Monday, July 29, 2013

Intelligeddon update

In this post I conjectured that Intel shares were going to turn down based on nothing but its chart pattern.  Go back and look at the chart prediction I provided in that post and then compare it to the real time chart below.  The correllation is quite high.  The stuff in the blue box is what happen since my last post on this stock.  In the predictive portion of my Elliott wave model from that post I simply aimed hard down (red line) but of course I meant that it should go down in 5 waves (nothing goes straight up or straight down).  I've changed the red line below from a straight line to the familiar EW motive pattern just to make it more clear.

In the chart above, I currently model red 1 and red 2 as being complete and now the shares are working on red 3.  In fact, within red 3 I am modeling black 1 and 2 as being played out.  If this is a correct modeling then I expect a black 3rd wave down to occur that will likely include a large gap since it is a 3rd of a 3rd (black 3 of red 3).  And this whole wave that is happening right now is itself a larger degree 3rd wave.  So I see a 3rd of a 3rd of a 3rd happening real soon now and it promises to be a doozy (and thus the title of these two posts: Intelligeddon).

Look how red 2 retraced to the level of the prior 4th wave (wave 4 of red 1).  Look how the chart is requiring nested 3rd waves to break down the 38.2 fib.  Again, since this is all happening within a 3rd wave, the Elliott wave aspects of it will likely be quite easily noted.  December 20 puts will likely pay off handsomely for gamblers.  If INTC shares break below $19 then I foresee dire things for the stock.  If Intel goes down, it will likely not collapse in a vacuum.  It will likely be part of a much larger market collapse that includes IBM and other big names.

What will be interesting if this plays out is what happens to gold and silver.  I suspect they will be sucked down at first as if they were commodities but then they will likely bounce as shares keep falling because they will finally begin to be treated as a cash type of safe haven.  Lots of conjecture here for sure.  I hope people are enjoying the free financial entertainment.

GLD Wave count suggests one final pullback

In this post I show that GLD broke below the 38.2 fib and is now testing it from below.  While I pointed out that this was an important technical juncture as well as the two ways it could go, I did not render a strong opinion on which way it would likely go.  In today's post I want to show my wave count for gold which suggests that the resistance will hold and that GLD will likely take one more wave down (along with silver IMO) before the bottom of this 2 year bull market retracement is in.

In short, the GLD count is likely to be very similar to the SLV count and so that is how I modeled it below.  The model does have a lot of Elliott wave fundamental backing including alternation shown at 2 levels.  While Prechter never specifically states it, I have found that EW principles are more easily discerned in C waves/3rd waves (the current wave downward is a C wave IMO).  Thus, we see features like alternation and 3rd of 3rd cliff diving show up very prominently.

In any case, GLD is not only trying to break back up through the 38.2 fib shown in the last post, it is also up against the top channel trend line in the Elliott wave sequence.   Thus I think the odds strongly favor one more leg down to try to retest the recent 3rd wave lows.  Note that wave blue 1 down is not very long and that wave 5 should be the same length as wave 1 if wave 3 is the extended wave in the series (and it clearly is).  So the 5th wave down is not expected to break below $110 IMO.  If this scenario plays out as my model suggests then this will form a double bottom or more likely an inclining double bottom.  A subsequent break out of the channel and then possibly a back test of it from above will likely signify that the GLD pullback is done.  The current modeling suggests the bottom will be sometime in Aug or Sept 2013.

Some fundamentals that are happening also support a bottoming move in metals.  First, on hand metals stocks are very low (historic lows) as owners of the metals have been drawing it down from the metals exchanges even as the price has been falling.  So the price smash down has not been working as expected.  The fractional reserve gold system is in trouble.  The other fundamental change is that Bernanke is escaping the Fed and Janet Yellen will likely be picked to replace him.  Yellen is a Keynesian "dove" meaning she wants more inflation.  Obama is on record that he is looking for someone to continue greasing the economic wheels. 

In short, Yellen is very close to being a puppet Fed Chairman for the government.  This means that she will be most likely be announcing new stimulus measures, increasing the fed's balance sheet and generally debasing the dollar at a significantly increased rate as compared to Bernanke.  I expect a lot of turmoil to be coming from the other Fed Presidents as they watch her destroy the dollar.  I think Yellen will be compared to Japan's Abe BOJ pick who is clearly nothing more than a puppet leader for the bank of Japan.  These things will mark the end of the pullback in metals and might also mark the beginning of significant inflation here in the US.  Time will tell but metals holders will not be disappointed IMO.

Sunday, July 28, 2013

GLD at important technical juncture.

I've been posting a lot about silver of late but I think gold and silver will move with close correlation so today's post is about the interesting technical point that the GLD ETF finds itself at.  While GLD continues to diverge from GOLD (i.e. the real spot price of the metal on the metals exchange) as well as physical gold (i.e. bullion coins and bars in your hands), it is still the easiest chart to come by for me so I use GLD as a proxy for the metal.

To keep it short, my recent Elliott wave charts for silver indicated that we would have the rally that is now occurring in both gold and silver but that my current model for silver indicates one more wave down will occur.  Of course that model could be wrong but assuming it is correct for now, gold will likely have one more small wave down as well.

In the chart at left, gold is seen to bounce at the 38.2 fib twice before breaking down below that support level with pretty good gusto.  It then went down to touch the bottom of what I think is the channel and has been doing a vee recovery ever since.

What is interesting about the chart right now at this very moment are in fact two things:

  1. Whereas the 38.2 fib was support before that broke down, it is now resistance.  In other words, the chart broke down below support and is now re-testing it from below.  If the chart cannot break out here but is instead rejected back downward, it will be the famous "goodbye kiss". In that case, near term caution is warranted.  As you can see, the long term trend line is within a few hundred bucks.  Note:
    • While not shown in the chart, the bounce that recently occurred was right at the 50% fib.
    • It will be VERY bullish for the price of GLD if the current retracement cannot make it back down to long term support.  It means that the sellers could not revert it to the mean.  This is the stuff of very bullish inclining double bottoms... 
  2. A break above the 38.2 fib would also be a break outside of the green down sloping channel.  That would be unusual in terms of bear market continuation and trading computers would pick up on it.  This occurence would likely send a buy signal to market based trade bots all over the world.  Note:
    • There is broad speculation (with some interesting evidence to back it) that central banks are trying to manipulate the price of gold down.  Many dismiss it as "conspiracy theories" but of course conspiracies are the norm for mankind throughout history.  For example India, whose government I believe is now a puppet of the US, is pulling out all the stops to dissuade its people from buying physical metal.  They put import tariffs on it and created all manner of paper gold "products" in order to attract buying away from the physical metal.  None of these distractions seem to be working.  So if the metal breaks out then I think it will attract massive buying. 
    • If manipulators are indeed at work here, they better pull out even more stops to halt gold at its current level and send it back down for another month or two.  Failure to do so will likely result in massive gold buying and a loss of confidence in the con men to keep their fiat currency sham going.  But even if they can manage to push it down one last time, I think that will represent the 5th of C which will still form a very bullish inclining double bottom that will push it up into a massive new 3rd wave that takes the metal well over $2000 ozt.
In short, I see golden fireworks happening before the end of the year.  We might have to endure one more smash down, perhaps even to the 61.8% fib before it is over, but the buyers will come and turn it around this year IMO.  Forget the day to day gyrations.  Take advantage of the gold pullback to fatten up your retirement savings.  Don't be like the Detroit public employees who now have to go begging for their pensions in bankruptcy court.  Be your own central banker and your own retirement account manager.  Allowing anyone else to do this for you will end badly for they are con men running a massive con game called the Global Debt Ponzi.

Friday, July 5, 2013

Flash Alert: An alternate wave count for silver.

Before I get into any details let me first say that I am unwavering in my stance that gold is money and everything else is not.  These famous words by Mr. J. Pierpont Morgan will be ignored only by those who do not understand money or the economy.  I will also say this this is elite-think and thus only partially true for the rest of us. Silver is also historical money for the masses.  Many Spanish speaking countries use the word "plata" today to indicate money (plata is the Spanish word for silver metal).  Another old saying is that "Gold is the money of kings, silver the money of lords and gentlemen, barter is the money of peasants and debt (paper money) is the money of slaves".  Of the things in this second list, only gold and silver fit the definition of money.  Money must meet all of the following three requirements:
  1. a unit of account.
  2. a means of exchange.
  3. a store of wealth. 
Barter is simple straight across trade without use of the invention which we call money whose intention is to serve as a fungible token that represents stored labor.  Barter is for those living hand to mouth.  Slaves of course do not have the freedom of trade.  Their purpose is to work hard enough to barely support themselves and their children and then work a bit harder in order to lavishly support their masters.  Every aspect of the life of a slave revolves therefore around debt.

I think it good to have some "king money" for very long term retirement purposes but also some "lord and gentleman money" for nearer term needs.  Barter has it's place as well.  Debt is a gamble, a trap for most.  Some can use it to game the system to some success but make no mistake: use of debt is a game and one that the con men are well versed in.  You might win using debt to your advantage but if you stick to honest money you will not lose except by your own lack of ability to produce anything of value or lack of work ethic to actually produce anything.  Perhaps this is why so many elite are elite.  They have no real ability or desire to produce anything and so they resort to the con in order to thrive.  Smart con men will, for a time at least, live very high on the hog.  Until, that is, they get caught (which most usually do in the end).

In any case my silver bottom watch continues.  In short, it appears to be closely following my prior EW model, at least at the small scale and at least for now.  The top chart below was provided in a post on 6-26 of this year.  It clearly predicts another small wave down followed by a bounce down to
what I listed at the time as the 5th of 5th of C. 

That modeling is represented by the red line coming up to the top of the down sloping channel  and then bouncing down.  In subsequent posts I suggested that the bottom would likely occur in 1 of 3 places: mid channel resulting in inclining double bottom (which would be bullish and likely predict a rapid rebound) OR
bottom channel OR just below the bottom channel (which would be an Elliott wave "throw under").  In the first 2 cases I would expect declining volume as the sellers dried up and in the 3 case I would expect a volume surge as the suckers were psychologically pushed into capitulation right at the bottom.

The picture to left is an overlay of the above chart with the current action that has occurred up to 7-5.  Everything in the orange box is new data.  In short, the chart did push a little lower as expected before doing a vee style recovery to the top of the channel.  In fact, the action continued above the channel briefly but then formed a double top which sent the short sellers back into action.   After that there is a clear 3rd wave down which is indicated by the large gap (aka "cliff diving").  Given the presence of the 3rd wave, I assume there was also very small scale 1st wave before the 3rd and thus likely a similarly small 5th wave following the 3rd.  Given the small size of the 1st wave and the likelihood that the 5th will be the same size as the 1st according to EW rules where the 3rd was an extended wave, that 5th could be so short that it might even already have occurred.  If so, the chart will not make it back down mid channel and the resultant inclining double bottom will be all the more powerful.  If this is all correct, we should expect a big rally from here.

Now the bad news which is, in short, that I now think we really just witnessed only the completion of the 3rd of 5 of C, not 5th of 5 of C as originally stated some days ago.  I think many will get overly bullish into the coming rally and that there will be a final shakeout to kill off even the most determined metals bulls.  Only after capitulation will the real recovery begin.

So why the new doubt when things have been following the model so well to this point?  Well, there are 2 reasonsFirst, I really expect a selloff of this magnitude to end with a capitulation blowout. Everyone has to be ruined on metals.  This is mostly the case today with many "experts" even calling metals "a bubble" regardless of the fact that we have nearly 17 trillion dollars worth of un-payable debt on the books (and 100 trillion in future obligations and likely many trillions in off balance sheet debt as well).  The real bubble is in Ponzi promises, not physical metal.  I am 1000% sure of that.  Still, a high volume capitulation finish would really cinch things up for me that a long term bottom is in (as in "likely never see silver price this low again in history").

Second and more important than the lack of capitulation bottom is an error in my initial reading/modeling of the Elliott wave chart that left me 1 large wave off of the real wave pattern.
My initial interpretation is shown in blue.  My new and current interpretation is shown in red.  Turns out, this makes a pretty big difference in the final outcome.  Why did I change my view on this?  Because my first interpretation was in violation of the EW rules.  Namely, wave 4 can never go back into the region of wave 1.  It is a rookie mistake but I made it.  The correct interpretation is that blue 1 is in fact the first wave down but blue 2 is really A, blue 3 is really B and blue 4 is really C which makes it also the real 2nd wave of the big C.

The corrected modeling of the entire C wave is thus shown at left (click on it to get a more detailed image).  As you can see if you compare this to charts above, the action is the same except we really did not reach the bottom of C yet (5th wave), we instead only reached the 3rd of C.  IIF this new interpretation is correct then we should get a very big, vee shaped rally to the top of the channel in which the bulls get too bullish too prematurely.  That will be the 4th of C.  Notice that the new interpretation shows red ((2)) as a sideways correction.  That implies, via the EW rule of alternation, that the 4th wave will be a vee type wave.  The recent chart ending of wave 3 (which I think has now occurred) was very weak and it leaves us with an inclining double bottom. It is cause for bullishness for traders and they will jump in on leverage to make a quick buck from it IMO.  So this is a very good setup for a strong 4th wave move as modeled.

Following a likely failed test of the top channel line, my current model predicts that the chart should be deflected downward into a 5th wave that should be about as painful as the 1st wave ((1)) was.  Well, that 1st wave was not really very strong, was it?  So the final 5th wave down might not actually fall below the 3rd wave which I think has just finished.  In fact, a failed 5th would result in an inclining double bottom which would be an extremely bullish setup for the next big wave up which I think at the very least will approach $50 and just as likely make a new high to $70 or above.  So while I think the 3rd of C is now likely done and that a 5th wave down is still in the cards, anyone buying silver in the current area will likely not be far wrong when the smoke clears.  A good strategy for savers is to dollar cost average into this bottoming process.

I think it's important to note that humans are obsessed with catching the exact bottom.  If they miss it by a couple bucks they despair and freak out when they see lower prices happen.   I can understand that behavior when applied to stocks because stocks clearly have no long term historical value other than what the next, highly leveraged, greater fool will offer you for them.  With stocks and bonds there is always a great chance that they will go worthless some day. 

The beauty of physical metals is that you never have to worry about that.  You buy the metal and, if the dollar price goes lower for a month or a quarter or even a couple years, your metals are in no way diminished.  They will happily sit there in your vault until the grand debt Ponzi collapses of its own corrupt weight.  They will be there for you when electronic accounts fail and every paper investment reveals its disgusting Madoffian stench.  Real metals buyers are savers who always hope for lower prices in the near term given the long term certainty that corrupt fiat currency and fractional reserve scams are destined to fail.  Moreover, world conditions make is clear that the time for collapse is not far off.  Years, not decades IMO and I would not completely rule out quarters or months either.

And now for the obligatory disclaimer.  EW modeling is just that: modeling.  Modeling theory is not perfect and modelers themselves can misread the data (cough cough).  Chaos is by definition difficult to predict with any accuracy although there are in the field of mathematics areas of study which specialize in trying to do just that.  Also, as we get down into the wee waves, the chances of chaotic events affecting the model in subtle but significant ways increases rapidly.  In other words, predicting to a certain degree is not that difficult but the smaller the degree, the higher the odds are that something will play out differently.  The one saving grace of EW modeling for this is that it contains built in triggers to tell you when your model is wrong (if only you remember to discount them in the model...).

Thus the prudent market timer will use modeling as only one set of input data to be used in conjunction with other world events (such as an increase in QE instead of the suggested tapering...) to time purchases.  For those whose energies are focused on other things (which is most people), dollar cost averaging is often a better strategy than market timing.  Forget the day to day ticks of the con and buy on a regular basis.  When you retire you will have a pile of metal coins that will have value when other things do not.  This is never a losing strategy and it has the benefit of freeing you from agonizing over market fluctuations.

Wednesday, July 3, 2013

Intellageddon on deck

Intel investors should take note of an extremely bearish chart setup now unfolding.  In short, the shares peaked in April last year and then got creamed into November 2012.  That was 5 waves down into "blue 1" shown on the chart below.  Then a clear A-B-C retracement to the 61.8% fib followed by a nasty double top that looks like a Batman cowl.  It is now finishing what I believe to be 1 of 3 which will likely bounce at the 38.2 % fib as shown below before breaking down with gusto as shown.  The 3rd wave down will reach a much lower low than the Blue 1 wave.  This is a good time for gamblers to be researching short term puts IMO.  Wait until the small 2nd wave transpires and then buy a few hundred bucks worth for asymmetrical gains.  The confirmation will be the breakdown below the 38.2 fib.

Needless to say, I do not expect Intel shares to collapse in a vacuum....

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