Tuesday, December 27, 2011


I have just read through Larry Williams 2012 Forecast, and he appears to be in agreement with me about most of what I think is going to happen. He is my mentor, so I do tend to look at things in a similar fashion to him due to that, so it is not a huge surprise. I am going to do a quasi forecast over the next several days, with just a few things each day. The first market to discuss is of course Gold. It has been my position recently that the trend in this market has turned down now, and that we are going to begin a huge decline in this market. I have showed the reasons why I think that in previous posts, so I will not rehash those. These reasons were all based on trend lines and my bands I use to identify trends. Whether or not I think it is a bubble or not was not part of that rationale. Bubbles can go on for long periods of time. There is no reason to short a market just because you think it might be in a bubble state, that is a sure way to get run over. My bubble comments are just observational, they do not dictate my trading.

I was pleased to see that Larry in his forecast also is forecasting mostly downward prices in the Gold and Silver markets. For those who want those details, go to his site and purchase the forecast. These are great tools to have at your side during the year. It will be the best $200 you will spend. What I would most like to see is for a bounce to occur here and to have my new indicator get into the sell zone. I do worry that this market is so weak now this will not happen. However, if it does, bet the farm on this one to move back down. This is the trade of the year, maybe of many years. As readers know, I think there are a lot of weak hands in this long trade right now. When we reach the point where they realize they have been hoodwinked, it will be one spectacular decline. I hope I am short when that happens.

What I really like about my new indicator is how well it picked the top not being too early. Most of these darn tools always fight trends, and this one seems to pick pretty much the right times to fade them. That Gold top this year was impossible to pick any other way that I know of. I do not have a position in this market right now, but I am looking for a short. This has been an incredible trend that has made a lot of people a ton of money. However this types of moves in commodities do not go on forever. The game is over for now here.

For the stock market, it does appear to me that a sell signal is coming very soon. This total lack of a significant rally at a time when everything that "should" influence stock prices upward, is lined up, is a very negative overhang to me. That mystery chart that I have showed does show down into June, and I think that is about what we are going to see. Larry's forecast shows things a little different, but not too far off. I won't discuss it specifically other than to say when it supports what I am looking at, because it is a great product. He puts a lot of time into this, and I will not compromise it by telling everyone what it says specifically. If we take into account the big picture of all the stock influences we get the following overall view.

The European mess is just being kicked down the road, nothing that is being done over there is doing anything to solve the real problem. Socialism does not work. When you look at China, the worlds savior, and the reason Gold and Gi Joe's and everything else in the world will rally in price, is in reality a house of cards. We also have a bear market in commodities going now, just look at the CRB chart if you are not sure about that.

If we look at China you can see this market has been in a downtrend for 2 years now, hardly what a boom economy should look like. When you read about all the accounting fraud that goes on over there, and you couple that with the shocking stat that about 70% of their GDP is real estate and construction, doesn't that make you wonder how real the "boom" is or more importantly, how long it can last. At the top of our Bubble in Real Estate, I think out percentage was about 40%. That tells us that this bubble is expanded far more than ours was. Jim Chanos is right in his bearishness on China in my opinion. We will see this talk about how China's currency will become the new world reserve currency disappear this year when the dollar soars. What a ridiculous idea that is anyway, I wonder who the pinhead was that started that one? You can say what you want about our problems we have here in the US. When the "sh..." hits the fan, the best safe haven in the world is still the good ole USA.

I also forecast that I will stay on the top of the comments better now that I know what the problem was before. That forecast is likely to be accurate! I also had a few typos get past my editing due to being in a rush a good bit of the time I try and crank these out. I will try to catch all of those next year if possible. I just think it takes away from the professionalism when there are grammatical errors.

I have tried my best to put out a good product here every day and I think I have for the most part accomplished it. There have been times where I have been very accurate and others not so much this year. However, overall I have had a good trading year, and been pretty good about my market calls. That is all I can hope to do.

Enjoy the holidays, more coming tomorrow


John M said...

Hope you had a great Christmas, Chris, and I guess we don't disagree wildly where Obama is concerned as you pointed out. I also agree that both parties are so broken they can't be fixed, not in their present mode of operation at any rate.

Socialism can work, I think the Scandinavian countries have put to bed by now the old myth that it can't. Don't let ideology get in the way of the obvious. The mess we're in and that Europe is in isn't about socialism, it's actually about capitalism and the greed surrounding the mortgage bubble. And we can look to Scandinavia there, too, since the Swedes are the only ones I know of who handled the banking crisis competently: they took over the banks, stripped out the crap and sold the good parts back to the private sphere with health restored. We, of course, didn't do that, because we're ideologically bound to reject that possible road and continue to adhere to the 'too big to fail' mythology. Whatever. Most of Europe is following in our misguided footsteps. Ideology will always come back to bite a country or a person in the butt, like it did in the USSR and is doing here. Rejecting practical solutions outright on ideological grounds (otherwise known as 'faith' in religious circles)is a good chunk of why we continue to flounder and just make things worse.

I think any mode of economic system can work if it's applied wisely and practical considerations are always at the fore. Both of which are pretty damn rare, which is why every system usually ends in the same place--failure.

Sorry to run on. I know you're opposed to supporting people with the money you've earned, and theoretically I get that. On a practical level, when the gap between rich and poor is at a level we haven't seen since the Gilded Age and the ranks of down and outers is growing year by year, I have to think that something is seriously wrong here, and that the answer isn't more of the same. I don't see where a few extra thou in taxes is going to kill us. I've seen government programs actually help people--in fact, I got my first decent job through CETA back in the late '70s, which resulted in the career I've had ever since. A little bit of socialism that got me and a lot of other people on track.

Thanks for the metals analysis, I fully agree with you there and pretty much always on market issues! And don't dial back the politics, I enjoy reading how another good mind is seeing things. It makes me think, and that's never a bad thing.

Robert said...

Excellent report ,just a little confused about your gold comments .If you feel that gold market is so weak why not just short it now ? You say you would like to see one more bounce in gold so your new indicator would issue you a sell--are you saying if we don't get that bounce gold will not go down..just a little confusing to me in that if its so weak why not just short it now--if it bounces up or not does not seem relevant ..maybe you could explain your reasoning some more and how your indicator works-bottom line why do you need to see a bounce up in price if you believe gold is headed down in a big way.
Have a Happy New Years !!!

Mingoman said...

Thanks Chris
Looking forward to learning from you in the New Year....awesome stuff!

Chris Johnston said...

John, don't get me wrong, there is not a day that goes by that I don't get more angry with banks. I do blame them now, I did not initially. However, for you to say that the socialism model is not to blame for Europe is just incorrect. Just look at the entitlements. Someone retiring at age 50 with lifelong benefits like they are given, paid for by others is the problem everywhere in the world. How in the world can you support that? When you go to Italy, the siesta's are ridiculous when you are trying to find a trattoria to get something to eat in the afternoon.

It all boils down to the world having too many people not supporting themselves. I wish I had the answer but I do not. I sure as hell don't see the answer in any of the political candidates out there today.

There is just nobody that is ever going to convince me that just taking all the money from the have's and giving it to the have not's can ever get you anywhere. I remember a year earlier in my life when I was in sales that I purposely made no money over the last few weeks of the year so that my tax rate would not jump up. Had I made more money in gross terms, I was actually going to wind up with net less after my tax return. My bosses at the time were not pleased, but when I showed them the numbers they actually agreed I was doing the right thing even though it pissed them off.

You can't take more than half people's money that they earn, who in the world would be motivated to keep earning it? If you could structure Socialism in a way where the tax rates on the accomplished was reasonable, I would consider that but I don't think these models you mention do feature that. Helping those who need help is something I willingly do, but having big burdens put on me to force me to do it is another story.

Chris Johnston said...

On the subject of Gold, there is a big difference for me in a market that is setup to move in a certain direction and actually executing a trade. As a short term trader, we have to be pretty precise in where we enter and exit trades to keep our money management sound. On a short term basis I am actually looking at getting long Gold and Silver right here. However, I think the large moves this coming year are going to be to the down side. I want to sell rallies not sell breaks. We are just way to oversold on a short term basis for me to take a short entry in Gold here. The problem as we all know is that at times oversold can get more oversold. Sometimes we just get these huge waterfall types of moves from formations like this. I would hate to miss that, but the way I have success is sticking to my discipline and taking the trades that have the best risk to reward ratios in them. At times this causes me to miss moves which I hate, but I just can't find a way around it. I hope this answers the question, if not let me know.

Robert said...

Thanks for the explanation on gold above--yes it does make sense the way you explained it--at least today gold is having one of those days where it is down big time and even as you said it is way oversold etc.---Would you still look to go long now ?--Its even more oversold at this point--it could drop even more before it goes back up .We could of possible missed the big move down as you said, but i guess time will tell.
Like you said gold and silver are looking very weak and today even more so.

Chris Johnston said...

With Gold it just is not setup for an entry in either direction for me right at the moment. I am looking more long that short, but I don't have a trade in either direction. The big move is when it goes back under $400 again, that is yet to come. I doubt that will happen in one year, but we will go back down there or lower again in spite of what all the "experts" say