Subscriber Update 3.25.2014

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Good trading all.

Steve Chapman, TRI


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16 comments on Subscriber Update 3.25.2014

  1. James Simon
    March 25, 2014 at 8:19 AM (5 months ago)

    I’m at a loss how to reconcile these two comments: “if today is the A Wave up then tomorrow and/or Thursday could be the B Wave down before we see if the market can generate a Wave 2/C Wave with any strength.” vs. “There are two momentum divergences using either RSI or MACD on the following chart, and so the odds of Wave 1 to the downside being over have increased dramatically”.

    This EW stuff is confusing for the uninitiated…

    • Steve Chapman
      March 25, 2014 at 8:45 AM (5 months ago)

      Sorry for the confusion. I just use EW as a framework of expectations within an intermediate cycle. Here is a visual diagram to show it better:

      http://therefinedinvestor.com/wp-content/uploads/2014/03/Mar-25th-GLD.png

      The basic premise is that the market unfolds in 1-2-3-4-5 patterns in the direction that it wants to go, and A-B-C patterns in the opposite direction. You will often hear the phrase “Two steps forward, one step back” to describe the markets, and this is why.

      If gold is back to being a bear market, then we will see 5 waves to the downside followed by 3 waves to the upside repeating over and over. Each C Wave within a correction has 5 Waves, and that is the only tricky part to remember. The Wave 3 of a 1-2-3-4-5 impulse or in the middle of a C Wave is almost always the strongest move.

      Right now we are waiting for the A & B to finish, and then any bounce to the upside should be the C Wave later this week. That is what I was trying to describe.

      I try to keep Elliott Wave at a generic level because you can take it way too far. It is good for managing risk though and building potential frameworks of expectations.

      -Steve

  2. Edward Bernhart
    March 25, 2014 at 8:42 AM (5 months ago)

    Steve, It is much easier for me to endure the whipsaw action of a position knowing the amount of knowledge and patience that you have demonstrated in taking that position. Your measured judgment gives me the necessary psychological confidence. Thanks for everything!

  3. James Simon
    March 25, 2014 at 9:00 AM (5 months ago)

    Thanks Steve. The additional diagram made it much easier for me to visualize. BTW, of all the services I subscribe to, yours has been the most reasoned, unemotional, and useful of them all. Many thanks.

    • Steve Chapman
      March 25, 2014 at 9:07 AM (5 months ago)

      Not a problem at all. I try to maintain a balance for subscribers of all experience levels and sometimes I accidentally gloss over something that needs more explanation.

      Always feel free to ask.

      -Steve

  4. David Akridge
    March 25, 2014 at 11:16 AM (5 months ago)

    Steve, your linked GLD chart shows an April 1st top. Is that your intention or is it just illustrative? Thanks for all your personalized responses!

    • Steve Chapman
      March 25, 2014 at 11:48 AM (5 months ago)

      Illustrative. Predicting timing is nearly impossible. Following the common sequences of price movement is much more reliable overall. It could be 1-3 days or it could take 5-15 days, every time is different and a lot of it depends on sentiment.

    • Steve Chapman
      March 25, 2014 at 11:50 AM (5 months ago)

      I think everything commodity related could experience a countertrend bounce over the next 1-2 weeks, especially if the dollar is not done going down. After that, I think strength will be sector-specific.

  5. wavesofcash
    March 25, 2014 at 12:05 PM (5 months ago)

    I am STILL a USLV bagholder (in decay hell) from when I bought April 29th and should have sold 8/27. I bought for a gapfill in april and it never filled. I have always thought they would fill that gap, but now it looks like they might in 10 more years! Can you go over silver tonight? Also, I never bought Uranium, but it has dipped alot now. Should I buy Uranium now? Can you go over that tonight too? Thanks!

    • Steve Chapman
      March 25, 2014 at 12:19 PM (5 months ago)

      I believe that silver will drop by another 25%-50% from here before it finally finds a bottom, so a triple-levered instrument will essentially go to zero. Silver lost 93% of its value after the 1980 top, and while I don’t think that it will be as extreme the bulls need to get to the point where they wish they had never seen a silver bar…then a long-term bottom can be put in. The silver pumpers have cost a lot of people a lot of money, and I personally think we have already seen the high for 2014 because silver appears to be in yet another descending triangle and the dollar is due for a big rally. The silver parabola ended at the last dollar multiyear low in 2011 and I don’t think it can resist a strong dollar again. I will cover it tonight.

      -Steve

  6. wavesofcash
    March 25, 2014 at 12:13 PM (5 months ago)

    I forgot to mention — I had pointed out i think around 2 months ago what I thought was a Biotech bubble top. I was VERY early on that call, but now see that THIS might have been that parabolic top. Is it too late to short biotechs and the general market (QQQ for example)? Can you go over the general market and Biotechs tonight? I feel that we are at a very important trading point now, hence all of my questions. I feel now that you and I should not be in cash, but acting big time for the big gains if we have topped in the general market. Thanks!

  7. David Akridge
    March 25, 2014 at 12:36 PM (5 months ago)

    Steve, will you be considering ZSL and DSLV for silver’s and DUST for gold’s “ride to hell”? Thanks.

    • Steve Chapman
      March 25, 2014 at 1:11 PM (5 months ago)

      They have horrible decay and silver is better played with medium-term puts on the downside instead of ETFs.

      I also think that we might not make a new low during this intermediate cycle, and that it could occur during the next one. We will have to wait and see. I have seen people be correct on silver’s downside direction and not make any money using the inverse ETF’s due to decay.

  8. Mario
    March 25, 2014 at 1:18 PM (5 months ago)

    The BEARISH argument for metals has been laid out clearly and concisely. I am certain you have a “point of recognition” where the bullish argument will gain credence; what would it take (what is needed to be see) for a bullish outlook to gain the upper hand?

    • Steve Chapman
      March 25, 2014 at 1:43 PM (5 months ago)

      Price moving impulsively to the upside and then either correcting in a controlled fashion or making higher highs/higher lows. Since the 2011 top all of the clean Five Wave sequences have been to the downside, while all of the moves upward have consisted of Three Waves or odd-looking short squeezes without waves (like the recent one in gold/miners). There were a ton of people that bought from 2011-2013 and they are now sitting in losses. That represents overhead supply that needs to either capitulate and sell through time or price. When those longs give up then price will be able to move above $1525 again. As long as they hold out hope that they can get their money back the shorts will continue to dominate the price action. Twelve years is a standard time period for a bull market, and it can typically be followed by a secular bear of equal or longer length.