real1-

What do you think of the EW count at this site? It's a little different than yours I think.

http://investmiddleway.blogspot.com/

MarkM, what is the "... the coming wave 3 of III will one for the book" that he refers to?

That sounds like its on the way up, while Bill's forecast here is for a big drop.

Thank you.

ursus-

According to EW theory that wave is sustained and very large.

Is Bill that bearish on gold here? I see some intervention knocking it down and making trading dicey but holders have been well rewarded. Did I mis a WIR or comment while I was on vacation?

Okay folks, I DO NOT LIKE the gold/miner charts this a.m. and something needs to change here. Miners VERY tentative. Skittish. Just a caution.

the golds and the drillers should be in a position to rally with the market. the daily charts have turned up. if they can't, it's an extremely negative sign for the overall market.

maybe they're afflicted with the same problems that the DJTR is experiencing. short-term, transports should be oversold enough to start bouncing here. like the golds and the oils, if they can't, it's a bad sign for equities.

however, short term, the daily charts do look like this rally has room to run. position: real close to stopping out of some dia puts from yesterday.

Thanks for the explanation. No, I believe Bill is long on gold but expects a drop on the Dow.

Very hard to make heads and tails out of this.
How about the big chip equipment orders (below). Is this a bear?:

Japan June chip equipment orders 58.3 pct yr/yr
TOKYO, July 27 (Reuters) - Orders for Japanese chip-making
equipment in June grew for a 10th straight month to hit the
highest level in six years, an industry group said on Thursday,
as chip makers spend aggressively to meet growing demand.

June orders rose 58.3 percent from the same month a year
earlier to 203.2 billion yen ($1.75 billion), the Semiconductor
Equipment Association of Japan (SEAJ) said.

The steep growth raised concerns about a potential pull-back
ahead."Demand is strong across the region from China to Europe, not
to say Taiwan, South Korea and Japan," an SEAJ spokesman said.

"This could be a little too much. I personally wish to see more modest but steady growth."

More Tanier (ECONODAY) on the housing collapse:

"After two strong months, new home sales showed weakness in June, down 3.0 percent to an annual rate of 1.131 million, 19,000 lower than expectations and including sharp downward revisions to May and April that totaled 88,000.

Supply on the market rose sharply to 6.1 months, up from 5.9 months in May and compared with 6.8 months for existing homes (data released Tuesday). Median price of a new home fell back in the month to $231,300, for a modest year-on-year increase of 2.3 percent that compares with a nearly identical median price for an existing home of $231,000 and an even more modest year-on-year increase of 0.9 percent.

Weakness in new homes was centered in the Northeast as it was for existing homes, due at least in part to flooding in the area. Sales were up in the West."

i don't eat their cereal and i don't follow the stock but kellogg is talking today about losing thirty cents off their 2006 earnings because of fuel, energy and commodity costs.

this kind of announcement takes place amid signs of a rapidly slowing economy.

i haven't known what to think about mr. cara's stagflation forecasts just because i'm the world's worst economist (and that's saying a lot) but maybe in the next few weeks we're about to see a lot more evidence to support this prediction.

If CPI was calculated the same way today as it was Pre-Clinton, Stagflation would be fact.

Stagflation has been a key, and profitable theme for me for a few years now and I believe that it will continue for a number of years.

If CPI was calculated the same way today as it was Pre-Clinton, Stagflation would be fact.

Stagflation has been a key, and profitable theme for me for a few years now and I believe that it will continue for a number of years.

... and now miners have turned as a group into the red, despite gold being up $12. Man I hate being right all the time. :)

I remember a "g034". Nice fellow. Very helpful. Are you the same one?

good shot markm.

the OIH and the XAU are both moving down. like the rails or the homebuilders, these two groups have been very important for this market for a few years.

it makes me wonder how much longer the rest of the market can rally.

After the late stage M&A activity is over and the financials finally puke it up then you'll see some carnage. Only a rate CUT will save them and that ain't on the agenda with the numbers we've been seeing. Not til some time in 2007. Energy and financials are holding this market together right now and I would be surprised if it's energy that gives up the ghost first.

Nice call on the metals/miner action, MarkM.

Excellent call Mark. If you keep it up, the groupies here will be waiting for you to announce your very own blogsite.

the selling in transports is getting serious again.

the daily r.s.i. looks like it could approach a bounce point somewhere in the next couple of days. prior to the bounce, however, i wonder if we're gonna get a more serious washout.

groupie?

huh. i've been called worse.

it's good to give credit where credit is due.

I have a knock-off version of Bill's Crystal Ball I picked up at WalMartfor three bucks. Contrary to his, mine only works on rainy days when my knees hurt. :)

We now have two averages in confirmed downtrends: The Naz and Transports. I suspect the SP500 will turn before the Dow as there is definitely a shift to large cap occurring.

The metals/miners "call" was fed by yesterday's action which was a bit iffy also. When the train left the station this morning and they were still standing on the platorm you could tell something was up-- at least I could. Same with the Dow/ Wilshire divergence this morning. It can all turn around though as this market seems to blow with the wind lately.

looking at the daily on nasdaq, there was no bounce at all over the last few days. there are some pretty dark clouds gathering.

ben better call the crash protection team back from the beach.

monthly RSI on DOW now <30; appears to have settled in for the day.

note similarity to last cycle (1Q1999-3Q2000) in magnitude and duration. no hurry, as with MMM the lows are likely to be recorded this quarter but that leaves a few dangerous months immediately ahead.

stockman,

if you don't mind educating me a little, what do set your r.s.i. to?

thanks

Howdy stockman....

All you gold miner fans do not want to see these little blue lines and red lines cross in the next few days on the following chart:

http://stockcharts.com/h-sc/ui?s=$XAU

That is very bad sign to us technicians.
So get out the rally caps, rally monkeys or your prayer beads (if so inclined).

mtzion-

usually 9, sometimes I move it a bit up from there though.

given that I am generally in agreement with Bill on downside ahead I am looking at some of these as they 'come in' to see how they look compared to the last cycle down on WEEKLY and MONTHLY data. Not all stocks will bottom at the same moment and I need to hold some equities now (I am currently holding my maximum cash and bond levels). Some stocks like DOW and MMM appear to have come into an area that I am interested in scaling in.

markm and bill are the experts on the rsi and it's trading application. i mention it here on DOW as (i did with MMM) to point out examples of stocks that longer term folks may want to begin doing some research on.

"Not all stocks will bottom at the same moment "

Folks, print that one out and paste it on your screens. Every stock has ITS OWN cycle. For example, we were following JNJ a few months back. It hit 56ish and is now at 62. JNJ did great in the last sell off. It looks to be gaining strength. (I opined a couple of months ago during the healthcare sell-off that I suspected The Boys were driving them down to pick them up cheap right at the inflection.Look at what is leading the past few weeks.) So as stockman says you have to look at the individual stocks. Great point.

Howdy MarkM

Whatdaya think? I've been pondering the possible rise into the 1st of the month (Tuesday)... break just above early July highs in SPX... get everyone excited about breaking out of that box... then fail and officially start the fall fall...

What do I think? The last two days action tells me we are being set up for FRIDAY. I think FRIDAY may be MOVING DAY.

That didn't look like a "let's square it up" day today.Maybe Beeks stole the crop report again (GDP release @8:30am). That's what I think.

"Not all stocks will bottom at the same moment "

JNJ is a great example MarkM. KO and BUD also moving along. My list is growing but currently I also have: STJ, SYMC, MMM, DOW, DELL, MSFT, INTC, WWY... for the 'next' bull market. I think on average these should outperform the market as/if it slowly sinks... but that is a 'relative' thing. In the heat of the bear market they will likely get hit as well. Right now we are in a choppy market, downside bias. So everyone is calm and rational... but that can change.

I remember in 1987 watching a closed end bond fund (which I owned for defensive purposes for widows and orphans who had trusted me with their savings) drop 35% in a day! Now bonds were up that day- BIG, so the discount to nav was incredible. No matter, everything got sold. So in the heat rational thought goes away and even JNJ, KO, BUD, etc can get taken down BIG.

MarkM, I know this is not new news to you, but thought I'd throw it in for others who might be tempted to get aggressively long these 'safe' names... only to see them pummeled in a decline. Cash is the SAFE place to be during the heat of the bear cycle.

MarkM - Re: the MA cross-over.

Since the current price is above the MA's, it will get close but not cross-over. The 200-D is rolling off values in the low 100's from Oct-05 (with a very slight up-trend). While the 50-D is rolling off values in the low 140's, where we are currently. So at the current level they'll just run a limit into 140. With a drop to the 120 level, it can last about 8 days before the current price needs to move back above the MA. It's a good 65 days before the 200-D starts rolling off values above the current level, so there's no relief on the horizon, if the current price sees weakness.

Like many here, I am short the overall market (based on fundamental and technical signals) but long the miners (as a leveraged play on the commodity and geo political situation).

The result, recently, has been some satisfaction in the "hedge" effect, but uncertainty going forward.
My concern, of course, is that I have myself at cross purposes:
equities fall dramatically helping my shorts, but mining equities fall in sympathy offsetting these gains.
Has anyone done any historical work on how PM equities behave during market drops?
stockman has me thinking that no equity is a "safe heaven" at these times, including companies that are producing "real money".

My take on the charting pattern of the miners (generally) is that they are building a symetrical triangle or (slightly bullish pennant) from which they could breakout in either direction. Correct me if I am wrong.

I am aware of the convergence that suggests a possible crossover, Markm, but have to wait on that.

Lower volume would suggest indecision at the moment.

Is the right tactic to place stops just outside support and limit orders just above resisitance, or get the hell out until the market decides?

Did anyone see a doji pattern in the Dow yesterday? Followed by another today?

XAU 10/1/87 = 150 +/-

XAU 10/28/87 = 85 +/-

Gold 10/1/87 = 455 +/-

Gold 10/28/87 = 465 +/-

Disclaimer- I am not confident on older data (Decision Point source). Only ONE panic (data) period here, so be careful. Do your own reseach, etc.

rusticuf-

Good points!

rigdon-
Re: doji
...and that's why I think tomorrow is MOVING DAY. Today just may have been a beta dump prior to report release. Didn't feel right though.

rigdon,

you're right about the candlestick patterns.

yes this market has a chance to roll over into a frightening tailspin and gold does have a chance to hold and move higher if the stagflation thesis is correct......

however, sleeping comfortably at night is more important than anything else. the one without sleep is usually the one who is too tired to think clearly. he will lose the battle.

examine your risk structure. can you handle the worst case scenario if you are wrong? sometimes lightening up your positions is the best thing you can do. it allows you to sleep....and much more importantly, to think clearly.

a lot of times, if you do the math, giving up a little bit of your position so that you can see and respond with clarity and flexibility is worth more than the bottom line on your account.

always live to fight another day. it sounds trite and corny but it is more important than being correct in any given trading situation. the wild thing about this stuff is that you are encouraged to keep your mind open to all possibilities at all times.

that said, i'm still short the indices.

Rigdon - I'm wondering the same thing. Working off a bullish view on gold and bearish view on equities, can the miners still reap profits from moves in gold in the face of a tanking market? Even just the recent action is enough to present a concern of "sympathy" in form of beta to the overall market. Is it to the extent that it might make sense to just roll a miner exposure into the pure bullion.

stockman...are you speakng in riddles? Just joking, I find myself unable somtimes to keep up with you (more experienced) players, particularly with abreviations. I thank you for what appears to be historical data, but am too stupid to understand your message or its ramafications. Please don't feel you have to elucidate (or suffer fools), but some further translation would be appreciated. Thanks.

mtzion, your suggested risk evaluation and recommendation for caution is appreciated. But my father used to say: everything in moderation...including moderation. Probably not a great thing to say to a twenty year old.

Actually, I have just moved back into AU (having taken profits during the last up leg), now I am worried about the see-saw action. I am deciding whether to hold or bail and look for a better entry.

Index shorts are a given at the moment.

rusticf
You have read my mind.
Lets hope that wiser folks will chime in...Bill?

rusticf

Have you noticed that au spot prices appear to have bounced off a test of 630 and are headed up?

I guess the distilled question is whether mining stocks will follow bullion or their status as paper.

Huge question.

Rigdon-

Sorry, just trying to be brief.

The data appear to suggest that in a panic decline like 1987 bullion holds up well (up 2% in the data above) and miners not so well (smashed over 40% to the downside).

Two thoughts on now vs. then. We are in a period of more controlled declines. So traders may have time to discriminate between their sell orders. (In 1987 they were selling everything.) Also a downside to investors 'best ever' access to gold bullion subjects it to new risk as well. So perhaps the disparity would not be as great this go around?

There is a reason Bill has 75-80% of his money in cash... even though he has strong conviction on the gold story. Cash is like... cash. In an uncertain environment cash gives you objectivity and confidence while others are running on emotions- that's a real edge in a bear market.

And at this junction, cash is offering a nice return despite it's risk-free nature. (Ignoring of course, the potential loss of purchasing power)

Rigdon - I'm at the bottom of the list here for technical analysis questions. The other experts are timely with their comments though. And I imagine 'real1' will have an update with exhibits at some point at his EW blog located here:

http://globalgold.blogspot.com/

and this morning MarkM mentioned another EW analysis on the gold chart as of 7/25 located here:

http://investmiddleway.blogspot.com/

Thanks all for thoughtfull input.
Much now to digest and see what happens tomorrow.

Stockman+rusticuf:

Don't worry, I am mostly in cash.
Luck to all.

Holy smokes, great comments everyone!

For those who like Fib retracements, look at where the Nasdaq fibs line up perfectly with previous lows on this four year chart.

1750 anyone? Mind you, that's only 15% lower than we are today. Seems a bit conservative.

http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&yr=4&mn=0&dy=0&id=p73496582068&a=81415072

stockman-

Re: "getting aggressively long": I mentioned a month or so ago that my preferred play with these (KO, BUD, MMM etc) would be to create alpha by pairing them with an index short. You'll look a little foolish (but not much I suspect) on a rally but will look like a genius when this rolls over.

That's the trouble with email and posts. Brevity gets in the way.

doug11- Re: "great comments": My experience with this blog is if one person starts sharing, others will join in.