The global economy is in shambles, it’s terminally ill. Just take a look at China, Europe and India, not to mention the numerous South American and African countries on the brink of monetary disaster.
America is irreparably linked to these economies and a collapse in any one could cause the collapse of the entire global monetary system. Not to mention that America’s economy is teetering on the edge with its own massive bubbles in stocks, bonds and real estate.
An example of this link is the historical collapse of our stock market in August 2015 when China unleashed a massive devaluation of the Yuan to save its own economy. Of course, the Plunge Protection Team of the US Treasury and Exchange Stabilization Fund intervened to reverse the collapse.
That’s called manipulation and this is why stocks continue to rise. As a result, investors believe that the Fed will always come in and save the day. Instead of investors being prudent and following the fundamentals of an insanely overvalued market, caution is thrown to the wind and greed takes control.
Another example of the coming turmoil is the most recent surge in the US Dollar which has created massive problems for the Chinese economy because the Yuan is linked to the US Dollar. This has caused a financial crisis in China, which has caused China to unload $ billions of US Dollar reserves to defend the Yuan.
It also created havoc in China’s bond market in which trading had to be suspended temporarily and emergency lending was issued to financial firms to keep them from bankruptcy.
The most likely option for China will be a massive devaluation of the Yuan, just like they did in August 2015. This could have a huge negative impact on the US stock market and might be the catalyst to pop the stock bubble and send it crashing. Although I think the recent rate increases might do that already.
If the dollar continues to rise, China may be forced into the ‘Nuclear Option’, which is to demand that the US Dollar be removed from the SDR as a reserve currency. Of course, this would not happen, but China is the 2nd largest economy in the world and just the suggestion of removing the dollar as a reserve currency would have an enormous negative impact on the dollar and this measure would be supported by Russia, India and other BRICS countries.
There could be panic selling of US Treasuries and other dollar denominated holdings and the current currency war would erupt into a massive worldwide currency crisis as confidence is lost.
Let’s talk about India. Does anybody know what’s happening in India? The Prime Minister of India has outlawed cash, supposedly to counter the black market trade. Instead it has sent the Indian economy into a tailspin and the gold market has doubled in India. That’s right; gold is trading at more than twice the value in India that it trades for in the US, nearly $3,000 per ounce.
Europe is also on the brink of disaster. What started with Brexit is now spreading to Italy, France, the Netherlands and many others who are contemplating leaving the EU and abandoning the Euro. Italy’s banks are bankrupt, Deutsche Bank is bankrupt, Greece is bankrupt, and Spain is on the verge of imploding, just to name a few.
Any one of these Black Swans could trigger a massive global economic catastrophe and the pressure is building every day.
No one is paying attention and this warning continues to fall on deaf ears, to be treated as conspiracy theory. Well when this system breaks, and it will, I will say with remorse that I tried to warn you.
Personally, I believe after Trumps inauguration, the dollar will decline, stocks will decline, gold and bonds will surge. That’s why I continue to suggest you allocate at least 10% of your portfolio to physical gold or gold mining stocks which grow with the price of gold and also pay a dividend.
The weekly chart of gold below shows the direction from October 2008 to its peak in Sept. 2011 and then back down again to its low in December 2015 to present. You can clearly see the wedge pattern that has formed from this long term chart.
If we zoom into the wedge on the chart below, we can presume that the current bullish movement will continue up to the downtrend line which will act as resistance somewhere around 1280 – 1300, depending on how fast gold reaches that level. (See blue arrow.)
In addition, the stochastic oscillator confirms that there is plenty of upside to go in gold before the next retracement is due. We also know that the commercial banks short positions are very weak and they have a strong net long position in gold.
This tells me that the next few weeks should be very bullish for gold and we should position ourselves for a run up to resistance. As we get closer to that resistance level, then I would place trailing stops or close out any positions at the peak and wait for the gold price to either bounce back off of the downtrend line or confirm a break through resistance to the upside.
If it breaks through resistance at the downtrend line, then we should see the bull market in gold really take off, just like we expected back in July last year.
Miners tend to move faster than the gold futures market and we are currently witnessing this action in (GDX) and (SLW).
Both the gold miners’ index ETF (GDX) and Silver Wheaton (SLW) broke through resistance on Thursday. This could set up a powerful surge higher from here, although the Stochastic is topping out, which may indicate a short term retracement is coming in the next couple of weeks.
That could be enough time to see gold reach resistance before the next retracement, but the longer term picture shows a bullish trend is under way.
The dotted red resistance line shown below may be a temporary pause point for a slight retracement, which will allow the stochastic to correct somewhat before the next major move up.
Stock Market: (SPY) (QQQ)
The chart of stocks below shows a lot of uncertainty for the past couple of weeks. It appears that a topping pattern is forming. You can clearly see that the elusive 20,000 DOW has not been achieved, despite all the cheer leading from the main stream financial media.
I still believe that some event may occur just before Trump’s inauguration or shortly thereafter. The economy is not fixable and the Fed can only paper over the mess for so long before something breaks.
I also believe Trumps inauguration could be the catalyst before all hell breaks loose, so his policies can be blamed for the financial apocalypse that is coming over the next couple of years. I know many of you don’t believe it, but it’s already happening, you just have to look at the real economic indicators and ignore the mainstream media.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
Crude peaked a couple of days ago and now we wait to see which way it goes. I believe we will see a breach of the uptrend line, which will signal a retracement in crude oil. However, Saudi Arabia is now talking about production cuts in the next month which could cause crude to bust through upper resistance and continue higher.
This kind of uncertainty is not conducive to trading at this time. It’s best to wait until we get confirmation, one way or the other.
Housing Market Stocks: (DHI) (TOL) (PHM)
There’s nothing in the chart pattern for homebuilders that makes me think they are headed higher, at least in the short term. I do think that once they reach support (blue circle), we can expect a bounce higher.
The bond market will be the key to homebuilder’s surging higher from here. If the bond market shows a sustained surge higher, this will allow interest rates to reduce slightly and that will be bullish for home mortgages and the builders.
But once the bond market begins to falter again, then real estate and builders will immediately react to the downside again.
The chart below from SentimenTrader shows that the smart money is historically long in 10 yearTreasury Bonds. This could indicate a couple of things.
When stocks decline, bonds typically surge as investors transfer money into less risky investments, such as bonds and gold. Either the commercials are piling into treasuries because they know that stocks are about to tank or this could be a contrarian indication for a short term bounce in treasuries before a major collapse occurs.
IMO, I think both scenarios will play out starting before the end of February and gain momentum as the year progresses.
Remember SentimenTrader is a contrarian indicator and when you have a record number of longs in any one position, you can expect a turnaround sometime soon.
(SLW) January 2018 CALLS
(GDX) January 2018 CALLS
(RGLD) January 2018 CALLS
(SPY) December 2017 PUTS
(DHI) August 2017 PUTS
(TOL) August 2017 PUTS
(PHM) August 2017 PUTS
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Marc Faber – This Will Be The Big Surprise For Investors In 2017
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Bill Murphy from the Gold Anti-Trust Action Committee joins Silver Doctors. Murphy predicts new highs coming for gold and silver in 2017. Murphy is especially bullish on Silver. He predicts that once silver breaks through $21/oz, the gold cartel will start to lose control, and silver will be on a volatile ride toward $100/oz.
2017 looks dangerous! The US stock markets spectacularly defied the odds in 2016, soaring after both the UK’s Brexit vote and US presidential election. Both actual outcomes were universally feared as very bearish for stocks before the events. These contrary stock rallies have left traders feeling euphoric, convinced stock markets are impregnable. But with stock valuations hitting bubble levels in an exceedingly-old bull, a major bear still looms.