If you’ve been reading my commentaries over the past few months, it’s obvious that I’m a gold and silver bug. There are specific reasons for my perspective which I would like to share with you, so you can understand why I feel this way.
Fundamentally, I’ve been a gold bug for the past 3-4 years. In fact, as an example, during the summer of 2011, I made $40,000 on a single trade in less than 30 days with (10) option contracts in (RGLD). That was the peak of the gold market, before the central banks decided it was getting out of hand and decided to suppress the price to hold their fiat currency together.
Can you imagine what you could earn if gold and silver changed direction now? There is a huge profit potential just waiting to be set in motion. Now is the time to take advantage of it.
I like to buy sectors when they are hated, cheap and bottoming. I look for signs of a trend change to the upside and then I make a trade. I’ve been able to hone my skills technically over the past few years and I’ve learned from plenty of mistakes, like getting in too early or expecting a much bigger rally and not exiting in time to protect my profits.
So here we are today. The fundamentals for gold and silver are extremely bullish and the sector is hated, cheap and due for an upswing. Virtually all of the fundamental indicators point to a trend change back to the upside. Let’s look at all the signs…
1. Physical gold and silver sales are through the roof. The demand for physical metals is overpowering the supply and causing shortages and delays in delivery. In a normal market, this condition would cause huge increases in price based on the natural laws of supply and demand.
2. The paper price of gold and silver is lower than the cost to mine it out of the ground. That in itself is a huge reason to start stacking physical metal or trading the gold mining and royalty stocks.
3. Global economies are crashing; China, Japan, Europe, South American Countries and the U.S. are heading into recession, if not depression.
4. The stock market is topping and getting ready to roll over. Bonds are in a bubble and bond liquidity is at all-time lows.
5. The U.S. economy is in recession with two consecutive quarters of negative or declining growth. Even though it’s not being reported that way.
6. The COT – Commitment of Traders report. This is a report that shows the positions (long or short) of the largest commercial gold traders. When gold is trading low and commercial traders expect the price to increase, the COT short interest often drops to less than 100,000 contracts. Last Friday's COT report showed that commercial gold traders were short just 14,000 contracts. This is an extremely low level. And based on history, it's a very bullish development.
7. Sentiment Trader is a site that shows the sentiment of traders in relation to specific sectors in the market. The Gold sentiment is now at the second most pessimistic level in the past 25 years! This is a very bullish contrarian indicator. Low level sentiment always signals a trend change.
8. Precious metals are hated, cheap and now in an uptrend. This is the perfect setup for an early entry into a long term bull market in precious metals.
These are the fundamental reasons for my bullish perspective. Read the ‘Sector Trades’ section below to see the technical patterns that signal an entry point into these positions as things begin to break.
These stocks are at extreme lows and sentiment is at an all-time low. The best time to buy any security is when it’s hated and at the bottom. These securities will provide massive gains when the market decides to break loose. (Which I think is now.) Buy the stock outright or trade late 2016 CALL options.
Look at the chart above. I told you that a breakout was coming and that you could make a short term trade with a profit target of $1140 - $1160. I made the trade and I’m up 35% already. I expect the price to continue up in a stair step pattern to our target level of $1150 before consolidating to build up pressure to break through the upper resistance line for a significant move higher from there.
I think the next several months are going to be stunning in the PM markets. There are several black swan events that are forming in the background and the global economy is starting to crater. There will be a flight to safety in Gold and Silver markets by investors creating new bull market in PM’s.
Stock Market Indices
Look at the chart of the Dow Jones below. You can clearly see the roll over taking place, in fact, we had a brief trend line break of the lower support line. I think that break will solidify next week and a new bear market will begin in stocks.
The best time to short the stock market is when the price drops below the lower trend line. That break will signal a move down into a bear market. I expect that to happen over the next week or two. If you are long the stock market, then that trend line break is where you should put a hard stop loss. That way, you’re out before all hell breaks loose.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
Crude oil is stuck and can’t decide which way to go. 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 will move higher if we have inflation, however, I think we will start with deflation as the global economies crash and have inflation after the central banks begin printing more money to try to stem the crash in the markets. I will just watch these until I see a signal of a move up in price and a break of the downtrend line.
The Ability to Prevent a Crash No Longer Exists -Bill Holter
I cannot emphasize more that you watch this video with Bill Holter. It should shock you!
Too many sovereign governments have bumped up against debt saturation. In the U.S., we are over 100% debt to GDP.
The Deflationary Implosion On The Road To Full-Blown Global Collapse
For those who claim that we are an island economy and don't care if the rest of the world falls apart, I’d like to know what will happen to U.S. multi-national companies' earnings as global trade evaporates and the Fed sends the U.S. dollar even higher.
Paul Craig Roberts – The U.S. Economy Continues Its Collapse
Do you remember when real reporters existed? Those were the days before the Clinton regime concentrated the media into a few hands and turned the media into a Ministry of Propaganda, a tool of Big Brother.