The stock market tends to repeat itself on regular bases. Why? Because it moves mainly based on the emotions of market participants, with the exception of extreme times when the masses are moving the market with extreme fear or greed, at which point they are flooding the market with buy or sell orders to create a final pop or drop in the market just before a major market reversal.
As with everything in the universe, everything moves in cycles, periods of expansion and contraction, and there are regular wave-like patterns that happen on a regular basis no matter the time frame one is reviewing on a stock chart.
Below are three charts, each showing a similar price pattern of extreme washout lows, followed by roughly a 1.5-month rally taking investors on a roller coaster ride from fear and complete panic to greedy know-it-alls.
Current S&P 500 Daily Chart Price Action
October 2014 – S&P 500 Daily Chart Price Action
September 2015 – S&P 500 Daily Chart Price Action
Trading Conclusion:
In short, no pun intended, us large cap stocks look and feel toppy here. I feel a correction is likely to take place any day now, and the big question is “how much will the stock market pullback?
Will it be another 4-5% correction similar to the chart examples above? Or will it be something larger 8-15% correction?
https://thegoldandoilguy.com/wp-content/uploads/2016/08/timesup.jpg404611adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2016-08-13 10:11:122016-08-13 10:11:12It Can’t Wait Any Longer – Deja Vu!
My analysis indicates that gold will be implemented in order to protect ‘global purchasing power’ and to minimize losses during our upcoming periods of ‘market shock’. It serves as a high-quality, liquid asset to be used whereas selling other assets would cause losses. Central Banks of the world’s largest long-term investment portfolios use gold to mitigate portfolio risk, in this manner, and have been net buyers of gold since 2010.
Investors should make use of golds’ lack of ‘correlation’ with other assets which makes it the best hedge against currency risk. Last May of 2016, there was a huge trend change in U.S. gold investment as the Swiss exported a record amount of gold to the United States. There has been a huge increase in gold flows into the Global Gold ETFs & Funds. Something seriously changed, in May of 2016, as the Swiss exported more gold to the U.S. within one month than they have done so over the last year.
Gold has a “clear presence” to play in a world dominated
with ‘global economic uncertainty”
Despite the fact that we are in for a period of great financial turmoil, investors can safeguard themselves by investing wisely in gold. Do not be left behind and witness your dollar assets losing their value.
It is in these very conditions that gold (precious metals) is the only investment that will appreciate in value over time. Gold will continue to perform its’ role as a “safe haven” during these times of crisis which currently appear to be never ending. The metals surge of as much as 8.1% on the day of the “Brexit” vote, last month, is an indicator that its’ luster of safety is undimmed in the current markets. There is little to be gained from arguing whether such beliefs are right or wrong: Governments, around the globe, have moved to a new stage of desperation by toying with the idea of “helicopter money”.
It is my belief that since “Brexit” occurred, it could unleash a general exodus and the disintegration of the European Union is now almost unavoidable.
The list of prominent Hedge Fund Managers who are investing in gold is growing. Paul Singer, of Elliott Management Corporation, is the latest name to lend his support. It is likely that more investment institutions will turn to gold as the logical solution to countervail the effects of many years of ‘quantitative easing”.
Gold has been traded for over 5,000 years and for the first time has a positive carry in many parts of the globe as bankers are now experimenting with the absurd notion of negative interest rates. Some regard it as a precious metal while I regard it as a currency!
Soros Fund Management LLC, which manages $30 billion for Mr. Soros and his family, sold stocks and bought gold and shares of gold miners whilst anticipating weakness in various markets. Investors view gold as a ‘safe haven’, during times of turmoil but they tend to be late to the game as they don’t buy gold until there truly is turmoil and gold will have already appreciated substantially at that point.
“It’s a glaring warning sign of deflation. We’ve never really had deflationary fears throughout such a widespread part of the world before,” said Phil Camporeale, a Multi-Asset Specialist at JPMorgan Asset Management.
The FED is doing everything in its’ power to prevent a rise in the dollar. They are willing to “orchestrate” any scenario so as the stock market will continue to soar and people will feel a “wealth effect” from new stock market highs while the others are experiencing the economy “contracting”. The FED is getting everything it wants, in this regard, and will continue to do so as their number one priority is “debasing” the U.S. Dollar.
As the U.S. Dollar falls from all of the FEDs’ QE, it will lift up gold prices to unprecedented highs.
Investors of all levels of experience are attracted to gold as a solid, tangible and long-term “store of value” that historically has moved independently of other assets classes.
Golds’ importance, even in today’s environment, was clearly visible during the massive rally at the start of the year, when all other asset classes were tanking. Investors piled into gold on the scare of an imminent global financial reset.
Investors should make use of golds’ lack of ‘correlation’ with other assets which makes it the best hedge against currency risk.
Does Gold Continue Its Bull Market Towards $1500.00?
Conclusion:
The trend for ETFs to pile in to the precious metal sent the price of gold soaring by 25% in H1, the biggest price rise since 1980. For the first time ever, investment, rather than jewelry, was the largest component of gold demand for two consecutive quarters.
There will be another great opportunity in gold, silver and especially miners in the near future which followers of my work will benefit from. Follow my analysis and trades at: www.TheGoldAndOilGuy.com
Chris Vermeulen
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During the last stock market top in 2007-2008 the price of natural gas completed a basing pattern (bottom) and broke out and had a massive rally. Will this happen again this time around?
Based on the stock market stage analysis, market sentiment, and the price action of natural gas, it appears the stock market is topping and natural gas is on the verge of a breakout and rally.
The price of natural gas moves in strange ways, and I mention this to subscribers when its taking place. I found that on when there is fear in the stock market and stocks are down along with almost every other asset class (this is rare), that natural gas is typically the only asset and/or commodity trading higher those days. I’m not 100% sure what to make of it, but I have seen this repeatedly over the years.
See the weekly chart below of the SP500 index and natural gas
Natural Gas Forms Bottoming Pattern and Basing Pattern
Earlier this week I recorded my conversation with HoweStreet talking about natural gas, gold and oil – LISTEN HERE
Natural Gas Trading Conclusion:
In short, no matter if this correlation in stock price and natural gas exists or not, the fact of the matter is that stocks are showing signs of a significant top, while natural gas appears to be bottoming.
In the coming days several swing trade and long-term opportunities will present themselves and I will share which ETFs and or stocks I will trade to profit from the pending moves.
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We are currently experiencing a “Kondratiev Winter” stage in this stock market which is at its’ “tipping” point. This is where nominal to incremental highs on the SPX can be exceeded by 2%, but, by no more than 4%. I am observing a “MARKET FAILURE” right here and now. This is a BULL TRAP!
Last Fridays’, August 5th, 2016 rally in the SPX big price move, on low volume, resulted in no trend change to the larger BEARISH patterns. It does not change the Bearish pattern, but it probably does mean that the current rally will last for at least a few more days. There are multiple times in which rallies are reversed during the early part of the following week after a strong jobs report.
Both investors and traders continue to throw money at stocks every time that there is any hint of “manufactured” good news. The majority of stocks, on the NYSE, are still in ‘downtrends’. Last Friday, August 5th, 2016, the Bureau of Labor Statistics released their “bogus” jobs report claiming that 255,000 new jobs were created.
This strong number caused gold to drop sharply, which momentum traders could have profited handsomely if they knew about the rouge price spikes taking place in gold just hours before the move.
The labor participation rate rose a mere 0.2 percent to 62.8 percent which is at a 40 year low. This means that potentially over 90 million Americans are still not working.
After adding only 11,000 jobs, in May of 2016, the Bureau of Labor Statistics would have the public believe that the US has now added over 550,000 jobs, in the sixty-day period, since. I find these numbers still hard to believe. There is no actual evidence of this having occurred:
It is all just a statistical adjustment as well as the “seasonal adjustment” factor as mentioned by Zero Hedge.
Over the past 120 years, within in a 7-year bull market, it is during the Fall season of the 7th year when the next major decline commences. The SPX is putting in its’ final TOP. It will become a well-defined top that usually cannot exceed a 2% to 4% throw over.
We are currently witnessing an extremely aged and overvalued bull market. The SPX Index, despite the exuberance of “record highs,” is just 2% above its’ May 2015 peak. The SPX has pushed it to its’ most extreme overvalued, overbought and over bullish syndrome in an environment where momentum is slowly rolling over. Whether one is bullish or bearish, one needs to recognize that any current extremes are “unparalleled”.
Statistically speaking, the single most probable outcome is actually a small gain which we have experienced and which is then followed by abrupt and severe losses that can have the potential of wiping out weeks or even months of upside progress with an unexpected and rapid decline.
I will have to wait for the market sentiment to shift toward “risk-aversion”, before participating in any long-term bearish ETF trades. Within an increased global systematic world, both investors and traders are making “risky and unparalleled” bets, these days.
I can visualize the financial meltdown. Many financial entities will have lower profits since low interest rates persist. Historically, low yields squeeze the net interest income of banks and make liabilities harder to meet for insurance companies. I would cut their EPS forecasts by 5%-7%. The fall in Treasury yields explains most of the cut. Their strong headwind is headed our way.
Sell into These Rallies: If you are still in the stock market, I continue to recommend to sell stock positions into the rallies.
Chart End of July 31st, 2016
Take a look at the stock index outflows in July. This shows money continues to leave the leading indicator stocks (Russel 2k, and the Nasdaq).
CNN Chart of Fear and Greed August 6th, 2016
Now, take a look at the fear index. While I personally use a slightly different mix of indicators to measure market sentiment, this is very close to my calculation and shows it in a simple visual format.
Conclusion:
With all of the “Extreme” complacently and the “Extreme” greed in the stock market, it is the perfect storm for DISASTER!
With that said, nothing happens exactly when it should in the stock market. The market is constantly trying to get the mass of participants on the wrong side of the market. If it doesn’t shake you out, it will wait you out and I feel it’s doing the later method now.
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Here is my chart of GLD during post-market trading today (Thursday, Aug 4th). I sent this chart to my followers alerting them of the next day’s market bias/trend and trade setup.
If you don’t know what spike alerts are, let me explain briefly. In short, the market gives of these rogue price spikes which I have been able to filter and identify. On top of that, some data feeds filter their data depending on the chart timeframe you are loading and will only use the AVERAGE price and not every tick to create the price bar on the chart to remove these spikes.
Meaning, even if your charting platform and data feeds don’t filter out these rogue price spikes then you may only see these price spike with specific chart time frames like the 30-minute or a 10-minute chart. It varies from day to day and when these special rogue spikes happen.
Bottom line, if you see these spikes, 80% of the time we see the price spike target reached within 24-48 hours.
Thursday Aug 4th Spike Alert:
This shows you the spike down as it was taking place with my automated spike identification software. This spike took place right after the market closed Thursday giving us several hours in afterhours trading to enter the trade (short gold, or buy an inverse ETF).
GLD didn’t only drop to the price target of $128.87, but gap below that and continued to fall all session closing at $127.55 a share. There are many ways to play these spikes in price of gold. You can trade the ETFs or futures contract as shown in the chart below, or trade the even faster moving ETFs like DUST or NUGT, GDX, GDXJ, or even a high beta gold miner stock.
Trading Chart Post Spike Alert:
Back in April/March I shared many of these spike alerts trade setups and I also talked about the best ways to trades them and my recommended USA/Canadian broker and also the CFD and spread betting firms I use.
Check out this post showing spike alerts in more detail and best brokers: Click Here
Trading Conclusion:
In short, while most price spike alerts are not huge by any means, in many cases these spikes will provide $1-$3 per share profit and if you are active trader with 500 or 1000 share lots or trading futures with a $5000 account size you can making some decent weekly/monthly gains with these special price spikes.
Get My Special Secret Spike Alerts Today:SPIKE ALERTS
Gold has a “clear presence” to play in a world dominated with ‘global economic uncertainty”
My analysis shows that gold will be implemented to protect ‘global purchasing power’ and minimize losses during our upcoming periods of ‘market shock’. It serves as a high-quality, liquid asset to be used when selling other assets would cause losses. Central Banks of the world’s largest long-term investment portfolios use gold to mitigate portfolio risk in this manner and have been net buyers of gold since 2010.
Investors should make use of gold’s lack of ‘correlation’ with other assets which makes it the best hedge against currency risk. There was a huge trend change in U.S. gold investment last May 2016. Switzerland is now a major source of U.S. gold exports. The tables turned back in May 2016 as the Swiss exported a record amount of gold to the United States. There has been a huge increase in gold flows into the Global Gold ETFs & Funds. Something seriously changed in May 2016 as the Swiss exported more gold to the U.S. in one month than they have every year for several decades.
Though we are in for a period of great financial turmoil, investors can safeguard themselves by investing smartly in gold. Do not be left behind and see your dollar assets lose value. Invest in gold!
It is in these conditions gold is the only investment that will appreciate in time.
The world including Russia, Syria, Libya, North Korea, the South China Sea, Venezuela and social discord from Europe to the U.S., it is difficult to make the case for any good news. Gold will continue to perform its role as a “safe haven” in these times of crisis which appear to be never ending. The metals surge of as much as 8.1 percent on the day of the “Brexit” vote last month is an indicator that its’ luster of safety is undimmed in the current market. There’s little to be gained from arguing whether such beliefs are right or wrong: “The market can stay irrational longer than you can stay solvent”.
The list of prominent hedge fund managers backing gold is lengthening. Paul Singer, of Elliott Management Corporation, is the latest name to lend his support. It is likely that more investment institutions will turn to gold as the logical way to countervail the effects of many years of quantitative easing.
“It’s a glaring warning sign of deflation. We’ve never really had deflationary fears throughout such a widespread part of the world before,” said Phil Camporeale, a multi-asset specialist at JPMorgan Asset Management.
These accommodative Global Central Bank policies has lead to monetary easing policies that have been adopted globally. It is not so much that the U.S. Dollar has become strong the last few weeks. The “systemic” uncertainty of the recent “Brexit” vote in the U.K. resulted in the U.S. Dollar became a “safe haven”.
The FED is doing everything in its power to prevent a rise in the dollar. They are willing to “orchestrate” any scenario where the stock market continues to soar and people will feel a “wealth effect” from new stock market highs and fight the argument that the economy is “contracting”. The FED is getting everything it wants in this regard and will continue to do so. The number one priority of the FED is “debasing” the U.S. Dollar. Gold can rise even if the dollar continues to rise
Investors of all levels of experience are attracted to gold as a solid, tangible and long-term “store of value” that historically moved independently of other assets classes
Golds’ importance even in today’s environment was clearly visible during the massive rally during the start of the year, when all other asset classes were tanking. Investors piled on gold on a scare of a likely financial crisis in the world.
Investors should make use of Gold’s lack of ‘correlation’ with other assets which makes it the best hedge against currency risk.
Though we are in for a period of great financial turmoil, investors can safeguard themselves by investing smartly in gold. Don’t be left behind and see your dollar assets lose value. Invest in gold.
It is in these conditions that one of the best investments is gold.
Talk of further “unconventional” monetary policies globally has increased. Japan has reached the limit of what negative interest rates and quantitative easing have achieved. The Bank of Japan may adopt a policy of so-called “Helicopter Money”.
Dr Loretta Mester, President of the Federal Reserve Bank of Cleveland and a member of the rate-setting Federal Open Market Committee (FOMC), signalled direct payments to households and businesses to stoke spending was an option Central Banks might look at in addition to interest rate cuts and quantitative easing.
However, back in April 2016, if you have followed my recommendation, you would have maintained that once gold crossed the $1190/oz. levels, it was destined to go higher. Above the downtrend line, which acted as a resistance from 2013 and onwards, the trend altered and it appears to be extremely highly unlikely that it will reverse downwards, at all!
However, the head and shoulder formation tested my resolve to buy into gold, as it is a most reliable bearish pattern, but, once a bearish pattern fails, it becomes very bullish which is what has happened in this case. I was quick to alert my subscribers to buy as soon as the pattern was triggered.
“We’re always assessing tools that we could use,” Dr Mester said in response to a question about the potential use of “Helicopter Money”. However, Dr Mester signalled that in the event of another shock or economic downturn that most likely option would be more quantitative easing-style money printing.
Global Government Bond rates are negative:
Global rates are at zero too negative, money will continue to chase gold and U.S. Treasuries for the higher yield. This will continue to push yields lower as the global economy continues to slow. What would cause this to reverse? It would require either an “economic rebound” or a complete “loss of faith” in the U.S. to pay its debts such as a collapse of the U.S. Government.
Addicted to debt:
The total amount of government bonds in the world that have negative yields are currently $13 trillion, according to Bank of America Merrill Lynch. Given that there were almost zero negative-yielding bonds just two years ago, the rise is “incredible”. Do not be surprised to see $15 trillion to $20 trillion worth of negative-yielding government debt by the end of this year. The yield on short-term government include Switzerland, Belgium, Denmark, France, Germany, Japan, and the Netherlands which are all sub-zero. Even short duration U.S. bond rates are barely above zero. Bonds are not fixed-income assets anymore now as fixed-outgoings once were ones. Investors are currently buying them for their ‘capital appreciation’ rather than their ‘coupon payments’.
Gold is currently in a correction. In this upcoming August of 2016, gold is set to surge much higher and surprise ALL. As you can see from the chart below, I am targeting 135 level on GLD.
Global Central Banks have yet to ‘manufacture’ inflation!
This trend will continue to grow for now, until, just like in 2008, the bubble bursts in “cataclysmic fashion. ”
The Central Banks are manipulating the fabric of price-time by reversing the flow of time via negative interest rates. Therefore, the global financial system no longer possesses the “productive capacity” to generate any income to sustain current equity asset values.
My own economic outlook is “invaluable” and is a must have if one wishes not only to save their wealth to profit themselves handsomely from this current “gloomy” crisis that is only worsening behind the scenes. There are many ways to survive, protect, and grow one’s financial position in this prolonged economic downturn.
The end of the Great “Keynesian” Experiment is upon us. Follow my lead as we navigate through the various financial markets using cycle price forecasting, technical analysis, my secret pre-market price spike intraday trend indicator for accurate swing trades and long term ETF investment positions. Copy what I do in both of my portfolios – Active Trading & Long Term Investing at www.TheGoldAndOilGuy.com
Chris Vermeulen
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The ‘blockchain’ technology, the very basis on which the bitcoins were created, is likely to become the backbone of the future digitization of money. The importance of the technology was asserted in the 16th Annual International Conference on Policy Challenges for the Financial Sector; a three-day convention which was held on June 1st through June 3rd in Washington, D.C.
The conference was held under the tutelage of the FED, the World Bank, and the International Monetary Fund.
It was attended by representatives of the major Central Banks, across the world. The subject for this year was ‘fintech’ and the first day was dedicated to studying the ‘blockchain’ technology which is the framework on which the popular digital currency bitcoin has been built.
FED Chairwoman Janet Yellen was the introductory speaker and she said that, “central bankers don’t normally like the word “disruption, but it’s not something to fear.
Technology has played a role in solving problems in the financial system in the past, and she encouraged her fellow bankers to learn everything they can about this new technology”, reports the Wall Street Journal, from comments relayed by Perianne Boring, the president of the Chamber of Digital Commerce.
“This truly shows the technology has reached the highest levels of society and government,” Ms. Boring said.
What is ‘blockchain’?
Simply put, a blockchain is a digital ledger of transactions that have been executed. New data continues to be added in a linear, chronological order through the completed blocks of data which are shared among the computers on the network.
Participants on the network use cryptography to edit the ledger online without the involvement of a central clearing authority. This ledger contains all the data of transactions from the start of the first block to the latest block.
Advantages of the ‘blockchain’:
As there is no necessity of a centralized authority to oversee the transactions, it creates a transparent, simple and fast transaction environment. As the data is available to all of the members, and any modification requires the permission of the majority of the members, it is better equipped to handle the onslaught of cybercrimes.
As no one can bypass the rules, the members can be assured that no single authority can deviate from the protocols. Due to direct transactions between two parties, transaction costs will be negligible.
The interbank transactions, which currently take days, can now be cleared in a matter of minutes, 24/7 and without the restrictions on working hours.
“Soon, the phrase ‘cross-border payment’ will make about as much sense as ‘cross-border email’,” said Mr. Adam Ludwin, co-founder and Chief Executive of the ‘blockchain’-focused startup Chain, during his keynote address.
Changes are needed to adapt it for the financial system:
The technology which is used in ‘bitcoins’ is unsuitable to be used directly in the various types of transactions like commercial papers, corporate bonds, U.S. Treasuries, etc., as these are issued for various business or policy purposes but there is already a new digital currency working with many of the top banks already which I mention later in this article.
Hence, a new more advanced and complicated system needs to be generated on the same ‘blockchain’ principle which can duplicate the ease of the use of current assets in a newly digitized model.
Challenges to adapting to ‘blockchain’ within the existing financial system:
It is unlikely that any government will be willing to part with their powers of which they control most of the monetary and fiscal decisions either directly or indirectly. Although the technology has enough security measures that are in place, the theft that occurred at Mt. Gox, which handled around 70% of all ‘bitcoin’ transactions, until 2013, reveals its’ vulnerability.
The ‘bitcoin’ is a small asset class with only a small quantity of bitcoins in circulation as compared to the trillions of transactions that take place daily, around the world. The computing power needed to handle such vast transactions is humongous. Such a setup requires billions of dollars, in investments, which may not be feasible to many.
Nonetheless, there are a number of entrepreneurs like Todd McDonald, co-founder and Head of Strategy at R3CEV LLC, a consortium of more than 40 financial institutions that are working towards the application of distributed ledger technologies to global financial markets.
“We can monitor compliance in real-time. We can answer questions about collateral ownership and hypothecation that were at root in the run on the system in 2007,” said Mr. Ludwin.
ARTICLE:The institutional investors are recognizing this outcome,
hence, they are the largest group of Bitcoin buyers.
Conclusion:
The days of cash are numbered and will soon be a mere memory! The revolution in ‘blockchain’ technology has reached the doors of the FED and it is now only a matter of time before the ‘greenback’ is phased out by the general public.
The reason I have started to cover bitcoin and digital currencies (Alt Coins) is because I believe they will become main stream much sooner than you think. In fact, there are already hundreds of new digital currencies available, though many are not and will not become key currencies.
I am watching, tracking and analysing many different digital currencies based on different metrics: how many online communities are focused on various alt coins, which ones have the most search engine searches, growth in market cap, have strong price charts, and which ones are focusing on working with large banks like the one call Ripple.
This new asset class is definitely disruptive, but I believe digital currencies add diversification not found anywhere else in the financial markets. They are a speculative play, safe haven during next financial crisis, and allows many people around the world to transfer money without being tracked and to possibly avoid taxes for those who want to side step government. Either way, more people and companies are accepting digital currencies and the demand and value they offer will eventually be priced into each each currency.
I have learning and slowly identifying some exciting opportunities in this new asset class which I feel everyone should some exposure to in their portfolios. Soon I will unveil some of my top currencies and where to buy and store them – Stay Tuned!
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Investor optimism in stocks is becoming more widespread. Last week’s NAAIM Exposure Index rose to 101, which is the highest level since December of 2013. The trading sentiment composite has moved to a “Sell Signal” and last week saw an 11 on the VIX. Excessive optimism is universal.
We are entering an interesting time of the year for investors. Is this stock market going to break out to the upside and rally to further new highs, or will this latest lull be followed by a painful reversal of fortune? Historically, the August/September timeframe is the “Danger Zone” for the stock market.
Investors are driven by two emotions: FEAR and GREED. Too much fear can sink stocks well below where they should be, whereas when investors become greedy, they can bid up stock prices too high.
“Goldman Turns Outright Bearish: Says to “Sell” Stocks Over Next 3 Months” – source: ZeroHedge.com
Mr. Stan Druckenmiller recommended that investors sell their equity holdings, “The bull market is exhausting itself. A major factor has been the Federal Reserve’s easy money policy which has resulted in reckless corporate behavior.”
The US stock market has skyrocketed towards record highs after encountering troubles earlier this year. Chinese markets have stabilized. I still remain skeptical of the Chinese economy, which has crashed. The fallout from any unwinding of Chinese investments will most likely have global implications.
Is The Rally In The US Dollar Over?
The release of the weak GDP number last Friday, July 29th, 2016, caused a significant drop in the dollar. I do not believe investors will look at the dollar as a safe haven any longer. They flocked to the dollar because they thought that the FED would raise interest rates later this year, thus producing a stronger dollar. After seeing Friday’s numbers, the chance of that happening is near zero.
As I had stated last week, the FED would not raise interest rates before the U.S. presidential election. Instead, the FED would do everything possible to be accommodating so as to make sure that the economy and stock markets exhibit signs of strength while entering into the election. The FED announcement last week reflected precisely that. There would be no change, nor increase, in short-term interest rates. On that news, the dollar fell hard, and we were short the dollar with an inverse ETF, UDN, and, consequently, made a very quick profit for the sharp drop in the dollar.
My longer-term chart for the dollar is very bearish. With the dollar near 97 Right now, there is a long-term pattern that projects a move down to the 75 level sometime next year.
A big decline for the dollar does not bode well for interest rates or the economy. So, with the dollar about to begin a major decline, gold and silver will be a very nice place to be invested.
Friday’s trading action was all about the GDP numbers. They were horrible! The data showed that the US economy only grew at a disappointing rate of 1.2% within the second quarter. This combined with a downward revision to the first three months of the year to produce an average growth rate of just 1 percent.
Wall Street expected a 2.6% increase. Therefore, you have to wonder about what the FED was saying earlier in the week when they expressed confidence in the economy. The economy continues to contract and is not growing as the government would have you believe. With interest rates near zero, we should be growing, but we are NOT. The economic numbers have failed miserably. While the GDP growth remains “anemic”, there will be no wage increases or many new jobs created.
I figure the SPX is due for a retracement/correction to start within the next 10 trading days. Many things like sentiment, put/call ratio, volatility index and recent strength in safe-haven assets like the price of gold, indicate smart money is rotating out of stocks and into defensive positions as of this writing. Meanwhile, the average market participant is becoming overly bullish on stocks and buying at new all-time highs.
We have a couple new ETF trades that should trigger this week, which might post explosive moves that could last five weeks in length.
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The Gallup Poll has released an Economic Confidence Index which reflects the sentiment of Americans, as it pertains to the economy.
As the stock market makes new record highs and the housing “bubble” market soars, one would expect that the “average” American would be smiling from ear to ear. However, the chart below appears to present nothing but gloom and doom. The Gallup Polls results are dumbfounding the American public as to why this divergence has occurred. I feel we have touched upon a few points as to why this is occurring.
First off, half of all Americans do not even own one stock. Secondly, there are many U.S. companies making large profits overseas. That may be positive for the company but that does not necessarily translate into a better financial position for mainstream Americans.
A survey was recently released showing that 62 percent of Americans do not even have $1000.00 in their savings accounts. Most Americans are only one small emergency expense away from being on the streets. What this means is that many will simply rely on credit cards, friends and/or family for their funding should a financial emergency arise. Is this meant to be our economic recovery?
How much do Americans save?
Housing values, which are being “artificially” inflated, only prevent Americans from purchasing their ‘dream homes’, as is reflected in low homeownership rates.
The housing market is once again too expensive for most American families to afford. During the last housing “bubble”, many Americans were able to partake in the mania and enjoy equity gains although they were fleeting.
This time around, most of the gains are going to investors and large institutional buyers that have crowded out mainstream America. This is a first in history to occur, at least on this large of a scale. The homeownership rate is the lowest in a generation as many young Americans are saddled with unsurmountable student loans and consequently forced to return to living at home.
Inflated home prices coupled with decreasing incomes, provide a recipe for disaster! Total wealth, in the U.S., is at a record high level, once again. Consequently, most of the gains are in the hands of a very few.
Americans are angry with the “establishment” and are frustrated with their economic ‘uncertainty’
The stock market is fully “decoupled” as to how good Americans are doing, overall.
The SPX is up a stunning 220% since the lows that were reached in 2009 and US economic confidence index shows more people simply do not trust the economic numbers and media.
Concluding Thoughts:
In short, I continue to warn about a down turn in both the economy and stock market. The markets continue to mature and the leading indicators point to a sharp correction in the financial systems I the coming months.
Safe haven investments have rocketed higher like bonds, gold, silver, mining stocks as smart money positioned its self in preparation for a crisis. As I have mentioned many times already, is just going to take one bad event or piece of data to cause the tipping point for the market. The question is when and what will it be?
Just like the 2008 bear market in stocks and financial down turn, this will be no different in terms of what will happen, just like every previous bear market/financial down turn before that. Stock prices will fall, people will lose their jobs, companies go bankrupt, housing defaults increase, personal spending comes to a grinding halt.
When it comes to our investment and trading capital, you can either ride the financial rollercoaster and do nothing, move to cash with some safe haven investments like bonds/precious metals, or bet against the US economy and watch your net worth reach new highs during a time when everyone you know is losing money, jobs and confidence.
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