I’ve been receiving so many email questions of late, about almost every market, that I decided to devote this week’s column to answering the most important ones. So here we go. Do note that the questions have been edited for clarity and brevity …

Q: Rumors abound that the Chinese yuan will soon be given reserve status by the World Bank or IMF. That might occur as early as October. It is also said that the U.S. dollar will crash as a result. Your thoughts, Larry?

A: Will the yuan gain reserve status? Absolutely. Will it crash the dollar? Absolutely NOT.

Look, don’t buy into the garbage about the dollar crashing any time soon. It’s not going to happen. Period.

There are several reasons why. Chief among them:

A. There is too much dollar-denominated debt out there – at least $9 TRILLION.  As that debt gets paid off, however slowly, it’s dollar bullish. And …

B. No other single currency, even the euro, comes close to the amount of dollars in circulation around the world.

Total global currency reserves are roughly 62 percent dollar-based.

For the dollar to crash, you would need the yuan or some other currency to replace those dollars held all over the world, overnight. That’s not going to happen so easily.

More simply put, there’s not enough currency in the world to topple the U.S. dollar. There are not enough euros, yen, pounds, or Swiss francs, let alone yuan.

Bottom line: The notion that the dollar is going to crash come October, or anytime soon, is nothing but bad analysis and/or fear-mongering.

Q: Why are you so bullish on Asia, China, while so many analysts are bearish?

A: Simple answer: I live in Asia. Most analysts who write about Asia have never put their feet on the ground here, or if they have, it’s for a few days to attend a conference.

On the other hand, I get out and mix with the people, with farmers, shop owners, the locals.

Do that and you see an entirely different Asia. You see one that is booming with desire, booming with wants and needs, booming with economic growth.

Moreover, you have to understand where these economies are truly coming from, and how they are managed. It’s all very different from what you know about the West, and very different from the analysts who never come here or spend a few days here at most.

Nationalism in Asia is extremely high, as high as some 80 percent approval of the current government in China, just as an example.

So when governments in Asia steer their economies in a certain direction, the people approve and follow. That too is obviously very different from the West.

But most of all, as I pointed out in last week’s column, is the fact that three out of every five people in the world live in Asia.

And they are all pretty much at the same point as the United States was in the late 1800s: Experiencing industrial and service sector revolutions and the birth of free market economies.

One that is 4 billion people strong. My advice: Don’t buck the trend in Asia. You’ll get run over by eight billion feet.

Q: Is gold still on track for lower lows? Silver?

A: Unequivocally, YES. Based on all my models, there is no question, no doubt whatsoever, that gold is heading below $1,000 and silver to roughly $12.50.

Per my column of two weeks ago, the short-term timing sell signal I wrote of is also on track, as gold plunged last week from roughly $1,209 to about $1,182 — a pretty significant $27 drop.

There’s one last chance for a bounce, but unless gold can get above $1,210 this week, everything remains on target for a June low, down near or below $1,000.

If by some miracle gold moves back above $1,210, the low will be postponed until October.

Either way, the precious metals remain in bear markets.

Q: What’s your latest on the U.S stock markets?

A: Long-term, still extremely bullish. Short- and intermediate-term, expecting at best sideways action, at worst, a decline back to test longer-term support levels, which now stand at roughly 14,300 in the Dow Industrials.

Keep in mind that no matter what you hear, no matter what kind of foolish analysis about earnings, etc. that most analysts espouse …

The U.S. equity markets remain in long-term bull markets because …

A. They are the world’s largest, most liquid — making them magnets to attract capital from weak economies such as Europe … from crisis hot spots around the globe like again, Europe, and the Middle East … and other regions of the world where the cycles of war are now ramping up.

And …

B. They are the world’s strongest bastion of capitalism. That means as governments of the west, namely the U.S. and Europe, become more authoritarian, struggling to survive, capital will continue to pour into U.S. equities.

Equities are non-confiscatible, offer private sector opportunities to build capital, and are symbolic of true capitalism.

Those attributes are going to become even more important in the months and years ahead, again, as the cycles of war ramp ever higher, and as investors all over the world begin to realize …

That it is the governments of Europe and the United States that are really the sectors that are in trouble, and that trillions of dollars will soon begin to pour out of sovereign debt …

And flood into our stock markets even more.

Lastly, some parting comments for today: For all of the above questions as well as those I have not been able to address in this column:

1. Don’t buy into all the garbage out there in the financial media. 

If the medical profession had as much mis-information, garbage and fear-mongering out there as the financial world does, we’d all be dead by now.

2. Think out of the box. Question everything you ever felt you knew about the markets. Everything you read or are told, even by me.

Think independently and you will not only survive any financial crisis that comes your way, you will also prosper.

3. Build your cash, your ammo, while the markets are relatively quiet, like they are now. 

That way, you can deploy your capital at the right times to capture the truly life-changing profit opportunities that are soon coming your way.

Best wishes, as always …

Larry

– See more at: http://www.swingtradingdaily.com/2015/04/29/important-qa-with-larry/#sthash.YIIDxsTW.dpuf

I am not one of those people who believe that if the Fed is dramatically easing, you simply must own equities. I must admit, charts like the one below (source: Bloomberg), showing the S&P versus the monetary base, seem awfully persuasive.

But there are plenty of counter-examples. The easiest one is the 1970s, shown below (source: FRED, Bloomberg). Not only did stocks not rise on the geyser of liquidity – M2 growth averaged 9.6% per annum for the entire decade – but the real value of stocks was utterly crushed as the nominal price barely moved and inflation eroded the value of the currency.

If you do believe that the Fed’s loose reins are the main reason for equities’ great run over the last few years, then you might be concerned that the end of the Fed’s QE could spell trouble for stocks. For the monetary base is flattening out, as it has each of the prior times QE has been stopped (or, as it turns out, paused).

But for you bulls, I have happy news. The monetary base is not the right metric to be watching in this case. Indeed, it isn’t the right metric to be watching in virtually any case. The Fed’s balance sheet and the monetary base both consist significantly of sterile reserves. These reserves affect nothing, except (perhaps) the future money supply. But they affect nothing currently. The vast majority of this monetary base is as inert as if it was actually money sitting in an unopened crate in a bank vault.

What does matter liquidity-wise is transactional balances, such as M2. And as I have long pointed out, the end of QE does nothing to slow the growth of M2. There are plenty of reserves to support continued rapid growth of M2, which is still growing at 6% – roughly where it has been for the last 2.5 years. And those haven’t been a particularly bad couple of years for stocks.

So, if liquidity is the only story that matters, then the picture below of M2 versus stocks (source: Bloomberg) is more soothing to bulls.

Again, I think this is too simplistic. If ample liquidity is good today, why wasn’t it good back in the 1970s? You will say “it isn’t that simple.” And that’s exactly my point. It can’t be as easy as buying stocks because the Fed is adding liquidity. I believe one big difference is the presence of financial media transmitted to the mass affluent, and the fact that there is tremendous confidence in the Fed to arrest downward momentum in securities markets.

What central bankers have done to the general economy has not been successful. But, if you are one of the mass affluent, you may have a view of monetary policy as nearly omnipotent in terms of its effect on securities and on certain real assets such as residential real estate. What is different this time? The cult.

I am no equity bull. But if you are, because of the following wind the Fed has been providing, then the good news is: nothing important has changed.

You can follow me @inflation_guy!

Enduring Investments is a registered investment adviser that specializes in solving inflation-related problems. Fill out the contact form at http://www.EnduringInvestments.com/contact and we will send you our latest Quarterly Inflation Outlook. And if you make sure to put your physical mailing address in the “comment” section of the contact form, we will also send you a copy of Michael Ashton’s book “Maestro, My Ass!”

Question: Do price waves answer the Continuation or Reversal question?

More from RTT Tv

Answer: Yes when you understand Wyckoff logic, more so if you understand Richard Wyckoff law off ‘Effort vs Results’ and how it supports the Richard Wyckoff law of ‘Supply and Demand’.

AMZN price chart with waves colored (the daily price waves are the same formula as PnF wave/bar calculation below, allows sync of price action).

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Auto PnF chart from our Swing Pop out charts.

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NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net

Investing Quote…

“Success in trading means excess of profits over losses. If anyone tells you they can almost be invariably successful, put him down as trying to impose on your credulity.” ~ Richard D Wyckoff

“If past history was all there was to the game, the richest people would be librarians.” ~ Warren Buffett

Most Read this week:

Legendary trader Paul Tudor Jones: Prepare to Make Money When the US Stock Bubble Pops

A boom for American defense contractors:

“As the Middle East descends into proxy wars, sectarian conflicts and battles against terrorist networks, countries in the region that have stockpiled American military hardware are now actually using it and wanting more.” 

“Saudi Arabia spent more than $80 billion on weaponry last year — the most ever, and more than either France or Britain”

“Qatar, another gulf country with bulging coffers and a desire to assert its influence around the Middle East, is on a shopping spree.”

Dow Jones US Aerospace & Defense Index

….read the whole riveting article HERE