I’m not a day trader. I don’t look for something to trade every day or even every week. I like to trade sectors because when one sector is down, another will usually be up.
But things have changed over the past couple of years. It’s very difficult to find a sector that is worth trading when there are no free markets anymore. What I mean is that all markets are being manipulated or there are multiple market interventions by the world’s central banks.
They will do anything to keep this house of cards from falling, but it’s already too late. Look at what is happening around the world; China is crashing only to be temporarily halted because China has threatened to arrest anyone who sells stock into the crash. That’s right, if you try to sell your losing stock positions, so you can cut your losses and salvage whatever you have left, you can be arrested. That is the ultimate intervention, no free markets there.
Greece has effectively been forcefully taken over by the European Union. The EU has actively forced a financial coup on Greece. They’re government is essentially nothing but a puppet being controlled and owned by the EU and yes Greece is still bankrupt and has no way to pay back the original loans made by the EU nor the new loans from the EU.
The European Union has bought Greece and now literally owns all the assets including, the banks, the airports, airplanes, certain Greek islands and any other Greek government owned property that can be used as collateral. The Greeks have lost their sovereignty as a nation.
It’s just amazing what’s happening over there. The Greek people voted with a huge majority of over 61% to break from the EU, but the new Prime Minister caved in and gave the country over to the Germans who control the EU.
Let’s not forget Puerto Rico has also defaulted and many other countries, including Spain, Italy, Portugal, France and Ireland, are about to follow in the same path. The United States is the biggest bankrupt domino of them all. Remember the bigger they are, the harder they fall.
With all of the turmoil going on in the world economies, you would think gold and silver would be skyrocketing higher. Well, in the un-manipulated world of physical precious metals, there is huge demand and a huge supply shortage. The US government ran out of Silver Eagles in June and has halted all sales until at least August. Record levels of physical metals are being bought worldwide. Don’t you think the price should be going up when there is such a huge demand and little supply? That’s Economics 101 right?
My point is this. This can’t go on forever. Eventually, this charade is going to catch up to the central bankers and all hell is going to break loose. It’s all about confidence in the system and when investors begin to lose confidence, the house of cards will come tumbling down.
So let’s get back to how to trade these markets. Where should you put your money to protect your net worth and better yet, win huge gains?
Well fundamentally, I think we are very close to the point where investors begin to lose confidence in the system. If you look at the stock market in the chart below, I just don’t think there is any more upside potential or if there is, it can’t be much, so why risk it?
It’s already beginning to roll over from record highs and the consensus is that we will experience a crash starting in September / October that lasts well into 2016. Do you think the stock market is a good place to have your money right now?
The smart money doesn’t. They’ve been selling into this market in mass. If you don’t want to lose everything you’ve gained over the past 7 years, now would be a good time to go to cash or at least hedge your positions with precious metals or some Put Options (Short positions).
What about gold and silver positions. In the chart below, you can see gold bottomed last November and as of today (Friday 7/17), we have a double bottom. If the price of gold breaks Novembers support line at $1130, we could see it continue down to the next support level at $1084 for a new low. If it closes above the November bottom, we should see a bounce back up to new resistance.
Understandably, this is a frustrating development in Gold because it throws a wrench in our cycle wave count. However, sentiment is at extreme negative levels and that’s bullish for gold and silver going forward. That’s also the best time to enter a trade, when nobody else wants it.
The key to investing is to buy low and sell high right? Well isn’t that what we are doing by selling the stock market (S&P) at its high and buying precious metals at their low? Isn’t that Trading 101?
Seems logical to me and you will make a ton of money if you do it right. So how do you do it? I’ve listed the symbols of the stocks I’m investing in below under ‘Sector Trades’. You can buy the stock outright and hold or you can trade options with an expiration date well into 2016.
If you trade options, the farther out your expiration date, the less price decay you will experience and you can feel confident that the markets will change direction during the time of your trade. Options will reap huge gains and if done the right way, you will risk less money.
Our time is coming soon. Be prepared to prosper.
Until next week,
Bare Supermarket Shelves In Greece Should Be A Huge Wake Up Call To Millions Of Clueless Americans
Precious Metal Stocks: (RGLD) (SLW) (GDX) (SIL) (GLD) (PHYS) (PSLV)
The securities referenced above will provide massive gains when the market decides to break loose and precious metals bounce higher. You can buy these positions and hold long term or trade late 2016 CALL options. That will give you time for this capitulation phase to exhaust and a reversal to take effect.
Stock Market Indices: (SPY) (QQQ)
I’m shorting the stock indexes. Short the stock outright or buy late 2016 PUTS, if you’re trading options.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
Crude oil is crashing with the rest of the commodities sector. We need to wait for a bottom before making any moves in this sector. (See commodities comments below.)
Financial Stocks: (XLF) (IYF)
I’m staying away from financial stocks at this time, until after the S&P correction. Once this economy implodes, financial stocks are going to lead the way. I will place short positions at that time.
Biotech: (BIB) (KITE) (IBB)
Biotech’s have been in an uptrend along with the stock market, however, just as a rising tide raises all ships, a receding tide will lower them as well. I think we will see a correction in the biotech sector along with the impending stock market correction.
Commodities: (FCX) (JJG) (DBA)
Commodities are taking a hit this week in a final capitulation phase before a big change to the upside when the dollar begins to fall. I will just watch these until I see a signal of a move up in price and a break of the downtrend line.
Weekly Trading Lesson
Common Chart Patterns
Head & Shoulders
Below is an example of a Head & Shoulders pattern in the S&P. You can clearly see the formation of the left shoulder, then head and then right shoulder. The right shoulder will typically continue down from the neck line for the start of a down trend.
The chart below shows an example of an Ascending Triangle pattern. The upper resistance line is considered the top with the expectation that price will break the lower, ascending support line to begin a new Bear Market trend, as it has in this chart of the S&P.
Descending Triangle Pattern
A descending triangle pattern looks like the one in the chart below with an obvious support line at the bottom and a descending resistance line on top. The support line acts as the bottom, so price would be expected to break through the upper resistance line to start a new bull trend, as in the case for Gold below.
Bearish Rising Wedge
Below is an example of a Bearish Rising Wedge pattern. Notice how the wedge gets narrower near the top. As soon as the price breaks through the lower support line of the wedge, that will signal a downtrend has begun and the start of a Bear market. You can see in this chart that we are getting close to that point now.
Bullish Falling Wedge
The opposite of a Bearish Rising Wedge is the Bullish Falling Wedge, as shown in the chart below. Once the price breaks through the upper resistance line, a new trend to the upside is expected for the start of a new bull trend.
When a chart is showing a bull trend, in which the price is in an uptrend, a ‘Bull Flag’ pattern forms when the price shows a slight pull back from the uptrend, but then bounces back to resume the uptrend. See the chart below of a typical Bull Flag.
Many traders will enter a position at the break of a bull flag downtrend line. (Blue line at purple circle) Others may wait for a full recovery and the break of the upper resistance line. (Red line, purple circle)
A ‘Bear Flag’ is the exact opposite of a Bull Flag. A Bear Flag will move up during a down trend and then retrace back down to resume the bear trend pattern.