At this point I think the dollar is the key. If the current daily cycle breaks down and moves below the June lows then the odds favor inflation. If the dollar can hold above the June lows then deflation is probably still in control.Since the fundamentals for the stock market have not improved and the bear still hasn't taken the market to absurd valuations yet, any positive action in the stock market will be based on whether the Fed is successful in breaking the dollar.
As long as the dollar remains below the important 80 level I don't want to be short anything. However I'm really not interested in investing in sectors with impaired fundamentals and that surely includes everything from banks to energy and tech. None of these sectors are going to flourish in a declining global economy
The one sector I continue to like is precious metals. This sector does have improving fundamentals and if the Fed is successful in debasing the currency so much the better.
So far the 5 month consolidation appears to be wearing out most of the bulls, which is exactly what we need to happen for gold to break through the $1000 mark.
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UNG holders or bulls may want to read an interesting blog post.
Hey Gary,
I have a question on timing the exit of the juniors. You've sais you'll exit when the Dow and Gold ratio is 1:1 and/or when this C wave is topping out. So my question is, do you expect this C wave move to be the one that brings the ratio to 1:1?
Thanks
For a writer who has been laughing at when traders blaming on PPT and now speculating Fed short circuted the daily and weekly cycle seems to be ironic.
Although there is a price to pay; Has markets gotten into a stage where they can be manipulated by Fed?
I doubt this move will bring the Dow:gold ratio to 1 but we never know.
Do I think the Fed bought stocks to save the market? Hardly. Do I think some imaginary group of shadowy conspirators bought stocks to save the market? Not really.
Do I think the Fed printed enough money to send the dollar below the last cycle low and potentially below the June low thus pushing liquidity into the market? Yes I do.
No the markets can not ultimately be manipulated over the long term no matter how much money the Fed prints. All that liquidity will eventually result in inflation and probably hyper inflation. Stocks will not hold up in that kind of devastating economic climate.
The age old maxim of not getting something for nothing still remains true.
Folks...
I believe Fed has no role in recent market rally. What happened is all those impatient souls who missed the March bottom and subsequent super rally are in play right now.
btw do read my thoughts at my blog. I can't provide you with fascinating charts. but certainly it has some random thoughts and important thoughts. One of them to keep an eye is a mere 1% upside on weekly closing basis would produce a major Buy signal on DXY
http://tradergalaxy.blogspot.com
i m not sophisticated blogger but don't go on my blogs appearnce..do read it as an input to your thought process. (and not as an final answer)
When everyone is saying the same thing, no body is thinking -- that saying has failed in USD.
The herd seem to have got USD correctly.
How do you counteract now?
I just deal in odds. The odds suggested that about 85-90% of the time the 4 year cycle in the dollar should run at least two seasonal cycles. 85-90% isn't 100%. This may just be that 10% of the time that the trade goes against the odds.
When that happens I just cut my losses as best I can and reevaluate.
It was pretty obvious by the size of my position that I wasn't willing to bet too heavily on the market decline.
Now if one ignores risk control then they are going to get hurt by a 7% move in the market although if you entered shorts when we got the selling on strength signal and exited on Thursday you didn't get hurt that much. Well unless you just got stupid with leverage.
If that's the case maybe you learned a lesson and won't do that again.
All in all the only trade/investment I'm willing to take a large position in is the gold bull. This is why I didn't let go of any of my juniors or silver miners.
Any timing mistakes in this sector will eventually get corrected so I'm comfortable taking drawdowns in order to eventually reach strong hand status.
anonomy
do u think really herd got it right on USD....i don't think so yet!
tradergalaxy (tg)
I will point out that ultimately the Fed is going to destroy the dollar. All we've been talking about here is the timing.
And we also have a major cycle low for US general stock market due in 19 weeks!
The dollar is awfully close to breaking down. I'm looking at the 78 level on the dollar index. Once this level is breached, I expect precious metals related equities to explode.
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