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A Fresh Look at the Gold Bugs Index Analog

Tim Knight from Slope of Hope's picture




 

I feel almost inclined to apologize for the number of times I trot out the gold bugs index analog, but - - well - - I think it's important. Week after week, this analog has held together and strengthened itself. Here's a grid chart comparing the 2005-2008 period (top) to the recent market history (bottom):

0312-gdx1

 


 

This reason I'm so hung up on this is because of where we are at right now relatively to the appropriate point on the past analog. Trading the miners ETF (symbol GDX) is the most direct way to participate.

0312-gdx2

 

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Mon, 03/12/2012 - 23:14 | 2249488 Stepbackfromtheledge
Stepbackfromtheledge's picture

I finally figured it out - TK keeps posting this CRAP because he is completely numb to all criticism, to all intelligent views contrary to his own.  This has occurred as a result of him being consistenly wrong in every top call he has made.  In fact, the more he is criticized, the more he will post because he honestly beleives that he is smarter than everyone and that it is his job to enlighten everyone.  Since it dones't look like Tyler will boot him off ZH, for God knows why, it looks like we are stuck with TK.  At least I have company in continually calling out TK's moronic assesments.  God help us all when this blind squirrel finds a nut.  He will be freakin unbearable.

Mon, 03/12/2012 - 22:13 | 2249351 FataMorgana
FataMorgana's picture

Shorting of a life time

http://www.youtube.com/watch?v=C4K3pd_0jfQ&feature=related

This Tim Knight is really becoming a joke of a life time. He continued stating the very same throughout the past years.  

Mon, 03/12/2012 - 20:20 | 2249051 Freegolder
Freegolder's picture

It is comforting to know that TK will have no gold at all when the dollar collapses. Traders like him, dealing only in the monetary plane, will be wiped out.

His chart analogs from two years ago were wrong time after time.

No doubt he'll disappear from ZH soon, as his posts are about as useful as a chocolate tea-bag.

Mon, 03/12/2012 - 19:44 | 2248984 XtraBullish
XtraBullish's picture

Did anyone understand WTF this guy is talking about?

Mon, 03/12/2012 - 20:06 | 2249027 exartizo
exartizo's picture

he's suggesting a short play on GDX.

Mon, 03/12/2012 - 19:06 | 2248896 uno
uno's picture

Tim what do you want to do when you grow up?

Mon, 03/12/2012 - 18:38 | 2248810 GIABO
GIABO's picture

BTFD

Mon, 03/12/2012 - 18:26 | 2248773 toothpicker
toothpicker's picture

Which drugs does he use? Could be a fun ride...

Mon, 03/12/2012 - 17:58 | 2248707 FataMorgana
FataMorgana's picture

TIm Knight has shown many analogs in past years and a lot of trend lines he likes to draw in his charts. He has constantly called tops and amazing shorting opportunity. One day he will be right and I hope he has money left

Mon, 03/12/2012 - 17:39 | 2248642 dumpster
dumpster's picture

kito

 

the fed is injection billions into the market via loans at 0 percent ... trillions needed to cover debt in the euro ..

Gold is now international .. and will move in all currencies

the fed is pushing silver and gold down for eye wash and those who aare easily fooled

your sucking an egg gold will zoom are you part of the no look at facts person and believe the lie fed and the doctored stats

Mon, 03/12/2012 - 17:38 | 2248635 exartizo
exartizo's picture

A case for gold going backward is not out of the realm of possibiity, even with worldwide money printing.

The reason for this is that if (when) the Euro crashes there will be a run out of the Euro into.....the dollar. It is possible that gold could get hammered for a very short time on a Euro Destructed Strong Dollar... until they figure out that the dollar is.... not in any better shape than the Euro.

Mon, 03/12/2012 - 20:13 | 2249037 Renfield
Renfield's picture

@exartizo

We have a small supply of USD, that we've been holding until the euro finally falls apart. Like you, we also anticipate a short, fast spike in the USD when that happens. At time, we will sell our USD and buy - of course - gold and silver, which we're thinking will also take a quick swoop down at that time.

I anticipate a fast flight into the USD when the euro tanks, just because that's what people are used to. A knee-jerk reaction.

Might not happen. Euro might not fall, but transform into some kind of nordic-Russian(-Asian?) alliance currency, ditching the southern countries. Or gold might soar when the euro falls. Maybe everyone will pile into gold instead. Or there might be such a panic that we will not be able to exchange our USD at all until it's all over.

So...it's a small speculative USD pile. We still hold gold/silver as our main investments of course. But I think what you're talking about is likeliest to happen. So for what it's worth I'm seconding your opinion.

Since all our gold is physical, we can afford to sit back and wait. I hope gold does fall again soon. Hate buying at a 'high' when I could get it lower. We've held this USD for like a year now, and we can wait it out for longer if we want to.

Fiat trading is our 'speculative' investment activity. :-)

Mon, 03/12/2012 - 20:40 | 2249086 exartizo
exartizo's picture

Agreed Renfield.

The problem, as we both know, lies in the timing, magnitude, and collateral directional elements of the events/systems surrounding the Euro crash. Yet another possibility is that, as you stated, gold may soar and bypass a run into the dollar.

That's a difficult call. 

Cheers :)

Mon, 03/12/2012 - 19:15 | 2248922 Reptil
Reptil's picture

mmm I don't think so. Why? Investor sentiment:

Many here are wary of the US dollar, and the whole US Gov/FED machine. It does not inspire much confidence.

German investor panic = gold not dollars. Happened in 2010. Spike not dip.

Dumb US money got burned last year, I don't see that coming back soon. Europe is a leper now, for non-europeans.

 

Mon, 03/12/2012 - 19:29 | 2248956 exartizo
exartizo's picture

The last time the Euro dipped, so did gold and silver.

I know because I bought silver when that happend.

The money that flowed out of Euros flowed into the dollar last time. The dollar is still in the situation of being "the prettiest of the ugliest" by most accounts.

Europe is still not the leper it should be...why? because the Euro is still trading at 1.3149

It is possible that money could flow out of the Euro into BOTH gold and the dollar... but that remains to be seen. 

Mon, 03/12/2012 - 17:31 | 2248622 dumpster
dumpster's picture

pretty sure the bottom of the fruit basket  is now posting .articles

does this represent a numbing down of information  for information sake.

ignore sinclair on zero hedge ,, but post a fruitcake

 

Mon, 03/12/2012 - 17:29 | 2248616 exartizo
exartizo's picture

The flaw in his chart (and logic) is that the miners do not and, indeed, have not been tracking the price of gold... AT ALL.

Google Sam Kirtner's articles for more information if you're interested.

Mon, 03/12/2012 - 18:22 | 2248765 A82EBA
A82EBA's picture

I've held GDX since August 2011 at $64..today it's $53, hope it breaks out soon.

Mon, 03/12/2012 - 23:58 | 2249561 FataMorgana
FataMorgana's picture

Same like Tim Knight as he wanted to hold the breakout for a long time at this price.  His own article back then highlighted his long entry at levels above 63

Mon, 03/12/2012 - 19:41 | 2248979 exartizo
exartizo's picture

A82EBA:

Kirtner's article is here... It's a good quick read... it might help you...

http://www.skoptionstrading.com/updates/2011/11/15/the-gold-beta-of-mining-stocks-and-why-we-continue-to-avoid.html

 

 

 

Mon, 03/12/2012 - 20:46 | 2249118 A82EBA
A82EBA's picture

Thanks, the beta concept is clearer now. It was an interview on Bloomberg with some guy that had been trading for 30 yrs that seemed really familiar with miners and gold correlation and pointed out that the miners and especially junior miners value had not "caught up with the commodity yet" but it would soon.

Mon, 03/12/2012 - 17:16 | 2248549 apberusdisvet
apberusdisvet's picture

The author is trying intimate that all those who hold gold are about to fall off a cliff.  I think he's in Nadler's wet dream.

Mon, 03/12/2012 - 17:23 | 2248583 kito
kito's picture

not sure what he is intimating, but no way gold does anything new until next year. without qe3, gold stays flat to down...and qe3 isnt coming until next year......i commented before that m1 and m2 money supply are starting to contract, and yet bernanke isnt budging. way too dangerous for him to announce anything prior to elections. this year, dont expect any gold run past its end of qe2 highs..........

Mon, 03/12/2012 - 17:45 | 2248655 jimmyjames
jimmyjames's picture

.i commented before that m1 and m2 money supply are starting to contract, and yet bernanke isnt budging.

***********

 

WTF can Bernanke do about people pulling their money out of money markets?

Or do you interpret M2 to be?

north = inflation

south = deflation

Could this possibly be why M2 is contracting?

http://research.stlouisfed.org/fred2/series/WRMFSL?cid=29

http://research.stlouisfed.org/fred2/series/WRMFNS?cid=29

 

Mon, 03/12/2012 - 19:25 | 2248945 LowProfile
LowProfile's picture

Very few people want to hear this...  Makes me think they're already all in.

Hope they have solid titanium bearings for balls.  What's a 30% correction off of 1900 again..?

Not that it will stay there for more than a hearbeat though...

Mon, 03/12/2012 - 17:08 | 2248521 eddiebe
eddiebe's picture

Bring it, I've got a little extra cash to buy more.

Mon, 03/12/2012 - 17:03 | 2248502 Spigot
Spigot's picture

Not sure I get it. In 2008 the liquidity trap door dropped open, and there were no strategies in place to prevent what these charts show.

This is 2012, and I would say that TPTB have indeed implimented a fantastic array of precedents and structures which basicly have welded that trap door shut.

If indeed, somehow, the door opens up again there below is a veritable firehose of "liquidity" that will keep ol Wile E Coyote churning in the clouds forever.

Not the same situation at all. Today $1.5-$2 trillion federal deficits and trillion$/E bailout packages are just a wet signature away.

Mon, 03/12/2012 - 17:15 | 2248544 Al Huxley
Al Huxley's picture

Exactly. This is the point I was making previously - although the HUI and Gold charts admittedly are quite similar to those back in summer 2008, NOTHING ELSE IS.  So to have gold and the miners crash right now would require the markets to some how believe that the WORST thing to hold in an environment of ever-expanding debts, deficits, bailouts and bandaids is gold and the stock of companies that mine gold.  And I know the markets can be mind-bogglingly stupid (and/or mind-bogglingly manipulated) but I find this one to be a bit of a stretch - gold and the miners relive the panic crash of 2008 while the S&P drifts slowly higher?  I can't see how it could be done even in today's pretend markets.

Mon, 03/12/2012 - 18:33 | 2248797 SAT 800
SAT 800's picture

Both the two above posts are pointing in the right direction. To simplify; it's not 2008. It's always good to try to analyse a market; but you have to try quite a bit harder than, "hey look here's a chart that reminds of me of this other year"; that's not good enough.

Mon, 03/12/2012 - 19:47 | 2248989 AbelCatalyst
AbelCatalyst's picture

So, what you're saying is that this time really is different? Good debate - I think both sides make good points... That's why this market is so incredibly frustrating to trade. Highly manipulated, but fundamentals show up out of the blue only to be manipulated away again!! Ugh!!!

Mon, 03/12/2012 - 16:51 | 2248445 ivars
Mon, 03/12/2012 - 16:50 | 2248438 bugs_
bugs_'s picture

nice to see a contrary viewpoint.

today on CNBS we were treated to the spectacle of Pisani fondling gold bars.

the CNBS headline read, "How high can gold go?"

 

Mon, 03/12/2012 - 19:23 | 2248940 LowProfile
LowProfile's picture

I smell a rat.

I've been expecting a ~30% correction off the 1900 highs for some time now.  This would be in line with historical corrections, and is not only easily within the realm of possibility with another bout of waterfall deflationary domino credit deflation, but TO BE EXPECTED.

But with CNBS touting it through Creamer and now Pissani, I think they may go ahead and give it one last hard whack to scare the sheeple out of it.

Equities, real estate, commodities, gold, silver... THEY'RE ALL TOO VOLATILE, AND THEREFORE RISKY.  Here, buy these safe 30 year treasurys over here.  They're nice and stable...  Yeah, doesn't that feel better now?

And then WHOOSH.  The rug gets pulled out, sellers are trapped, everything sells off except gold, which becomes the landing place for all those dollars printed for all those generations.

Something stinks more than usual out of Wall St., over and above the stink of infection from the festering carbuncles masquerading as investment bankers.  The aroma of sulfur and rotting flesh, produced by something more sinister is starting to waft up from the steaming sewers there.

Get ready, this is liable to freak even the staunchest gold bugs right the fuck out.  Which is another reason to own the physical - It's harder to panic sell...

Mon, 03/12/2012 - 18:19 | 2248759 Zero Govt
Zero Govt's picture

Pissani was fondling an unallocated bar

CNBC research is as weak as the airheads that present it

Mon, 03/12/2012 - 16:45 | 2248425 Al Huxley
Al Huxley's picture

Wouldn't you expect the other indexes to line up in the same way as well, if there was going to be a repeat of 2008?  Do a comparison of the S&P for the same period, no rhyming at all.  So somehow the goldstocks are going to take a panic drop ala 2008 while the broader indices remain relatively strong?  What would the spin be - gold would have to drop to about $700 again, do you really think that will happen with the broad markets rising?

Mon, 03/12/2012 - 16:44 | 2248417 ilovefreedom
ilovefreedom's picture

Because in 2005-2008 the conditions were exactly the same as they are today? I might agree if all the other metrics didn't point the other way. In 2008 the 10lb bag was only overstuffed with 15lbs of shit, today we're closer to 20lbs of shit.

Wages are deflating, core commodities will see inflation. WHEN, not IF the dollar collapses where will all that value go? In 2008 the government could beat down precious metal assets with numerous tools. Today those tools are fewer and fewer.

So when debt is 20-25 Trillion (cash accounting, don't even bother with GAAP accounting), that means gold/silver should be worth about 5% of today's value, right? Just enough to dig it out of the ground? LOL

Mon, 03/12/2012 - 16:43 | 2248411 israhole
israhole's picture

So short it up, Timmah.  Go easy on him guys, at least he used dates on the axis this time.

Mon, 03/12/2012 - 16:43 | 2248409 Gold Dog
Gold Dog's picture

How about an overlay including debt? You moron!

Mon, 03/12/2012 - 16:26 | 2248349 NoWayOut
NoWayOut's picture

I think I just threw up a bit in my mouth.  What utter crap this post is.  Why is ZH allowing this nonsense to be posted here?  Leave this drivel over at Kim Tight's site.  

Mon, 03/12/2012 - 16:42 | 2248413 Non Passaran
Non Passaran's picture

I tend to agree with him.
It may hold up better than he thinks but another 10-15pct down wouldn't surprise me.

Mon, 03/12/2012 - 16:44 | 2248423 Gold Dog
Gold Dog's picture

A correction? Sure, but this idiot thinks gold is going back to $35.

Mon, 03/12/2012 - 17:16 | 2248550 unwashedmass
unwashedmass's picture

you are right there. he does. but...having watched him in action for the past several years, he has nothing less than a horrific record in calling the metals markets. i don't think he's ever been long, or if he has, its been for ten minutes.

kinda too bad cause anyone who listened to him has completely missed the run on gold from 400 to now, and silver from 4 bucks to now.

Mon, 03/12/2012 - 18:16 | 2248748 Zero Govt
Zero Govt's picture

he's as crap as Rob Prechter at Elliott Wave then

getting it wrong 95% of the time doesn't shut these morons up ...the upside is their comedic value

Mon, 03/12/2012 - 18:58 | 2248870 rocker
rocker's picture

Preacher Prechter thinks the market is going back to 100 too.  Yeah. Right.

The preacher said this was going to start 3 years ago.  Wrong for three years straight.

Somebody should take him to the wood shed for all the money he lost people.

Mon, 03/12/2012 - 20:06 | 2249029 GernB
GernB's picture

Both inflationists and deflationists views have merit. I think either is a possible outcome. Or even both, like rampant inflation followed by crushing deflation. I think it all turns on what the political elites decide to do. Look at it this way. If the Ron Paul fans on Zero Hedge get their wish I don't think it will be hyperinflation we need to worry about.

Mon, 03/12/2012 - 16:55 | 2248463 web bot
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The optimal word is idiot...

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