The Seasonal July High for OIL seems in.....

Crude tends to consolidate in August after setting a high in late July.......

September usually kicks off the yearend rally. Let's see how August goes and then adjust accordingly.

Gold aiming for a s/t top in August in order to correct into September

The following reads like a symphony with numerous harmonics. We have run countless analysis that came up with a host of different parameters and that in summation all seem to tell the same story.

Let's see whether all these reflections can make a whole picture.

Let's start with our Options work. We clearly see that we are in a topping pattern for Gold and for Silver. Previous pattern hint at the possibility of neg. Div's in the making. All would hint at a top in the foreseeable future. (We are not talking here about long term Tops, we look at tradeable medium term one)

Next comes the Exhaustion analysis on Gold in Euros that is clearly warning of a medium term correction.
Now look at all these TimeCycles Charts that are all telling the same story. All feel like snapshots from different perspectives of the same story.

Silver: Top in Aug, Low in Sep
GOLD: Top in Aug, Low in Sep
GOLD/SILVER RATIO: Top in Aug, Low in Sep
GOLD in EUROS: Top in Aug, Low in Sep
REAL GOLD (Gold measured by a Commodity Basket/ trades inverse to the RISK TRADE) : Top in Aug, Low in Sep
Conclusion:

Expect some hot action in GOLD and SILVER over the next 2 weeks and then put in some tight stop loss orders to pause the Precious Metals trade into September to get in position for the yearend rally.

Gold Blow Off 2012/3

Look at our long term Exhaustion work on Gold and you will see that the current phase since 2010 has only one precedent over the last 40yrs and that is the 77-80 Blow Off.

Let's have a close eye on the roadmap of this rhyme in order to see for how long we can stay on or when do we deviate.

DXY is in search for a LOW

...and the EURO is looking for a TOP

A Cyclical Top in the Institutional Portfolio is in the making

Our Option work is exactly confirming the topping action from last week. All 3 key gages we look at scream TOP !

The TimeCycles model could allow for some bounce next week or so but points to a cyclical LOW in September. This would invert the normal SEASONALITY .
On the MOMO side Price as well as FLOW MOMO have turned down at resistance levels. We could retest those levels as part of the bounce but if the TOPPING story is real then those resistance level should hold.

Giving the Market-Spasms we expect early next week as result of the US Debt Ceiling Drama the POP (Bounce) could be brief and intense if they pull a rabbit out of their hat in the final hour.

If not.....

Is this the exception to the rule...?

Following our previous post we looked at all cases since 1997 where the VIX_OSC was OVERSOLD (>75%) and where the VIX_Fair Value was at least NEUTRAL.

Our Findings:

• The Bounce set up works very well in Bull Markets
• Bear Markets and Corrections usually show failed signals where the market continued to tumble
• All failed Bounce calls led to a brief bounce and subsequent (deeper) Low.
• The final Low usually comes within 1-2 month

So now we know.

• The high probabilty case is the BOUNCE scenario
• If we see a continuation of the fall then the BULL from 2009 is over.
• A failed Bounce could lead to some quick & deep downside action
• A intermediate LOW could be in place in AUG/SEP

Base Case: Expect a bounce

The Vix_Osc is oversold and will either fall into the Abyss or bounce. History suggests a bounce.

The longer term measure warns us that this could be a trap..

We also see some relive of the extreme bearishness.

Conclusion:

We the current news situation....hard to tell

Greek Winners

The Energy complex is testing the highs and could find resisitance. On the other side a break out to the upside would mean a complete new ballgame.

Look at the bottom chart, our ActB MOMO Indicator, and you see we have some room left to the upside for early next week.

Expect a good week for the OIL/ Energy Sector with headswinds approaching.

The happy banks celebrated Angela Merkel knowing that she will bet the farm to save the EURO. To make this more than an oversold bounce we need more upside action. The ActB Indicator has some room left but be aware that we are around the level in the ActB as the last bounce (same is true for Price.....).

Dollar still building a medium term base

The Dollar is still in the process of building a medium term base. We like to highlight the resemblance to 1995 .

Our TimeCycles model seems to project the way. As long as the74 level holds we assume the DXY wil try to take out the 76 level.

Bear in mind that when the Dollar rallies all categories of the RISK TRADE will suffer.

You need a fundamental story to back up this cycle work then just try to imagine what will happen to the Dollar if OBAMA comes up up with a $4bn savings program to resolve the debt ceiling discussion by next week (not the 2-3 he is tying to save his ass but just the 4bn S&P is demanding and the Republicans must get politically...)

...and i'm not even taking into account the consequences of a failed greek/italian Euro pipedream ....

Comeback Kids that enjoyed the Greek Sun

A good 2% up week for the SPYDER and our beta friendly TECHs (thanks to Apple) and the Energy/Materials Complex enjoyed the sun.

More interesting though are the comback kids like SLV, USO and the Banks that really starting building up some hope.

Try to interpret the comeback kids and you would come up with a story like this.....

"...once upon a time when Aunt Angie decided to assume responsibility for her brother in law, the one with the gambling habit, all bookies began to smile and all speculators to doubt that she actually has the money....."

ISE and CBOE send warning signals

Lower Highs in the Indicator paired with an initial spike down are a clear warning sign that the overall structure of the market is not healthy signalling that Investors are 'trigger happy with a short fuse'.

We find similar patterns in the CBOE and ISE data.

These patterns were also present in 2007-2008. Resemblence is NOT Causation, but caution is warranted.

Breadth in the Goldmining Sector looks for further upside action

Goldminers Breadth shows that the bulls are in control.

....more interesting though is to see Gold breaking out with a divergence developping in the medium term BuyingPressure.

We could see some nice spike up followed by a re-test of the breakout.....let's see.

Options on Lg Caps hint at a topping process within days....

The Option Chains on the institutional 'must hold' portfolio show all signatures of a topping process and thus an end of the summer rally within the next week.

(on the bottom right we showed what low and high readings of our green Indicator 'RanGeWidth' mean in terms of Optionchain structures. A low 'green value' indicate a very steep option curve with lots of black swan insurances bought for the up and downside. These Extremes have usually been associated with HIGHs).

Breadth: Bulls are still in control of the summer rally...

Sentiment expects some severe Volatility

Now that the EURO is saved and Germany virtually is backstopping the entire EU, funding the Bail out fund and allow the ECB to dump their Zombie exposure into the fund, Mr Market took this as good news. (only the German Credit Spreads seem to disagree...)

The overall context on the other side develops some explosive structures. Our VIX_OSCs sport triangles that will resolve (normally with lots of Vola) over time and our VIX true Value Indicator shows some extreme bearishness. We're always alert when the Mr. Market refuses to follow through after a triangle break out like in the Vix true value chart.

GOLD is breaking 1600 and SILVER 40 against a strong USD

Precious Metals flying in Dollars and Euros plus a strong Dollar jive with our Gold view and our 1995 Rhyme on the Dollar

Watch especially the filght out of Euros into Gold......

EOM turn in GOLD and SILVER

We expected a turn in the prec. Metals around the EOM and boy did we get one yesterday with GOLD defending the $ 1500 level and Silver taking back the $ 35.

The move seems to continue as you see from above.