The global economic carnage is coming unglued. Banks are ramping up huge losses and their stocks are tanking. Bankruptcies are accelerating in companies related to the oil industries, global commodities trade and corporate bond hedge funds.
The Baltic Dry Index, an index of global trade, has plummeted to record lows. Maersk, the world’s largest shipping company, has reported its profits have plunged by 84%. Caterpillar sales have dropped to ‘depression’ levels. Chesapeake Energy’s stock has gone from $70 in 2008 to $1.70 today.
The oil glut is worsening as BP stunned everyone this week with the announcement that “Every Oil Storage Tank Will Be Full in A Few Months”
The world’s economies are in serious trouble as an avalanche of deflation is heading our way as global trade comes to a grinding halt. Brace yourselves as you watch history in the making. A depression is coming and there is nothing any government or central bank can do about it, as they were the ones that caused it in the first place.
The 10 year bond yield continues to plunge to the 1% level. This does not bode well for the US economy as investors are flocking to the only safe haven assets left, gold and bonds.
The unfortunate thing is that as more investors flock to the bond market, yields plummet, making it hardly worth the investment, which won’t even keep up with inflation. I wouldn’t be surprised to eventually see negative rates in the bond market and this will just cause precious metals to skyrocket as investors look for safety and yield.
The S&P is crashing, however, the markets are rigged against mom and pop investor and I wouldn’t be surprised to see an announcement of QE, NIRP or some other form of intervention to juice the markets just enough to lure everybody back in, before it collapses completely.
I truly believe the market collapse will really pick up steam this summer and people are going to be stunned. The indicators are flashing RED everywhere, yet people choose to believe the Fed fantasy instead of reality.
If you’re still in the stock market, you should at least hedge your bets with a 20% stake in gold stocks.
Good luck and….
Live long and prosper.
Special Note: On February 26, 2016; the NYSE will no longer accept ‘stop orders’ and ‘good-till-cancelled’ orders. Check with your trading platform account to see how that will affect your future trading plans. I trade with Charles Schwab Street Smart Edge and they have told me they will continue to maintain all stop loss orders in the future by using a third party to execute all stop loss trades.
The weekly chart of gold below shows the breakout of the downtrend line last week and then a retest and bounce off of the breakout point this week. This represents a very bullish sign that gold will continue to the upside from here as the downtrend line has now become support.
Gold futures filled the ‘Gap’ on Monday while the U.S. markets were closed and retraced back a large portion of the gains we saw last week. As this gold bull market gets underway, we will continue to see high volatility with large retracements before resuming back to the upside.
As a result, I would suggest maintaining a hard stop just above your entry point until your positions have gained at least 50-75%, if trading options. If you decide to place a trailing stop, I would provide enough room to handle the volatility with at least a 40% – 50% trailing stop.
If you are trading for the short term, then I might suggest a tighter trailing stop position or just a price target to close out once your target is reached. As the gold market picks up steam, longer term positions will benefit the most.
In the chart above, you can see that a massive cup and handle pattern has formed. The bull flag at the top creates the handle and a massive upswing should breakout from the handle very soon.
Stay tuned for more upside coming in the gold sector.
Stock Market Indices: (SPY) (QQQ)
Last week, small (mom & pop) traders bought more than 1.9 million put options in the stock market, the highest since November 2008. This usually is followed by a short term rally as the smart money creates a stop run causing the small traders holding short positions to cover.
This ‘short squeeze’ creates a strong pop to the upside which allows the smart money to sell into the rally and sure enough, this week we’ve had such a rally. But don’t let this rally fool you; this is just a short squeeze to strip mom & pop of their short positions. This rally will be short lived and the bear will continue in due time.
Notice we still have lower high’s and lower lows.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
Same pattern - different day. But notice how tight the triangle pattern is getting near the bottom? Watch for the break out of the upper trend line.
Financial Stocks: (XLF) (IYF)
Same as S&P above.
Commodities: (FCX) (JJG) (DBA)
Still falling and it looks a lot like oil doesn’t it?
US Treasury Bonds: (TLT)
When stocks go down treasuries go up. Treasuries came down with the latest short squeeze in the stock market, but as I said above, this will be short lived and treasuries will make a comeback as the stock market drops again.
(SLW) January 2017 CALLS
(GDX) January 2017 CALLS
(ABX) January 2017 CALLS
(FNV) January 2017 CALLS
(RGLD) January 2017 CALLS
(SPY) December 2016 PUTS
(IYF) August 2016 PUTS
Stocks Cut in Half & Gold Doubles in 2016-Bo Polny
“between now and October of this year.”The crash will happen long before October…
Financial Crisis 2016: High Yield Debt Tells Us That Just About EVERYTHING Is About To Collapse
It isn’t just the energy industry that is seeing a massive wave of defaults, debt restructurings and bankruptcy filings. Just like with subprime mortgages in 2008, investors are starting to wake up and realize that the paper that they are holding is not worth a whole lot. So now investors are rushing for the exits and we are starting to see panic on a level that we have not witnessed since the last financial crisis.