Crush the Gold bugs

Above is a chart of Gold.  We believe gold is ready to move down once more. Our first target is in the 640 region. This is probably the last move before the great gold bull raises its horns again in the first quarter of 2009.

As for the markets, our strategy is still to short on strength.  But these will probably be very small positions, since we are ofcourse scared, like everyone else. We are expecting a bollinger band push-up rally in the next day or two, which should give us a nice opportunity to short.

We are still holding on dearly to our UUP. The set up to short gold is there. We are waiting for a trigger. We fully expect to see a trigger in the next couple of days. We will employ a sliver of our funds towards DZZ (which shorts GLD).

The dollar

The chart above is of the only bull market in town. We parked the majority of our funds in UUP, since sept 15th and are very thankful. It has one last leg remaining, the divergences are already showing. We think the dollar index will go into the 90s before the retracement really begins.

While we think every chart has its own rhythm, sometimes correlations do occur and as of now, there is a significant inverse correlation between the stock market and the dollar. Accordingly, we believe there is one last down leg in the stock indices and all the commodity names.

According to our calculations as of now, we are looking for a multi-month top in and around the first week of december for the dollar and subsequently, also believe the stock market will bottom around that time.

When this does occur, we expect the commodities and emerging markets to really take off. We believe some of the commodities could double from their bottoms. Any one short commodity names, better take care for we think the rally in these names will be very very vicious.

Are we breaking down?

Are we breaking down? are we going to see the mother of all crashes?

I don't know, ofcourse we could. But our bet is still bullish, the near term trend is still oh-so-slightly-bullish.

What do elliott waves tell us?

If anyone tells you, they know what is going on with an EWT explanation, we think that would be BS. Elliott waves are notoriously difficult to decipher in corrective patterns. There are infact 11 corrective patterns. Corrective patterns are sloppy and they are meant to keep everyone guessing. So we have a multi-tude of elliott waves with mixed signals.

What can charts tell us?

We still prefer the uptrend. We don't know where this pullback will end. Our guess is around the 895-905 area. We will look for signs for huge downward volume. 

Why are we still oh-so-ever-slightly bullish?

We like the 5dma uptrending and the 20dma coming from under. We are not short or long this market. Should it come down to the above 900 region - we will look at short term intra day moving averages to put in a buy if there is a bullish set up.

We have also looked at many stocks and lots of them have had huge 25% run, a 10-15% pullback is only natural. 

We will turn bearish should we take out the 900 region.

Lets see

 

The week ok the elections

We received some emails (some of them even hateful) late last week and earlier this week, saying we were wrong in our oh-so-bullish look on the market and this was the work of the PPT and how the gloom and doom still exist and wave 5 of the bear market is yet to unfold.
It may all be true. We don't deny any of it. We only write what we see. We have been wrong before and we have also been right where many others were wrong.
But the argument just reminded us of the time around the beginning of July, when we warned the commodity trade was going to burst and there were many saying there is going to be hyperinflation etc.

As we see, it is very simple. The rally came furtively when no one expected it - on no news, and I will reiterate, for sure it caught a lot of shorts with their pants down. These shorts are averaging up and waiting to cover.
I don't know how far the indices will rally - yes the volume is pathetic etc. This is afterall a bear market rally. Sure, the lows of oct 2002 will be taken out. Until then, we don't want to miss the juicy quick 20-25% on offer. It has been a nicely profitable week given our exposure to SSRI, CSIQ and ACH. We chased SLV a bit, but the returns have been nice and quick. We are trail stopping on this.
Even our bagholder position UNG is acting well.

We are not adding any new longs, but slowly peeling off on some of our hugely profitable longs at this point. We will buy select dirt cheap/dividend stocks on any low volume pullbacks.

My preshyuss

Above is a chart of SLV. There has been absolute carnage in SLV. As they say a downfall in SLV predicts a recession. Well how true. Anyways, we think SLV has almost completed the first of its downward move. The chart looks prime for a take off to the 14 region, in the next 2-3 months.

Buy on any pullbacks. Hop on, ride on.

Triangle smashed?

Guess, everyone knows what happened. The triangle has been invalidated. We got of our short SDS at around 115, after we saw a ginormous green candle on the 15 min. We definitely did not see such a big rally. Nevertheless, we are less bearish than yesterday. 

What now? -

we don't want to play until we understand what is happening? One day doesn't make a market. We want follow through. The next couple of days are important. 

Is the low in?

The next couple of days will tell us.

Our strategy?

Until the indices shows follow through or busts through another resistance, we are not playing.

our stance: we are oh-so-slightly bullish, given the nature of this rally. Why? because we are dead sure there are a million shorts out there who are caught flat flooted given the nature of this rally.  It was a stealth rally with no warning and even the media is groping for reasons. Heck, even we did not get whiff of it, even though we were looking for a bottom sometime this week. Any down day and there will be short covering. Either ways, you can bet there will be a tussle.

If things workout fine, we could see 1150 on the S&P in a few weeks.

The abyss ahead

I got an email, requesting me to atleast draw a chart instead of soothsayer like predictions. Sorry but we have been extremely busy and trading is only an addictive hobby for us.

So here goes -

The chart above is of the SPY.
We were hoping that the pennant type cluster which began on oct 10, resolve quickly last week and we finish off the necessary 5 waves. Unfortunately, that hasn't happened. I guess no one can command the waves. This is also because in general corrections alternate. Wave 2 as you can see was a sharp, short affair. Wave 4 is this sloppy, time consuming pennant or triangle or flag or whatever you chose to call.
I believe, we got into wave 5(i), on thursday late and ended with the gap down on friday morning. Whole of friday we spent on wave 5(ii). The last 10 minutes, could have the been the beginning of wave 5(iii). The silver lining is the positive divergences on the momentum indicators, indicating the selling is losing strength and validates our view that we are in the final phase (wave 5) of selling.

If this plays out, we could be down hard next week. We are praying that the 2002 lows hold. That target is around 768. We don't expect 840(oct 10 lows) to hold. There are other targets around 730 and around 656. But the most dire target is around 484.
Timewise, these waves should end by next week. And we should see a multi-month bottom in a week or so. The question is at what price?

We are fervently praying that this market holds near 768 or even 730. Beyond that, it is extremely scary to even think what would happen to the world we are living in.
I guess we all need to pray.