Trump’s Financial Revolution!

A financial revolution is now taking place and I want to tell you the story. It has rather large implications for interest rates, the stock market, gold and real estate.

The only reasons for the DOW JONES sharp gains, post-election, is due to the fact its’ index leans toward financial and industrial stocks, (as seen in the chart below), more than the SPX and Nasdaq Indexes. Those two sectors have outstripped most of the market since Election Day.

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Trump’s economics policies include: substantial tax cuts, spending at least $300 billion on infrastructure, increasing defense spending and shaking up major trade deals.

President-elect Trump plans to change the status quo not only in Washington D.C. politics, but for global financial markets, as well.  On Monday, December 19th, 2016, the members of the Electoral College will gather in all 50 state capitals to cast their votes for president.  It is then, and only then, that the next president of the United States will be elected.

All the proposed infrastructure spending is expected to put upwards pressure on “demand-pull” inflation which would be a catalyst for tighter monetary policy.

Regardless of the U.S. negative economic data, I believe that the U.S. equity markets are destined to trend higher now.

‘Hot money’ is supporting the market. The FED will not stop supporting this market because it promotes the illusion of a healthy economy.

Stocks should continue to rise for the remainder of 2016 with the belief that Trump’s stimulus package will boost company profits and growth. Last week, investors returned into investing of equities.  This was evidenced by the massive Equity ETF flows, last week, of $31 billion. You should follow my trading plan as it is presented daily by video.  You cannot afford NOT to be part of my cutting edge daily “cycle analysis”!

Institutional investors have been caught on the wrong side of all market ‘asset classes’. The rate on the 10-Year U.S. Treasury Yield ($TNX) surged (as can be seen in the chart below), thereby, increasing interest rates in the United States.  On November 9th, 2016, the first day after the Presidential election, yields rose.

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Global bonds yields, around the world, remained at record lows and with no real prospect of them rising much, if at all. When Japans’ Ten Year Yields climbed above 0, the BOJ promptly intervened with its’ unlimited bond buying program. The ECB President Draghi signaled that its’ QE program will continue.  Global investors will want to invest their money in U.S. Treasury securities. There has been a huge sell-off on international bond markets in response to the rising higher yields (bond prices fall as interest rates rise).

 

The Revolution:

Our historically low-interest rate environment that we have experienced for too many years is soon coming to an end!  It came about following the global ‘financial crisis’.

All the markets have shifted radically and with longer-term interest rates spiking higher, along with copper, iron ore, nickel, and shipping costs. The world is preparing for a large infrastructure project in the world’s largest economy.

If, and when, President- elect Trump attempts to patch up our current financial and economic system, he will struggle to be successful. If Donald J.Trump truly wants to fix the economy, he must reshape the Federal Reserve: (http://www.globalresearch.ca/trump-prepares-to-take-over-the-federal-reserve/5557824). The Federal Reserve Banks consider themselves to be private corporations with private funding.

Our current financial system is not working. The powerful forces on Wall Street restructured our financial system over a century ago.  The Federal Reserve was created on December 23rd, 1913.  This Central Bank (http://www.nytimes.com/2016/11/13/business/economy/trump-the-fed-yellen-gets-ready-for-reckoning.html?_r=1)  has turned the U.S. dollar into a debt-based currency that continuously is inflated creating an endless debt spiral from which we cannot recover from!

 

The Bottom Line:

Being on the right side of all the financial markets are discussed in my daily videos telling you where you need to be in these markets to take the opportunities that are presented. Today, there are unique trading setups in which you can make HUGE profits in.

Follow my lead at www.TheGoldAndOilGuy.com where I trade ETF’s and recently close UNG for a quick 2.6% profit and GDX for another 5% profit in a couple days.

If you prefer more lucrative potential profits like these recent trades: EDZ 20.7%, NUGT 11%, UGAZ 36%, VUZI 25% then join us at www.ActiveTradingPartners.com

Chris Vermeulen

May never get another opportunity to buy gold at this level again

America has chosen Donald Trump to be its next President and the world markets, whether metals, gold, bonds, equities or Forex are all highly volatile. In fact, I got long GDX and NUGT last week for a quick 5% and 11% gain with gold miners, a get-in and get-out type of trade to take advantage of these extreme volatility levels.

While the initial projections were for a Brexit type turmoil in most markets, those predictions did not prove to be correct. The markets quickly reversed course and gave a strong Thumbs up to Trump’s policies.

Trump’s economic plans will increase national debt

The mammoth US debt stands at $19.8 trillion and it will increase under the new President, considering his lenient tax cuts and plans for infrastructure spending.

The proposed tax cuts, inclusive of accrued interest and macroeconomic effects will increase the national debt by $7 trillion over the next decade and by $20 trillion in the next two decades, according to Forbes. There is no detail on how the President-elect plans to finance these tax cuts.

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Though Trump says that he will make it deficit-neutral, there are no specifics available at this point in time.

All these will stoke inflation, which is what the investors are focused on right now and as a result, the safe havens are being dumped, while risky assets are on the rise.

The dollar is flying as higher inflation is likely to  force the FED to increase rates at a much faster pace than previously anticipated.

Protectionism will dent part of the above benefits

Candidate Trump had radical plans to tear long-standing trade agreements like the NAFTA, levy taxes on the Chinese imports, etc.

However, in a highly global world, every action that President Trump takes will have an equally strong reaction. This global trade war is unlikely to benefit either the US or the global economy, which is already struggling with anemic growth.

It is not clear if the US public will be happy to pay higher prices for the imported goods. After all, offshoring has also given a boost to the American industries, which have managed to bring down their cost of production. A costlier iPhone is likely to reduce the demand for the product, both at home and abroad.

The markets are currently discounting only the positives and are not addressing the related negatives that will tag along.

Without knowing the finer details of the proposed policies, the markets have run up far ahead of themselves, leaving a very small margin of error.

The Fed is unlikely to raise rates in December

The Fedwatch tool is projecting an 81.1% probability of a rate hike in December. I have been advocating throughout this year that the FED will not raise rates and I believe that this time too it will not be any different.

The FED will develop cold feet and is likely to postpone its rate hike to March 2017 wanting to know more about the policies of the new President before hiking rates.

If I am proven correct for the umpteenth time on the FED’s action, the market will be greatly disappointed and the dollar will fall.

With the above-mentioned uncertainties, it is unlikely that the dollar is going to breakout of the strong overhead resistance.

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The dollar has returned from the 100.5 levels on two previous occasions. In the short-term, the dollar will face resistance from the channel line close to 99.5 levels and also from the 100.5 levels, which should be a more formidable resistance to cross. Hence, I believe that the path of least resistance for the dollar is down.

Gold is in a win-win situation

Gold has always been touted as a hedge against inflation. If Trump’s policies increase inflation, gold is a winner.

If President Trump implements his trade protectionist policies, it is likely to lead to a global economic and geopolitical turmoil, which will be even better for the buyers of gold.

So, whichever way you look at it, gold will benefit its buyers.

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The current fall in gold is retesting the strong support area of $1200/toz. Can it break under it?

Yes, it certainly can, but the break is likely to be short lived.

The RSI has formed a positive divergence, i.e., while price of gold has fallen, the RSI has held above the lows, which is a positive sign and a sign of a bottom. Markets usually take off when positive divergences form at the bottom.

The Bottom Line

The speculators had accumulated short-term positions in gold, expecting a Brexit type rally if Trump were to be elected. However, when that hasn’t happened, they are in a hurry to close their positions, which has exacerbated the fall.

Once these positions are cleared, the stronger hands are likely to step up their purchases because gold is available on a ‘SALE’. We expect these prices to be the lowest in our lifetimes.

Hence, be ready to buy gold in large quantities for the long-term. Follow me at www.TheGoldAndOilGuy.com

Chris Vermeulen

Only winners of the Presidential Election Are…

HSBC,(https://en.wikipedia.org/wiki/HSBC), is projecting gold to rise to $1,500 an ounce, since the ‘real-estate magnate’ triumphed up from behind in the election results (http://www.bloomberg.com/news/articles/2016-11-01/buy-gold-no-matter-who-wins-the-election-hsbc-says). It is protection against everything!

The U.S. Debt-to-GDP ratio is 125% and will be growing. ‘Main Street America’ has been told that these are measures required to stimulate economic activity, to prevent crises, increase employment, and soothe the financial markets.

There are those who believe that we can keep spending money that is not generated from economic growth by continued borrowing. This “mindset” believes that the debt does not have to be re-paid. It is this mentality that will make gold soar to new unprecedented highs.

The Congressional Budget Office is showing that the interest on our current debt is about $250 billion for fiscal 2016. These annual interest payments will be growing to over $800 billion in less than 10 years. We are on an “unsustainable” path!

t1(https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm)

The Trump Economy:

President Elect- Trump has promised more spending. The budget deficit will probably balloon by at least $450 billion. The key part of Trump’s platform is massive deficit spending on infrastructure and a lot of pro-growth policies Then comes jobs.

There is a better chance that governments could coordinate their timing on a spending plan after the German and French elections in 2017.

While Helicopter money (fiscal stimulus) is not the “sea of cornucopia” to our financial woes, it could complement the ongoing easy monetary policy and potentially generate some real economic growth. In a good scenario, it could help to normalize interest rates. Fiscal expansion could allow the FED to raise interest rates. Vice-chairman Stanley Fischer has suggested that every one percentage point of GDP growth would allow rate rises of 50 basis points.

Global Central Banks will need to continue to purchase their own bonds otherwise, yields will need to rise to attract more investors into the market to purchase up the additional supply.

The clearest message sent by President – Elect Donald Trump was delivered in his election victory speech, a focus on greater infrastructure spending in the U.S. Goldman Sachs Group Inc. analysts said in a Nov. 9th, 2016 report. “Without specific details, it is hard to quantify the impact on commodity demand, however, such policies would support steel, iron ore, zinc, nickel, diesel, and cement.”

This week I locked in 20.7% profit on shorting the emerging markets with EDZ, and go long natural gas using UGAZ for another 14% profit in just two days… global indexes and commodity ETFs are going to provide massive opportunities going forward.

 

Invest In The Next Bull Market!

Fears over US election spur investors’ dash for cash. (http://www.cnbc.com/2016/11/04/fears-over-us-election-spur-investors-dash-for-cash.html). The real direction of the market’s next move is the most important!

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Courtesy of Sentiment Trader

There will continue to be sharp price swings in all markets, especially precious metals and currencies, usually up at first and then down towards the end. However, when one begins the other ends, it will be fireworks that last at least a couple of weeks if not longer.
Famous investor, Jim Rogers, calls the U.S. dollar ‘the most flawed currency’. The Yen is a ticking time bomb, considering the unmanageable debt of Japan and the actions of the Swiss Central Banks led to large bankruptcies in January, 2015.

This brings us to the final safe haven which has stood the test of time; Gold. It has maintained its value during the last five-thousand years and the current rise in gold during the market collapse is proof that its’ safe haven status is intact. Imagine how high gold will go when the real crisis hits the world economies. Gold is money.

Everybody I talk to are holding unprecedented cash positions, they are scared and do not know what to do. So, they believe the only way out right now is to play the stock market. This is an ‘illusion’ as all hope in a new bull market will not be realized. We have just experienced the second largest bull market in history.

How high can gold go? I believe it can go as high as $5000/oz. during a full-blown financial crisis. With a limited downside risk and huge profit potential, readers should accumulate gold. In fact, with this week’s start of the 5th and final leg down in mining stocks we should have a great opportunity to get long metals and miners shortly.

I will inform my subscribers about the next asset class that will go up, as and when I see a pattern developing. I have advised many times that one wants to set aside cash for future investments as a reserve for liquidity and buying in volatile markets. Let me help you achieve your financial goals.

Chris Vermeulen – www.TheGoldAndOilGuy.com

Gold Drops To Critical Support Point

Time To Short the U.S. Dollar?

The dollar rally has been led in hopes of the FED tightening rates in December of 2016. While most of the other developed nations are still struggling with low inflation, the U.S.Government provided data that has been largely supportive of a rate hike.

The sharp rise in the dollar had taken it to extreme levels against the EURO, as shown in the Bloomberg chart below.The reversal was due, as evidenced by the RSI, however, the fall has been more vicious and looks like a correction, rather than a mere pullback.

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The seesaw in the U.S. Presidential election polls is affecting the dollar.

“There is some anticipation that the markets have built in a Hillary victory and that a Trump victory is going to roil the markets,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, reports Reuters.

However, after recent reports of the FBI reviewing of more emails in its investigations of Hillary Clinton a few polls are now showing Mr. Donald Trump ahead in the polls.  The markets have started to realize that both the candidates have an equal opportunity to win.

Will A Trump win quash any hopes of a December rate hike?

Mr.Donald Trump has long been critical of FED Chair Janet Yellen. He has also spoken against the rates being artificially kept low to benefit Wall Street.

“It’s staying at zero because she’s obviously political and she’s doing what Obama wants her to do. And I know that’s not supposed to be the way it is, but that’s why it’s low,” Trump said during an interview with CNBC back in September, reports USA News.

Hence, most believe that a Trump win will force the FED to push back their plans of a rate hike in December of 2016.

“The uncertainty over the election is certainly weighing on the dollar,” said Stephen Casey, senior foreign exchange trader at Cambridge Global Payments in New York, reports Reuters.

Yellen in support of running a “high pressure” economy.

The FED projected four rate hikes in 2017 after the first rate hike in December 2016. Following the China scare and the Brexit uncertainty in the early part of this year, the FED developed cold feet and they brought down the expectations of rate hikes from four to two.

Since then, the members of the Central Bank have been jawboning the dollar. Though there were three dissenters in the last meeting, the permanent members are of the opinion that the economy should be given more time.

In a recent speech,  Dr. Janet Yellen said she might be open to “temporarily running a ‘high-pressure economy'” to help heal the damages caused due to the anemic recovery. “High pressure”, implies to allowing inflation to rise above the FED’s target of 2% to 3%. This can be possible only if  Dr. Yellen does not do a rate hike at all in the near future.

What does the technical picture of the dollar forecast?

The dollar has a history of making double tops, as marked by the circles in the chart (below). Every major double top formation has led to a slide in the dollar. Presently, the dollar has again formed a double top, along with a false breakout. A fake out leads to a sharp fall, as being seen in the dollar currently.

The ADX reading shows hysteric buying of the dollar, which is coming to an end. Similarly, the Stochastics are showing a trend change. So, what do we do to benefit from this fall in the dollar index?

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Buy inverse ETF “UDN”.

The chart (below) shows that the ETF has been trading in a range since March of last year. The last two times this  ETF had come to the lower end of the range, it showed a sharp pullback, which carried it towards the highs. Currently, the ETF is rising from the support levels and a rally to the highs of $22.62 cannot be ruled out in the medium-term.

The current rally will face resistances at the three trendlines as seen on the chart (below).. There is a trade in UDN for both the short-term and the medium-term trader!.

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The Bottom Line:

I have been warning my readers all throughout the year that the FED will not employ a rate hike and I have been proven correct, now, I am again going to forecast a Q.E.5 sometime in 2017. I have been among only a couple analysts who has gone against the crown and has been proven correct!

The stock markets are at a critical juncture, as is the dollar and gold. The different markets are not following the traditional rules of trade. The globe has changed with the ultra-loose monetary policy of the Central Banks. Hence, a deep understanding of economics and trading is needed to catch the next move up or down.

If you also want to benefit from my timely calls, please subscribe to my trading newsletter services at www.TheGoldAndOilGuy.com

Chris Vermeulen