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Standing Against the Crowd in Gold, Silver, Stocks, Bonds and Commodities

patrickwoodAs recently as early Jan­uary 2010, the vast majority of investors and pro­fes­sionals were intensely bullish on the economy and the stock market. Gold & silver investors and traders were just as bullish on pre­cious metals. Econ­o­mists world­wide were claiming vic­tory over the recession.

What went wrong?

Nothing. When­ever a strong con­sensus exists, you can always bet that the crowd will be wrong. It was wrong this time, and to the largest degree possible!

djia120-20100205

When you stand against the crowd and pur­pose­fully decline to "listen" to it, you have a decent chance to catch reality in its most sen­si­tive moments... like when stocks, gold and silver roll over at the same time into a major bear market leg that could reap finan­cial destruc­tion for mil­lions of Americans.

That's why I write the Market Update at August Fore­cast - to help sub­scribers stay away from the crowd and out of harm's way.

So that you can better under­stand my thinking, the fol­lowing chart and asso­ci­ated foot­notes anno­tate direct quotes from The August Fore­cast on the indi­cated dates leading up to the recent stock market crash.

[Note: The public is wel­come to accept a free 30-day trial sub­scrip­tion to The August Fore­cast, which is posted three times per week on Monday, Wednesday and Friday. Ongoing sub­scrip­tion rates are ridicu­lously low at $69 per year or $39 for six months!]

Foot­notes to chart:

  1. 12/16 - "Gold and silver have both peaked and expe­ri­enced at least the first leg down in their antic­i­pated bear market. The dollar has set a major bottom.  Stocks are holding out, but are looking riper for a turn every day."
  2. 12/18 - "With gold and the dollar changing major trends, you can bet that equi­ties will soon follow suit. At this point, I would look to the first half of Jan­uary to kick off Pri­mary Wave 3... The stock market crash of 1973  -  1974 started in Jan­uary 1973 and resulted in a loss of 45 per­cent in the DJIA. Nobody expected that one, either!"
  3. 12/20 - "Even though stocks are holding up, gold and silver are not, and the dollar is racing higher... This is a strong head­wind to any fur­ther stock advance, and will even­tu­ally pull stocks off their perch."
  4. 12/28 - "Since the metals and stocks have been tracking together for so long now, it is a glaring non-confirmation that stocks are at their highs while the metals are well off their highs and can make no fur­ther headway."
  5. 12/30 - "With the dollar strong and metals weak, the stock market is on bor­rowed time. The entire top­ping process that started in early November has been slow, choppy and treach­erous. Still, very little net upward progress has been made, indi­cating that the November call for a top was cor­rect but did not take into account exactly when prices would start down in earnest."
  6. 01/04 - "I still strongly sus­pect that that Pri­mary Wave 2 up is either over or soon to be over."
  7. 01/06 - "Gold has expe­ri­enced a clear A-B-C cor­rec­tive move off its December low of $1,074.  The range of $1,150-$1,170 should con­tain this rally, and there­after it should turn down again. A drop below $1,115 would indi­cate that the A-B-C is finished."
  8. 01/08 - "There are other soci­o­log­ical sign­posts as to why equi­ties are in a major top­ping process. First, India pur­chased 200 tons of gold in November 2009 from the IMF... I am quite sure that it was the dumbest thing they could have done."
  9. 01/11 - "Are we on the verge of some­thing like an 86 per­cent crash? I believe so, although it will take months to work off."
  10. 01/15 - "If you have any long posi­tions in stocks, bonds or com­modi­ties, get out. Now! Gold is on the cusp of begin­ning a third major wave down. Wave 2 up looks com­plete and prices are off the peak. Wave three down will be very volatile at times and prices could ulti­mately see $700 or lower."
  11. 01/20 - "If the chart were of a heart get­ting ready for an attack, one might con­clude that these shallow waves are like fib­ril­la­tion. Yes­terday and today were the last gasps for fresh blood and oxygen. Also con­firming the worst for equi­ties was gold's break­down below $1117. Wave 2 up is clearly over and wave 3 down has started. Look for wave 3 to carry below $1,000 over the next month or two."
  12. 01/22 - "We are cur­rently seeing the kickoff wave down in Pri­mary Wave 3 and judging the inten­sity so far, you can get a sense of the ugli­ness to come."
  13. 01/25 - "This dichotomy (between DJIA, S&P 500 and DJ Trans­ports) sets up a pos­sible non-confirmation sce­nario, which would be a warning sign of lower prices straight ahead."
  14. 01/27 - "When this cor­rec­tion is over, it will be counted as wave 2 up and will be fol­lowed by wave three down, which will itself con­sist of five waves. Stocks, gold and the dollar could all be in third waves at the same time over the next month, making for some very dicey action."
  15. 01/29 - "Stocks are sig­nif­i­cantly over­sold but that does not auto­mat­i­cally mean there is a big rally at hand. These con­di­tions could per­sist for some time while prices con­tinue to fall."
  16. 02/01 - "When wave 2 up is com­plete, wave 3 down will com­mence, drawing prices below Friday's lows. It will be a psy­cho­log­ical blow when the DJIA falls below 10,000."
  17. 02/03 - "Weak­ness in gold and silver, cou­pled with today's sharp spike in the dollar, add pres­sure that stocks will resume their decline. The DJ Trans­ports might already be leading the way down."
  18. 02/04 - "Today's action was typ­ical (if exag­ger­ated) for a kickoff of a third wave."

Standing against the crowd is never easy. Peer pres­sure can be immense. Crit­i­cism can be intense. When it's just you and your own thoughts, you can even doubt your own sanity.

Nev­er­the­less, his­tory is lit­tered with exam­ples of crowds being proven dead wrong and con­trar­ians being proven exactly right.

When critics scoff at con­trar­ians like me for being wrong 10 per­cent of the time, I can only reply, "It sure beats being right only 10 per­cent of the time."

Would you like to join me?

[Note: The public is wel­come to accept a free 30-day trial sub­scrip­tion to The August Fore­cast, which is posted three times per week on Monday, Wednesday and Friday. Ongoing sub­scrip­tion rates are ridicu­lously low at $69 per year or $39 for six months!] 

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