Timing & trends
Stewart Thomson’s 25 point summary of what is happening in the US Dollar, the US Stock market, Central Banks & Interest Rates, Treasury Bonds, Gold Stocks Gold.
Most importantly if Piyush Goyal should take charge of the Indian finance ministry on a permanent basis “he will likely be the catalyst that launches a massive and sustained rise in Indian gold demand. Demand that should be enough to drive gold in an Elliott C wave advance to at least $1650, and probably $2000!” – R. Zurrer for Money Talks
June 18, 2018
1. The dollar and the US stock market may be starting their next major legs down today. Please click here now. Double-click to enlarge this ominous US dollar versus Japanese yen chart.
2. Central banks around the world are ramping up their tightening. Back in 2013-2014 when I predicted quantitative tightening and relentless rate hikes were imminent, almost nobody believed me.
3. I promised that this tightening cycle would be like no other because of the enormous size of the QE money balls in Japan, Europe, and America. The tightening action is moving the money balls out of the deflationary government bonds asset class and into the inflationary fractional reserve banking system.
4. Powell just raised rates again and is poised to launch another increase in quantitative tightening. He’s also beginning to change the spread between the Fed funds rate and the excess reserves rate that banks get paid to keep money at the Fed. Going forward, I expect him to put much more pressure on banks to move money out of the Fed. This is highly inflationary action.
5. Please click here now. Double-click to enlarge. The US stock market looks like a technical train wreck.
6. For the stock market, one mainstream money manager just referred to the global tightening cycle in play as akin to a sports team losing their goalie!
7. It’s obvious that the stock market is doomed. Powell appears determined to push through another rate hike in either August or September. Maybe the market staggers sideways or slightly higher until then, but the US stock market train is headed towards a global central bank tightening cliff. It’s going to go right over that cliff and implode, and tariffs are just icing on the cake.
8. Please click here now. Double-click to enlarge this interesting T-bond chart. Stock market money managers usually buy bonds when they panic, and that’s starting to happen now.
9. This time they are jumping from the fire to the fry pan. They believe the Fed will blink and stop hiking. In contrast, I predict the hiking will be accelerated, with a possible half point hike coming in December as inflation continues to rise.
10. Because of the widening spread between the Fed funds and excess reserve rates, banks will become more aggressive about moving money out of the Fed. Ultimately, the money managers will panic-sell bonds and buy gold as they see the stock market melting but inflation getting even stronger.
11. The bottom line is that Powell’s tightening actions to date have not done enough damage to the bond market to kill it as a safe haven for stock market investors. That will change fairly soon.
12. Please click here now. Double-click to enlarge this GDX chart. Gold stocks continue to meander sideways in my important $23 to $21 accumulation zone.
13. Many individual miners have started to trade independently of the ETFs and mine stock indexes, and are staging fabulous rallies. There are always some outperformers in a sideways market, but the large number of them staging these rallies now is quite impressive.
14. Note the strong volume bar that occurred on Friday. Gold stocks are in very strong hands now at a time where some possible “game changing” news is coming for bullion.
15. On that note, please click here now. India and China are the biggest markets for physical gold, and price discovery on the COMEX and LBMA ultimately relates to changes in demand there versus mine and scrap supply.
16. When Narendra Modi got elected as India’s prime minister, he put Arun Jaitley in charge of the finance department. This was disappointing, because Jaitley’s actions and words have been very negative for gold, and the finance ministry has the power to set the gold import duty.
17. Jaitley has a long history of health issues, and he just had a kidney transplant. Piyush Goyal has been appointed as “interim” finance minister. He’s pro-gold and fought against the import duty. There are rumours that his appointment may become permanent.
18. If that happens, I think gold investors around the world are going to watch the import duty tapered to zero just like American QE was tapered to zero.
19. Please click here now. Double-click to enlarge this spectacular long-term gold price chart. The Indian finance ministry is the main driver of the global gold price doldrums that have been in play for the past seven years.
20. It’s unknown if Goyal takes charge of the finance ministry on a permanent basis, but if he does, that is likely the catalyst that launches a massive and sustained rise in Indian gold demand. That demand will be enough to drive gold in an Elliott C wave advance to at least $1650, and probably $2000!
21. If “Royal Goyal” has charge of India’s finance ministry at the same time as Powell is joined by the ECB and then Japan in a giant effort to roll the QE money balls into the fractional reserve banking system, gold will likely surge to $3000 – $5000 very quickly.
22. When gold began its “eight-bagger” advance from the $250 area in 1999, few people anticipated the upside potential. The highest price targets coming from mainstream analysts were in the $400 area. Most of them thought gold was going to stay in the doldrums for decades, while the stock market would never decline in a material way. They had no clue what was coming!
23. Please click here now. Double-click to enlarge. I believe the potential for another eight-bagger is much stronger now than it was in 1998. This quarterly bar chart shows gold making an epic bull wedge breakout.
24. All that’s technically in play right now is a pullback from the breakout zone and that’s very healthy. Note the rise in volume from 1998-2002. That came ahead of the runaway action in the price. The exact same thing is happening now. Gold and silver investors should have absolute confidence in their holdings… and look to eagerly accumulate more!
Thanks
Cheers
St
This great article exposes how far the “hemline indicator” has gone recently. The “hemline indicator” methodology says women’s hemlines rise with the stock market. So what does it mean when the Miss America beauty pageant has declared it was no longer a “beauty pageant” & eliminated the swimsuit competition altogether – R. Zurrer for Money Talks
So, what about that wedge in the Nasdaq I was looking at last week? The upward momentum stalled 61 days from the prior high. Oddly enough, it was tech stocks that stalled last week while McDonald’s had that big day on Thursday which drove the Dow. MCD is rated seventh in the Dow in terms of its weighting. A lot of other Dow names started well but backed off. On the same day all the FAANGs got hit. The SOX got hit while oil stocks were strong.
Even financials under the BKX recovered as the situation stabilized in Italy. Right now, markets could be in wait and see mode as history is made this week in Singapore. History of another kind may have been made over the weekend with the G-7 meeting. I’m not going to weigh in on the controversies of trade wars, press conferences and mean tweets. Upon deeper observation, I’ve discussed what cycle experts call the fourth turning, which has happened every 70-80 years since the American Revolution. What we are witnessing here is a dissolution of old alliances and a transition to something new. The architecture set up in the post-World War II era is crumbling. The Europeans have threatened to come up with an agreement without the United States. The new Prime Minister of Italy Conte tweeted that he agreed. We may also be front seat observers to a new alignment this week as Trump attempts to bring Kim Jong Un into the world of nations.
Also on tap is the big Fed meeting as well as the European Central Bank meeting a day later. All of this comes a week before the all-important seasonal change point where markets tend to change direction. This year the calendar falls a little different as the Fed meeting is usually the same week as the seasonal change point. What does that mean to us? We could see added choppiness given the cycles and the degree of important events materializing at the same time.
In a major new development, the Transports broke through the congestion zone of the past two weeks to the upside. Since there was a key balance line sitting in that zone, whichever way the worm turned was going to be important. I told you if they broke below congestion it was over for the Transports. But the market bounced back and now it appears we can get a leg up at least through the week and the door is open for a Transport rally into the seasonal change point next week. Next week is a long time from now. My indicators suggest the Transports can stay on the current path for another 5 trading days. Even housing broke out of its congestion to the upside. All this is happening while the bond market stays flat. Prices are no longer going up providing interest rate relief in the near term, but at least they aren’t going down.
Crude oil has remained flat around its low after a decent amount of technical damage on the recent downtrend. Oil stocks have outperformed and if you are an oil bull, its always better to see the stock lead the commodity.
Gold is also in a holding pattern after a decent low and pinballing inside tight trend lines.
But the most important news item of the week might not have been Italy, G7 or even North Korea. The Miss America beauty pageant announced it was eliminating the swimsuit competition and it was no longer a “beauty pageant.” Are you familiar with the “hemline indicator?” This was first observed by University of Pennsylvania economist George Taylor in 1926. Prechter’s Socionomics correctly points out “hemline indicator” methodology says women’s hemlines rise with the stock market. If a hemline is an indication of an expanding or contracting social mood, what are we to make of America’s most popular beauty pageant completely changing its mission? This is next level stuff.
A WWD.com article from Feb. 7, 2018, also projects the fall collection in fashion has lower hemlines projected. I’ve heard experts and those with ‘animal spirits’ suggest the swimsuit competition will return within three years or the Miss America pageant will be gone within five years. That may be the case but keep in mind it’s the rising or sinking social mood that will be driving the bus. What is the takeaway for those of us who observe, analyze, invest and trade these markets? This is an indication of a contractionary social mood and should lead to a be bear phase or a complete bear market. This is not a “today” indicator but something to keep in the back of your mind as time goes by.
For our part, we’ll be keeping close tabs on the next 610-day window coming up in July. The first 610-day window to the August 2015 low already fired off in January. There is a very good chance we’ll see another reaction in July. With the NDX and Russell 2000 at new highs and the Dow barely beyond the middle of the range, there is a divergent market for certain. This is an indication of a topping process but this one is a very long process. For now, it’s not going to hurt that sectors like transportation and housing are catching second winds. That’s the good news.
With that, I leave a word of caution. There could be an important turn by the middle of next week. Not all the market could turn, it might turn out to be a narrowing of the advance. We could see something top by next week which we will only recognize in hindsight. The turn window in July? Let’s take this one step at a time.
About the Author
Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.
With a few exceptions, I notice around the internet that some services like to tell you about all the massive gains they’ve provided their subscribers in certain stocks. This especially goes on in the junior mining swamp but is also a proud tradition in the stock picking world. Tout the multi-baggers and conveniently soft shoe the losers, which everybody has.
So here at NFTRH we will continue the proud tradition of touting the winners but also exposing the losers, with the key being have more god damn winners than losers! Duh. The reason I don’t get defensive or obsessive about this stuff is because stock picking is not even my main charter; keeping us right with the macro markets is. It’s only everything if you ask me.
So anyway, Robbie the Robot here was first charted in NFTRH using a weekly chart as we scouted its bounce potential from longer-term support. I then bought it just above said support and it was initially robotic in its gains but lately is getting a little impulsive (read: pumpy).
Meanwhile, the Electric Car (noted here publicly a while back), complete with a Tweeting CEO who I cannot stand (yup, that’s emotion folks) has done a similar thing, against my short position. I am down 18% on Tesla and up 25% on IRBT. So these are basically a wash because the TSLA short position is a little larger than the IRBT long position.
did two things purposely here. I did not sell IRBT as it exceeded the SMA 200 and I did not cover TSLA as it exeeded the SMA 200. That second thing is going against sound trading practices but as a portfolio twittler I can afford a view of things working in unison and among my few short positions there are some that are very strategic and working well, partially offsetting the TSLA debacle (in the making?). And then there is the rest of the portfolio, which is long and doing very well on balance.
I may not come out here and report to you if/when I cover TSLA in ignominy because you (the public) are a casual reader and not part of the business end of NFTRH (it’ll be noted in the NFTRH Trade Log). But since I’d highlighted it previously in public I wanted to note here that as of now it’s not going well and that’s just the way it is.
IRBT on the other hand was a ‘bottom feed’ play and I am trying to decide whether it holds the potential for further gains or perhaps I should slink away and not be greedy.
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Trouble in Canada – “So a busy week and so far in Asia the main story is the G7 summit. The summit ended in a war of words as Trump refused to allow US officials to endorse a planned joint communique after Canadian leader Trudeau comments in a press conference at the close of the event basically suggesting US tariffs were insulting. Mr Trump tweeted that the Canadian PM was “very dishonest & weak” and White House advisor Larry Kudlow backed him up by saying on TV yesterday that Trudeau “really kind of stabbed us in the back”. Late last night German Press also reported Chancellor Merkel as saying that the EU wont be “taken for a ride” by the US.” – R. Zurrer for Money Talks
Bulletin Headline Summary From RanSquawk
- European bourses higher ahead of Trump/Kim summit and as Italy reiterates plans to stay in the Eurozone
- Sterling slides as industrial production has biggest monthly fall since October 2012 and trade deficit widens
- Looking ahead, highlights include 3- and 10-year note auctions from the US
The “most important week of the year” started off with a session that has been a study in contrasts, with risk-off trades emerging early on in Asian trading, as Asian markets and US futures slipped pressured by the higher Yen in the aftermath of this weekend’s G-7 debacle which resulted in a communique that for the first time ever, was not signed by the US; concerns about a potential trade war, however, quickly morphed into optimism as investors shifted their attention to the historic summit between U.S. and North Korea as well as the meetings by three of the world’s three most important central banks, with the EUR spiking ahead of what may be the ECB’s announcement that it will end QE in early 2019, while Sterling returns to center stage with tomorrow’s critical Brexit vote.
The net result has been an offset of extremes, with US equity futures flat, but don’t expect this to last: as Deutsche Bank’s Jim reid writes, “today is actually the calm before the storm” and we’ll at least be able to monitor the fall out from the tense and quite remarkable G7 meeting over the weekend or G6 vs US meeting as it could be called.
Helping boost sentiment, Italy’s new finance minister, Tria, gave a strong endorsement of the euro in comments over the weekend, prompting UBS to suggest that Italy’s disagreements with the EU seem more likely to focus on immigration than on economics. Italian bonds and stocks surged while helping the Euro rise to session higher highs, after Tria told the Corriere della Sera newspaper over the weekend that there was “no discussion” of any proposal to leave the common currency and that the government would also block any market conditions that would “push toward an exit” (he would naturally say that having seen the recent rout in Italian bonds).
“This is the one of the first references on not letting the fiscal plan getting out of hand, and that the government will not let the BTP-bund spread get to the same wide level as back in 2011-2012,” Danske Bank’s Arne Lohmann Rasmussen told clients. “We expect to see some stabilization in the BTP-bund spread.” And sure enough, Italian 2Y yields tumbled following renewed hope that the status quo will return to Italy.
Of course, it’s only a matter of time before the Italian sentiment changes: after all for the ruling populist coalition to reach its goals, it will have no choice but to bust Italy’s budget, but until then hope has returned. Among his other points in the Corriere interview, Tria said that the government will seek an EU accord that would allow the exclusion of infrastructure investment costs from the budget deficit; that a review of legislation on co-operative and small banks isn’t a priority; and that he can’t provide targets for growth and deficit before September.
As Bloomberg notes, not all are convinced that Tria’s comments warranted such a large push higher, given the challenges the new government’s fiscal program will pose to the country’s finances as debt stands at around 130% of GDP as Morgan Stanley noted recently.
…continue reading this extensive article HERE
The fundamental drivers for Gold and the US Dollar are similar and that is why they typically trend together. Negative and/or falling real rates drive Gold and the same drives the greenback though with respect to differentials between the other competing currencies. When real rates are rising or strong in the US that is bearish for Gold and bullish for the US Dollar. The opposite is also true. And with the US Dollar being the global reserve currency, it naturally competes with Gold, which is an alternative. All being said, history as well as recent action suggests that weakness in the stock market is more crucial to Gold’s future than weakness in the US Dollar.
We do not want to diminish the impact of the US Dollar (with respect to Gold) but its weakness from early 2017 into Q1 2018 failed to impact the precious metals sector in a meaningful way. Since precious metals peaked in the summer of 2016, the US Dollar index made two new lows (one in September 2017 and one in early February 2018) yet precious metals (aside from Gold) didn’t even come close to their 2016 highs. Moreover, during the recent decline in the US Dollar index from nearly 104 to 88, the stock market outperformed Gold, gold stocks and Silver. Clearly, Gold needs something else to happen to trigger its bull market.
As we’ve often discussed, Gold has continued to underperform the stock market and from an intermarket perspective, this has prevented it from starting a real bull market.
History argues that Gold cannot be in a real and significant bull market unless it is outperforming the stock market. In the chart below we plot Gold (blue) along with the Gold to S&P 500 ratio (black).
In the 1970s and 2000s the two plots are trending in the same direction.
However, note what happened during the 1993 to 1996 period, the 1985-1987 period as well as during the past few years. These were Gold “bull markets” but they were quite weak as Gold did not consistently outperform the stock market during these periods. (As an aside, Gold only outperformed the stock market in late 1987 after the stock market crashed and the precious metals bull ended. Despite a massive dollar decline in the mid 1980s, Gold only enjoyed a merely decent run).
The reality is, real interest rates tend to follow the stock market.
At present, If the stock market continues to rise, then the economy is performing well and that means the Fed will continue to hike rates. That means real rates (at least on the short end and that is what impacts Gold) will remain stable or even rise.
Last week we noted the similarities between today and the 1999-2001 cycle. Interestingly, the stock market peaked in March 2000, which was 16 months before the US Dollar peaked. If the current rebound in the US Dollar is the start of a much bigger move, then I would expect the stock market to peak before the US Dollar.
The other bullish catalyst for Gold (an acceleration in inflation) is also bearish for the stock market as rising inflation leads to falling margins (for corporations) and falling multiples for stocks.
In any case it’s quite clear that a big bull market in Gold will not begin or take place without first a bear market in stocks. A bear market in stocks would trigger or coincide with positive fundamental developments for Gold. Sure, a decline in the US Dollar can certainly stabilize Gold or support rallies in the interim. However, Gold’s outperformance of the stock market is more important (than a falling dollar) for it to begin a big bull market. Until that begins we have narrowed our focus to a smaller group of companies, capable of rising 300% to 500% without the help of metals prices.
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