‘The introduction of Japanese NIRP will result in currency wars and
especially cause the Chinese Yuan to devalue faster.’
There are so many actions of desperation from the world’s central banks that it’s becoming hard to keep up with all of them. Japan just shocked the world last week by implementing NIRP or Negative Interest Rate Policy.
Let me ask you, would you be willing to pay interest to your bank just so they could hold your money for you. I wouldn’t want to leave my money in a bank just so it could lose value. I’d be looking for a place to put my money to grow.
That’s what’s been happening in China and other countries around the globe that have a negative interest rate policy. People are removing their cash from banks, creating bank runs, and investing in other areas where they can at least get a modicum of return on their investment.
According to Rick Rule,‘Negative interest rates are probably the dumbest idea since central banking.’
The whole world is in an economic tailspin. We are falling at terminal velocity into worldwide deflation. You can see it manifested in the Baltic Dry Index, commodities like oil, copper, iron ore and the money velocity, which are all at record lows.
Shipping rates are at the lowest levels in history. All of the world’s economies are interlinked and all are crashing. The central banks are clueless as to what to do about it. Thus these acts of desperation like ZIRP, NIRP, QE (money printing) and soon to be helicopter money are the result..
What’s helicopter money, you ask? It’s another form of QE; some would call it national welfare for all. It’s when the government gives its populace money every month in the hopes that they will spend it and increase the money velocity, thus increasing economic activity. It’s just another way to devalue the money supply.
All of these interventions will eventually hit a wall. Then what? Depression? Economic Reset?
There is only one asset class that will protect your net worth when the ‘shit finally hits the fan’, physical gold and gold stocks.
‘Asset prices and economies have become wards of central banks and their endless ability to increase the rate of money creation. Therefore, since the global elites have placed all their faith in the fiat confetti spewed out by central banks, investors would be wise to increase their exposure to the only genuine form of money there ever was…gold.’
Day Trading Tools
Last week I said I would discuss how I handle short term day trades, including the trading tools and trading plan that I implement. When I day trade, I set a minimum goal of how much I want to make that day, usually anywhere from a few hundred dollars to $500 or more, depending on the underlying stock position and its volatility or how much it moves in a normal trading day.
Day trading, as the name implies, means that I am in and out before the trading day ends. This requires the trader to watch the charts continuously, allowing you to enter and exit at a moment’s notice. As a result, I only recommend day trading for people who have the time and knowledge to handle this fast paced trading environment.
The tools and trading plan are relatively simple and I prefer to keep it that way. I use a very short charting time interval. I want to be in the trade for a short time and sell when price pops or reaches my predetermined exit point, so I typically use a 2 minute or 5 minute chart interval, but never any longer than that.
This allows you to see the fast movement of price and react to it when necessary. In addition, I rely on the stochastic oscillator to time my entry and exit points. As an added probability tool for support and resistance points, I might draw the Fibonacci retracement tool based on the high and low of the previous or overnight session.
These Fibonacci levels in combination with the stochastic oscillator provide an extra level of probability analysis to your decisions to enter or exit a trade.
The chart above is a 5 minute interval of (GLD) showing the stochastic oscillator. Note the entry point at the blue circle when the stochastic is at 20 and then an exit at the higher blue circle when the stochastic is at 80. I usually place a trailing stop once the stochastic starts getting close to the 80 mark and let the trailing stop generate the exit.
This one trade which took an hour to complete would have provided a gain of about .60 cents on GLD. Now that doesn’t sound like much, but if trading one option contract that could have been a gain of approximately $60. If trading 10 contracts, that could have been a gain of $600, depending on the ‘Delta’ you chose when you entered the trade.
If you made several trades like this each day, you can see how they can really add up. Next week I’ll talk about choosing the right ‘Delta’ and why it’s important when trading options.
Recently gold has rallied when the stock market sold off and also rallied when the stock market went up. When gold rally’s as stock markets climb, that’s a very bullish sign.
There have been a lot of bullish signs for gold recently. It shouldn’t take too many more shocks to the system for investors to finally realize that gold is the place to start putting their money.
Look at the chart of gold above and notice how it’s broken through the 200 day moving average. This was a major resistance line.
Also, notice the stochastic oscillator is now above 80 and just like last October, we could have a slight pull back to relieve some of the overbought conditions. This started today due to the jobs report this morning, however; I expect it will be short lived and produce some massive rallies very soon.
Gold is proving to be the go to investment as the financial markets begin to melt down and the recent chart activity is proving me right.
In the 70’s, gold went up a whopping 20 times, but was up only about 7 times during its recent peak at $1,900 in 2011. If history repeats, and I think it will, gold should go up many multiples once the bull market resumes.
Let’s take a look at a chart of (GDX) below. Notice the bullish wedge pattern that has formed over the past 3 years? Well yesterday we had a major breakout to the upside.
The miners are the place to be right now and after a small retrace to relieve some of the overbought pressure, we should see things really start to skyrocket from here.
Stock Market Indices: (SPY) (QQQ)
The bear flag in stocks continues and it is rumored that news out of China this weekend, regarding the announcement of US Dollar outflows to protect the Yuan, could cause either a spike in the stock market or a strong crash on Monday. The consensus is $120 billion outflow; Goldman Sachs believes it will be closer to $185 billion. If Goldman is right, expect a big plunge on Monday. If less than $120B, expect a strong but temporary surge to the upside.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
There is no good news for the price of oil coming out of OPEC or Russia and many analysts, including Conoco Phillips are stating oil has more to fall before we hit bottom.
But if you look at the weekly chart below, you can see a bullish wedge pattern that is getting very narrow near the bottom. In addition, the stochastic oscillator has turned up and should break above 20 soon. This would be a bullish sign of change for oil and the energy sector.
I would wait for a break out of the upper trend line, but it’s getting very close.
Financial Stocks: (XLF) (IYF)
No change here, still a mirror image of the S&P. Could fall hard on Monday depending on which way the S&P goes.
Commodities: (FCX) (JJG) (DBA)
Commodities have inched up recently, but I’m not convinced now is the time to jump in. We need to see a break of the upper trend line before I would consider a swing in the commodities sector.
Based on the slowdown in global economic activity, I just don’t think commodities have bottomed yet.
US Treasury Bonds: (TLT)
Investors are moving to Treasuries as a safe haven asset from the stock market. But the yield is below 2%, which barely keeps up with the inflationary decay of the dollar. Besides gold, it’s the only source investors consider as a safe haven. When the credit markets finally implode, gold will be the only safe asset left.
(SLW) January 2017 CALLS 13 Strike
(GDX) January 2017 CALLS 15 Strike
(ABX) January 2017 CALLS 10 Strike
(RGLD) July 2016 CALLS ATM
(SPY) December 2016 PUTS 190 Strike
(IYF) August 2016 PUTS 84 Strike
"Pandora's Box Is Open": Why Japan May Have Started A 'Silent Bank Run'
…the risk that NIRP backfires and leads to another "China", where the local citizens rush to park their assets offshore, resulting in a slow at first then rapidly accelerating capital outflow.
Peter Schiff: Gold is Going to SKYROCKET- People Need to Prepare for That Now!
The admission that the economy is so weak that it needs more QE is going to destroy the narrative that the U.S. economy is in great shape and it’s no longer going to be the safe haven for capital around the world…it’s going to prick the bubble in the dollar…and people are going to realize that we’ve never recovered from anything, the economy is sicker than ever, the Fed’s going to make it even sicker with more of its toxic monetary policy, the dollar’s going to tank and the price of gold is going to skyrocket – and people need to prepare for that now.