This week's report is likely to be a longer than a normal article, as there is so much I want to put pen to paper, and with such a crucial time in the markets, I hope that some readers take note and benefit from my writings or at least think about what I have written in the past.
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http://www.wavepatterntraders.com/index.php?/forum/179-before-after/
The week just gone
One nasty week, and the only time in recent history I can remember seeing such a bloodbath was in the fall of 2008, the ironic thing, this could be about to just get started.
To those that think this is not 2008, are you really sure? Did you look at the markets this week? Are you prepared to make the same mistakes as you did in 2008?
If we are replaying 2008 or not, the fact is that the themes are the same, US$ goes up, the rest of the markets go down. Don't believe me??? Check this out.
Even the mighty gold and silver markets got killed and I mean killed, it's not every day you see such liquidation events, and that's the point I want to focus on.
There will be those that will use "da funnymentals" to justify holding onto positions, yet again it's been proved time and time again, in a liquidation type event everything gets killed.
That means everything from the kitchen sink to the babies pram gets sold, when you are faced with a margin call, you are forced to sell everything.
In 2008 we saw such an event, and this is how it started, go back to July 15th 2008, align your charts to see what I am referring to, oil, gold, silver, EUR/USD and AUD/USD all started their crashes, and potentially now the same could be setting up.
Do you want to make the same mistake as the bulls did back then? Thinking this was a run of the mill garden variety correction, in case you aint being keeping up with current events, the markets literally took a swan dive the past week.
Who was the benefactor to the mini market crash this week??
Yep you guessed it, the 2 markets that everybody loves to hate, the US$ and US bonds.
Wait a minute how can that be? I thought the US economy was a ponzi scheme?? It is, but once again it shows you that when an event like a liquidity crisis arrives, the safest and most liquid and trusted market, that's the key word here trusted, is still the US$.
I know, as crazy as it seems, the one market that people spend most of the year saying is a ponzi scheme is now seeing a safety bid.
Gold
Last month I wrote a detailed report on gold.
See here http://www.safehaven.com/article/22330/market-report-key-inflection-points
Much to the amusement of many readers, I wrote about the fact I thought that cracks were being seen in gold and I suspected a top was near to the parabolic move.
I wrote this.
"I will just say this, if your still long gold it might be an idea to take some profits off the table, watch the market very closely from here for a failure to make a new high, or just push to the previous high and a rejection, as a topping formation has these sorts of characterizes and humans never change, and they make the waves that us Elliotticians count".
Well you got the new high and rejection, the result speaks for itself, I only hope some readers took that advice and locked in those gains.
Judging by the amount of e-mail I received, the article was not received that well, whenever I take the opposite side to a trend based on my work, I tend to see an abundance of rejection to my ideas, it tends to come from traders that are simply not interested in other alternative ideas, and I suspect once again many bulls got burned on the puke you saw in gold.
Now I am a big fan of gold, but there is also a time and a place to be buying gold, and the one time to buy gold is when its cheap and you see a nasty sell off like you are seeing now, but at the present time you could see far far lower, if an event like 2008 is just starting.
Ask you yourselves this?
Do you want to buy gold when its cheap or expensive, it literally disgusts me seeing the behaviors' of some analysts touting gold at the highs of a trend, and now likely trying to make excuses of why they never saw this type of move happen.
they don't look at charts then?
Parabolic moves like you saw in gold end in tears, history shows you this, yet time and time again, traders and investors fall the oldest trick in the book of buying near the highs and selling near the lows.
Yet just one look at a chart would have told you to stay out, or if long to lock in gains.
As I point out to my members, the $$$ is not yours till it's banked, and this week was a great week to prove that, all those imaginary paper profits just gone up in flames.
If we are in some sort of 2008 event, gold I suspect will get sold off with the rest of the markets, that fact that it's not seeing a safety bid and went down like a ton of bricks with other risk markets is telling you, that this will crash and burn with the rest of the markets.
Welcome to the real world where gold can do DOWN as well as up. With so many traders stuck with the mentality of being brainwashed that the market only goes up, and buying near the highs of a trend, they are now stuck and will likely hold, until capitulation eventually drives them to sell at the lows.
s everything, and when most are capitulating, and my work suggests a low is near at hand, that's when I step up to buy aggressively when I suspect most are not interested having ridden the move down and capitulated.
Don't forget to thank your brokers and advisors for not getting you out with your profits, or getting you to buy the highs.
$HUI
I showed this chart to members a few weeks back and it was a warning sign that gold stocks could have found an important high. Another clue to a potential high in gold let alone put pressure on the stock market.
I even narrowed it down to a potential smaller ending diagonal of the 5th wave of the larger ending diagonal.
As I write the $HUI stands at 536.40, it looks to me that it's just getting starting on the downside, and I suspect more downside looming especially if gold and silver and even some of the precious metals like palladium and platinum sell off as they did this week.
So if you're in gold and silver stocks, you may want to think about the very real fact that, if this is a 2008 type event, and forced liquidations are seen across the board. Everything will get sold.
Loose the 500 support area and then you will see the trap door open. (Red support area)
Don't take my word for it, look at your charts, go back to July 15th 2008 and see what could be happening here.
Are you prepared to take that risk??
How do you make $$$ on the $HUI pushing lower? You buy DUST.
Silver
Wow!!! This market got creamed this week, a crash in itself and I again wrote about an analogue I found on silver and I even had a time window that traders needed to be careful about, price action time was mirroring that previous analogue.
I wrote about it here http://www.safehaven.com/article/22243/market-report-the-bear-lives-on
Fast forward to today, it's looking good, bulls better pray that this is not going to follow the same script or a world of pain is coming for the silver bulls.
If you're bullish silver, are you willing to risk seeing this play out? Imo you need to focus on the US$, in fact hope and pray that Ben Bernanke does something crazy and print $$$$, because if a liquidation type event like 2008 has started, go and get the popcorn, because it's just getting started.
NDX
In last week's article I penciled in a target range for a reversal at 2323-2346
http://www.safehaven.com/article/22561/market-report-a-tale-of-two-markets
The result was a perfect rejection and likely now an important high in place, the weekly candlestick this week, further supports the idea that an important high has been locked in.
ES
Last week I left you with this chart.
We never quite got my target, but the idea all the same played out as I suspected, but it never really kicked in till the FOMC made it clear that it was not going to do QE3, so the market now has no reason to stay up, many leveraged players now are disappointed that the FED did not print more $$ and the market threw a hissing fit.
As long as the market continues to correct in 3 waves and trend lower in 5 waves, that's the definition of a trend going lower.
Our timing window for a reversal worked out perfectly. I have many tricks up my sleeve, Elliott wave analysis is just a small part of my work.
I am still bearish the markets, in fact the price action this week further suggested what I already was looking for, me and members simply respected our ideas and traded our plans to the ideas that we have before the markets moved.
If my ideas are correct and looking at what I am seeing across the board of other markets, then we are just getting started for the main event.
An event that will likely surprise many in the markets.
As always, ideas are one thing, price action is another, but I don't have any reason to change the working ideas, we have been all over these markets, and the script is working well, our areas continue to work, so we stick with what works till the market tells us that we are wrong.
If I am wrong it won't take much to find out, but if I am right, well ............................. I am sure you get to gist of the idea.
Conclusion
Seeing the price action we saw the past week, really does open the door for a 2008 type event, there will be those that ignore the potential clues.
I am not in the game to ignore what I see, I respect price action till it tells me otherwise. The clues are there, and if this really starts to unwind, this can get ugly very very fast, you only have to look to the 15th July 2008 peak to see what the potential could be.
Will it happen?? I don't need to know the answer, I just need to respect price action, if the market keeps pushing lower and corrects in small weak bounces, then the market is still a sell, its that's simple.
Traders can choose to buy a falling chainsaw if they wish, but I will stick with the facts, until price action gives me reason to caution my ideas, I stick with what works, so far I see nothing to suggest a low is near, in fact quiet the opposite, it could be about to get more crazier.
Ignore that if you wish, but price action this week, just proves when things get out of control and markets go into a full on crash, things happen quickly and people get hurt.
Please be safe out there, this is not a time to be a hero trying to catch a falling chainsaw, there are far easier ways to find lows in markets, you don't have to so what others do and think they are smarter than the market.
Being a contrarian, well that only works some of the time; the markets can trend far far longer than you think. Stick with the facts, not opinions.
Until next time.
Have a profitable week ahead.
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