The Song Remains the Same

“Here we go, here we go

All you gotta do, now

All you gotta do, now

Ooh-ee

Sing out Hare-hare

Ooh, dance the Hoochie-Koo” – Led Zeppelin, The Song Remains the Same

“The key 2790-2800 region, which represents a 50% retrace of the decline, should act as support if the market is as bullish as it is trying to present. Otherwise, the move above 2800, like Friday’s move over the SPX 50 day moving average, are Pinocchio’s.”

I wrote the above in Monday morning’s report, Edifex Rex.

In fact, the 2790-2800 region did not act as support. On Tuesday, the SPX gapped decisively below 2790, dropping more than 70 points in the aftermath.

Wednesday, we got more of the one-day-up-one-day-down do-si-do dance that’s been dominating the tape since the SPX first struck this 2800 level of lore on April 9.

Instead of downside follow through on Wednesday, we got a trend day to the topside.

We had a bear market for a month. We got a ‘bull’ market for a month.

Since April 9, it’s been a Cow Market.

Allow me to explain.

Since the SPX first kissed a 50% retrace at 2790-2800, it's been milking premium in both directions.

The index has been whipsawing one day to the next dancing around the ’50 yard line,’ the 50 day moving average, as bullish players bet on the prospect for a successful push higher while bearish players place bets on a rollover.

It’s been utterly marvelous for the option expiration arbs who sell premium on both sides of the field.

The question is whether this dance at the 50 day line and the 50% retrace is a prelude to another leg down or a new leg up?

Youse puts up your money, youse takes your chances.

That’s if you don’t have a method.

Our trades are based on a method which tells us the primary and secondary trend of the market, both of which work concurrently.

If you don’t have a method to determine these trends, volatility will treat your account like a ship tossed about in a storm.

Like Homer’s Ulysses, the market is sailing the straits tormented by the voices of bewitching Sirens who try to lure the ship onto the rocks.

It’s always been the same for traders: we have to strap ourselves to a mast that sturdies us against our emotions.

The song remains the same.

Today the ship of state of the US is poised to enact the third stimulus package.

Will the Federal Government be able to rescue the markets and the economy from its third crisis this century?

I can’t help but wonder wither this 3rd rescue attempt since the 2000 debacle, and the 3rd stimulus since the virus struck, will coincide with a powerful 3rd of a 3rd wave down.

In this scenario, the SPX completed a wave 2 countertrend rally on Friday’s spike with wave 1 of 3 starting on Monday.

If this is correct, then yesterday was a smaller wave 2 up prior to a THIRD OF A THIRD to the downside…

Just when the vast majority of market participants are imbued with the notion that the coast is clear.

From my crow’s nest, it looks like the rally is occurring on a Cross of Gold.

To quote friend and fellow trader, Ken Rostron, “There is the potential that what just happened in oil (absence of bids) could happen in reverse to gold — an absence of offers!

Such a technical event would not surprise us.

And if it occurs, it will probably be associated with an ambush-type news story. Perhaps one that comes from European or U.S. bank sectors.”

What happens if the paper holders demand delivery… and it’s not there?

What happens to the price of the mining stocks who own what’s in the ground?

Yesterday, gold struck a new 9 year high vaulting over 1700.

It is set to challenge its 2011 all-time high of 1921.

Monday’s report showed the weekly GLD below.

GLD turned its weeklies down following last week’s reversal, but turned right back up with authority this week. That is conspicuously bullish behavior.

If GLD offsets/clears last week's high, Keyser Soze will be in town.

In other words, if last week's high is quickly cleared, a Reversal of a Reversal signal, or what I call a Keyser Soze, will be triggered.

If so… BUCKLE UP.

The usual suspect precious metal miners are exploding… and they have beaucoup catchup room to run.

GOLD (American Barrick) is up 100% since March 16.

FNV has rallied from 77 on March 16 to 131 yesterday for a 71% gain.

(In the interest of fair disclosure, subscribers have long positions/call options on these and several other precious metal names).

The metals are on fire and fuel is being thrown on that fire every day.

Just as the 90 Year Cycle was due to exert its influence to the downside in equities by 2020, so too there is a confluence of longer term cycles that were set to exert their upside influence on precious metals.

The recent action is powerfully validating that premise.

As we noted a few weeks ago, when gold clears its March 9 high, it will be talking.

That high was cleared on April 13.

Gold pulled back to the breakout point on Tuesday and is exploding.

The action is undeniable.

Many times I’ve written about the synchronicity between the SPX and gold.

It is fascinating that the price high in gold, 1921, coincides with the year of the low that started the Roaring Twenties bull market, ending in 1929.

Likewise, the price of 1921 aligns with the SPX 666 bear market low in March 2009.

What is interesting is that both prices, 1921 and 666, vibrate/vector the date of June 6.

June 6 forms a T-Square which corresponds to some dates of destiny in the history of the U.S.

Blue is 666/667
Purple is 1921 (gold ATH)
Red on left is early September
Red on right is early March
Green is June 6
Yellow is Dec 7

June 6 was D-Day.

Straight across and opposite is December 7, Pearl Harbor.

Square both dates is the 1st week of September, which was the 1929 high, 9-11 and the start of WW2.

The last piece of the T-Square is early March, which is when the Articles of Confederation, the 1st U.S. Constitution, was ratified.

Pos GLD calls, GDXJ, GDXJ calls, GOLD, GOLD calls, SSRM, WPM, PAAS, FNV, AG