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There’s No Fever Like Gold Fever

Michael Ballanger |

Precious metals expert Michael Ballanger discusses how investors should interpret the recent shifts in gold and silver “market techtonics.”

As we move rapidly through the spring of 2016 and with summer less than a month away, I thought it would be a good time to revisit the main markets that dwell on my financial radar screen (gold, silver, gold and silver equities, and the S&P 500) because there has been a fairly sizable shift in market tectonics, particularly in gold and perhaps more ominously in silver over the past month.

Call it deterioration in momentum or correction; the NYSE.Arca Gold BUGS Index (HUI) is off 10% from its top at 236.23. I am almost afraid to mention the term Commitment of Traders or the word Commercials because everyone from Dennis Gartman to “kitchen chair financial planners” have now become “COT experts,” pointing fingers and resurrecting archived blog posts from the last 10 years to prove their exclusive ownership of “COT analysis.”

This humble scribe only learned about the COT some 10 years ago but cast it aside as a play toy for “eccentric gold traders” until 2015 when, thanks to my good friends at Gold Anti-Trust Action Committee (GATA), I started reading interpretations by the likes of Bill Murphy. Taking his lead, I delved deeper into the role of the bullion banks and why it was that, unlike every other market in the world, technical support and resistance levels were meaningless. I discovered that the only way one could monitor the activities of those banks that act and execute for the Exchange Stabilization Fund (another topic for another day) was to monitor the very banks that show up in the Participation Rate survey and which are represented as “Commercial Traders” in the COT.

So, if the guys painting the tape to create false breakouts and false breakdowns RELIGIOUSLY, time after time, are the same guys that can sell infinite amounts of synthetic “metal” represented as a keystroke entry on a inventory spreadsheet with ZERO correlation to actual vault inventories, then I better damn well USE that data as a rudimentary “tracking bracelet” of the Crimex criminals. Could the data be cooked? Of course, but I take the attitude that this is a data set designed not for the public but for the other bullion banks to check up on one another to see who is cheating and who is singing the proper words from the “hymn sheet.”

Needless to say, the last four months of action in the metals has been bizarre. While there is “no fever like gold fever,” that the gold market traded up $250 in the first quarter with the Relative Strength Index (RSI) peaking on Feb. 7 at 86.75 (above 70 is a “sell”) at $1,263 was certainly enough to give us a short, sharp correction to $1,190 (for about a half a minute) and then despite waning RSI, waning Moving Average Convergence/Divergence (MACD), gold actually powered higher to an intraday level of $1,306 before succumbing to profit taking. Silver made its run to $18 as gold was dancing, but as I ponder the charts and breathe in the air of sentiment from the caverns of Bay Street, I get the sense that bullish sentiment has resumed as if 2011–2015 never occurred.

It took almost a decade for the Commercial Traders to amass a net short position of nearly 300,000 contracts, culminating in the 2011 top after a 766% advance in gold prices. It has taken a mere four months to repeat the drill. FOUR MONTHS! Friday’s COT showing a 290,243-contract short position against total open interest at nearly 600,000 means that gold has gone from the dark depths of bear market misery with Commercials short a paltry 2,911 contracts back in early December to the exalted peak of bull market euphoria not seen since 2011 at 290,243, while the cycle of extremes took 1/33 of the time. That, my friends, is either a testimonial to the raw power of this new Golden Bull or it’s a classic case of “Too far, too fast” and we are headed lower.

Which camp should we be in? Better still, how do we play it out? Now, coming from the “analyst” that called the bottom in early December, be it known for the record that I exited the leveraged ETFs (Direxion Daily Gold Gold Miners Index [NUGT] and Direxion Daily Junior Gold Miners Index Bull 3X [JNUG]) and then a bit later the Market Vectors Gold Miners ETF (GDX)—at huge profits—way too early when the COT report showed Commercial shorts at a 12-month high north of 166,000. My thinking was that there would be an initial pullback after the mindboggling rally that saw RSI for the HUI hit 86.75, and MACD and the Histograms all confirming wildly overbought conditions in both the metals and in the shares.

Furthermore, last Friday, I had the Market Vectors Junior Gold Miners (GDXJ) May $35 puts I owned expire, so I replaced the May hedge with the GDXJ June $37 puts for $2.30. Mind you, I did not touch my massive aggregation of junior explorer/developers all of which have done exceedingly well. However, what to do now is difficult because while I have been forecasting a “correction that will rip your face off,” it was the action in the gold-to-silver ratio that gave me encouragement that perhaps the Commercials would indeed get “theirs.” Having shorted the gold-to-silver ratio above 80, it traded down to 72.95 recently, but in the past few weeks has reversed back up ward (75.96) and as I have babbled on about ad nauseum for years, you aren’t going to sustain a gold rally with silver underperforming. Lately, silver has been doing just that and that ain’t good.

All of this cyber-jabbing that I read, as bloggers and newsletter writers engage in gold authority one-upmanship be it through podcasts or YouTube or FaceBook, is really akin to having a cocktail party debate amongst home security experts about which system one should install as a thief sneaks into your upstairs bedroom and removes all the valuables from the safe. Suddenly the party is over and you won the debate but all your valuables are gone. As we all talk up our books and go back out on speaking tours (now that someone actually cares), the bullion bank behemoths have actually entered your upstairs bedroom AND your office and taken your goodies AND installed listening devices. These cretins are now short as much synthetic gold as at any point since Gordon Brown dumped the U.K.’s gold holdings at the exact bottom in 1999. How on earth can one carry a gold or silver or GDX/GDXJ position without being hedged?

Calling for a correction since March-April has allowed me to seesaw back and forth but as we have all been arguing and sniping and chirping over the next $100 move, the gold price has moved sideways in perhaps a $50 band while the bankster banditos have raided the vault. With gold printing $1,235 this morning and the Commercials short roughly 300,000 contracts, on a notional basis, every $10 down move is a $300 million improvement on a marked-to-market basis. More importantly, support lines on everybody’s charts are breaking like wind at a bean-eating contest, so this week could easily be a nasty one.

The “Fido Indicator” worked like a charm; two weeks ago with gold at nearly $1,300, he was a goofy, tongue-hanging-out, tail-wagging fool of a dog all happied up and snoozing on my feet under the desk; today with gold at $1,235, he is nowhere to be found. along with the other inhabitant of this house, which means the dog will be eating steak somewhere tonight while I am dining on Alpo Fettucine with a fine Chianti and some fava beans. . .

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

Source: Michael Ballanger

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Disclosure:
1) Statements and opinions expressed are the opinions of Michael Ballanger and not of Streetwise Reports or its officers. Michael Ballanger is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation or editing so the author could speak independently about the sector. Michael Ballanger was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
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All charts courtesy of Michael Ballanger

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gold-coins-168

NOBODY KNOWS ANYTHING

Kal Kotecha PhD

Any ordinary person using nothing more than common sense and what they already know or can easily obtain, can learn to make profitable decisions if only they learn to ignore the experts, the gurus and other fools.—Bob Moriarty

Bob Moriarity of www.321gold.com, an icon in the resource arena has written a fantastic, easy to read and practical book called Nobody Knows Anything that focuses on why it is more important for investors to understand human behavior than it is to know about a specific investment. With all bubbles, eventually the lemming investors will want to go over the cliff together because everyone will be doing it. Nobody Knows Anything will prepare you to see the opportunity when the herd is headed for the rocks.

This book resonated with me as I just completed my PhD thesis on the Affective Heuristics of the 2008 stock market crash which focuses on human psychology and investment behavior.

Teaching at the University, I see so called experts professing to know something I feel they really do not. Their stale knowledge was useful 30 years ago but being out of the field for so long, what motivation do they have to upgrade their skills as they collect their 6-figure salary and fat pension? Yet hundreds of students eat up every word thinking they are learning something useful. One cannot blame the teacher nor the student but the fact remains that common sense trumps theoretical knowledge from any expert.

Unfortunately, I learned the hard way that listening to experts doesn’t always translate to big profits. In fact it originally had the opposite effect. In 1987, at the tender age of 17, I was working two jobs while finishing up grade 12. I was also studying the stock market and thought I was going to be a millionaire by the time I was 19 if I listened to the “experts”. They were saying BUY BUY BUY – so I invested my hard earned money into the market in September of 1987 and then Black Monday hit wham! – the single one day largest crash in history. I was wiped out! I could have held and waited for the market to rebound but I sunk all my money into Bank of Montreal call options which were expiring in December of that year—yes, I really listened to the experts. Again during the tech rally, I bought when everyone else was buying and again lost – I wish Bob’s book had been written back then. In Chapter 2 he talks practically about contrarian investing and why it is important.

In 2002 one year before I started my gold newsletter, I decided to learn from my past mistakes and do exactly the opposite of what the so-called experts were saying as they echoed, “don’t buy gold.” I bought my first gold stock and silver coins during that year—it paid off!

As Bob explains: You would need to know the basics of investing because none of the experts or gurus wants you to think. They want your money and the only way to do that is to keep you ignorant. So they take your money and tell you what you want to hear. (A lack of) money is the root of evil. It’s a very successful business plan; politicians have been using it for centuries. If you tell people what they want to hear; they will vote for you. That’s just as true in investing as it is in the voting booth.

Bob answers these important investing questions in-depth: Should you invest on news? Does manipulation really matter? When should you sell? Why is contrarian investing important? What is the next big investment opportunity? The little investment in this book could save you alot of money and also could make you a lot more money.

Nobody Knows Anything is available on Amazon in Kindle format for $3.99 and in paperback format for $9.99

I’ve always enjoyed reading Bob’s books and articles. I appreciate the fact that he has a no holds bar approach to writing – he calls it like it is. He has a flare for writing by providing a story that is related to the material and then proceeds to give examples. Even a seasoned investor can get a lot of practical information from this 125-page power packed book.

Happy Investing!

Kal Kotecha PhD

Kal Kotecha, PhD, is the editor and founder of the Junior Gold Report, a publication about small cap mining stocks that is read and enjoyed by thousands of investors. He was the editor and creator of the Moly/Gold Report, which focused on critical analyses and open journalism of companies profiting from the precious and base metals sector. The scope of his current activities include worldwide onsite analyses and reporting of developing companies. Kal has previously held leadership positions with many junior mining companies. After completing his MBA in Finance in 2007, Kal completed his PhD in Business Administration in January 2016. His thesis was on the Affective Heuristics of the 2008 stock market crash. He also lectures Economics at the University of Waterloo and Niagara College where he was voted Professor of the Year 2013/2014.

Contact: kal@JuniorGoldReport.com

Global financial forecast symbol with globe, 3d render, white background

Is This the End of the Road?

In May of 2008, there was a very similar stock market ‘rally’ as compared to today’s ‘rally’.  Investors believed that the ‘turmoil’ during the latter part of 2007 and the early part of 2008 was permanently over and that we were headed towards a strong economic growth!

In actuality, it merely masked the ‘declining economic collapse’.  The same situation is happening, all over again, even as you are reading this article.  There are numerous flashing red lights, currently while the stock markets is ‘collapsing’ once again, just as it did during the beginning of the spring of 2008!

may201

There have now been four consecutive quarters in which corporate earnings have declined. The profits from the SPX were down over 7.1 percent during the first quarter of this year.

The U.S. markets have now entered the next phase – a stock market downturn. The global financial system is now starting to ‘unravel’ which will have far reaching implications!

In fact, the real truth of the matter, is now about to worsen, from this point of time and onwards!

While this country has 100 million American people, who are unemployed and searching for work, and yet are unable to find any, I say this is a major RED WARNING ALERT that must now need be heard loud and clearly!

According to the FED, forty-seven percent of all Americans are not able to come up with $400.00 in case of an actual emergency situation, that they may incur.  They would either need to sell personal belongings or borrow the money, somehow!

The majority of Americans are now living from paycheck to paycheck: (http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/).

 

In December of 2015, when the FED raised their interest rates, for the first time, in almost a decade, they had projected a one percent ‘hike’ in 2016. I was apprehensive of their prediction and had forecasted that the FED would not “materially” hike rates!

The FED later backtracked their estimates to half of a percentage point ‘hike’, in 2016 during their March meeting.

The chances of a June 2016 ‘hike’ are low to nil as the “Brexit” referendum is being held only one week after that FED meeting. If the U.K. votes for a “Brexit” from the European Union, then the financial implications may wreak havoc on the already fragile global economies. Hence, the FED will not chance raising it especially before such a significant and important event.

Similarly, post July 2016, the U.S. Presidential race will ‘heat up’ and the FED will not want to raise interest rates prior to knowing what the next Presidents’ ‘economic policy’ will be. However, if the world economy falters, the FED will have to follow the other Central Banks and ‘restart’ QE.

The timing of a stock market ‘crash’ is presently within our reach. All signs are pointing towards a higher price for gold; both in the near-term and the long-term.  Enforced negative interest rates which are more of the FEDs’ Quantitative Easing (QE) and the race to devalue the U.S. dollar. This proves to be quite bullish for gold. The timing of all of these concurrent events are affecting the gold market!

The rise of the stock market is widely viewed today as the result of ‘Quantitative Easing’(QE).  A bandage was placed on that financial crisis which was never structurally repaired. Today, I believe that investors have long since given up on the FEDs’ bond buying as a means of repairing the economy.  There is so much skepticism, at this point, as to what direction the equity-market is trending – Up or Down?

SP500 Weekly Chart

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The response from the FED was to ‘debase’ the U.S. dollar as reflected in its’ decline of 4.7% thus far in 2016.  Treasury bond yields have dropped well below 2%.  Something has truly gone horribly wrong within the economy!  However, the FED is trying to put up a brave front.  They have asserted that they are considering a ‘hike’ in their June 2016 meeting, but this is very misleading as there will be no “material” short-term interest rate hike in my opinion.

Monthly US Dollar Index:

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Weekly SP500 Stock Index

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Daily Gold Chart

May2015

These problems that exist within all of these markets are that of the global Central Banks, which are sending their mixed messages. They are actually driving the dollar higher for the time being.

Two weeks ago, the Bank of Japan did not provide more monetary accommodation, as was expected, at that time; whereas last week, BOJ announced they would do so. Therefore, the dollar rose up whereas other currencies, including the Euro and the Yen, fell rather hard.  This reaction resulted in both metals and stocks going down.

The three Central Banks have now reversed their prior announcements regarding monetary policy, within the last month. First, the ECB and then the FED and now the BOJ.

The FED is currently working on a different scenario in which they are stress testing negative Treasury bills. This scenario, in which the interest rate on the three-month U.S. Treasury bill becomes negative, in the second quarter of 2016 and then declines to -0.5% remaining at that level until the first quarter of 2019.

The Fed stated, “The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities.”   (http://www.bloomberg.com/news/articles/2016-02-02/rates-less-than-zero-is-bank-stress-fed-wants-to-test-in-2016 ).

Gold prices are surging this year and that has ‘the smart money’ flocking towards the yellow metal.

During this global contraction, it is only a matter of a very short period of time before the stock market reflects this reality.

Truly, this is the beginning of ‘The Great Reset’!

 

CONCLUSION:

In short, big things have slowly been unfolding that will be not only life changing but will change the entire financial situation of the world.

The good news is that there are many ways to profit and prosper from these events. A few simple and well time positions can yield huge results for the savvy trader and investor.

Follow my lead as we place special ETF trades to prosper during the pending market collapse:www.TheGoldAndOilGuy.com

Chris Vermeulen

link to article: http://www.thegoldandoilguy.com/is-this-the-end-of-the-road/