Gold Trader: “Stock Market May Crash 10-20% In Next 5-10 Days, Will Create Setup For Bubble Phase In Gold”

\”BullMarketThinking.com\”

**This interview was recorded Friday evening, 5/31/2013**

I had the chance on Friday to reconnect with technical gold traderGary Savage, publisher of the “Smart Money Tracker” daily gold market commentary and trading service, which has outperformed most of the world’s hedge funds in 2011 and 2012.

It was a powerful interview as Gary indicated the S&P 500 is at its most overbought level in nearly 40 years, and may crash 10%-20% within a few trading days as a result. Following this crash, Gary expects a massive central bank monetary intervention to create the “launch pad” for an explosive move higher in gold and gold equities, ushering in the final bubble stage of the bull market.

“We’re at a very important crossroads here,” Gary explained at the beginning of the interview. “The S&P 500 [broke] through 1640…and I expect we’re going to have some kind of crash, or semi-crash over the next 5-10 days…The selling is probably going to get huge…and it [may] take everything [down] with it.”

When asked why he’s expecting a crash of such magnitude to occur, Gary replied,“If you look at [a] long-term market chart…you can see that at the recent peak, [it] was stretched further above the 200 day moving average then it’s ever been in the last 30 or 40 years. So the forces of regression are going to be extremely powerful…We’re probably going to [cut] right through the 200 day moving average and [it] may make the 2011 correction look small [in comparison].”

This fragile equities market plays a key role in determining gold’s next move according to Gary, in that, “When it breaks, the Fed is going to freak out, [and] they’re going to double, triple, and quadruple down on QE to try and pump stocks back up, [and] that liquidity…[is] going to find something else…I don’t believe it’s going to pump up a double parabola in stocks…[It's] going to look for something that’s undervalued…and that right now is commodities in general, more specifically—gold.” 

As to the consequences of gold being driven down so far when compared to this blow-off in equities, Gary stated that, “Regression to the mean not only works on the upside, but also on the downside, and gold is in the mirror position of the stock market—it’s stretched extremely far below the 200 day moving average. So when [the] regression occurs, it’s going to be an extremely violent move back towards the 200 day moving average, and like I said, I think what will trigger this [move in gold], will be the stock market crash, the Fed, and the central banks’
Source: http://bullmarketthinking.com/gold-trader-stock-market-may-crash-10-20-in-next-5-10-days-will-create-setup-for-bubble-phase-in-gold/