Archive for category: Gold Forecast

This analysis is by Mike Swanson as we share a similar outlook on the various markets. Last week we saw a nasty drop in the stock market following the BREXIT vote, but this week it has rebounded.

I am surprised by the size of the move up from the S&P 500 2000 area for sure and have gotten several emails asking me what I think of the US stock market now.

My view really hasn’t changed about the markets from where it was before the BREXIT vote.

I see the stock market as completely dead money for most people as it has been for well over a year while gold and silver are in new bull markets.

Yesterday silver had a big surge as it smashed through $19.00 an ounce.

Money is to be made in such moves!

Mining stocks have been the best performing sector of the market this year in the entire stock market.

Gold of course is up again in pre-market action.

In the past week gold cleared $1,300 an ounce.

Gold, silver, and mining stocks have totally broken away from the US stock market.

They are acting as safety trades for people who want to get out of stocks and bonds, but are also acting as pure momentum plays for people who want to invest at the start of new bull markets to grow their brokerage accounts.

Most American investors though are totally ignoring them as they remain fully invested in the US stock market too lethargic to make any changes and mesmerized by the up and down action and CNBC calls for massive gains to come.

But CNBC bubble bulls have been making such predictions for over a year while those fully invested in the US stock market are making no money.

To make meaningful money in a market you need that market to make a new high and then keep going higher, but the US stock market has not done that in a long time now.

It’s in a giant topping pattern.

Look at this.

The big high volume drop in the market that hit recently made me get worried about the stock market small fry who is fully invested in the market.

I see it as a bullet that hit the market much like the August and January drops did.

These hits damage the internals of the market and convince me that the topping pattern will lead to a collapse.

So a few days ago I told people that they should reduce their long exposure and do some serious selling.

And GET OFF MARGIN.

The market bounced though so no one is going to listen to any warnings.

Yet what is crazy is that there is money to be made going long silver and gold that these people simply won’t take advantage of.

A lot of exciting things are happening with gold and gold is quickly becoming the necessary investment to own in a portfolio and the safest thing to trade.

It is in fact stock market problems that is also making gold ownership a necessity.

Like you I have seen the boom of 1999 and the bust of 2008 and the wild moves of the past few months in the US stock market.

And I have seen the Federal Reserve take action to make the stock market go up.

In 2008 the Federal Reserve lowered rates to zero and in 2009 it began money printing operations called quantitative easing to force the stock market back up after it crashed.

And they did this in 2010 and 2012 in order to keep it up too.

In fact after they did it in 2012 the stock market went up for two years at a forty-five degree angle without ever pulling back.

Look at this chart and you can see what I mean.

The stock market had never traded like that before in it’s history.

It had never gone up like that for so long without a real correction before.

This was the impact of Federal Reserve manipulation through its money printing.

And as long as the stock market continued to go up like this people had fun, because it seemed like it was easy to make money in it.

But then in 2015 the stock market stalled out and the stairway to heaven came to an end and it has not made a new high ever since. It’s just wobbling. Oh it has big rallies after big drops, but all that is happening is people lose money than make it back and lose again.

You need real bull markets in which a market makes a new high and keeps going up for real for people to make good money.

So now all people are doing is watching the stock market make these big swings up and down as it goes nowhere leaving them feeling confused by the market.

The tough reality is that very few people are making any money in the stock market anymore and most people have no idea what to do with the market to make money now.

But most are not even sure that they know what is happening to the financial markets.
First you need to know that there are three things that have happened to make the stock market behave like this.

Financial markets move in bull and bear cycles.

I call them stages and you can tell what type of risks you are taking for what potential return by identifying what stage in a financial market you are in.

There are four stages to a financial market cycle in a stock or entire financial market. As you know you can have a bull market. Before a bull market starts though you usually have a stage one basing phase in which a market simply goes sideways and builds a base.

Then it breaks out and begins a full blown stage two bull market that typically lasts for several years. Then there is a stage three topping phase and then a stage four bear market.

I can quickly show you one important indicator to watch to identify the trend the market is in.

That’s the long-term 150-day moving average, which is simply a line plotted on a chart using the average price number of the past 150-days.

In a bull market this line slopes up on a chart and the price of the market tends to stay above it, so it acts as a nice price support level in a bull market to make for a good entry point timing mechanism.

In a bear market this line slopes down on a chart and the price of the market tends to stay below it and it acts as resistance.

The stock market was in a stage two advance way back in 2013 and 2014 and that was a long time ago.

But now the long-term moving averages are going sideways to down so the times have changed.

But the stock market did go up so much in that big bull market run that it became overvalued from a valuation standpoint.

In terms of the cyclically adjusted P/E ratio in fact it had only reached a valuation level like this three times in its prior history.

Those times were in 1929, 1999, and in 2007.

The simple fact of the matter is that the more highly valued a stock or market gets the more risky it becomes.

So the market is actually at risk of suffering from more stock market drops.
But this situation is now happening to stock markets all over the world and you have been seeing constant central bank interventions to try to manipulate the markets and prop them up.

But these moves are not all working anymore.

The stock market in China has crashed, despite government action there.

And in January the Japanese Central Bank announced a giant money printing operation to try to make their market go up.

But all it did was pop and dump.

Then just a few months ago the European Central Bank announced a giant money printing program of their own and the markets have done nothing over there.

Those markets have since gone done.

The problem is that such programs cannot create brand new giant bull markets at this stage of the market cycle.

But they do create big moves up that last weeks and sometimes months and so far have kept the US stock market afloat.

But the big swings up and down are confusing to most people and so in the end they do not make any money out of this, because it’s hard to catch a good wave that lasts.

So most people are just caught in this central bank money trap spinning their wheels not knowing what to do and taking more risks every day to make nothing.

The reality is the stock market is becoming a big mess.

But there is a solution to this problem.

This solution is to own gold.

And today gold is easy to own and trade in any brokerage account with exchange traded funds and you can buy mining stocks that mine gold for extra juice.

I am personally making a lot of money this year and a big reason why is because I am invested in gold and mining stocks.

I want you to get involved in these markets, but almost all of the emails I get are just from people bullish on the stock market who want it to go up for them and get angry when warned about the risks they are taking.

They are being lazy when if they took the time to get learn about gold and get involved in it they could be making money.

But it isn’t just the risk of losing money they face, but simply missing out on making money in real bull markets.

Let me make a big point.

A few years ago if you watched CNBC and Mad Money Cramer and the Fast Money boys like pony tail you would see them recommend momentum stocks that made new highs as buys.

Often those stocks would breakout of their highs keep going up.

They no longer do that.

So now they look for bottoms and “rebounds” in stocks to buy.

That is a very difficult way to make money.

This shows the difference in the market structure now.

You see the momentum of new highs and higher highs is now in gold, silver, and mining stocks.

So they are the place to be along with a few others…

 

Find out what to expect from the markets this summer for stocks, oil, gold and more importantly gold miners…

Gold has a clear presence to play out in this new world, which is now dominated by global economic uncertainty.  Gold’s importance in today’s environment was clearly visible during the massive rally at the beginning of the year, when all other asset classes were tanking.

What does this mean for gold going into 2017 and beyond?

READ FULL POST: CLICK HERE

This past Friday, June 3rd, 2016, The Bureau of Labor Statistics released their most recent report regarding new employment data and nonfarm payroll employment which indicates that during May of 2016, it was the smallest increase seen in 28 months.

During May of 2016, there were 144,592,000 payroll jobs within the US, which was up by 1.6 percent, or equivalent to 2.3 million jobs, from May of 2015 (These are all not-seasonally-adjusted numbers).

That represents the smallest year-over-year increase that has been reported since February of 2014, at which time payroll jobs increased by 1.57 percent. The largest year-over-year increase, in recent years, was reported during July of 2015, when it was up by 2.18 percent:

Since July of 2015, the general trend in growth has been down. This 1.6 percent remains well below where growth was during most of the 1990’s.

I am not fond of using the seasonally adjusted numbers, since they add an additional layer of ‘needless manipulation’. I do prefer to compare job growth, from the same time of year, over several years.

When I do this, I find that the job growth from April to May of 2016, was the lowest April-May growth total since 2009:

From April to May of 2016, there were 651,000 new jobs added, which is a significant drop from that same period of time, last year when 947,000 jobs had been added. Over the past decade, this current year of 2016, in this measure, beats out only 2008 and 2009, both of which were years of ‘economic decline’.  Therefore, May of 2016 was the weakest May on record, for job growth, in eight years.

The Secretary of Labor, Tom Perez attempted to blame everything on the Verizon strike. That is a nice “spin”, however, the strike does not explain the obvious ‘decline’ in the year-over-year numbers!  The strike might explain why the May numbers dropped off as much as they did, however, it cannot explain the ‘trend’. It is a bit of a stretch to blame this drop from April-May of 2015 to April-May of 2016 on the Verizon strike.

Mr. Perez, however, attempted some other, even less convincing, claims as well, stating that the U.S.’s insufficient mandates on paid family leave means that fewer women are entering the work force, and therefore pushing down the jobs totals. Is this IMPORTANT? The answer is NO!    These bad numbers merely reflect our current poor economic situation, today!

In any case, the overall trend should not be a big surprise, as it has always has been weak. It has been dependent on the FED and their low interest rates. In recent quarters, the FED has finally been backed into a corner and has become hawkish. Realizing that more rate cuts are unlikely to occur any time soon, the economy is not receiving the usual FED-manufactured stimulus which investors and companies have both become accustomed to. With the FED talking about the need to raise ‘rates’, who can be surprised that the “recovery” is nonexistent?

 

The financial news, of the past few weeks, had its cadre of regional FED Presidents attempting to sway markets into believing that the Central Bank was sure to ‘hike’ interest rates during this current month of June 2016.

The jobs report sent ‘shock waves’ throughout the entire financial system. The report printed a jobs number of just 38,000 new employees, which is the lowest single month since the height of the “Great Recession”.

What is even more ludicrous than this, is the fact that the unemployment rate fell to 4.7 percent seeing as 664,000 workers are no longer being counted and included, by the government, within the labor force.

The FED relies heavily on these ‘manipulated’ government jobs numbers, the idea of “data dependency” being used to determine when to ‘hike’ or ‘drop’ interest rates shows the incompetency of a body that supposedly employs hundreds of economists who are dedicated to discover the true state of the economy and of its’ economic data.  This in turn, should provide Americans with the reality that not only does the Central Bank have any idea what they are doing, but, more often than not their policy decisions are based on ‘incorrect’ and ‘outdated’ models which have only served to make matters worse, since the “Credit Crisis of 2008”.

The majority of jobs created were either part-time or low-wage service sector oriented.   You can bank on the fact that the FED is now more likely to lower ‘rates’ than they are to raise them, going forward!

 

Today, it is both unlikely and irrational for the FED to raise interest rates either now or in the near future, despite the Central Banks’ recent “moral suasion” on mass media, of a potential rate ‘hike’ occurring as early as this month or possibly next month. The FED continues to create policies in an attempt to protect the economy and stock markets through November of 2016 so as to “spin” the election in favor of Hillary Clinton.  This is due to the uncertainty from the presumptive Republican candidate, Donald Trump, who may force the Central Bank into ending its’ mission to fuel ‘stock and housing bubbles’.  I, myself, as well as many economists, are seeing the ‘Summer of 2016’ as a dangerous period of time where and when a financial, economic, or monetary ‘collapse’ could take place from any number of ‘flashpoints’.  The actions that are now taking place, in the equity markets, are an indication that these ‘fears’ may very well be arriving much sooner than most analysts expect.

 

  The economy is still performing ‘significantly’ below its’ potential:

The problem is that the FED, including other Central Banks, have waited too long and gone too far in their ‘zero interest rate’ policies and ‘quantitative easing’ programs.  With all of this nonsensical talk coming from the FED, the debt default levels, especially for credit default swaps on the 10-year Treasury are NOW at their highest level since the FED raised rates by a quarter of a point, back in December of 2015.

The probability of a U.S. default of its’ debt has hit its’ highest point since the FED has hiked rates in December of 2015.  This is indicated by the recent dynamics in credit-default swap (CDS) agreements.  The expectations that the Central Bank may raise borrowing costs still further, in the coming months, will set off this ‘time bomb’. Since the FED has turned increasingly hawkish of their policy outlook since late April 2016, market volatility has increased, with stocks swinging between gains and losses and U.S. Treasuries sliding along slide with the dollar. “Systemic risks” stemming from the CDS transactions are rising amidst the unfavorable global financial environment.  This is not only true in the U.S., but its’ counterparts are also subject to greater turmoil in the coming months, as possible FED hikes, “Brexit” concerns, U.S. elections and faltering global growth are all interconnected factors thereby contributing to the recent spikes in U.S. CDS spreads.

If things follow the FED script, I imagine that next months’ payrolls will exceed ‘tapered down’ expectations and consequently, there will be an upward revision of Mays’ numbers.  Will this continue sending the market into exuberance?  NO!  However, the FED officials will then restart the rate ‘hike’ talks with just enough offsetting uncertainties to mislead everyone while trying to keep the market ‘bubble’ from ‘bursting’.

The financial system is like a giant game of poker with all the major player holding a seven and two off suite (worst hand you can have), yet they are all-in with their chips (money & policies) trying to bluff their way out of this mess.

Things are going to be very crazy over the next 6-12 months and beyond, but until the US large cap stocks breakdown and start a bear market expect tough trading and investing.

Find out what I think the market is doing and where its headed with my ETF Trade Alerts: www.TheGoldAndOilGuy.com

Chris Vermeulen