Looking at the market cyclically this extended sideways action is just not a positive development. Let’s face it the longer this lasts the closer we get to a correction.

You can see from the following chart that despite the trillions of dollars being thrown at the markets the daily cycles have still run their course like clockwork.

At this point we are 27 days into this cycle and so far there’s nothing that even vaguely looks like a decline into a daily or intermediate cycle low. That must mean it’s still ahead of us. Even if the market were to break to new highs in the next day or two it would probably be very short lived. I expect when it comes it’s going to be sharp. That is how most right translated cycles unfold by the way. Just look at the ongoing correction in the right translated gold cycle.

The banks may be telegraphing trouble ahead. I was expecting maybe another day or two in the coil before a break but today’s action looks like the BKX may be ready to move now.

We’ve already lost the energy sector if the banks go to the market is going to follow.

Dollar:

We should be looking for a right translated cycle in the dollar also. Especially if it just put in an intermediate term low, and I think it did. That means we probably still have another sharp move higher soon before the dollar rolls over into the cycle low later this month. That would give us the deceptive bounce I’m looking for in gold.

I’m guessing we should get at least one more daily cycle up on the dollar index after this one although it could be left translated. It probably just depends on how long it takes the dollar to work its way up into the resistance level around 79/80.

Gold:

It’s not on this chart but today was day 6 of this correction. The shortest correction into a cycle low over the last year has been 7 days, the longest 24. Since I think the dollar still has another leg up I’m guessing this leg down may run a bit on the long side. Maybe 10-13 days before we see a bounce.

I bought part of the put position in OIH on the gap up this morning. I was waiting for a tag of the $115 resistance level to add the rest but since it never quite made it I just added the rest at the close.

That’s about it for me at this point. I have the small OIH position working for the imminent correction into the daily cycle low and that’s all I care to do with the market at this time. Now I will just continue to twiddle my thumbs and wait for the correction to run its course. When it does I have plenty of dry powder ready to go for what should be a truly mind boggling run in the precious metals markets.

Short term indicators are still neutral.

Gary

Portfolio:

15% position in silver miners (5% SLW, 2.5% PAAS, 2.5% CDE, 2.5% HL, 2.5% SSRI)
25% position in 10 junior miners
UNG calls (I expect this to be a total loss but I will hold the position on the chance the move out of the coming bottom is explosive enough to give these some value)
10% equivalent position in Jan. 120 calls on OIH (I'm controlling the same amount of shares as if I had shorted OIH with 10% of my portfolio)

 www.garyscommonsense.blogspot.com

 
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