The recent Fed comments should have helped settle the global market expectations related to if and when the Fed will start raising rates and/or taking further steps to curb inflation trends. Additionally, the Fed has been telegraphing its intentions very clearly over the past few months, providing ample time for traders and investors to alter their approach to pending monetary tightening actions. Read the full Fed Statement here.

In my opinion, foreign markets are more likely to see increased risks and declining price trends for two reasons. First, at-risk nations/borrowers struggle to reduce debt levels. Second, foreign market traders/investors struggle to adapt to the transition away from speculative “growth” trends. I think the US Dollar may continue to show strength over the next 4+ months as the foreign traders pile into US economic strength while the Fed initiates their tightening actions. So it makes sense to me that global markets would recoil from Fed tightening while debt-heavy corporations/nations seek relief from rising debt obligations.

Foreign Markets Struggle For Support Before US Fed Monetary Tightening

In a continuing downward slide, global market equity indexes continue to move lower after the US Fed comments this week. In this article, I wrote about this dynamic on August 3, 2021: US Markets Stall Near End Of July As Global Markets Retreat – Are We Ready For An August Surprise? At that time, I suggested the US markets were stalling while the global markets continued to decline.

Now, nearly five months later, we’ve seen the US market trend moderately higher, attempting to struggle to new highs and exhibit deep downward price trends, while the global markets have continued to trend lower. As we move closer to the US Fed pushing interest rates higher, I expect these trends to become even more volatile and pronounced.

US Equities May Find Support After The Fed Raises Rates

The current dynamic in the global markets is that capital is seeking investments where safety and profitable returns dominate over risks. As the global markets transition ahead of the Fed rate increases, I believe the US markets will continue to dominate global assets in opportunities, safety, and returns. Once the Fed starts to raise interest rates, a brief period of volatility throughout the global markets may occur. Still, that volatility should quickly settle as traders chase a stronger US Dollar, US Dollar-based Dividends, and a potential “melt-up” of the US Equity market (particularly the Dow Jones, S&P500, and possibly the Russell 2000).

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Unless the US Fed takes very aggressive action in raising rates too quickly, I believe, at least initially, the US equity markets will continue to benefit from perceived strengths compared to many global equities/indexes.

This means there will be many opportunities for traders and investors in 2022 and 2023 – we have to be patient in waiting for the chance to profit from these big trends. Jumping ahead of this volatility could be dangerous if you are on the wrong side of the price trend. Instead, wait for the right opportunities while you protect your capital from extreme risks. Let the markets tell you when opportunities are perfect – don’t try to force a trade to happen.

On December 28, 2021, I published this research article showing how my Adaptive Dynamic Learning (ADL) Predictive Modeling system expects price to trend in 2022 and early 2023: Predictive Modeling Suggests 710 Rally In SPY And QQQ Before April 2022. I strongly suggest taking a look at the recent downside price trends in relation to the lower range of the ADL Predictive Modeling expectations. If my ADL Predictive Modeling system is accurate, we may see a relatively strong recovery in the US stock market throughout the rest of 2022 and beyond.

Strategies To Help You Protect And Grow Your Wealth

Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Recent volatility in the US markets ahead of the Fed comments/actions have prompted a relatively big pullback in almost every sector. Many traders are concerned the Fed may take immediate action to raise rates. Yet, a small portion of traders believes the Fed may be trapped in a position to act more conservatively in addressing inflation going forward. I think the Fed will continue to talk firmly about potentially raising rates. The Fed is more interested in decreasing the assets on their balance sheet before they risk doing anything to disrupt support for the global markets.

Suppose my analysis of the Fed predicament is correct. In that case, the recent collapse of the US markets represents a fear-based emotional selloff of many sectors that may still represent a strong opportunity for a recovery rally in 2022. One of those sectors is the Financial sector – particularly XLF.

I wrote about this on January 7, 2022, in this article: FINANCIAL SECTOR STARTS TO RALLY TOWARDS THE $43.60 UPSIDE TARGET

I also wrote how the US Fed might be playing with fire regarding their stern positioning and statements recently in this article on January 14, 2022: US FEDERAL RESERVE – PLAYING WITH FIRE PART 2

Critical Components Of Recent Inflationary Trends

If you attempt to follow my logic as I read into the Fed’s intentions. There are three critical components to navigating the rise of inflationary trends recently.

  • The COVID-19 virus event created several disparities in the global markets. First, the disruption to the labor and supply-side markets began an almost immediate inflationary aspect for the global economy. Secondly, the US’s stimulus and easy money policies have stimulated demand for products, technology, houses, autos, and other real assets. These two factors combined have increased inflationary pressures on the global markets.
  • Rising consumer demand for real and virtual assets such as Cryptos, NFTs, and others has pushed the speculative investing cycle into a hyper-active rally phase. This was clearly witnessed in early 2021, with the Reddit/Meme rallies became the hottest trades, then quickly dissipated after July 2021. This speculative rally has pushed the post-COVID rally well beyond reasonable expectations over the past 16+ months.
  • Excessive debt levels push a deflationary process to the forefront. Consumers are now starting to pull away from the excesses of the past 16+ months. The Fed’s tough talk and recent deeper declines in various sectors over the past 12+ months show that inflationary trends are subsiding. Despite the supply-side issues being resolved, consumers continue to pull away from hyper-speculative activities. The markets will naturally revalue to support more realistic price levels, deflating excessive P/E ratios and recent extreme price peaks in assets.

Possible Next Steps for the US Fed

My interpretation of the global markets is that excess speculative trending and rising commodity prices, combined with excess debt levels and consumers who have suddenly become very aware of global market risks, are already acting as a deflationary process. Because of these underlying factors, which I believe are currently in play throughout the globe, the US Federal Reserve may be forced to wait things out a bit. The Fed may have to navigate these natural deflationary processes while attempting to provide monetary support for what I believe will be a downside/deflationary trend over the next 3+ years.

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The US Federal Reserve may not have to take any aggressive action right now. Instead, it may decide to watch how the global markets contract as consumers pull away from inflated price levels and higher risks and attempt to navigate these natural deflationary price trends. If the Fed were to act aggressively right now and raise rates, they could push the global markets into a steeper collapse. This process would likely burst numerous asset bubbles very quickly and push many foreign nations into some type of debt default.

This presents a new problem for the US Fed – going from inflationary concerns to global economic collapse concerns very quickly. So when I suggested the Fed is playing with fire – maybe I should have said “playing with the nuclear economic football”?

Financial Sector Resilience

Still, I believe the US Financial sector is showing tremendous resilience near $37.50. I think it has a powerful opportunity to rally back above $42 to $44 if the Fed takes a more measured approach to let the global markets deflate a bit before taking any aggressive actions.

The US Financial sector will likely continue to benefit from price volatility and consumer demand as these deflationary trends prompt consumers to engage in more normal economic activities. The Financial sector also has continued to stay under moderate pricing pressure since the 2008 highs. XLF is only 25.46% higher than the 2008 highs, whereas the NASDAQ is more than 575% above the 2008 market highs.

The Financial Sector may be one of the strongest market sectors over the next few years. Deflationary trends push consumers and global markets away from excess debt levels and towards more traditional economic activities/trends.

Want To Learn More About Financial Sector ETFs?

Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Many companies regularly distribute a portion of their profits in the form of a dividend to attract investors and incentivize them to remain long-term shareholders. But most companies, ETFs, and commodities don’t pay a dividend at all. When there’s no dividend, the only opportunity for income or a profit comes from a capital gain (or loss) from selling the position.

Wouldn’t it be nice to get regular payouts from “no dividend” investments? As a dividend, these payouts could be used for income. Or, if left invested, our cost-basis could be further reduced with every payout.

A Commodity ETF Example

While the strategy presented here can work on any stock or ETF that has options, it works best with relatively lower-priced products under about $25. A commodity ETF such as SLV – currently trading around $22 a share — is an ideal candidate.

Like gold, silver has historically been used as a physical store of wealth and a hedge against inflation. But long-term charts on gold and silver show that these products often go sideways for a long time before having a significant move. Historically such investments have required buying, holding, and waiting – sometimes for a very long time.

One way to compensate for the lack of a dividend on silver is to purchase shares of SLV and write Call options against those shares.  This is a relatively simple options strategy of writing “Covered Calls”.   

Two Ways to Open the Trade

We want to buy low and sell high by purchasing shares on weakness and selling Calls on strength. We can also sell Puts on weakness as an alternative to purchasing shares. The Profit and Loss graph of selling a Put is the same as for selling a Covered Call.

If we sell Puts, we’ll likely have shares “Put” to us at some point and will then own the shares at the strike price we sold minus the premiums collected. Having shares put to us at a reduced cost basis is part of the plan. When we sell an Out-of-the-Money (OTM) Put, we’re methodically nudging the statistics in our favor by “buying low” when there is a pull-back in the underlying. We can alternately think of selling a Put as a Limit Order to buy shares with the limit price equal to the strike price we sold.

When shares are “Put” to us, we then sell Calls against the shares we now own. And the cost (or basis) of the shares we purchased will have been reduced by the cumulative option premium collected by selling Puts.

Trade Management

We may not have a great opportunity to sell option premium in every possible cycle. There will likely be times where the underlying will be in a pullback, and we may want to wait for the price to recover before selling Calls. Actual expiration cycle outcomes are likely to be a mix of having Calls expire worthless in some cycles and having shares called away in other cycles.

Writing Covered Calls is a relatively low-maintenance strategy that doesn’t have to be watched continuously. Once we write Calls, the shares will either be called away or not. But we do have to be patient and let time decay in the options we sold work for us.

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If the Calls we sold expire worthless, we still own the shares. In this case, we sell Calls again for some future expiration cycle and collect more option premium.

If our Calls expire In-the-Money (ITM), the Calls will be exercised, and the shares will be called away. The shares are purchased by our counterparty at the strike price we sold, and we no longer own the shares. As the Call seller, we keep the premium and any gain on the shares. In this case, we start the process again by buying shares or selling Puts.

Upside and Downside Risks

Writing Covered Calls (and selling Puts) is a neutral to bullish strategy. There can be sustained downtrends, price shocks, and changes in volatility that can affect strategy performance. As with any strategy, it’s important to ask and understand “What could possibly go wrong?” before getting involved.

There’s always a tradeoff when selling Covered Calls. In exchange for collecting option premium, profit is limited to the amount of premium collected plus any appreciation in shares up to the strike price. For that reason, I tend to sell Out-of-the-Money (OTM) Calls.

Keeping probability in our favor and letting time decay work for us are benefits of selling a Covered Call (or Put). As option sellers, we don’t need large up moves to make a profit. We have the statistical odds in our favor and option time decay working for us. The underlying share price can go up, sideways, or even down a bit, and we can still profit. The “Synthetic Dividend” is one of my favorite ways to generate repeatable profits.

What Else Is There To Know About Options Trading?

Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.   

If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. The head Options Trading Specialist Brian Benson, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. Ready to subscribe, click here:  TheTechnicalTraders.com.

Enjoy your day!

Chris Vermeulen
Founder & Chief Market Strategist
TheTechnicalTraders.com

Chris Vermeulen from The Technical Traders sits down with Jim Goddard on HoweStreet.com to discuss precious metals and the latest moves in the stock markets. We’ve definitely had a wild ride in equities with concerns of rates going up and the fed starting to liquidate their balance sheet.

Gold and Silver have been under tremendous pressure for the past year and change. They have constantly traded sideways, lower, or rotated out of favor. Overall, precious metals tend to come back to life right near the end of a bull market cycle for stocks. We’ve also seen increased volatility in gold, silver, and minors. The stock markets sold off this week in a big way, down 1 to 2 percent while gold minors were up 7 percent and silvers minors up 9 percent.

TO LEARN MORE ABOUT THE LATEST MOVES IN THE MARKETS – WATCH THE VIDEO

TO EXPLORE THE DIFFERENT TRADING STRATEGIES CHRIS OFFERS, PLEASE VISIT US AT THE TECHNICAL TRADERS. YOU’VE GOT MORE TO GAIN THAN TO LOSE WHEN SEEKING INFORMATION!

Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.

The timing of the super-cycle in commodities and the incredible speculative rally in the US & Global markets over the past 4+ years is hard to ignore. Even though these rallies are exciting and profitable when everything seems to be skyrocketing, traders need to continue focusing on the broader market cycles.

The next 5+ years could be very interesting for global traders and investors. Not only are major cycles aligning to present a potentially large global market price rotation, but global central banks have also played a major role in supercharging the speculative bobble phase of nearly all global assets over the past 10+ years. These events are unique because the planet has not seen anything like this in more than 85+ years.

Today, we will explore how these cycles align and how traders should prepare to profit from the potentially broad market cycles over the next 10+ years.

Follow Consumers When Attempting To Understand Market Psychology

Consumer and trader psychology plays a massive role in the speed and amplitude of these major market cycles. Optimism drives significant risk-taking and the desire to share in the profit-taking of major market rallies. Fear and uncertainty usually shock people into a period of inaction—panic and pessimism shift traders into a process of protectionism and a move to safety.

We are currently still in the Euphoria Phase of the market trend. We are starting to see some fear and uncertainty move into trader psychology, but we have not yet seen a roll-over in price to qualify as the Complacency Phase. What this means is that we may still have more opportunities for a continued price rally soon.

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I’ve often shared my belief that people need to be keenly aware of their surroundings and what is happening worldwide. Simply paying attention to how friends spend their time and money and how businesses are operating can lead to a better understanding of the local economy. For example, watching to see if commercial properties are suddenly filling with new shops or becoming vacant at a faster pace can tell you quite a bit about the local and regional economy.

Open your eyes and talk to people around your home town. Please pay attention to the global economic factors and ask questions about how people feel or how their business is doing. Sometimes, it is really that simple.

The 9~10 Year Appreciation/Depreciation Cycle Phase – And The Excess Transition Phase

I remember how the economy shifted before the DOT COM bubble burst and ahead of the 2008-09 housing market crash. Suddenly, the local economy and psychology shifted from optimism into fear, shock, and uncertainty. Many people I talked to were not aware of the broad market cycles that continue to drive market sentiment, but they were aware of the potential crisis that was building around them.

My research into various cycle phases suggests that a 9~10 year Appreciation/Depreciation cycle may be a key factor in understanding various cycle trends and lengths. I’ve also identified an 18 to 30-month transitional phase, which I call the “Excess Phase,” that takes place near the beginning of new Appreciation/Depreciation cycle phases.

The major Appreciation/Depreciation cycle phase usually drives price advance or decline periods. The Excess Phase, the transitional 18 to 30 month period when one cycle ends and another begins, usually reflects a very opportunistic and profitable extreme cycle process. This is often when extreme volatility in market trends can produce very large price trends and sudden price rotations.

Global Market May Shift Into The Depreciation Cycle Suddenly In The Future

Shortly after the COVID-19 crisis in February 2020, I published an article related to the expectations of a “transitory inflation” trend. My research suggested the US markets would rally after the COVID-19 bottom, then peak and roll over into a diminishing cycle amplitude-phase – possibly lasting many years.

Although my research suggested this peak in cycle amplitude was likely in early 2021, it appears the markets pushed the expansion cycle phase higher throughout most of 2021 and suddenly shifted expectations near the end of 2021. Now, in early 2022, it appears we are shifting direction much faster than many traders expected. Yet, I will warn you that we have not broken into a broad market downtrend at this time. Instead, we still see the initial shift away from the Euphoria phase (possibly).

I’ve shared many articles on the shifting global market cycles and how they would create incredible opportunities for traders over the next 10+ years. Let’s take a minute to review these past research articles:

25+ Months Into An Excess Phase – What Next?

Currently, we’re starting to see some shock in the markets, with the US major indexes rolling downward after the US Fed indicated tightening and rate increases are likely in 2022. My research suggested the transition from an Appreciation cycle into a Depreciation cycle took place in December 2019 – nearly 25 months ago. Additionally, over the past 25+ months, the market trends have resulted in a massive Excess Phase rally – likely prompted by the COVID crisis and a huge speculative wave by consumers/investors. What next?

At this point, it is a little too early to determine if this is a market peak or if the US markets continue to rally higher – attempting to establish a new higher peak in this Excess Phase Rally. Yet, one thing is certain; we are starting to see some real fear in consumers and traders due to the diminishing expectations related to the US Economic growth rates and the US Fed.

Traders should keep these broad market cycles near the front of their thinking as they attempt to navigate the trends over the next 12+ months. I believe 2022 could see another rally higher, possibly resulting in the SPY moving above $500 before finally reaching a peak price level. After that peak is reached, I believe the US market will roll over into the Complacency phase and transition into the Anxiety/Denial phase fairly quickly.

How To Position Yourself For What May Come

These huge market cycle phases and trends will present incredible opportunities for traders. Learning how to prepare for these big cycle phases and profit from them should be near the top of the list for anyone with money in the markets right now. In my opinion, waiting to prepare for these shifting trends only creates great risks for investors/traders as the Excess Phase Peak appears to be nearing an end.

I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Chris sits down with Craig Hemke of Sprott Money to talk about their Precious Metals forecast, latest moves, and this year’s projections.

From a long standpoint, the dollar index has covered a huge range. From a shorter-term view, the dollar has put in what looks to be a double bottom, rounding formation, and a series of bull flags. When there is fear in the market we tend to see the US Dollar rally as a cash safe haven. This week, we are starting to see some good traction with the US Dollar.

Gold serves as a global safe haven – it’s driven by countries that believe in physical metal. Though it can sometimes trend along the same lines as the US dollar, this is not always the case. Ideally, we want to see Gold break through the pivot point of $1800. The question remains, when will it finally break up to the upside?

Bonds have been trading sideways for a while now, and there is not much indication that this will change within the next few months. We saw this pattern back in 2008 when everyone piled into Bonds as a safe haven play, opting to avoid the stocks due to the financial crisis. So where did the money go? People invested in precious metals. The charts are now indicating a rinse and repeat may be forming.

Silver has recently moved above some key moving averages. We are seeing higher highs and higher lows indicating a new uptrend may be beginning. For a short-term trend, we have a nice bull flag forming. A good sign now would be to see a consolidation before it continues to gain traction.

Overall, the precious metals market is at a pretty big turning point. It will be very interesting to see how precious metals and miners move going forward.

SEE LATEST PRECIOUS METALS forecast

Precious Metals Forecast

Get Chris Vermeulen’s Gold And Silver ETF Trade Signals.
www.TheTechnicalTraders.com

Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.

Chris Vermeulen sits down with Patrick Vierra from Silver Bullion TV to go over the signs that point to further correction in the silver and precious metals market in general. Looking at the daily chart of silver and recent price actions, we can see these critical major turning points sometimes acting as a resistance short term but usually trading above them. On a short-term basis, silver is at resistance and really needs to start to break to the upside.

In general, the precious metals markets are primed and ready to have a very big move. The markets are still trying to base at a really critical point. Chris also mentions that gold and silver minors are at a major support level trying to get some traction and whichever way these break is going to be a pretty big move.

TO LEARN MORE ABOUT THE FUTURE MOVES GOLD AND SILVER – WATCH THE VIDEO BELOW

GET CHRIS VERMEULEN’S ETF TRADE SIGNALS and charts by visiting:
WWW.THETECHNICALTRADERS.COM

Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.

The US Federal Reserve has recently taken steps to communicate a change in future policy – suggesting raising interest rates and acting more aggressively to combat inflation. Throughout the last few weeks of 2021 and early 2022, these comments and posturing by the US Fed have created some very big downside price moves in the US major indexes. As a result, the US markets’ volatility levels (VIX) have moved to a recent average between 17~21 – nearly 3x historical normal levels.

US Fed Likely To Move Very Slowly On Rates

One thing that I believe has become evident to many people is that we have moved past the COVID stimulus conversations of the past 24+ months. Inflation, rising prices, constricted supply-chains, and an excess of capital throughout many global markets appear to have shifted how the US Fed interprets future risks. The Fed is telegraphing these concerns to investors very clearly right now, which means traders/investors are shifting their focus away from high-flying Growth stocks.

Even though traders are attempting to shift capital away from certain risky sectors in the US and global markets, I still believe we have about 60 to 120+ days before the bigger market shift takes place.

The US Federal Reserve will likely start addressing inflationary concerns by reducing their balance sheet assets – not by aggressively raising interest rates. I feel the US Fed will navigate Q1:2022 and Q2:2022 by reducing balance sheet assets while allowing the global supply-chain issues to attempt to resolve themselves. By June/July 2022, or later, I believe the Fed may start to consider rate increases as a means to slow inflation.

Fed Comments Shift Investor Sentiment – Metals In Focus For Later 2022

This move away from Dovish/easy-money policies will push traders to consider more traditional hedge investments – like Gold and Silver. I’m sure you’ve read some comments over the past 24+ months about Gold being an extremely undervalued asset as the US Fed poured trillions of stimulus dollars into the economy? These comments were made concerning the fact that Gold rallied from $1450 in 2019 to almost $2100 in 2020 – over 12 months (over +43%). Could a big move in Gold/Silver happen again in 2022 or 2023?

My research suggests a Double Pennant/Flag formation in Gold suggests the $1675 support level becomes critical soon. It also indicates a Breakout/Breakdown move may start to happen before March or April 2022 – near the APEX of the current Pennant/Flag formation.

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The key APEX range is currently between $1785 and $1830. This represents a very tight price range where Gold may attempt to consolidate as we move towards the March/April Apex. My research suggests a move to levels near $1740 to $1750 may happen just before the Apex Breakout/Breakdown initiates. So, watch for a bit of downside price volatility in Gold before the end of February 2022.

Junior Gold Miners May Rally +45%, Or More, On A Gold Price Rally

The Junior Gold Miners (GDXJ) Weekly Chart shows a firm support level near $37.35 that should act as a floor for price. My research suggests the next 45+ days will see GDXJ prices stay below $44 to $45 – trading in a reasonably tight range before starting to rally higher near the end of February 2022.

I believe Metals and Miners are aligning for a late February 2022 or Q2:2022 rally. The reason is that I believe the positioning by the US Fed, and expectations related to later 2022 (a mid-term election year), may prompt quite a bit of concern for the US and global equities. This will likely push investors and traders into “old-school” hedge instruments – like Gold and Silver.

That means Junior Gold and Silver Miners maybe about 55+ days away from an explosive upside price trend.

SILJ May Rally +70% to +100%, Or More, On Fed Actions

Near the end of 2022, I published a research article highlighting the incredible opportunity in Silver – focusing on how the Gold/Silver ratio had recently reached another peak level and had started to decline: Fear May Drive Silver More Than 60% Higher In 2022. This move suggests the disparity between the price of Gold to the price of Silver shows Gold is appreciated (and holding greater value) than Silver over the past few years.

The COVID virus event, and the subsequent Fed/Government stimulus, shifted investors/traders focus away from precious metals and into the equities market speculative rally. Now that the US Fed is starting to warn of more aggressive rate increases and other actions, precious metals are suddenly much more important as a hedge against future risks.

This SILJ Weekly Chart highlights the incredible base level, near $12, that continues to offer traders a fantastic hedge against a sudden Fed move. Using a simple Fibonacci Price Extension, we can see a $20 target level (+61%) and a $25.64 target level (100%). If the $12 level holds as a base/support, SILJ may be one of the easiest and best hedges against a sudden Fed move right now.

The US Federal Reserve is, in my opinion, playing with fire

The COVID Virus Event pushed global debt levels higher by more than $19.5 Trillion Dollars (Source: Bloomberg ). The rush to attempt to save the global economy has created a massive surge in global debt levels – pushing the global debt to GDP level to well above 356% (Source: Axios).

Why is this so important right now? Because the US Federal Reserve is talking about an attempt to move interest rates and Fed decision-making back to near-normal levels. In my opinion, this was the one fault of Alan Greenspan in 2006-07. The thought that we can raise rates to “near normal level” at any time when we have grown debt levels excessively throughout the world is failed thinking and ignorant, in my opinion.

The US Federal Reserve is trapped and almost backed into a corner. I believe the US Fed will find any rate increases above 1.00 before the end of 2023 will significantly disrupt the global speculative bubble. Any attempt to move rates to levels near or above 2.00 would represent a nearly +2000% rate increase in less than 12 to 24 months. If you want to see a shock to the global markets where global debt to GDP is closing in on 400%, try raising the FFR by more than 2000% over a short period of time. That is what I call “playing with FIRE.”.


(Source: Axios)

2022 and 2023 will be filled with significant market trends and increased volatility. Right now, traders and investors need to understand the global markets are attempting to quickly transition away from a speculative/growth phase as the US Federal Reserve attempts to telegraph future rate increases. So it’s time to start thinking about how to prepare for unknowns and how to protect your capital more efficiently.

Growth sectors and US major indexes may continue to move higher for the next 30 to 60+ days, but my research suggests Q2:2022 may represent a “change in thinking” related to a late-2022 Fed shift. We are starting to see the markets move away from the speculative bubble-type trending we saw in 2020 and early 2021. Keep your eyes open and learn how to prepare for the big trends over the next 3+ years. The Fed is playing with fire right now. One wrong move and the markets could start a drastic price correction/reversion.

Finding The Right Trading Strategies

If you have struggled with finding opportunities over the past year or so and want to know which are the hottest sectors, or how to protect and grow your capital, then please take a minute to review my Total ETF Portfolio – Triple-Strategy Trading Plan to help you profit from these big market transitions.

Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 

Chris Vermeulen
Founder and Chief Market Strategist of The Technical Traders Ltd.

Few things are certain in life.  But as the old saying goes, there is nothing quite so certain as “death and taxes”.  As an Options Trader, I would enthusiastically add option time decay to that list.  

Options offer traders and investors more leverage and risk mitigation than just purchasing shares outright. For example, if I were to purchase 100 shares of a stock at $100 per share, my total capital outlay would be $10,000. Options give us the right to buy or sell at a certain price for a pre-determined length of time. I could control that same 100 shares by purchasing an At-the-Money call with a $100 strike price with 90 days to expiration for perhaps $6 per share, or $600 total capital outlay. That’s powerful leverage. My downside risk is also limited to the amount I paid for the option, in this example, $6 per share. Compare that to purchasing the stock where my risk is, in theory, as much as $100 per share. (Although they’re relatively rare, “flash crashes” happen, companies can and do go bankrupt, get de-listed, etc.)

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Since options give the holder the right to buy or sell at a specific price for a specific time period, they have a time value component right up until expiration. Included in the price of every option (put or call) is the cost of the time value remaining in the option. In comparison, the holding period for stock can be indefinite, and there is no risk of expiration — only market risk.

Intrinsic and Extrinsic Time Value

The price of an option comprises two parts – intrinsic and extrinsic (time) value. Intrinsic value is simply the difference between the underlying’s market price and the option strike price. Extrinsic value is another term for the value of the time left in an option before it expires. When we buy an option, part or all of what we’re paying for is the option’s time value. The further away the option expires, the more time value will be worth. Prior to expiration, there will always be some time value. But there may or may not be any intrinsic value to an option. Options with no intrinsic value are referred to as Out-of-the-Money (OTM) options.

If you’re an option buyer with the right to buy or sell at a certain strike price, the “bad” news is options have a finite life – they expire. But for every option buyer, there is a counterparty. Option sellers are collecting a premium in exchange for taking on an obligation to either buy or sell shares at a certain price for a specific period of time. For option sellers, expiration marks the end of their commitment – so expiration is “great” news for them.

Time Decay

When we buy options, time decay works against us. For the holder of a long option, the option’s time value will decrease a little day by day as expiration draws closer. As an asset, time value is like an ice cube, melting slowly at first and then rapidly until it has entirely melted away. This is not to say don’t ever be a buyer of options. If we happen to be right about direction, duration, and magnitude, a long put or call option can generate a significant profit.

Option time value is measured by Theta Decay and is commonly estimated daily by the calculated Theta. Theta is one of the more valuable of the Option “Greeks” to make use of. Essentially all trading platforms for options can be configured to show Theta as part of the Option Chain.

Is it possible for the time value to increase rather than decrease even though the calendar time to expiration is decreasing? Yes, it certainly can. Remember that the price put on time value is variable and determined by market forces. If the underlying stock becomes much more volatile than it had been, then the value for that time can increase, sometimes substantially. If the underlying has been very volatile and becomes less so, then the time value can shrink.

To Sell Or Buy Options?

We can significantly turn the odds in our favor by being the seller of options. In that case, we’re selling any intrinsic value (which would be $0 in the case of an Out-of-the-Money option) along with some portion of time value. Intrinsic value will go up or down with the price of the underlying. But in the end, as expiration gets close, the remaining time value will always approach $0 regardless of volatility. That we can literally “take to the bank.”

There’s a well-known quote from Warren Buffett – “If you don’t find a way to make money while you sleep, you will work until you die.”. Buffett is also famous for being a seller — not a buyer — of option premium. Like Mr. Buffett, I too like to make money while I sleep.

WANT TO LEARN MORE ABOUT OUR OPTIONS TRADING SERVICE?

Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.   

If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. The head Options Trading Specialist Brian Benson, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. Ready to subscribe, click here:  TheTechnicalTraders.com.

Enjoy your day!

Chris Vermeulen
Founder & Chief Market Strategist
TheTechnicalTraders.com

The US Federal Reserve’s tightening monetary policy from a historically low-interest rate has slowed the US stock markets. As a result, traders quickly attempt to adjust their capital allocation levels as risk assets, technology, and US major indexes roll lower because of expected Fed Rate Hikes and other Hawkish activities.

We will explore how the US Fed’s comments and potential future actions may prompt significant market trends in 2022 and beyond. We’ll also attempt to identify how and when the US Fed may disrupt the US markets. We know the actions of the US Fed will prompt some significant trends over the next 12 to 24 months. We know certain assets will likely rise in value as fear settles into the markets because of rising interest rates and deflating asset bubbles. It is just a matter of understanding how the speculative asset bubble of the past 8+ years and how the US Fed may move to pop these speculative bubbles soon.

Asset Bubbles Everywhere, The Global Markets Continue To Froth

Asset bubbles, such as those created in Cryptos, the US stock market, US Real Estate, and the art/collectible market over the past 5+ years, have visualized the US Fed’s easy money results in terms of bubbles.

Take a look at this chart showing the growth in certain asset classes since the start of 2019. It is incredible to think that these asset classes have rallied so far and so fast in just over 35 months: 

  • The Grayscale Bitcoin ETF rallied more than 1200%. 
  • The Technology sector rallied more than 200%. Real Estate rallied more than 85%. 
  • The S&P 500 rallied more than 94%. 

The US Federal Reserve’s move to lower interest rates after the 2018 market collapse, which resulted in a December 24, 2018, Christmas Bottom, prompted an incredible rally phase where traders followed the US Fed in piling into assets. As long as the US Fed continued buying assets and kept interest rates near zero, global traders had no reason to fight the US Fed.

(Source: StockCharts.com)

Is The US Fed About To Pop The Bubble From The Stratosphere?

Our research suggests the US Federal Reserve is changing its policy a little late into the game. However, it appears the US and global markets have already “rolled over” in terms of growth trends and expectations. This SPY to QQQ ratio chart highlights that the US markets entered a peaking phase in late July/August 2020 and reached an ultimate peak in February 2021.

(Source: TradingView.com)

S&P 500 PE Ratio Suggests Investors Are ALL-IN For The Next 90+ Years

In other words, it appears traders have reached their ceiling in terms of what they believe the US Fed is capable of doing at this stage in the rally. For example, the PE Ratio of the US Stock market ending in 2021 ended just below 30, with a historical high for 2021 near 37. The historical mean is 15.96 – which is still relatively high for the US stock market.

Remember, a PE level of 15.96 means any investor buying in at those levels would need a minimum of 15.96 years of a company handing over “every penny of revenue” to the investor (excluding all costs, payrolls, taxes, fees, and other operating expenses) to cover the PE multiple of the investment. So a PE level of 30, as we see at the end of 2021, suggests that stock price valuation levels are at least 60 to 90+ years ahead of real returns.

The only thing that can change this historic level of speculation in the markets is a deleveraging/revaluation event.

(Source: multpl.com)

From the US Fed’s Actions To How Traders Should Prepare For Shifting Markets

This first part of our ongoing research into the US Fed’s actions and where they are telegraphing their intents will continue. Part II of this article will investigate how traders should read into these shifting markets and where we’re attempting to highlight what has taken place over the past 3 to 5+ years.

We’ve managed to live through an incredible event in history. I can only think of one other time when a global superpower extended this type of credit and support for the worldwide economy. That was the Roman Empire many thousands of years ago.

What we experience over the next 20 to 40+ years could be the biggest and most incredible opportunity of your lifetime. The process of deleveraging all this debt and working all this capital through the global markets over the next few decades may present one of the most incredible investment/trading opportunities anyone has ever seen in over 1500 years.

Look for my Part II to this article, and we’ll continue exploring the current shifts in the US and global stock and asset markets.

Finding The Right Strategies That Will Help You Navigate Through Bulls & Bears

If you have struggled with finding opportunities over the past year or so and want to know which are the hottest sectors, or how to protect and grow your capital, then please take a minute to review my Total ETF Portfolio – Triple-Strategy Trading Plan to help you profit from these big market transitions.

Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 

Chris Vermeulen
Founder and Chief Market Strategist of The Technical Traders Ltd.