating – 11 (0-100)	Extremely Bearish (Worsened)
Primary Trend (Weekly Chart)	Down	Bear Market Trend – Possible Trend Change Developing

Watch out to anyone long natural gas here.  This is a precarious setup as natural gas appears to be on the edge of a decent cliff.  The Cycle count is positioned well for a fall, as natural gas is late into the second daily Cycle that topped back on Day 6.  As natural gas closed right below the 10dma, that fall may already be in motion.  Once the trend-line completely gives way, I expect a fast drop into the DCL,

 

 

Investor Cycle Trader Strategy

No trades

 

Daily Cycle Trader Strategy

No Trades

 

Portfolio Positions Summary

Investor Portfolio –

None

Daily Cycle Trader Portfolio –

None.