I’m going to go out on a huge limb here. I want to lay out the steps for the way I think the collapse is going to play out over the next several months and years.
To begin, whether you personally feel it or not, the collapse of the global economies has already begun, and will really pick up steam before November. The consequences of this crash politically could be historic. Whoever becomes president will be faced with an enormous economic mess to clean up and the resulting turmoil from the crash will cause riots and mayhem in the streets of our big cities. We could see martial law imposed and our banks and financial markets could be shut down, at least temporarily.
These are the steps I believe will take place as this depression progresses:
1. I think the catalyst for this event will start with an explosive rise in the price of precious metals. This will signal a loss of confidence in the monetary system and could virtually happen at any time now. Gold and silver are already the best performing assets of 2016.
2. As gold and silver explode higher, that will be the signal that all confidence is lost and the stock market will collapse.
3. Then the Fed will panic when the market collapses and institute QE-4 to begin money printing on hyper drive to try and halt the stock market crash.
4. The banking system will be shut down in part or in whole to prevent a run on the banks and when there are no lenders to loan money for home purchases, the real estate bubble will burst creating a massive crash in home prices in the aftermath.
5. Bail-ins will result from the failure of the banking system. That is, depositor’s money will be frozen and then used to bail out the ‘too big to fail’ banks. If you are a large depositor in the banks, you are likely to lose your money or at least a significant portion of it.
6. Eventually, the bond market will collapse as a waterfall of US dollars comes back to the US Treasury from foreign reserves as foreigners unload their worthless US dollars for whatever price they can get.
Now I don’t want you to think that this will all happen before the end of the year. But the price explosion in metals could start any day and the subsequent crash of the stock market will soon follow. These will be the dominos that cause the remaining steps to fall in place.
I know I’ve been preaching this theme for years, but I’m tuned in to what’s going on behind the scenes and things are getting so bad, that only one black swan event could bring the whole house of cards down. The stars are lining up for an event and I believe we have finally reached zero hour and if you’re not prepared now, then heaven help you.
Gold and silver are the world’s monetary barometers and there is an enormous amount of capital sitting on the sidelines just waiting to move into precious metals. What are they waiting for? A big price pullback, mainly because they are watching the commercial bank positions on the COT report.
In the past, a large commercial short position virtually guaranteed a huge drawdown in the price of precious metals due to the price suppression schemes of the manipulators. But today, it appears that since illegal manipulation has been revealed to the public and with hundreds of lawsuits being compiled against the manipulators, the resulting manipulation has lessened drastically.
Could there be more? Probably; until the natural market forces overpower the manipulations, which could be any day now. I suppose the US Treasury could step in utilizing its ‘Exchange Stabilization Fund’, but that would be a bold step, unless they considered the price explosion of precious metals as a threat to national security, which is entirely possible since the price explosion of gold would cause a loss of confidence in the US Dollar and hasten the loss of the dollar as the world reserve currency.
But let’s get back to the current market in gold. In the gold chart below, you can clearly see an inverse head & shoulders pattern. This should be setting up for a huge upside move.
The current line in the sand is 1300. I think the next price suppression attempt will fail and once gold passes the 1300 mark and holds, we will see a huge run-up from that point forward.
In the short term, I think we will see gold consolidate over the next few days as it builds up energy to break the 1300 mark. Once it breaks, expect a big move up from there.
Stock Market: (SPY) (QQQ)
The stock market is extremely overvalued and due for another correction. You can see in the chart below that it has already turned over and should continue to head south over the next few weeks.
This weekly chart below shows that we had a double top (blue circles), which is a common technical indicator for a bounce off the highs back to a bear market stance. We are still showing lower highs and soon to be lower lows as this market begins its journey back down.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
Oil is in a wedge pattern and turning back down. If oil breaks through the lower trend line, we should expect to see a significant move down from there. The stochastic oscillator has peaked in overbought territory and is starting to roll over. It’s just a matter of time for this to break and when it does, it will also have a negative impact on stocks.
Commodities: (FCX) (JJG) (DBA) (JO)
Commodities are back and the bear market is over. It’s time to buy commodities. Commodities go up when the dollar loses value and that’s where we are today. The dollar has turned and is getting ready to crash; this will cause commodities and PM to rise. In addition, China is stockpiling commodities for the development of the Silk Road initiative, their version of the US industrial revolution.
Confidence in the dollar is falling globally as $16 Trillion of US foreign reserves is no longer needed overseas. A flood of US dollars is coming back to the US at some point in the near future.
That is why money market funds are under new government mandates to invest in government treasuries. (See article below regarding Schwab Money Market Funds.) This flood of dollars will crash the value of the dollar and cause commodities and precious metals to skyrocket.
It’s time to invest in the commodity sector. The symbols above represent agricultural (DBA), coffee (JO), grains (JJG) and copper (FCX). All are primed to go up from here.
US Treasury Bonds: (TLT)
I’ve never been a big proponent of bonds in the current market environment. The yields are minuscule and the market is volatile. We’ve seen a small rise in bonds recently as the stock market heads down, but overall, bonds are consolidating in a horizontal wedge pattern. As interest rates are kept low and the dollar loses value, bonds become a losing proposition.
(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
Powerful Inverse Head & Shoulders Pattern Means Gold’s Fun May Soon Accelerate – Stewart Thomson
Gold and related assets continue to stun most analysts and investors as they surge relentlessly higher against American fiat currency. While gold has risen dramatically, the powerful inverse head and shoulders bottom pattern now in play suggests that the upside fun may soon accelerate…