Happy Holidays

I hope all of you have a wonderful Holiday Season.

Dec 18

No bearish setup has worked at all the last two weeks. The 60-min system has turned around again and is back on a buy, and today the Daily system did the same thing. This Santa Rally is now looking and feeling like a much stronger rally. I have no opinion on the short term anymore, other than it being generally bullish.

Dec 15

I think that the rally since the mid-Novemeber low is now over. Of course, take this with a grain of salt because I thought the Dec 3 peak was the top of the rally, which it obviously wasn't. My 60-min system issued a sell on Dec 4, which got reversed and a buy was issued on Dec 10, and the system turned back around and is now on a sell again since Dec 13.

But a slightly more compelling setup has occurred for a turning point with the clear bearish reversal candle posted last week (which *must* be confirmed next week), and the close back at / slightly below the 50 DMA.

My take at any rate.

Dec 10

No time today, very busy. 60-min system rolled back up and is now on a buy again. Looks like we will get a FOMC rally. It will be interesting to see if it turns back down again by the end of the week (which I think is likely). But whatever happens a few days from now, it looks like this rally is still not over.

Dec 4

60-min system rolled over and issued a sell today. Current thoughts as to what is going on:

Nov 30

60-min system is still on a buy signal, but that signal is weakening. Monday should be a telling day either way (is this consolidation before a new breakout above the 50 DMA, or has this sharp move up exhausted itself?).

Stepping back and thinking about the bigger picture: I have been of the opinion that we are now in an Intermediate degree correction, and I have been saying that this pullback will be like "the Apr-June 2010 pullback and not the May-Oct 2011 pullback" in terms of severity.

But I think there is a case to be made that it might be similar in form as well. Here are my current thoughts as to how this pullback might count like:

And here is a look at the Apr-June 2010 pullback. While the recent move down is not analogous to the 2010 'flash crash' in terms of severity, it is certainly similar in form (fast move that accelerated into a spike bottom without even a hint of divergence on a daily chart). The current move up is a sharp retracement to alleviate the deeply oversold condition from a local perspective, and I think it is similar to the move up in early May 2010:

Nov 28

The 60-min System buy signal that was issued Friday 11/16 is still intact. I am still of the opinion that the recent low is a pause before more selling off occurs. Current thoughts:

VIX: Why I don't think this was 'the top' and also why I think the correction is not over

There are many reasons why I don't think we saw 'the top' with the recent peak. See these posts for why:

Thoughts on the Fiscal Cliff
Update on Long Term Projection (08/17/12)
Long Term Projection, Macro, and an Analysis Retrospective

Let me add another to the list, which I have talked about before (see: Yet another reason why I don't think we saw 'the' top (3)), the lack of a long term VIX divergence. The VIX keeps making new 'recovery lows' as the SPX keeps making new 'recovery highs'. This is completely counter to what we saw at the 2000 peak and the 2007 peak where there was a very pronounced VIX divergence that was several months long.

So count me firmly in the camp that we have not seen the end of this cyclical bull market.

That being said, the VIX has also not spiked up on the current pullback the way it has on all the other pullbacks so far in the current cyclical bull. It seems to me that option traders are getting 'clever' with the market. That they think this pullback is already 'overdone' and they won't panic and are ready, if not eager, to preemptively buy this dip.

As I have been saying this past 2 weeks, I think that is the incorrect position to take. I was of that opinion in October, but since November there is too much technical damage to buy the dip now. I think the evidence (including what is shown below) is clearly on the side of the bears for the near term. And I think option traders are on the whole trying too hard to be 'cute' with the market.

I think we will get a much better entry after some more panic early next year.

My take at any rate.

(Update 11/19 7:30) Wow, this projection is very similar to what I am thinking as well. Read all the way to the end: http://pragcap.com/goldmans-kostin-stocks-will-fall-8-further-before-year-end

Nov 16

I still think we are in the middle of this Intermediate Term correction and not near the end of it. Daily chart is still suggesting more downside if I am looking for the correct setup. The 60-minute system issued a buy this afternoon and we are very oversold for the short term. If the market is trying to stage a bounce here, it might try to retest the 200 DMA before continuing down:

Here is my current best estimate for how this wave is playing out, for anybody that cares:

Thoughts on the Fiscal Cliff

Everybody should read this post by Warren Mosler: more on the cliff. I very much agree with all of the macro observations he is making regarding the cliff and what it means for the stock market going forward. I do not think this was 'the top', I think that after a correction we will have a very nice dip to buy.

So, why do I think we will correct more? Why don't I think we are bottoming now? A few reasons: Because of the *uncertainty* associated with the fiscal cliff. Many pundits are saying that there will be some sort of 'deal' / the 'Grand Bargain' struck either before the end of the year or perhaps at the beginning of the year. The latter is the more interesting and 'uncertain' option being waved out. Basically the Democrats want us to go over the cliff 'just a little' to scare Republicans into some sort of deal. This is completely idiotic on two accounts:

1) The political machine has broken down and is playing chicken with the economy to pass legislation. In this regard the markets are reacting commensurately to this action, no one has any idea what to expect for tax planning going into the end of year. What will tax rates be for 2013? How long does this game of chicken get played? What if there really is no deal struck and the full force of the cliff goes all the way through 2013? Combined with a very dismal earnings season that started bad and got progressively worse (and a massive deficit reduction / full force of the fiscal cliff in 2013 would be bad news for corporate profits) has investors nervous for any delay in some sort of deal

2) There is no 'crisis' to begin with regarding the deficit. The private sector is still retrenched and is still saving (spending less than their income) due to the excesses (spending more than their income) accumulated during the housing bubble. They are rightfully repairing balance sheets. Unemployment is still very high but has been slightly coming down, which means that the private domestic sector is starting to come out of it shell but just barely. It is still fragile. Couple this with the fact that we have a trade deficit. Now in the macroeconomy there are three sectors: Government, Private Domestic and Foreign. The Foreign Sector is running a surplus (which is our trade deficit) and the Private Domestic Sector is running a surplus (saving more than their income to pay down debts) then by definition the Government Sector is running a deficit. And since the US won't magically start running trade surpluses any time soon and combined with the fact that the private sector is nowhere near done with its deleveraging cycle, the government will need to continue to run deficits for the next several years. This goal of trying to cut the deficit in the name of 'fiscal responsibility' will deprive the private domestic sector of income while they still need it desperately. The US Government is not a 'super-household', it issues its own currency. It never faces a 'solvency' constraint. The concept of 'fiscal sustainability' is inapplicable to the US Government. And because we have high unemployment and spare capacity (see the summary at the beginning of this post) we can 'afford' to continue these deficits before we start hitting the real constraint, which is inflation. There is no nominal constraint. For a very good and succinct presentation regarding the budget deficit, see this video by Stephanie Kelton. It is well worth 19 minutes of your time. (Update 11/16: Also read this well-timed post by Warren regarding the deficit).

Back to the markets, I still think there will be some sort of deal put in place regarding the fiscal cliff. Even mainstream economists agree that the full force of the fiscal cliff will put GDP negative in 2013 and virtually guarantee a recession. And while the parties are willing to play chicken with this issue, no one will want to accept responsibility for causing a recession.

Therefore I agree with Warren that the deficits although potentially lower will still be high enough to support aggregate demand (and corporate profits) and with the private sector still slowly coming out of its shell will also support aggregate demand (or be less of a drag as was the case in 2008-2011). Combined with the 'certainty' of a deal we should see a resumption of the cyclical bull market sometime early next year.

My take at any rate.

Nov 14

This move is starting to waterfall down as the 200DMA has been lost. This is looking extremely likely now that we are in the middle of an Intermediate Degree correction. As I have said previously, I expect the next intermediate degree pullback to be similar to the Apr-July 2010 pullback and not the May-Oct 2011 pullback.

I have updated my PPO chart with an overlay of the Apr-July 2010 pullback depth applied to the recent peak. I have also layed out how I think this may manifest, but more importantly the signals that I will be looking for on both the fast and slow Daily PPO indicators:

Nov 10

Here is another look at an indicator that is saying that the 'potential' for an Intermediate Degree pullback has been confirmed. I often look at PPO movements (see this post for why PPO is a superior indicator to MACD) movements on a couple of different timeframes. I like 14,30,10 as a 'fast' PPO indicator (I think the default 12,26,9 is too fast) for finding bottoms and I like 34,89,21 as a 'slow' PPO indicator for finding tops. Looking for confirmed divergences often givens you insight as to what is happening. And the wave up since the 2011 has now formed such a divergence on the slow PPO on the Daily chart.

Combined with the recent 60-min, Daily and now Weekly sell signals from my Trend System, I think the market is at risk for an Intermediate Degree correction. The more I study the charts this weekend, the more realistic I think that possibility is becoming.

Nov 9

Today the Weekly Trend System went from long to short. Now before anybody reads too much into this, let's say what this does and doesn't mean:

1) This means that the conditions have been meet for a top signal
2) Having a top signal in place does not guarantee there will be a top

From my backtests with the Weekly System, it:

a) issued a few sell signals without actual tops between mid-80s to late-90s
b) issued a sell signal in mid 99 and it issued a buy in late 99 for a loss (no actual top)
c) issued a sell in late 2000 and a buy in late 2001 for a gain (actual top)
d) issued a sell in mid 2002 and a buy in late 2002 for a gain (continued selloff)
e) issued a sell in mid 2006 and a buy in late 2006 for a loss (no actual top)
f) captured most of the 2007-2009 selloff (actual top)

Getting a sell signal is far from a 'lock' in forecasting a major top. If I tried to tune out all the noise the system would be so slow to respond that the bear market correction would be halfway done before a sell was issued because they move so fast. So the system is set up to filter some 'noise' but is not so insensitive that it can't be faked out during volatile uptrends.

I certainly am NOT inclined to call 'the top' of this cyclical bull market since 2009 based on this weekly sell signal.

In fact, if I had to make a call right now, I would say this is closer to the 1999 or 2006 corrections in terms of analogy. That is assuming of course that this pullback is forming into an actual correction (some wave of Intermediate degree), which is by no means guaranteed at this point.

But I am just reporting what the systems are saying, do with them what you will. And if you choose to do nothing and ignore it, or even do the opposite of what it is saying, that's fine by me too.

Nov 8

Daily System went from long to short this morning. This is starting to look a decent correction is shaping up.

As I said in my last Long Term Update, I thought that the next major correction would be an Intermediate wave down. However I was expecting another wave up into the end of the year before that Intermediate correction would take place. ... Now, I am not so sure. This correction is really looking like it could have some legs to it.

So if my large count is right and the next large correction (that we are possibly in right now) is an Intermediate wave down, as I said in my last Long Term Update: ... will be an Intermediate pullback (think the Apr-June 2010 pullback and not the May-Oct 2011 pullback)

Nov 7

So much for sure footing. 60-min system back on a sell.

Nov 1

60-min System moved from short to long yesterday morning.

For anybody who cares, here is my current thinking about what's happening:

Oct 19

And yet another gut-wrenching turn on little to no divergence. 60-minute system is back on a sell.

Oct 16

Man, the last month has been gut-wrenching for both bulls and bears. Crazy reversals with spike tops and bottoms on little to no divergence. But with yesterday's reversal at a key support level (and retest of the March high which now looks like some strong support) and a gap and run up today, I think the correction is over. Here are my thoughts:

Oct 6

The recent high and pullback has set the stage for some meaningful divergences on the Daily chart. Does this mean we are at a top now? NO. Does it mean we are *near* a top? MAYBE. These divergences typically take a few months to manifest and play out, and my observation is that we had a significant peak from which those divergences can START in September.

My thoughts right now are that we have a couple more months of the current rally left before a meaningful correction (Minor degree wave or higher). This also works with seasonality: October is typically one of the best months for the stock market (http://pragcap.com/october-the-jinx-month), I have serious doubts there will be any major pullback before the election, and then the market will be set up for a potential Santa Rally.

Of course none of that could happen, but if we are looking at odds and the lack of divergences in the current wave from a Daily standpoint, I say the strength still rests with the bulls right now.

Disqus (sorta) resolved

Man, this has been very frustrating. The issue was that all my comments had disappeared from my blog posts. And not once ... but twice. I will get a brief synopsis of my saga so that you will be able to avoid these problems in the first place, or if it does happen to you how you can 'fix' (used loosely) the problem.

Lesson 1: Do *NOT* upgrade to Disqus 2012.

This all started after upgrading to Disqus 2012 (like an idiot I suppose). Never happy with the look of it but improvements are coming they say. Fine. Then they introduced 'Promoted Discovery' (basically where they can put spam in your comments for revenue generation). I opt out of that immediately months ago. Fine. But early this week, the Promoted Discovery feature was turned back on for my site automatically and even after turning it off the spam comments would not go away.

Thoroughly pissed off at Disqus at this point I disable Disqus 2012 ... and all the problems begin

When I went back to Disqus 'normal' all of my comments disappeared. Yet they still existed in the Disqus Admin/Moderation Panel. Searches on this issue with these symptoms led me to: "if you had recently changed your domain and/or URL structure then Disqus will need to be mapped to your new structure"

I had not done either one (so I thought), but when I made a new test post with a test comment, I looked back at the URLs in the admin panel and all the new comment URLs had the format: http://domain/path/post.html/#commentid and all the old URLs had the format: http://domain/path/post.html#commentid (which is what you would expect). Notice the the / before the #. It seems like Disqus 2012 altered the structure of the URL resolution to place comments at. I tested this out on comments on other posts and sure enough all comments were going to this format: http://domain/path/post.html/#commentid

Accepting that the Disqus downgrade 'broke' my site I proceeded to map my site from http://domain/path/post.html#commentid to http://domain/path/post.html/#commentid via the 'Upload URL Map' in the 'Migrate Threads' Admin Section. You can download a list of all the URLs Disqus knows that it put comments on and it is a simple matter in Excel to generate a From URL, To URL .csv file.

So I do this, and with a few minor hiccups I have all my comments back .... for about half a day

When I get up the next morning to check the site again, all my comments are gone ... AGAIN!

Made a new test post and saw that the OLD URL FORMAT WAS BEING USED AGAIN! Disqus had somehow realized its error in using the Disqus 2012 URL format on my non-Disqus 2012 site and had 'fixed' it for me, after I had spent hours migrating URLs

So I decide to just reverse the From and To URLs in my Excel file, generate a new .csv and everything will be fine. Nope

That worked for 2009-2010 comments. But none of my 2011-2012 comments would come back that way.

For my 2011-2012 comments, I had to :

-- Do a URL map for each blog post one by one (and each URL is a copy/paste operation, and about 5 clicks per URL to submit and reset the URL map tool). This was exceptionally tedious.
-- That worked for about half the URLs, for the other half:
-- Do that process again 2-3 times
-- Sometimes making a new comment (you will see random 'test' comments by me all in 2011-2012) will 'refresh' the thread and bring the old comments back.

But some of those threads none of that worked. And there are some threads where the comments are simply lost forever

Lesson 2: Obey Lesson 1

Avoid this whole problem to begin with a put off upgrading to Disqus 2012. I wish I did.

Disqus (2)

Comments are still in limbo. I resurrected a bunch of them today via the URL Map Migration tool, but now they have disappeared again. This is exceptionally frustrating.

Disqus

Disqus appears to be messed up. I will try working on it tonight/tomorrow.

Oct 1

Crazy move up and crazy reversal. Current best guess:

Sep 27

This move up is too strong for yesterday's micro-count (the 15-min chart) to be correct. Here is my revised count:

Sep 26

Current thoughts:

Sep 25

See Thursday's post for what I think is happening: Sep 20

Yesterday morning the 60-minute System issued a sell signal (https://twitter.com/binve01/status/250225758616838144) and today has the look and feel of a breakdown. I think we will be correcting for the next couple of weeks.

Sep 20

I think this might be what's going on:

Sep 19

I occasionally go back and look at my monthly charts and today I was looking at my SPX monthly chart. Here it is for any one that is interested. I still don't think we have seen 'the top' / end of this cyclical bull market. Still no divergence on the monthly MFI for the last series of peaks over the past year. Read this chart below in conjunction with my most recent long term projection (with lots of links to previous long term projections): Update on Long Term Projection (08/17/12)

Sep 16

Here is a look at some indicators on my Daily chart as another reason why I think we have more upside for weeks/months before we have a meaningful correction.

Sep 14

Based on the recent strength, I don't think we are near the top of this Minor degree wave up. I think the market may try to pause and consolidate the breakout, but I think we will have another slower move up before a Minor degree correction.

Here are my current thoughts. And for how this fits with my most recent long term projection, see this post (with lots of links to previous long term projections): Update on Long Term Projection (08/17/12)

Sep 12

I am back. The market churn turned out to be consolidation and the market broke higher. Daily and 60-min systems are still on buy signals.

Aug 31

Nothing to say, so I haven't said anything. Market is going sideways deciding what it wants to do, so I am waiting to see what happens and being patient during this period.

Have a Happy Labor Day!

Also, I will be unavailable most of the next two weeks. So if the market does anything of interest (and the Trend System responds with new signals) I will likely not be able to send out anything in real time. However I will reference when the signal occurred and let you know as soon as I can when it happens.

Aug 21

Best guess as to what's going on

Update on Long Term Projection (08/17/12)

While the last few months have been very confusing regarding the Minute/Minor Degree waves, my larger view of the market remains unchanged. For the last large update, see this post: Long Term Projection, Macro, and an Analysis Retrospective.

All of the macroeconomic and fundamental analysis in that post is still very valid, as is the sentiment analysis from market indicators. Also with the VIX recently making a new 'recovery low' makes a confirmation in my mind that this next market peak will not be 'the top'. Like I have been saying for a couple of years now, we are in the middle of a cyclical bull market and any pullbacks are mid-bull corrections. I think this cyclical bull still has a few years left in it.

No new analysis in this post, just chart updates.

Long Term Projection History and the Current Projection

I have a long track record of being consistent with my projection. It has obviously adjusted based on how events actually unfolded (absolutely *nobody* can predict the future), but this long term projection which serves as my preferred count has been quite good in general directionality and intermediate timing.

-- Nov 2010: Abandoned the Primary 2 count and adapted my leading alternate count which was a Cycle X count - The Large Count

-- Jan 2011: Rethought the size of Cycle X with some historical analysis and comparisons. I lay out my thoughts for March 2009 - June 2011 (projection at the time) being only Primary W of Cycle X - The Large Count with Historical Perspective

-- Jan 2011: Macro thoughts that accompany my projection - Macro Thoughts and Observations. Is the Bear Market Dead? Is this the Start of a new Secular Bull Market?

-- Feb 2011: Long term context - Secular Bear Market Projection in Historical Context

-- Mar 2011: An in depth study and a comprehensive list of references and analysis of previous work. I highly recommend reading this post and following the references - First Derivative of the S&P 500, Long Term Study

-- May 2011: Count of the large structure (the top of this wave) being completed in real time - May 5 (and a Long Term View Update)

-- Aug 2011: Macro thoughts in the middle of the August crash putting this wave in context (specifically refuting that this was the start of 'P3') - Update on Long Term Projection

-- Oct 2011: Real time count that pointed to the October low as being a significant low based on how the waves and indicators unfolded - Revisiting the Large Count

-- Jan 2012: Confirmation of the October low being a significant bottom - Update on Long Term Projection

-- Apr 2012: Large macro, fundamental and sentiment update. In depth post and a recommended read (many links to previous analysis) - Long Term Projection, Macro, and an Analysis Retrospective

Primary Wave Projection

The May 2012 pullback while sharp, was not in retrospect a 'major' pullback. I think it is just a Minor degree wave down and we are now probing into the top to end the Intermediate wave up since the Oct 2011 low. If my count is correct, the next wave down will be an Intermediate pullback (think the Apr-June 2010 pullback and not the May-Oct 2011 pullback)


Secular Bear Market Projection / Long Term Count

For the SPX:


And NASDAQ Composite for good measure:


4-year Cycle Chart

This chart comes from this study (A Look at 4-year Cycles) and fits pretty nicely with my long term projection. I think the next pullback would fit timing wise with the next 4-year cycle bottom (which as I show on my chart can simply be a mid-range correction).

Aug 13

As Cobra has said many times before in similar situations: Nothing bearish works. The VIX setup described last week is invalidated. And despite being an overlapping mess, the market continues to make higher highs and higher lows and is now a handful of points away from a new recovery high.

I have been quite wrong in my thinking of how the market was going to play out the past few months.

It boils down to the volatility of the wave since June and the signals on my Daily System. The volatility has been great enough to issue multiple sell signals on the 60-min System. But as soon as one would get issued, the market would stage a terrific rally and invalidate the setup. These sell signals made me think this market was forming a bear flag. The reason I was predisposed to think this was my Daily System. As I was saying back in June, the Daily system issued a sell signal not on normal topping signals but an emergency sell based on the Cycle Signals. But since we were in a Daily Down cycle, I was expecting it to a) last longer and b) make a new low. Based on the stats from my system, those were the clear odds. Neither happened. Just today, we got a new Cycle Buy signal without even getting a normal buy signal. This makes an emergency buy/cover just like the June signal was an emergency sell/short. So we have an abnormally short Daily Down Cycle duration, no normal buy signal, and the worst fakeout my Daily System has ever endured.

Needless to say, I am not happy about this.

But the market doesn't give a shit if I am happy or not. So I just have to accept the fakeout, take my lumps, and move on.

So with the benefit of hindsight, I now believe that while sharp and bordering on severe, the May 2012 correction was not 'significant'. I think it was just a Minor degree wave down in an Intermediate wave up.

I think we make new recovery highs before the next significant correction (yes, Johnny-come-lately, I know, I know) so that we establish divergences on my Daily and Weekly charts below.

The VIX and some perspective

First things first: Even though I still continue to think that we have more downside in the SPX, I still think that downside will be a relatively short correction and that this cyclical bull market will continue and will likely achieve new all time highs before it is done. Why? For the many reasons outlined in this post: Long Term Projection, Macro, and an Analysis Retrospective.

So if I am bullish for the medium term, why am I bearish for the short term? Because we still have not seen an adequate duration Daily Down Cycle to correct the previous Daily Up Cycle, and because of something I discussed in the post above: the VIX.

Now in the post above, I showed why the VIX is *NOT* saying that we should expect a 'major' top to have occurred in May 2012. Here is the reason why: Yet another reason why I don't think we saw 'the' top (3) (and an update to that chart is in the first link above).

But watching for VIX divergences and the *lack* of VIX divergences at both long term and short term tops and bottoms is a useful exercise, and while there was absolutely no long term divergence at the May 2012 top (the VIX made a new 'recovery low' as the SPX made a new 'recovery high'), there was also no short term VIX divergence at the June 2012 low.

First, lets look at the long term:


There have been VIX divergences at all significant local minima and maxima in the last several years. But there is still no divergence in the VIX when looking at the 2011 to 2012 peaks (the VIX makes a lower low as the SPX makes a higher high from 2011 to 2012 => no long term divergence).

However, all bottoms after significant pullbacks the last few years have been marked by significant VIX divergences. Although we have not seen one during the last pullback.

A short term chart shows another reason why I don't think the June low marked the end of the correction:


We can see a similar pattern of clusters of VIX down gaps taking place near the April 2012 top that are also occurring near the end (potentially the end) of this wave.

So that is what I am thinking:
- Short term the correction is not over and we will revisit the June 2012 lows
- Medium term the cyclical bull market is not over, which means the the correction is a short term affair, and will be followed by new recovery highs and likely new all time highs

Aug 2

Another monster reversal last week invalidated the short setup that I discussed last Tuesday. A buy signal was issued last Friday which turned around and a sell signal was issued yesterday right after the FOMC announcement. Lots and lots of volatility. Since June, the cycle for each period has been about a week and a half with lots of movement in between. Which means that it has been tough sledding for the 60-minute system which doesn't turn quite that fast and so the market is almost acting like negative feedback for the system.

So is this move up done? I honestly don't know. But the 60-minute system is back on a sell. And this move up still counts like a big overlapping mess. Here is my best guess (which is admittedly pretty bad recently) at a count:

July 24

The projection for the continuation of the move up that I discussed on Wednesday and the subsequent turn seems to have worked out. So with that a sell signal (sub-cycle top) was issued on the 60-minute system on Friday and we finally got a Down Cycle signal today on the 60-minute system to correct the Up Cycle signal that began on June 8. This was a pretty average Upcycle duration and so if we have an average Downcycle duration, it will last somewhere around 15-20 days.

Based on the performance of the 60-minute system this year, feel free to use that as a contrarian indicator if you wish :)

Gold Projection Update

First things first: My thoughts on gold are very different from most gold investors. For those thoughts refer to my last post on gold (nearly a year ago) here: Gold. I think the inflationary (and especially 'hyperinflationary') thoughts that most gold investors espouse are mostly if not completely wrong. I think the macroeconomic thoughts that most gold investors espouse (especially regarding government 'debt') are mostly if not completely wrong. For my thoughts on these macroeconomic issues, refer to this list.

But for many reasons as outlined in the first link, I continue to be bullish on gold. In fact, I think the the next rise in gold will likely be due in part to the misconceptions that the majority of investors have about gold and macro. So when QE3 comes (which is a huge monetary non-event, is not inflationary, and actually removes income from the non-government sector) and misperceptions and emotion abounds, it will be fuel for the more legitimate reasons that gold continues to be in a bull market.

With that, here is my updated long term count on gold:

July 18

This corrective wave continues to be inscrutable to me.

The 60-minute system is still getting faked out / thrown around. Because we keep getting spike bottoms and tops on no divergence. So I am getting no normal exit signals and only emergency signals.

Oddly, my 15-minute system (which I stopped publishing in Oct 2011) is working quite well in this environment. There is just enough volatile non-trending movement with divergences that manifest on the 15-min timeframe that it can take advantage of and is giving clear signals.

The last few signals from the 15-minute system:

S/L           OPEN      PRICE        CLOSE      PRICE   GAIN
SHORT   5/30/2012 9:45  132.17  6/4/2012 14:30  127.91  3.22%
LONG    6/4/2012 14:30  127.91  6/7/2012 15:15  132.45  3.55%
SHORT   6/7/2012 15:15  132.45  6/14/2012 11:30 133.15  -0.53%
LONG    6/14/2012 11:30 133.15  6/20/2012 9:45  135.49  1.76%
SHORT   6/20/2012 9:45  135.49  6/25/2012 15:15 131.41  3.01%
LONG    6/25/2012 15:15 131.41  6/28/2012 9:30  132.25  0.64%
SHORT   6/28/2012 9:30  132.25  6/28/2012 15:45 132.79  -0.41%
LONG    6/28/2012 15:45 132.79  7/5/2012 9:45   136.82  3.03%
SHORT   7/5/2012 9:45   136.82  7/12/2012 14:00 133.75  2.24%
LONG    7/12/2012 14:00 133.75  7/16/2012 10:30 135.06  0.98%
SHORT   7/16/2012 10:30 135.06  7/17/2012 12:15 135.98  -0.68%
LONG    7/17/2012 12:15 135.98  open

Based on the phasing of signals, I would expect a roll-over in the next couple of days. This would be consistent with my 'corrective' 60-min MACD setting in the chart below.

I still think the move up is very corrective and this is my best (and likely incorrect) guess as to what's happening.

July 12

Big mess taking place right now on all my charts and systems. I haven't commented recently because I was out most of last week and this mess has been largely inscrutable (to me anyways).

But despite the large rally since the beginning of June (right when my Daily Trend system issued a sell, ugg bad timing) the Daily System never got back into buy mode. It almost issued a buy in June, then the selloff reset the buy criteria. And then it almost issues a buy in July, but not quite. So despite the rally since June, my system has not yet transitioned long.

Is it broken? Possibly.

But I am not gravitating to that conclusion. The duration of the cycle from Oct 2011 to June 2012, while exiting due to emergency conditions and not normal conditions, was very close to average. And so there is no reason to expect the down cycle to be abnormally short in duration, which it would have been if the June low had been the low of the correction and the cyclical bull had continued from there.

But that doesn't ring true to me. For this reason and many more on my charts, I think the correction is not done, and do think we will be revisiting the June 2012 low before the correction is done and the cyclical bull continues on to new recovery highs (and likely new all-time highs IMO).

For anybody that cares....

Here is my EW count that fits with what I think is happening and would fit with a much more average downcycle duration on the Daily System timeframe.

June 29

Skunked again. Huge gap up and main indicator upturn forces an emergency short cover / buy signal.

More 'interesting' action ....

June 28

Interesting week? check.

Crazy gap down, with a reversal and run up until Wed to close the gap, and now trading down again.

The 60-min sell signal (sub-cycle) since 6/20 is still in effect and today we got a Down Cycle signal. The reason this is of interest is that I am now expecting a 90% chance (63 of 70 similar occurrences) of a lower low below Monday's low before the next 60-min buy signal will be issued (when a Down Cycle signal is given after a sub-cycle top signal).

That is what I am seeing at the moment.

Warren Mosler: Macro Take

Fantastic interview with Warren Mosler. He discusses QE, earnings, cash flows, demand leakages, and the potential fiscal cliff.

I completely agree with his take that current levels of deficit spending are still sufficient to maintain aggregate demand (and hence corporate revenues and profits) to a level that is 'good for stocks'. I don't think we are seeing a 'major top' in the stock market. I think the real risk to the stock market and the economy is the *potential* 'fiscal cliff'. But as I said here at the beginning of June this would be the mostly widely telegraphed macro event ever. And like Mosler says, I am highly doubtful that is being 'priced in' to stocks right now.

Which means that I think the current pullback since May (and that we are still potentially in) is a correction and the cyclical bull market will continue, not the start of a cyclical bear market.

Early Thought follow up… A conversation with Warren Mosler

Please click on the link below to listen to a conversation with Warren Mosler. Topics include: Demand leakage (how to fix end-demand), Fed Policy (QE is counterproductive) and overall market/econ outlook for US, Europe and China.

Warren Mosler Interview Audio

June 21

Very interesting/odd week:

Monday: Gap up and breakout of the last week's congestion

Tuesday: Strong move up right to critical resistance. The Daily System *almost* issues a buy signal (just a couple of points shy), but midday the market pulls back.

Wednesday: Usual Fed day shenanigans, but the second move in the afternoon was strong enough to issue a 60-minute sell signal. The Daily System is still holding just short of a buy signal

Today: Huge sell off. The market turns away from the Daily buy signal.

Lot of weirdness at play here, but the 60-minute system looks like it could be leading the way. The Daily System is showing the market has lost its nerve right at a critical resistance level and so the sell signal from 6/01 still remains intact (despite continuing to be pretty far underwater).

Looks like next week will be another 'interesting' week.

June 17

Perfect week to be out. No new signals given (very sideways / consolidatory week). 60-min buy signal is still intact and the Daily system will likely issue a buy signal next week with any more strength.

June 8

I will be out next week, so I will not be able to send out any signals real-time. What I will do instead is send out the retroactive signals at the end of the week. Obviously imperfect, but that's what it is.

Here are a few thoughts and observations as I look ahead to the possibilities for next week:

1. More upside on the 60-min System.

We had a buy signal on Wednesday morning (see: https://twitter.com/binve01/status/210369520337039360) from a sub-cycle bottom. And today that signal was further confirmed with a Cycle bottom. Which means that a significant divergence is required before a sell signal will be issued, which means I expect another high above this week's high.

That high doesn't have to come next week. In fact it would be very healthy if the market too a breather early next week to consolidate the reversal (and maybe set up an inverse head and shoulders).

But however it manifests, I don't think this upmove is over.

2. Potential bottom on the Daily System.

As I said on June 1 there were a large number of reasons why I thought the Daily sell signal was suspect. We made a lower low on Monday after last Friday's sell signal, reversal on Tuesday, and then traded up the rest of this week. As it stands, we now have a divergence at the Tuesday bottom over the last down sequence since May. The Daily system is obviously slower than the 60-min system so my indicators have not turned around to give a buy signal yet. But another week like this past week and it likely will.

June 4

With the sell signal on Friday from the Daily System I have been doing a lot of thinking about the current count. Like I said on Friday there are still a lot of reasons why I think this correction is 'suspect' (see Friday's post and comments), but we have a sell signal and I am respecting it.

But the count is ambiguous. We did not make a higher high above the March high in May (although the Dow did), which my system was expecting. I was thinking that the move up in May was part of the correction, but now I think it is a failure (something that E-T was pointing out) with all the evidence considered combined with the Daily sell signal.

Here are my current thoughts on what could be happening. I am not hard over on any count at the moment because I am seeing conflicts on so many charts, but for many reasons that I have elaborated upon previously I still don't think this cyclical bull market is over.

June 1

Sell signal was issued on the Daily System today. This was not a normal exit signal, which is what this setup was looking for Apr 7 - Daily and 60-min Cycles, Looking for an Edge. It was a forced sell because a Down Cycle signal was given (which is uncommon, the signals are typically a sub-cycle top/bottom signals).

The way this signal was made is 'suspect' (non-normal moves relative to significant MAs, some secondary signal non-confirmations, etc.). And I think the fundamental environment is also very 'suspect'. But the signal is given and I am respecting it.

May 31

The last week has been decidedly un-face-ripping-ish. 60-min sell signal was just issued.

Also based on the lack of follow through up and the market beginning to trade back down, the Daily sell signal is coming close to being issued again.

May 23

What a crazy couple of days. However these gut-wrenching moves have a potential corollary, in recent history even. The move out of the May 2011 top.

Here is what that looked like:


Here has what has unfolded so far:


Is the correction done? I give a little better than even-odds that it has. Like I said Saturday, the 1290 target has been met, and that this week needed to rally or at the very least stop crashing. That was not a prognostication, but merely an observation of what needed to happen this week to keep the Long setup which has been open since Oct 11 on my Daily Trend System alive. And we had a huge scare 'redux' again today but a strong rally into the close.

Which means that so far a turn looks to be occurring exactly where it was needed. So for this corollary to play out, the bulls need to make significant progress in confirming this breakout Thursday-Friday. We we see if they can manage it.

Here is my current best guess at a count:

May 19

1290 target has been met. However in doing so, it has put a *very* ugly weekly candle on the chart by closing basically at that level. The market needs to rally pretty hard next week (or at least stop crashing) for the Daily Cycle scenario to play out (a higher high before a sell signal is issued). Any more strong down days past the middle of the week, then the Daily system will likely be at an emergency exit criteria (which it is not at yet but is fast approaching).

May 17

edit 12:05

That was obviously not a capitulation move. Move is starting to waterfall down. Next logical target is ~1290. We will see what happens there.


--------------------------

Emergency exit criteria was met on the 60-min system with the spike down. I think the move stinks (smells like capitulation), but I am listing what the system says.

May 16

My 60-minute system is displaying some crazy divergences. They are as severe as they were on the Nov 2011 and Dec 2011 pullbacks.

But a divergence by itself won't say when a pullback is done. So I am looking for other data to see if we are near anything important. Here is one view on the Daily chart. We are at a breakout retest line at a 38% retrace with oversold short term conditions.


The next view is a long term weekly chart looking at lateral support 'strata'. And it looks to me that this pullback is moving right into a zone that is consolidating the breakout.

May 11

A look at the weekly chart:

May 9

We got a sub-cycle bottom signal today on divergence with my 60-minute system: https://twitter.com/#!/binve01/status/200275729206878208.

There is a lot about the short term that looks compelling from a pullback perspective. Also the 'analogy' chart that was discussed on May 2 has a more complete look to it. Also notice the lower orange PPO indicator. It did not go into divergence at the top of the wave like it did at the 2010 and 2011 tops.


The next section is my current EW count. Feel free to skip this section if you are not interested.

First is the count of the most recent correction. And I see two sharp 7 waves down with a complicated/messy 3 wave up in the middle:


Zooming out is the count up from the Oct low which was discussed Apr 10 (and no, it's not an impulse):

Count since the October low where the waves down to the ~Subminuette/Micro degrees are identified.


Now, I am sure I will get comments about my counts. That these W-X-Y's don't follow the EW orthodoxy (to which I say the orthodoxy is completely incorrect: http://marketthoughtsandanalysis.blogspot.com/2011/08/regarding-tops-and-sloppy-misleading-ew.html#comment-276329829). Or that all these W-X-Y's are 'unhelpful' and complicating what could be counted as simpler wave forms.

I disagree on both counts. The fact is that the structure of this wave at nearly all degrees of trend has been distinctly three-ish ever since the March 2009 low. And for anyone who is looking at the waves objectively, we can see threes even in the move since the October 2011 low. You really don't get impulsive waves until you drill down to the micro/submicro degree. It is all right there, plain as day:


The fact that I don't suffer from the affliction where I try to shove every sharp wave into an 'impulse box' means that I am seeing the waveforms more objectively than the greater EW community. It is precisely this view that allowed me to call the top last May when the rest of the EW community was looking for another wave up to finish the 'impulse': Regarding Tops and Sloppy / Misleading EW Practices.

Zooming out again is my 'near-term' daily chart.


And here is my 'longer-term' daily chart.