Loading ...The Mother of All Bull Traps?
I just posted this work at the Rambus Chartology Forum, which I owe for being one of the best technical analysis “teaching” sites on the planet. I’ve been asked to add a few things and publish here at Goldtent so this could get a wider audience.
I’ve been quiet for a long time. Nothing has made sense to me. I made a small fortune using the knowledge gained from the Sir Rambus site to play long and short but mostly short the PM miners. I had multiplied my money in my trading accounts by 13 in 2.5 years!
I was an absolute pig. I knew it. I was playing with the 3X leveraged ETF’s. I absolutely knew they could wipe me out if I didn’t stop playing with them. The false breakdown in January confused me beyond belief. I didn’t expect it. The Dollar had broken out up. It was going to continue….
As confused as I was my charts told me, and I had many, that a temporary bottom was in for gold, but I kept waiting for a pullback to sell my shorts and enter long. I had done it so many times before. I could do it again…. This last move was diabolical though and almost straight up, and I kept waiting for a bigger pullback. It never materialized. DUST which I was trading went from $40 to $1.20. I was in and out several times so didn’t lose all of that but at this moment my account is still slightly below where I started in 2013. I know I am not the only one to have made this mistake, but perhaps I am the first to publicly admit it.
I was a pig. I was a rookie Trader using WAY too much leverage, and I became slaughtered… It’s what happens to pigs… I’ve learned a lot from it, and hope I’m much wiser and safer in the future.
I was a major contributor at the Rambus forum but had lost my money and my confidence, and recently had been afraid to post charts in fear of being wrong and hurting others. I didn’t listen to Rambus, Spock, or Plunger who are other major contributors at the Rambus site that had all gone long gold and the miners. I thought I could salvage the trade. Rookie mistake beyond belief.
I didn’t know if I’d ever post again. One of my good friends at Rambus Forum, Sir Schism, encouraged me to, and when I came up with this theory I felt absolutely compelled to do so.
I didn’t see this 2016 run up coming just like I didn’t see the 2008 drop in Gold and the HUI coming.
Keep these two runs in mind: the 2008 drop and this present 2016 surge.
At the end of 2015, the thought process of pretty much everyone at the Rambus site was that we were about to see the deflationary collapse of our lifetime. Everyone abandoned this when we started this surge in the miners, but I propose we’ve just had a Midpoint Pause like the 2008 drop. This is what the charts are telling me.
I have come up with this theory:
WHAT WE’VE JUST SEEN WITH THIS MAJOR RUN UP IS A MIRROR OF the 2008 drop. The 2002-2011 bull run in gold could not continue without shaking everyone off in 2008.
The current major bear in gold could not continue without shaking off every last bear, or eviscerating their accounts with the diabolical DUST, in 2016 and sucking back in every last bull…
MIRRORS TO 2008 IN THE XAU:
I love how this MAJOR breakdown line has just been backtested on Gold and the XAU…
I believe the XAU will barely make lower lows just like the miners barely made higher highs in 2011.
I believe gold will make incredibly lower lows just like it made incredibly higher highs in 2011.
This means the ratio chart for $XAU:$GOLD which has fallen beyond belief has, according to this theory, bottomed.
MIRRORS TO 2008 IN GOLD:
US Dollar Monthly (The Most Important Chart on the Planet)
This 800 lb Gorilla Dollar Breakout is going to make a lot of sense soon I believe…
Euro Monthly
Yen Monthly
Dollar: Yen Monthly
Subtle Signs…Euro Weekly
Am I right? Is this Possible? I have no idea. I’m searching… This though is what the charts are telling me… And they are very Compelling Monthly Charts
JUST A COUPLE OF MONTHS AGO SO MANY WERE EXPECTING INCREDIBLE LOWS FOR GOLD AND THE MINERS. NO ONE IS EXPECTING THIS NOW. THAT’S ONE MORE REASON WHY IT MAY BE CORRECT NOW…
Good luck. I pray and hope I’m helping and not hurting…
Oh and one More Important Chart to consider in this “Hyper Deflationary” Scenario:
Oil Monthly
At the Rambus Chartology Forum we consider ourselves Knights at the Round Table with our main mission to Slay the Dragon, The PM Market…The PM market has proven to be a most deceptive dragon and formidable prey.
Please keep an open mind and remember:
All for one and One for all
Good luck,
Parabolic Chuck
Added :
Gold Right Shoulder
Great charts Chuck 🙂
Great to hear from you again! I’ve been where you are…good Lord have’t we all?…..I’ve made a lot and then lost a lot since I started trading 20 years ago…if this weren’t so damned complicated and challenging I wouldn’t still be in the game trying to better my old reactions, strategies and psychological hang ups….so good for you for coming back—you’ve been missed!
Great post Chuck. Very sorry to read of your misfortunes with DUST etc.
I also love the leveraged ETFs and trade with those rather than individual miners. I will continue to do so, for some time to come.
At any given time, I limit my attention to 5-10 plays tops, and where liquidity is ample.
I adhere strictly to the signals my charting software shows me, and I also get clear in versus out guidance from that.
So I may be wrong, but seldom for long. I might see two or three compelling buy signals for DUST or NUGT each year. No more. I’m patient.
That said, the ferocity of this ramp certainly exceeded my expectations, and its also raised questions about what is going on in the big picture.
(I don’t know, but I suspect it was related to the Chinese commodity speculation craze that also began in January.)
Your post was titled “Bull Trap” and I do think — ultimately — that’s what it will become. We may in fact, have already topped.
I certainly have topping signals on my monthlies, that don’t come around often. However, in a new bull market, fresh support shows up well before we cycle down to the opposite extremes. Its too soon to say if we get that here or if we do go full bore bearish.
I probably ought to review some quarterly charts to get a better handle on that idea.
The bear case in EW terms, is that we completed an ABC 4 off last summer’s lows (within larger A down off 2011). And where the “diabolical” Dec/Jan lows was an irregular B wave (extending below the wave 3 lows of last July/Aug. The ensuing ramp was the C. They have the appearance of bull moves. (And my system admittedly did not read the abrupt Crazy Ivan move for what it became.)
As for DUST, I’m still waiting for one of my major trend reversal signals. We may have dropped (in GDX) for 1 of 5 down, with 2 up imminent. I will short when 2 completes, not before. There’s a retest of the recent dollar lows directly ahead, and so a PM rebound would not surprise me.
PS – I’m not a big fan of charting geometry. The patterns repeat, but in a case by case manner that limits what I seem to be able to conclude from them.
But I do like indicators that delineate bull and bear conditions in multiple time frames, and the longer term bull case for DUST is getting stronger.
So we have gone from the extreme bullish scenario of Mark-Spock-Plunger (new bull upleg) to the extreme bearish scenario with the resumption of the bear market suggested by Parabolic Chuck with Savage-Hoye-Maund etc….in the middle of the stage.
Anyway if this is a bull trap it will be a trap for very few gold bulls since many of them are not into the market.
will the central banks of this world allow such an extreme deflationary collapse?
Mamare,
Indeed you are correct that most small speculators are on the sidelines and almost all Guru’s are bearish here as this analysis of the COT Shows. Can the “Herd” be right?
http://prostedywagacje.blogspot.com/2016/05/gold-and-silver-alternative-look-at.html
In contrast, pull up virtually any Miner chart, on the weekly and take a look at the OBV indicator. This indicator alone shows me that Smart Money is accumulating.
Surf,
I really hope that YOU and your analysys will be correct since you are on the positive side 🙂
Anyway I’ve just listened to Peter Brandt and he also talk about a possible bear trap in the dollar with the green back as one of the best bet for the next 12 months 🙁
Here is another interesting COT analysis from this week:
http://seekingalpha.com/article/3978388-weeks-cot-gold-report-move-commercial-traders-unprecedented-reports-history
I’m just one man’s opinion….
Makes for interesting reading and confusing trading!
Thanks so much for sharing your story and your well reasoned charts. I’m going to make a new post that explains why this current move doesn’t have to trap anyone, long or short. The key is the trading plan….knowing exits and sticking to the plan. We can all be wrong, we just need to cut losses small so we can live to trade another day. I feel we are right at that inflection point.
Thanks all. Great insights. Look forward to the charts Mark.
I would argue that maybe not everyone is in now but they will be. At this support level or that which produces the right shoulder. At the 61.8% fib retrace. At the 200dma, at the double bottom. The buying won’t stop. Making it a very stair stepper decline if it does do this.
All depends on the dollar in my opinion which will make gold and the miners just keep stair stepping down dragging the new bulls down.
I will do a Special post on Gold/Rambus tomorrow!!! Stay tuned folks…
Chuck Great charts. Your labeling of A B and C does it have any relationship to price???
I believe analysts got the A B and C from Elliott wave nomenclature from flats(wave configuration). In EW analysis extended flats or running flats are labeled A B and C. These legs have specific rules and guidelines and have certain % price relations.
Currently gold has just completed cycle wave C at 1045 of extended flat and is in cycle wave B up. If it is extended flat then cycle wave B will move higher than $1923 2011 top. Once that structure is complete then wave C will be down to your target $700. That is several years away. This is what Elliott wavers are calling. ( not me)
Immediate correction by Hoye to 1160 may be achievable.
Wow. Interesting. I just used ABC to show the similarity mirror of the 2008 drop and 2016 pop with the B point being the extreme after the bull/bear counter trend move. Both the B’s if you notice also hit the major s/r rail which should be major resistance.
$700. Sir Rambus used to call for that! I thought it was crazy. Not anymore 🙂
Hi Chuck – I knew we would see you again! Thanks for your insights, as always. I love the longer-term view you presented (Always important to START there IMHO). Your most intriguing statement (at least for me) was: “This means the ratio chart for $XAU:$GOLD which has fallen beyond belief has, according to this theory, bottomed.”
Cheers!
Cheers Patty! Thanks:-)
Brexit / No Brexit could be a catalyst just waiting to tip these markets. I am confused as to what the result will be on the vote and also what the consequences will be. If there is no Brexit the political establishment might breathe a massive sign of relief and sell off gold. Euro decay can continue after a brief pop (but not a collapse that might happen if Brexit comes).
Oh I see how XAU:Gold has bottomed. I was going to ask about this but I relize it is because XAU may go down a bit and gold go down a whole lot!
Can this actually happen though? Would not $700 gold wipe out the gold mining industry? This industry is just starting to assume that $1250+ gold is the new norm and such a drop to $700 in gold would be a massive shock, with even more write-downs of reserves to companies that might be hoping that they are about to use the baby gold bull market to rescue their uneconomic gold that they wrote down in 2013/14/15.
Brexit is a big deal coming soon. Well, if this all happens I could see gold going to perhaps 1/2- 2/3 of its previous low and the XAU perhaps 2/3-3/4 of its previous low.
Find out soon if this is for real or not.