The Next Leg
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Update – July 24th
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Weekend Update – July 15th
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The Markets Are Speaking
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Midweek Update – June 6th
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Golden Fireworks
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Golden Fireworks
This is a follow up post to last month’s blog post – Gold is Ready to Perform and is an excerpt of the weekly premium report.
Gold surged on the Brexit vote a week ago, then then spent the early part of this week consolidating the gains. The net gain since the Brexit vote has been impressive, but Gold has still not regained the intraday high from the day after the Brexit vote. Since spiking to 1362 the morning after the vote, Gold has been filling and confirming the Brexit surge.
The initial spike after the Brexit vote was clearly an over-reaction, but the bullish action since has confirmed that the move higher is real. With Gold now approaching the Brexit intraday high, I believe that we should see another 2-5 day rally before the Daily Cycle peaks and turns lower. At this stage of the Cycle, any Swing High will likely mark the DC top.
At the end of 2015, the precious metals Miners were undervalued in relation to Gold by a historical amount, and the January-May Gold Investor Cycle (IC) allowed them to play catch-up. I have shown the Gold:Miners ratio chart numerous times in the past to illustrate how Miners typically catch the first real bid during bear market turns. And that’s what happened during the 1st IC. Now, the other precious metals can make their own runs.
Silver has taken off as only Silver can. It has already become significantly overbought, but the current move is showing no sign of stopping, and could become epic. It’s important that we recognize the move for what it is, maintain our composure and hold through the dips where appropriate. Silver is still trading at a historically massive discount to Gold, but it doesn’t need to catch up all at once. There is plenty of time for it to do so in coming Cycles.
Platinum and Palladium were also big winners this week. They have been underpriced (relative to Gold) and both saw broad-based buying. And as the end of the bear market has become clearer to investors, the entire precious metals sector has received an increasing flood of money.
The Miners are seeing buying across the board, and even the laggards and lessor quality names have begun to see bids. And that’s fine. Increasing participation confirms the bull market and tells us that we’re still very likely only in its early innings.
Recent history has not seen the precious metals Miners bullish percentage index ($BPGDM) pegged at 100, and the fact that it is now is a clear sign that we’re comfortably into the bull market’s next phase. It’s also, however, a warning that we’re likely beginning to approach the next DC top.
There is not much room for alternative analysis. The entire Gold sector is in the prime portion of the Cycle, and speculators have begun to lift the market higher. We’ve prepared for this outcome, and must be aware that short term, violent, counter-trend hits are possible at any time, as over-leveraged speculators bail on positions. Each of us needs to avoid being chased out of positions by making sure they are correctly sized, and that leverage is appropriate.
As predicted when the DC started (some $100 ago), we are likely to have another 6-10 weeks higher in the current Investor Cycle. My minimum target is $1,420, but my expectation is that the IC will top somewhere between $1,450 and $1,480. Be smart about your entries and exits – it is best to buy during dips and sell some during rips, as opposed to becoming excited during surges and adding leverage at the end of intraday moves. Most investors will be best served by not watching the tape too closely and by being content with the positions they have.
The Financial Tap – Premium
The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report. The reports cover the movements and trading opportunities of the Gold, S&P, Oil, $USD, US Bond’s, and Natural Gas Cycles. Along with these reports, members enjoy access to two different portfolios and trade alerts. Both portfolios trade on varying time-frames (from days, weeks, to months), there is a portfolio to suit all member preferences.
NOTE: For the first time ever The Financial Tap offers you a Full 14 day, no risk, money back Trial. It’s just $99 thereafter for a full 3 months of membership, a fraction of what one stopped out trade is likely to cost you. Consider joining The Financial Tap and receive two reports per week and the education you need to become a better trader or investor See >> SIGN UP PAGE!
Bob.
The Fireworks have started
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Midweek Cycles Update – June 29th
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The Cracks Appear
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S&P 500 – Will They Buy the Dip
Will They Buy the Dip
Below is an excerpt from the past 06/18/16 weekend’s premium member report. If you would you like to see the full premium report, please sign up using the email form at the end of this post. During the past few years, we’ve seen plenty of sharp sell-offs in equities that have reversed (Buy the Dip) to make new highs, but this time the sell-off feels different. I sense that the market’s character has changed on multiple time-frames. That said, I’m keeping my eye on the recent S&P high at 2,120.55. It’s just shy of the all-time high, and if the S&P rises above it, a big new all-time high is likely to follow.
Last week’s equity selloff was accompanied by an unusually big move in the VIX (fear) index. And in a clear sign of market distress, world sovereign debt markets rallied sharply, as capital moved from equities into the most defensive of asset classes. Such desperate bids to own debt at 0 or even negative interest rates, tells me where the smart money wants to be invested.
The decline this week was expected and the timing (day 19) for a move into a Half Cycle Low was perfect. The market tried to rally on Friday and failed, although I believe that during the coming week, the S&P will recover to retrace at least half of its recent decline.
Surprisingly, sentiment has remained significantly elevated. Bull market conditioning has left far too many people believing that equities will see another big rally in the near future. I don’t think that’s at all likely.
For the past 2-3 years, the market has not been driven by fundamentals. Earning grew until 2014 and kept the market at least somewhat satisfied. But now, with earnings and revenues both having peaked 2 years ago, and with the age of the expansion at 7 years, the economy has almost certainly peaked for this Business Cycle. Its next move should be toward the trough (recession).
Fundamentals were an afterthought while earnings were increasing. But now that earnings have turned lower, all eyes are on the FED. Only easy money from the FED’s printing press can sustain a market at historical overvaluation.
The FED’s recent policy focus has been on ZIRP (Zero Interest Rate Policy), yet it is clear from the chart below that ZIRP alone cannot lift the market higher. We’ve had a zero interest rate environment for 8 years, and to expect a new stock market breakout from a continuation of ZIRP is ludicrous.
The markets are running dry of liquidity again and only a new round of quantitative easing (QE4) can get equities going again. It’s my view that there are only a couple of events that could lead the FED to embark on QE4: a) the market takes a massive dive, or b) the economy turns decisively lower.
We are left with an Investor Cycle (IC) that stalled near the S&P’s all-time high. The market has spent nearly two years in the current topping range, and now that the current IC is at a typical topping point, I expect the coming Daily Cycle rally will quickly reverse lower. I expect that traders this tile will not Buy the Dip, and the next big Weekly Cycle decline over the summer will begin.
In summary: perceived risk for equities should continue to rise, volatility should increase, and a summer selloff should begin shortly. This should become one of those instance where they will not Buy the Dip.
The Financial Tap – Premium
The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report. The reports cover the movements and trading opportunities of the Gold, S&P, Oil, $USD, US Bond’s, and Natural Gas Cycles. Along with these reports, members enjoy access to two different portfolios and trade alerts. Both portfolios trade on varying time-frames (from days, weeks, to months), there is a portfolio to suit all member preferences.
NOTE: It’s just $99 for a full 3 months of membership, a fraction of what one stopped out trade is likely to cost you. Consider joining The Financial Tap and receive two reports per week and the education you need to become a better trader or investor See >> SIGN UP PAGE!
Bob.
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