Timing & trends
Here are today’s videos:
Gold Fibonacci Lines, MACD, & Hedging Tactics Charts
HUI MACD Histograms Analysis Chart
T-Bond Yield Weighs On Gold Chart
Thanks,
Morris
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“The long term versus the short term argument is one used by losers.”
-Larry Adler
There is a lifecycle of a trend. And breaking it down into five stages might look something like this:
Stage 1: Accumulation
Stage 2: Denial
Stage 3: Conviction
Stage 4: Doubt
Stage 5: Overshoot
Using the S&P 500, I think we may be nearing Stage 4: Doubt …
But is there anything else to suggest Stage 3: Conviction is coming to an end?
Yes. I would argue there is a litany of reasons.
A trend’s lifecycle certinly doesn’t have to break down into five nice, neat stages. But based on what we’ve seen from this trend since 2009, it appears as though we’re nearing the start of Stage 4: Doubt. (I’ve drawn in an alternate scenario in red that suggests what coming action would look like if we’re actually already in Stage 5: Overshoot. But that doesn’t appear as likely at this point.)
But is there anything else to suggest Stage 3: Conviction is coming to an end?
Yes. I would argue there is a litany of reasons. In fact, we’re preparing this long list of reasons for members of our Global Investor trading newsletter. And it will be published later today. If you’re interested in staying plugged in to what’s driving markets, and if you’re interested in explicit ETF trading ideas, then I suggest you snag yourself an early Christmas present.
Anyway, the reasons span from deflation in Europe to contrarian signals in key sentiment guages. But because I’m a nice guy, I’ll give you reason #1 right now …
Reason #1: An ENDING expanding diagonal showing up on Dow Industrials
The trend described above is going on five years running. And as I said, the lifecycle of a trend doesn’t always breakdown into five tidy stages. So let’s zoom in a bit for confirmation that the technical setup may be turning bearish for US equity averages.
I point you to the Dow Industrials:
A review of Elliott Wave Principle by Frost & Prechter reminded me of diagonals, particularly ending expanding diagonals. That’s what I’ve drawn in on the chart above. It suggests the Dow has exhausted its upside and is due for a significant retracement.
That’s all for now.
If you want the rest of the reasons we’re nearing Stage 4: Doubt, then I encourage you to have your mind blown with a Global Investor subscription. [And don’t forget:ClearPoint can easily and efficiently execute any of our trading newsletters.]
Have a great weekend.
-JR Crooks
90yr Old Richard Russell: “Imprint today’s stock market action firmly in your mind because I believe we are going to see an explosion in stocks beyond anything ever seen before. Something has taken over the minds of both retail investors and institutional managers.
In a sentence, the psychology now is — “you’re a pathetic sap if you’re not in this stock market.” The Fed is fighting a semi-depression, and Janet Yellen, if anything, is ready to throw more logs on the fire.
In today’s New York Times, Paul Krugman notes that Larry Summers calls the current depressed and deflationary economy “the new normal.” The only thing that will keep it from sinking into genuine depression is occasional bouts of bubbles. And a bubble in stocks we are now in.
Most investors who are in this market are convinced that they can exit the market in a timely fashion if or when this world bull market breathes it’s last. Lucky is the stout investor who does not need this market. Warren Buffett reveals that he bought over three billion dollars worth of Exxon. What the hell, If Exxon goes broke it will be the end of capitalism in the US. Good thinking, Warren.
But remember there’s only one asset class that can’t go broke, and it’s gold.
………………………………….
Like some unstoppable medieval monster, the Dow continues to march due North, confirmed by the Transports. There’s no return for investors in cash, there’s no return in bonds, which leaves the best blue-chip stocks the only profitable game in town.
And when does it end? That’s the other guessing game in town. Hedge and pension fund managers are afraid to get off the train too soon. If they leave the game, where will they go? The only choice — stay with the big blue-chip industrials, and play the same game everybody else is playing.
In the meantime, asset prices are sky-rocketing. At the art auctions, pieces are selling for record prices. Money has become a fantasy item. Everything is appraised in billions of dollars. Madness reigns as the Fed spews out a trillion dollars in new money annually.
Ironically, gold lags behind. But when gold finally catches on, it will make up for lost time. Meanwhile the Government churns out happy and optimistic statistics. We may well be heading into the greatest bull market climax in recorded history.
… I’ve been writing Dow Theory Letters ever since 1958 with never skipping a mailing or taking a vacation.
But now as I’m approaching the age of 90, I find that I have to conserve my ebbing energy … I’m going to reveal to you Emmet Fox’s marvelous “Golden Key.” If you have any kind of problem, a court case, a marital fight or a financial bind, this is the great “Golden Key” that will solve all your problems.
When the problem presents itself, turn away from it, put it out of your mind completely and think of something that pertains to God, such as God is love or God is truth, but you must keep the problem completely out of mind. This is the simple Golden Key which the great Emmet Fox recommends. It may sound too absurdly simple, it may sound like voodoo, but before you sneer at it and ignore it, first try it. I’ve used it many times and I can tell you that it works. The concept of the Golden Key is probably worth years of subscriptions to Dow Theory Letters. Use the Golden Key.
Late Notes — More of the same. The Dow pushing up towards a third phase climax and gold continuing to creep out of its huge base. If you have stocks or gold, your job now is to sit and watch. I believe a historic climax is not far away … History will be made over the coming 12 months.”
Kingworld News Note: Russell concluded with this astonishing and important quote from Janet Yellen which reveals the true reality of the Fed and its secretive nature:
“In 1977, when I started my first job at the Federal Reserve Board as a staff economist in the Division of International Finance, it was an article of faith in central banking that secrecy about monetary policy decisions was the best policy: Central banks, as a rule, did not discuss these decisions, let alone their future policy intentions.” Janet Yellen
To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.
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I’m becoming increasingly concerned by emails that I’m receiving from amateur investors. These emails tout a fabulous future for the American stock market. Many stock buybacks have occurred, but actual earnings growth for American companies is highly questionable.
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“I am very cautious on equities today. This market could easily have a big drop…. Very simplistically put, a lot of the earnings are a mirage.” – Reuters News, November 18, 2013.
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That’s legendary activist investor Carl Icahn, speaking at the Reuters Global Investment Outlook Summit.
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He doesn’t sound very enthusiastic, and nor do other powerful money managers who control enormous amounts of risk capital. “U.S. stocks are grossly overpriced, according to asset management firm Grantham Mayo Van Otterloo (GMO) & Company, which estimates fair value for the S&P 500 Index at 1,100 – or almost 40 percent below current levels. In a quarterly letter published on Monday, Ben Inker, co-head of global asset allocation at GMO said the expected rate of return on the stock market index is minus 1.3 percent per year, adjusted for inflation, for the next seven years.” – CNBC News, November 19, 2013.
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If gigantic funds like GMO (with over $100 billion under management) see the American stock market as “grossly overpriced”, while amateur investors are touting the market as a “fabulous bargain, with gains that are here to stay”, I would urge gold community investors to exerciseextreme caution.
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Investors who are selling gold stocks now, and buying general stock market equities on American stock markets, may soon find they become part of one of the biggest “out of the fry pan and into the fire” horror shows in history.
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I expect the Fed to taper their quantitative easing (QE) program in 2014, and perhaps in December of this year. If the Fed tapers in December, many institutional money managers are likely to quickly move a lot of capital from the stock market to bonds.
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If there is no taper in 2014, the reason is likely to be that the American stock market has crashed. If the stock market crashes, it’s possible that the Fed increases QE.
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The bottom line is that whether the Fed increases QE, tapers, or does nothing, the American stock market is at great risk, because value-oriented fund managers are pulling out. Stocks that were held by the strongest hands are now held by what appear to be very weak hands.
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It’s possible to make money in an asset class with “momentum investing” (price chasing), but it’s extremely difficult, and arguably impossible, to keep that money. Most of the world’s greatest investors are value-oriented.
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Gold stock investors who want “action” should probably look at the Chinese stock market, which is far below its all-time highs.
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“China has pledged to make the most sweeping changes to the economy and the country’s social fabric in nearly three decades with a 60-point reform plan that may start showing results within weeks.” – China Daily News, November 18, 2013.
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Please click here now. You are viewing a daily chart for FXI-NYSE. I call it the “Chinese Dow”. Institutions are buying Chinese stocks aggressively, and volume is enormous.
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Please click here now. That’s a longer term look at FXI, using the weekly chart. Technically, it’s on the verge of a major breakout from a symmetrical triangle formation.
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The Chinese stock market is now about 37% below its 2007 highs. Reforms there should increase urbanization, and increase the standard of living for most Chinese citizens.
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As Chinese citizens get more disposable income, including capital gains from the stock market, they are likely to dramatically increase the amount of gold jewellery they buy. That’s very good news for gold mining companies.
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Janet Yellen recently told US congress that she doesn’t know much about gold, except that people buy it when they are afraid. Please click here now. Does this Chinese lady look like she’s afraid? Most of the gold that is mined by Western mining companies is bought in the form of jewellery, by the citizens of China and India. They don’t buy it because they are afraid. With all due respect to Janet Yellen, I think she may need to ask the Bombay Bullion Association for a pamphlet on the basics of gold market supply and demand.
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On that note, please click here now. I showed you this table of gold demand about a week ago, courtesy of usdebtclock.org. It shows that whether gold buyers are afraid or ecstatic when they buy gold really doesn’t matter. What matters is how much gold they buy. Unfortunately, you can see that compared to China and India, Americans don’t buy very much gold at all, even when they are afraid.
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Please click here now. That’s a freshly updated table of gold demand. You can see that according to the usdebtclock.org people, American demand has fallen over the past week. In contrast, Chinese and Indian jewellery demand continues to grow.
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American economic events like the jobs report and QE announcements are powerful short term drivers of the gold price. In the big picture, it is the enormous growth in demand for gold jewellery that will drive the gold price vastly higher. Ironically, the American super-crisis caused terrified Western investors to buy gold and gold stocks, but it will be the ecstatic Chindian (Chinese and Indian) jewellery buyer that makes them richer.
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Please click here now. You are viewing the daily T-bond chart. In the short term, “where goes the T-bond, so goes gold”. Look at the stokeillator oscillator at the bottom of the chart. It looks spectacular, and there’s an upside breakout in play from the thin black supply line. I realize that many analysts are talking about a coming crash in the gold market, but powerful value investors are pulling a lot of money out of the stock market and pouring it into bonds. That’s bullish for gold.
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Please click here now. That’s the daily gold chart. Gold feels “soft” right now, because the Indian government has imposed draconian gold import rules. Given the fact that Indian imports have dropped from about 100 tons a month to 20 tons a month, gold is remarkably strong. From a technical standpoint, gold is “hanging around” the thick green line of a large symmetrical triangle, but the action in the bond market seems to be supporting gold nicely. The stokeillator suggests a substantial rally should begin soon.
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What about silver? Please click here now. Some silver bears see a head and shoulders top pattern in play. I think it’s more of a shape than an actual price pattern, and Indian silver demand has surged. Silver can’t replace gold in India, but it can serve as a kind of “stop gap” measure. A move to $23.10 should ignite bullish reports from technical analysts at major banks.
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Please click here now. You are viewing the daily chart for GDX. The stokeillator looks decent. I haven’t drawn any trend lines on this chart, because I think this is a time where they don’t work. When a major asset class makes a bottom, huge numbers of analysts struggle to identify the turning point. Whipsaw price action can be very frustrating to both bulls and bears. Rather than focusing on QE “taper caper” action, my suggestion is to contact the directors of mining companies and ask them what they are doing to prepare for the accelerating growth of the Chindian middle class. Or should I say, the growth of the Chindian gold buyer class!
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Cheers
St
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Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:
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The gold situation is something that has got everyone rather keen and this is how it has been for quite some time. If you’re to take a closer look at the current scenario, then you’ll realize that gold isn’t really glittering as much as it did last week. This precious metal is known to hog the limelight and that too for obvious reasons. Even a week ago, gold actually rallied sharply in the wake of the decision by the Federal Reserve policy-makers who wish to maintain the stimulus program in an intact form and it has actually helped support the economy for the whole of last year.
However, the gains were short lived as far as Tuesday morning is concerned. Gold trading stood at just above 1,315 dollars an ounce which is down from the recent high of 1,375.30 dollars an ounce. This is obviously a major dent and yes it hurts investors.
Actually the gold market and its volatility serves as a constant reminder of how odd an asset gold is. It’s a known fact that gold is one of those things that people have turned to since the beginning of time itself. Undoubtedly there are numerous advantages when it comes to gold. It’s not just so very portable due to the fact that it’s lightweight, but also the fact that it never spoils over time. The best part supposedly is the fact that you won’t even see it getting tarnished.
No matter what, it still remains a fact this 2013 that gold is absolutely unlike any other commodity in which people can go ahead and invest. Actually gold is a pretty tricky thing to analyze in terms of wealth. This is because of the simple fact that gold doesn’t serve any so-called “fundamental” purpose. Now it’s true that gold is used to craft jewelry items, but fact remains that it’s not a fundamental one for jewelry is simply a decorative form of gold coins and bars. The purpose served by jewelry is also the same – that of preserving wealth.
All of this put together makes gold rather tricky to analyze in terms of an investment deal. There are quite a few noted investors who’re of the opinion that gold isn’t even an investment like stocks and bonds for that matter. Now then it all boils down to one simple question that why should you own gold at all? More than this being a fact, it has become an emotion of sorts. In fact, even with time having reached the 2013 year, the gold investmentbit is still associated with the emotional connect and how exactly one feels about this entire thing.
Now, one of the major reasons that investors took to gold so ardently last week was essentially because of the fact that most were of the view that the US dollar was likely to weaken against other major currencies provided the interest remained low. Inflation is definitely another factor that fuelled the demand for gold.
Lorena is a professional writer. She has been associated with some leading related websites as an author. To know more about this page please visit.
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